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2019 (9) TMI 1459 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT - There is no dispute with regard to the fact that the Corporate Debtor has taken Credit facilities from the Financial Creditor on 20.08.2011. There is no dispute in the fact that the Corporate debtor has secured Credit Facilities taken by equitable mortgage of immovable property (exhibit B 31). The Filing of the proceeding before the DRT in 2014 under SARFAESI Act 2016 are also not disputed. The Corporate Debtor also submitted that in the case filed before the DRT Ernakulam claimed only an amount of ₹ 1,10,25,692.86/-. In the instant case it appears that the default in payment of debt is a default as defined in section 3(12). Similarly, according to section 3(11) a debt means liability of obligation in respect of claim and for the meaning of claim if we refer 3 (6) which defines claim to a right to payment even if it is disputed. Besides that, the word 'default' is of rupees one lakh or more (Section 4). The IBC provision may be trigger by financial creditor or operational creditor - In the instant case as stated the debt is claimed by financial creditor is more than 1 Lakh Rupees. Again, as discussed herein before the Financial Creditor has proved that an amount of term loan along with bank guarantee was disbursed against the consideration for the time value money which was defined under Section 5(8) of the code. Time Limitation - HELD THAT - The limitation for enforcing payment of money secured by a mortgage charged by the immovable property is twelve years at the time when the money sued become due. Thus for 12 years after becoming due, the debt would be payable by Law. In the Present matter, the sanction letter is on 15.05.2010. Apart from proceeding filed in DRT Ernakulam in the year 2013, the loan was secured by equitable mortgage and as such, it cannot be said that the debt was barred by limitation, when Section 7 application was filed on 31 July 2018 - Hence in this case the admitted fact is that the Corporate Debtor by taking the aforesaid loan from the financial creditor which become a due debt by executing some bank guarantee including equitable mortgage is not in dispute. And therefore, the facts and circumstances in the instant case, is not similar with the aforesaid case cited by the Learned senior counsel for the Corporate Debtor. Thus, the claim of financial creditor in the instant case cannot be said to be a debt which is time barred. This adjudicating authority having satisfied with the fact stated by petitioner, the Corporate Debtor defaulted in making payment towards the liability to the petitioner, Hence the petition deserves to be Admitted - Application admitted - moratorium declared.
Issues Involved:
1. Default in repayment of loan facilities. 2. Period of limitation for initiating Corporate Insolvency Resolution Process (CIRP). 3. Validity of the power of attorney used for filing the application. 4. Incomplete and non-conforming application under the Insolvency and Bankruptcy Code (IBC). Issue-wise Detailed Analysis: 1. Default in repayment of loan facilities: The Financial Creditor, Federal Bank, sought the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s. Sargam Builders Pvt. Ltd., due to a default in repayment of loan facilities amounting to ?27,50,000 and a bank guarantee of ?92,50,000 under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Financial Creditor provided various facilities to the Corporate Debtor, including term loans and bank guarantees, which were secured by an equitable mortgage. The Corporate Debtor admitted to taking credit facilities and securing them with an equitable mortgage of immovable property. The default in payment of debt was acknowledged, and the debt was considered due and payable. 2. Period of limitation for initiating CIRP: The Corporate Debtor contended that the application was barred by limitation under Article 137 of the Limitation Act, as the default occurred on 3.12.2012, and the application was filed on 30.07.2018. However, the Tribunal referred to the Limitation Act, 1963, which prescribes a twelve-year limitation period for enforcing payment of money secured by a mortgage. Since the debt was secured by an equitable mortgage and the application was filed within twelve years, it was not barred by limitation. The Tribunal distinguished the facts of the case from the precedent cited by the Corporate Debtor, B. K. Educational Services Pvt. Ltd. vs. Parag Gupta & Associates, and held that the debt was not time-barred. 3. Validity of the power of attorney used for filing the application: The Corporate Debtor argued that the application was based on a power of attorney executed in 2007, which was not valid for proceedings before the National Company Law Tribunal (NCLT). The Tribunal did not find this argument persuasive, as the primary focus was on the existence of a default and the debt being due and payable. The Tribunal emphasized that the Financial Creditor had followed all the necessary procedures under Section 7 of the IBC to trigger the CIRP. 4. Incomplete and non-conforming application under the IBC: The Corporate Debtor claimed that the application was incomplete and not in conformity with Rule 4 and Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Tribunal, however, found that the Financial Creditor had provided sufficient evidence of the debt and default. The Tribunal cited the Supreme Court's observation in M/s. Innoventive Industries Ltd. vs. ICICI Bank & Anr., which clarified that the moment a default of ?1 lakh or more occurs, the insolvency resolution process begins. The Tribunal was satisfied with the evidence provided by the Financial Creditor and admitted the application. Conclusion: The Tribunal, after considering the submissions and evidence, concluded that the Corporate Debtor had defaulted in making payments towards the liability to the Financial Creditor. The application under Section 7 of the IBC was found to be maintainable, and the CIRP was initiated against the Corporate Debtor. An Interim Resolution Professional was appointed, and a moratorium was declared as per Section 14 of the IBC. The Tribunal directed the Interim Resolution Professional to make a public announcement and perform all functions as per the IBC, ensuring cooperation from the Corporate Debtor's management.
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