2019 (7) TMI 1757 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT - The creditor bank counsel has mentioned that it is not the case of the corporate debtor that it has not defaulted in making repayment to the bank. It is also not the case of it that debt and default are not in existence. Indeed, the bank has also initiated proceedings against the debtor under the SARFAESI Act as well as under the RDB Act. In this backdrop, I do not believe this inconsistency regarding occurrence of default, especially in a case like this, will not have any bearing either on limitation or existence of debt and default. Time Limitation - HELD THAT - The bank has declared it as a NPA on June 30, 2015. Thereafter, since the corporate debtor itself sent a letter admitting the liability pending against the corporate debtor on April 13, 2017 as reflected above, it will become an acknowledgment falling under section 18 of the Limitation Act, 1963. If at all any difference in computation is there, the corporate debtor is entitled to place its grievance before the resolution professional. As to limitation point is concerned, this Bench hereby holds that the claim is within limitation. In the present case, it is not the case of the corporate debtor counsel that this admission of debt making an offer for one-time settlement in the letter dated July 3, 2017 is not related to the present claim and it is also not the case of the corporate debtor that there is some other claim against this corporate debtor and this letter of acknowledgment dated July 3, 2017 is not related to this claim - there are no merit in the defence raised by the corporate debtor counsel stating that an offer for one-time settlement dated July 3, 2017 does not amount to acknowledgment. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in loan repayment by the corporate debtor.
2. Time-barred debt allegation by the corporate debtor.
3. Acknowledgment of debt under Section 18 of the Limitation Act, 1963.
4. Initiation of Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Default in Loan Repayment by the Corporate Debtor:
The financial creditor, Indian Overseas Bank, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against the corporate debtor due to a default in repaying a loan amounting to ?29,96,10,603.01 as of February 28, 2019. The loans were advanced on various dates, including term loans and letters of guarantee, with specific amounts and dates detailed in the judgment. Various documents were executed by the corporate debtor in consideration of the loan, including credit sanction advice, demand promissory notes, general counter guarantees, and hypothecation of book debts.

2. Time-Barred Debt Allegation by the Corporate Debtor:
The corporate debtor's counsel argued that the debt was time-barred, referencing the date of NPA as June 30, 2015, in the SARFAESI notice and April 1, 2015, in written submissions. The debtor's counsel relied on a precedent where a fresh promissory note without reference to an earlier debt was not considered an acknowledgment of the earlier debt, thus making the claim time-barred.

3. Acknowledgment of Debt under Section 18 of the Limitation Act, 1963:
The creditor bank's counsel rebutted the time-barred debt argument, pointing out that the corporate debtor had defaulted and acknowledged the debt. The corporate debtor's letter dated April 13, 2017, admitting liability, was considered an acknowledgment under Section 18 of the Limitation Act, 1963. The judgment noted that an offer for a one-time settlement in a letter dated July 3, 2017, amounted to acknowledgment of the debt, referencing the debtor's meetings with the bank's officials and the intention to settle dues.

4. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Tribunal admitted the petition to initiate CIRP against the corporate debtor, appointing Mr. Radhakrishnan Dharmarajan as the interim resolution professional. A moratorium was declared, prohibiting actions such as the institution of suits, transferring or disposing of assets, and recovery of property by owners. The supply of essential goods or services to the corporate debtor was ordered to continue during the moratorium period. The moratorium would be in effect until the completion of the CIRP or approval of the resolution plan or liquidation of the corporate debtor. Public announcement of the CIRP was mandated, and the registry was directed to communicate the order to the financial creditor, corporate debtor, and interim resolution professional.

Conclusion:
The Tribunal concluded that the corporate debtor's debt was not time-barred and that the acknowledgment of debt through various communications and offers for settlement was valid under Section 18 of the Limitation Act. Consequently, the petition for initiating CIRP was admitted, and the necessary directions for the process were issued.