2019 (6) TMI 1463 - Tri - Insolvency and Bankruptcy

Maintainability of Petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - It is an admitted fact that the Corporate Debtor availed loans from the Financial Creditor. The Contention of the Corporate Debtor that the Corporate Debt Restructuring Scheme sanctioned by the Financial Creditor was not implemented by the Financial Creditor in true letter and spirt owing to which the Corporate Debtor suffered huge losses and cash flows of the Company got decreased. But since the corporate debtor did not comply with the essential terms and conditions of the sanctioned package approved by CDR, the loan accounts of the Corporate Debtor were classified as NPA on 30.09.2015 by the Financial Creditor. The Learned Counsel for Corporate Debtor would contend that the company is getting investors and it is going to revive. But Learned Counsel for Financial Creditor would contend this cannot be a ground for not admitting the Petition. Further the corporate debtor admitted default. The Corporate Debtor acknowledged the debt. The Petition is not barred by limitation. The Financial Creditor suggested the name of IRP and there is no compliant against proposed IRP. The financial creditor has fulfilled all the requirements as contemplated under Code. The petition is in order. Therefore the petition is fit for admission. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Limitation Period
2. Valid Authority to File Petition
3. Acknowledgment of Debt
4. Compliance with Corporate Debt Restructuring (CDR) Scheme
5. Grounds for Default
6. Admission of Petition and Initiation of Corporate Insolvency Resolution Process (CIRP)

Issue-Wise Detailed Analysis:

1. Limitation Period:
The Corporate Debtor argued that the petition is barred by limitation, referencing the decision in BK Educational Services Private Limited Vs. Parag Gupta and Associates, which held that a creditor cannot rely on the Insolvency and Bankruptcy Code (IBC) to recover time-barred debts. However, the Financial Creditor countered this by presenting Revival Letters dated 22nd March 2017 and 1st April 2018, acknowledging the debt. The Tribunal found that these acknowledgments extended the limitation period under Section 18 of the Limitation Act, 1963, thus making the petition timely.

2. Valid Authority to File Petition:
The Corporate Debtor contended that the petition was filed without valid authority. The Financial Creditor submitted an authorization letter showing that Mr. N. Venkateswaran, Deputy Manager of IDBI Bank Limited, was authorized to file the petition. The Tribunal reviewed and accepted this authorization, confirming the petition was filed with valid authority.

3. Acknowledgment of Debt:
The Corporate Debtor had acknowledged the debt in writing on two occasions: 22nd March 2017 and 1st April 2018. These acknowledgments were crucial as they extended the limitation period and confirmed the debt's existence. The Tribunal noted that these acknowledgments were clear and unambiguous, supporting the Financial Creditor's claim.

4. Compliance with Corporate Debt Restructuring (CDR) Scheme:
The Corporate Debtor argued that the Financial Creditor did not implement the CDR scheme in true letter and spirit, which led to financial difficulties. However, the Tribunal found that the Corporate Debtor failed to comply with essential terms and conditions of the CDR package, resulting in the classification of their loan accounts as Non-Performing Assets (NPA) on 30th September 2015.

5. Grounds for Default:
The Corporate Debtor cited various uncontrollable factors for their default, including non-availability of iron ore, unrest due to Telangana Agitation, power supply interruptions, raw material price fluctuations, and downturn in the infrastructure sector. The Financial Creditor contended that these factors did not absolve the Corporate Debtor of their repayment obligations. The Tribunal noted that despite these reasons, the Corporate Debtor had acknowledged the debt and defaulted on the loans.

6. Admission of Petition and Initiation of Corporate Insolvency Resolution Process (CIRP):
The Tribunal concluded that the Financial Creditor had fulfilled all requirements under the IBC. The petition was in order, and there were no valid objections against its admission. Consequently, the Tribunal admitted the petition under Section 7 of the IBC, 2016, and initiated the CIRP. A moratorium was declared, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovering property from the Corporate Debtor. The Tribunal appointed Mr. Dr. M.S. Sankar as the Interim Resolution Professional (IRP) to carry out the functions under the Insolvency & Bankruptcy Code.

Order:
The Tribunal admitted the petition, declared a moratorium, and appointed an IRP. The moratorium will be in effect from 3rd June 2019 until the completion of the CIRP or until the Tribunal approves a resolution plan or orders liquidation, whichever is earlier. Public announcement of the CIRP was to be made immediately as specified under Section 13 of the Code.