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2019 (12) TMI 1297 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - time limitation - dishonor of cheque - HELD THAT - It is noted that in the financial statements for the year ended 31st March, 2016, the amount of secured loan has been shown. The fact of default has also been mentioned. The said balance-sheet also contain figures of such loan in financial year ended on 31 st March, 2015. It has been also noted that in financial year 2011-12 and 2012-13 cheques given by the Corporate Debtor as EMI have been presented by the Bank which have got dishonoured. Such cheques were neither recalled nor any instructions had been issued as regard to cancellation/ non encashment. The Financial creditor has also produced the demand promissory note and other documents to establish the fact of continuation of limitation till December, 2012. Thus, a prima facie case of a alive claim has been established. In the present case, there is a continuous cause of action and an acknowledgement of debt resulting into continuation/ extension of limitation period before the expiry of the original limitation period. In this regard, the presentation of outstanding loan in the financial statements for the year ended on 31st March, 2016 which also depict the figures of the same as on 31 st March,2015 is continuation of such outstanding loan from the earlier financial years as in such a case no other conclusion can be arrived i.e. the outstanding loan continues from earlier years except the figure of the same which may vary due to interest, if any, charged subsequently or due to repayment of loan, if any. There are no merits in the contention of the Corporate debtor that there exists some dispute and it was a case of non performance for the reason that even a disputed claim can be considered for the purpose of section 7 so long, there is debt which is due and payable and a default has occurred in payment thereof. In the present case, it is not in dispute that undisputed claim remains more than Rs. One Lakh, hence, CIRP can be initiated. Thus, this claim of the corporate debtor is also rejected - The petition is otherwise complete in all respects and defect free - The name of the IRP has also been proposed who has given his consent and it has been claimed that no disciplinary proceedings are pending against him. Accordingly, his name is approved. Application admitted - moratorium declared.
Issues Involved:
1. Whether the debt/claim was barred by limitation. 2. Whether there was an acknowledgment of debt by the Corporate Debtor. 3. Whether the petition was maintainable despite alleged disputes regarding the debt and hypothecated securities. 4. Whether the presentation in the balance sheet constituted an acknowledgment of debt. 5. Whether the provisions of Section 18 of the Limitation Act, 1963 were applicable. 6. Whether the claim was extinguished due to writing off the debt in the CIBIL report and balance sheet. 7. Whether the petition was complete and defect-free for initiating the Corporate Insolvency Resolution Process (CIRP). Detailed Analysis: 1. Whether the debt/claim was barred by limitation: The Financial Creditor argued that the debt was not barred by limitation due to continuous acknowledgment and a cause of action, citing financial statements and a payment made on 20th June 2014. The Corporate Debtor contended that the debt fell due on 12.01.2010 and became time-barred on 10.09.2013 and 29.11.2013, with no subsequent acknowledgment or repayment. The Tribunal noted that cheques given by the Corporate Debtor were dishonored in financial years 2011-12 and 2012-13, establishing a prima facie case of an alive claim. 2. Whether there was an acknowledgment of debt by the Corporate Debtor: The Financial Creditor relied on the balance sheet for the year ending 31st March 2016, which showed the secured loan and default. The Corporate Debtor argued that the balance sheet indicated expired EMIs and did not constitute acknowledgment. The Tribunal referred to various judicial decisions, including the case of Stressed Assets Stabilization Fund Vs Ispat Profiles India Limited, to establish that continuous acknowledgment of liability through financial statements, proposals, and letters constituted acknowledgment of debt. 3. Whether the petition was maintainable despite alleged disputes regarding the debt and hypothecated securities: The Corporate Debtor claimed disputes regarding the debt and hypothecated securities, arguing the dumpers were defective and returned to the bank. The Tribunal held that even disputed claims could be considered under Section 7 of the IBC as long as there was debt due and payable and a default had occurred. The Tribunal cited the Hon'ble Supreme Court's observations in the case of Innovative Industries. 4. Whether the presentation in the balance sheet constituted an acknowledgment of debt: The Tribunal held that the presentation of outstanding loans in the financial statements for the years ending 31st March 2016 and 31st March 2015 constituted acknowledgment of debt. The Tribunal cited judicial decisions confirming that such presentation amounted to acknowledgment, including the cases of Bhajan Singh Shanna v M/s Wimpy International Ltd. and Bengal Silk Mills Co. vs Ismail Golam Hossain Arif. 5. Whether the provisions of Section 18 of the Limitation Act, 1963 were applicable: The Tribunal referred to the decision in the case of Prabhakaran & Ors Vs M. Azhagir Pillai (Dead) by Lrs. & Ors, where it was held that acknowledgment must be before the expiration of the limitation period. The Tribunal concluded that continuous acknowledgment of debt before the expiry of the limitation period extended the limitation period, making the claim not barred by limitation. 6. Whether the claim was extinguished due to writing off the debt in the CIBIL report and balance sheet: The Tribunal found no merit in the Corporate Debtor's claim that writing off the debt in the CIBIL report and balance sheet extinguished the debt. The Tribunal held that such unilateral actions did not result in the waiver of the loan or extinguish the debt. The Tribunal noted that the Financial Creditor pursued various legal options to realize the debt, and the default was shown in the Corporate Debtor's balance sheet. 7. Whether the petition was complete and defect-free for initiating the Corporate Insolvency Resolution Process (CIRP): The Tribunal found the petition complete in all respects and defect-free. The proposed Interim Resolution Professional (IRP) had given consent, and no disciplinary proceedings were pending against him. The Tribunal approved the IRP's name and admitted the petition, declaring a moratorium and ordering a public announcement as per Sections 13 and 15 of the IBC, 2016. Order: 1. The application filed by the Financial Creditor under Section 7 of the IBC, 2016, for initiating CIRP against the Corporate Debtor was admitted. 2. A moratorium and public announcement were declared in accordance with Sections 13 and 15 of the IBC, 2016. 3. The IRP was appointed to ascertain the particulars of creditors and convene a Committee of Creditors for evolving a resolution plan. 4. The Financial Creditor was directed to pay an advance fee to the IRP, and the IRP was to conduct CIRP in a time-bound manner as per Regulation 40A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016. 5. The Registry was directed to communicate the order to the Financial Creditor, the Corporate Debtor, and the IRP by Speed Post and email. 6. The matter was listed for the filing of the progress report on 15.01.2020.
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