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2019 (5) TMI 1687 - AT - Insolvency and BankruptcyAdmissibility of application - initiation of CIRP - existence of dispute or not - Section 7 of the 'Insolvency and Bankruptcy Code', 2016 - HELD THAT - In M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT the Hon'ble Supreme Court further held that where the Adjudicating Authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The property having mortgaged, it is also held that the claim is not barred by limitation as the period of limitation is 12 years with regard to mortgaged property and in terms of Section 5 (7) read with Section 5(8) as the property is mortgaged, Respondent No. 2 also comes within the meaning of 'Financial Creditor'. The application under Section 7 is not barred by limitation nor the claim of Respondent No. 2 is barred by limitation - Appeal dismissed.
Issues Involved:
1. Pendency of petition under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 2. Question of debt payable. 3. Applicability of limitation period for filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 4. Continuous cause of action and mortgage of properties. Issue-wise Detailed Analysis: 1. Pendency of Petition under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993: The appellant argued that a petition under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, was pending before the Debt Recovery Tribunal (DRT) in Aurangabad, questioning whether the amount is payable to the assignee. The tribunal clarified that the initiation of the Corporate Insolvency Resolution Process (CIRP) cannot be annulled merely due to the pendency of such a petition, as Section 14 of the I&B Code mandates a moratorium on all such pending proceedings. 2. Question of Debt Payable: The appellant contended that no debt was payable. However, they failed to submit an affidavit stating that no amount was received or that any received amount had been paid off. The tribunal, therefore, did not interfere with the order dated 9th August 2018, admitting the application under Section 7 of the I&B Code. 3. Applicability of Limitation Period for Filing an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The appellant argued that the claim was barred by limitation, as the default occurred on 8th July 2011, and the application under Section 7 was filed in March 2018. The tribunal referred to the Supreme Court's decision in B.K. Educational Services Pvt. Ltd. v. Paras Gupta & Associates, which held that the question of limitation applies to applications under Section 7 of the I&B Code. The tribunal examined the facts, including the loan sanction dates, demand notices, and the registered Assignment Agreement dated 30th March 2013. It concluded that the right to apply under Section 7 accrued only on 1st December 2016, when the I&B Code came into effect, making the application filed in 2018 within the limitation period. 4. Continuous Cause of Action and Mortgage of Properties: The tribunal noted that the corporate debtor had shown the loan in its annual reports for several years and had approached the financial creditor for a one-time settlement in July 2018. The tribunal found a continuous cause of action, supported by ongoing proceedings before the DRT and the mortgaging of properties. The tribunal cited Section 238A of the I&B Code, which applies the Limitation Act to proceedings under the Code, and Article 137 of the Limitation Act, which prescribes a three-year limitation period for applications for which no specific period is provided. The tribunal also referred to the Supreme Court's decision in Innoventive Industries Ltd. v. ICICI Bank Ltd., which clarified that the insolvency resolution process begins when a default occurs, and the adjudicating authority must be satisfied that a default has occurred. Conclusion: The tribunal held that the application under Section 7 of the I&B Code was not barred by limitation, nor was the claim of the financial creditor. It rejected the plea that no debt was payable by the corporate debtor in the eyes of the law and dismissed the appeal, finding no merit in it.
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