2020 (2) TMI 1342 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - The letter has been written by the corporate debtor to the financial creditor. It has been addressed accordingly and duly signed by the director of the corporate debtor. In the aforesaid letter, as apparent, the first detail is regarding present outstanding dues and related payments made. Second point is regarding future dues as per the agreed term sheet. In third point, reason for delays in past have been explained. In fourth point, a proposal has been made to sanction the reschedulement and terms conditions so as to enable the corporate debtor to meet its obligations - the above observations sufficiently establish the fact of acknowledgement of debt / liability by the corporate debtor, hence, the period of limitation needs to be computed from the date of such proposal. Having said so, we further find that such acknowledgement is well within original period of limitation from the date of last restructuring which was done on 21st March 2015, hence, this condition of Section 18 of the Limitation Act, 1963 is also met. The issue on hand can also be looked from other angle, i.e., whether such letter also constitutes a promise to pay within the meaning of Section 25(3) of Indian Contract Act, 1872. It is further to be noted that acknowledgement may not always be a promise to pay as to constitute such acknowledgement as promise to pay, there must be an express/explicit statement to pay. Thus, a promise to pay has element of acknowledgement and in addition to that, there must be an express confession to pay. Thus, considering this legal position as applicable to these letters, in our considered view, it is not merely an acknowledgement of debt but it also constitutes a promise to pay. It is also not in dispute that for the purpose of applicability of provisions of section 25(3) of Indian Contract Act, 1872, no condition of it being made within limitation period exists. Hence, for this reason also, the application filed under section 7 cannot be said to be barred by limitation. The corporate debtor has also taken technical pleas such as non-mentioning of date of default in the form etc. which, are not fatal as regards the maintainability of this petition is concerned for the reason that such technicalities cannot be given an undue weightage and that too in respect of an economic legislation. Further, such deficiencies have not been prescribed as incurable defect in the IBC, 2016, hence, for this reason also we find no merits in this contention of the corporate debtor - petition is complete and defect-free. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Application under Section 7 of IBC, 2016.
2. Default in payment of outstanding debt.
3. Debt barred by limitation.
4. Acknowledgment of debt under Section 18 of the Limitation Act, 1963.
5. Technical deficiencies in the application.
6. Appointment of Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Application under Section 7 of IBC, 2016:
The application was filed by the Financial Creditor, Asset Reconstruction Company (India) Limited, to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Raigarh Properties Private Limited, due to default in payment of outstanding debt.

2. Default in Payment of Outstanding Debt:
A loan was granted by Union Bank of India to the Corporate Debtor in 2010, and the Financial Creditor stepped in as the assignee in 2012. The loan was restructured on March 21, 2013, and recalled on February 3, 2015. Despite multiple correspondences and proposals for reschedulement from the Corporate Debtor, the Financial Creditor rejected these proposals and filed the application under Section 7.

3. Debt Barred by Limitation:
The Corporate Debtor argued that the debt was barred by limitation, as the application was filed beyond the three-year period from the last restructuring date (March 21, 2013). The Financial Creditor countered that the letters from the Corporate Debtor constituted an acknowledgment of debt, thus extending the limitation period.

4. Acknowledgment of Debt under Section 18 of the Limitation Act, 1963:
The Tribunal examined whether the letters written by the Corporate Debtor constituted an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The Tribunal found that the letters, particularly the one dated July 23, 2015, clearly acknowledged the outstanding dues and requested reschedulement, thereby extending the limitation period. The Tribunal cited several precedents to support this interpretation, including the decisions in Hari Om Transport vs. MSP Metallics Ltd. and Trinetra Electronics Ltd. vs. McNally Bharat Engineering Co. Ltd.

5. Technical Deficiencies in the Application:
The Corporate Debtor also raised technical objections, such as the non-mentioning of the date of default in the application. The Tribunal dismissed these objections, emphasizing that technicalities should not undermine the substance of the claim, especially in the context of economic legislation like IBC, 2016.

6. Appointment of Interim Resolution Professional (IRP):
The Tribunal approved the name of the proposed IRP, Mr. Kamal Nayan Jain, and ordered the commencement of the CIRP. The Tribunal declared a moratorium and directed the IRP to make a public announcement and conduct the CIRP in a time-bound manner as per the regulations.

Order:
The application under Section 7 of IBC, 2016, was admitted. A moratorium was declared, and Mr. Kamal Nayan Jain was appointed as the IRP. The Financial Creditor was directed to pay an advance fee to the IRP, and the IRP was instructed to conduct the CIRP as per the regulations. The matter was listed for a progress report on April 9, 2020. The Registry was directed to communicate the order to the concerned parties.