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2019 (12) TMI 1298 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - competency of person who has signed and filed the petition - existence of debt and dispute or not - Time Limitation. Whether the person who has signed and filed the petition is competent? - HELD THAT - The corporate debtor has placed reliance on the decision of the Hon ble NCLAT in the case of Palogix Infrastructure Private Limited Vs. ICICI Bank Limited 2017 (10) TMI 913 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI for the proposition that Power of Attorney holder was not competent to file an application on behalf of the Financial Creditor. However it is observed that in para 36 of the said order it has been held that mere use of word Power of Attorney while delegating such power will not take away the authority of such officer and for all purposes it was to be treated as an authorization by the financial creditor. Thus in fact this order supports the case of the Financial Creditor - The Hon ble NCLAT in para 38 has also observed that if an officer was authorised to grant loan then it could not be said that such person did not the have power to recover the loan amount or to initiate Corporate Insolvency Resolution Process in spite of default in payment of a debt. In the present case there exists two documents which make the case of the Financial Creditor more strong. Thus to give effect to the provisions of IBC, 2016 a harmonious and liberal approach is needed. Further Regulations made thereunder must confirm to be substantive provisions of IBC, 2016 as prescribed in section 240 of IBC, 2016 or to the overall object of IBC 2016. Thus on all counts this contention of the corporate debtor fails. Whether as per contract there exists liability to pay? - HELD THAT - There is a event of default as an enumerated in the contract/ agreements read with the sanction letter. The consequences thereof follow accordingly. Thus the amount disbursed till then along with interest becomes due and payable. Thus this contention of the corporate debtor is rejected. Whether debt is barred by limitation? - HELD THAT - The date of default has been stated as 05.08.2014. The financial statements for the year ended 31 st March 2017 which also contain figures for the financial year ended 31 st March 2016 show the amount of long term borrowings both secured and unsecured. In Clause 3.4 thereof, it has been stated that the company has made certain defaults payment of term loan and interest. It is also mentioned that the continuing default as on 31 st March 2017 was in respect of interest on term loan and the period of delay was more than 180 days.ln the Auditor s report also the fact of default in payment of interest and repayment of principal amount has been mentioned. Thus there is an admission of continuing default in the financial statements - It is now a settled judicial position that presentation in the financial statements constitutes acknowledgement of debt within the meaning of provisions of section 18 of the Limitation Act 1963. Impact of non mentioning of the name of the Financial Creditor in the balance sheet specifically - HELD THAT - As per explanation to section 7 (1) of IBC, 2016 the proceedings under section 7 of IBC, 2016 get triggered even in case of a default by the debtor in respect of any financial creditor other than the applicant. In the present case it is not in dispute that there is a default in respect of payment of financial debts. Thus for this reason also there is no merit in this contention of the corporate debtor. Promise under section 25 (3) of Indian Contract Act 1872 - HELD THAT - The presentation of a debt as liability in the balance sheet is a statement made by the corporate debtor to the world at large that this amount is payable by the corporate debtor. Even for commercial purposes such as credit ratings/ renewals obtaining of financial assistance or fixation of drawing limits or additional loan facilities etc. such liability is taken into consideration for computing net-worth current ratio capital gearing debt equity ratio etc., hence such presentation is of paramount importance from all perspectives.Thus the same cannot be ignored for the purposes of proceedings under section 7 or 9 of IBC 2016 - such presentation also amount to promise under section 25 (3) of Indian Contract Act 1872. The application filed by the Financial Creditor under section 7 of IBC, 2016 is complete in all respects - this application is liable to be admitted. Application admitted - moratorium declared.
Issues Involved:
1. Competency of the person who signed and filed the petition. 2. Existence of debt due and payable. 3. Whether the debt is barred by limitation. Issue-wise Detailed Analysis: 1. Competency of the Person who Signed and Filed the Petition: The Corporate Debtor contended that the petition was not signed by a competent person, arguing that the application lacked the required signature at the specified place. However, the Tribunal found that the application was signed by Mr. B. Mondal, Deputy General Manager, who was duly authorized by the bank's General Manager and Zonal Head. The Tribunal cited the Hon'ble NCLAT's decision in Palogix Infrastructure Pvt. Ltd. Vs ICICI Bank, which supports the case of the Financial Creditor, stating that the term "Power of Attorney" does not invalidate the authority if the officer is authorized to grant loans and recover them. The Tribunal emphasized a liberal and harmonious approach to economic legislation, rejecting the Corporate Debtor's contention. 2. Existence of Debt Due and Payable: The Tribunal examined whether there was a liability to pay under the contract and if the debt was barred by limitation. The Tribunal noted that the loan was a consortium loan, and the repayment was to start after the commercial operations date (COD). Due to the project's abandonment caused by external factors like the coal scam, the terms of the loan agreement, including clauses on events of default and remedies, were triggered. The Tribunal concluded that the amount disbursed, along with interest, became due and payable due to the project's material adverse effect, rejecting the Corporate Debtor's claim of no default. 3. Whether the Debt is Barred by Limitation: The Tribunal addressed the Corporate Debtor's argument that the debt was time-barred, citing various judicial decisions. The Tribunal found that the financial statements for the year ended 31st March 2017, which included figures for 2016, showed long-term borrowings and defaults, constituting an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The Tribunal referenced multiple cases, including Kotak Mahindra Bank Limited Vs. M/S Sri Balaji Metals and Minerals Pvt. Ltd., which held that financial statements' presentation of debt constitutes acknowledgment, extending the limitation period. The Tribunal rejected the Corporate Debtor's arguments, affirming that the debt was not barred by limitation and that the petition was maintainable. Order: The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium was declared, and public announcement was ordered in accordance with Sections 13 and 15 of the IBC, 2016. Shri Santanu T. Ray was appointed as the Interim Resolution Professional (IRP), and the Financial Creditor was directed to pay an advance fee of Rs. Five Lakhs to the IRP. The Tribunal instructed the IRP to conduct the CIRP in a time-bound manner and scheduled the matter for a progress report on 06/02/2020.
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