2020 (6) TMI 737 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make payment of its dues - Appellant alleges that Form 2 prescribed under the Adjudicating Authority Rules, which was filed along with the Application, copy of which is Annexure-A3 annexed with the Appeal, is not proper - parameters as laid down in Section 7(5)(a) of the Code satisfied or not - HELD THAT - On perusal of the declaration by the proposed Insolvency Resolution Professional, it appears that the proposed IRP Mr Anil Agarwal has not given declaration that no disciplinary proceeding is pending against him. It is also evident that the declaration of proposed Insolvency Resolution Professional, Annexure A3, is not in prescribed Form 2 under the Adjudicating Authority Rules. Therefore, as per the Ist provisio to Section 7(5) of the Code, the Adjudicating Authority should have issued notice to the Applicant/Petitioner to rectify the Application within seven days - But in the instant case, the Adjudicating Authority has not taken into consideration the statutory provision of Sub Clause (5)(a) of Sec 7 of the Code and passed the Admission Order. Admittedly, in this case date of default is shown as 12th May 2015. As per Article 137 of Limitation Act, the limitation period of three years was available to the applicant. But before expiration of limitation period on 03rd March 2018, the Corporate Debtor submitted an acknowledgment of debt in writing and promise to clear the dues at the earliest possible. In addition to this, the Corporate Debtor had also submitted OTS proposal which was later on accepted by the Bank - it is clear that a fresh period of limitation started after the acknowledgement of the debt by the Corporate Debtor and the Petition was filed within the extended period of limitation on account of Section 18 of the Limitation Act. Therefore, it is a Petition is not time-barred. On perusal of the record it is apparent that after acceptance of OTS for settling the dues of all the three companies ₹ 60/- Crores, Bank has received substantial amount from the Corporate Debtor. It is also clear that after making default in payment as per terms of OTS the Corporate Debtor further paid rupees One Crore to the Bank for renewing the OTS. Bank even after accepting after rupees One Crore revoked the offer to renew the OTS - On perusal of the record that it is also evident that there is no proper compliance under Section 7(5)(a) of the Insolvency and Bankruptcy Code, but this defect in the Application is curable defect which can be rectified. It is also on record that the admission order was passed even after the status quo order of the Hon ble High Court. This Tribunal allows the instant Appeal by setting aside the impugned order and matter is remanded back to the Adjudicating Authority to pass an order afresh, after providing an opportunity to the opposite party in the light of the directions given in the body of the judgment - Appeal allowed by way of remand.

Issues Involved:

1. Admission of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Barred by Limitation Act.
3. Compliance with Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016.
4. Status quo order by the Hon’ble High Court.
5. One Time Settlement (OTS) proposal and its revocation.

Issue-wise Detailed Analysis:

1. Admission of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The appeal emanates from the Impugned Order dated 23rd August 2019, passed by the Adjudicating Authority/National Company Law Tribunal (NCLT), Guwahati Bench, admitting the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) and appointing the Interim Resolution Professional. The Appellant contends that the Petition filed by the Respondent Bank was beyond the period of three years from the date of default, which is 12th May 2015. However, the Respondent Bank argues that the Appellant admitted the liabilities of all three companies through a consolidated OTS for an amount of ?60 Crores, which was approved by the Bank on 27th December 2018. The Bank revoked the OTS on 31st July 2019 due to non-compliance by the Appellant.

2. Barred by Limitation Act:
The Appellant argued that the Petition is barred by the Limitation Act as the loan was sanctioned in 2004, with various enhancements up to 11th June 2012, and alleged restructuring on 25th July 2014. The Petition was filed on 09th July 2018. The date of default mentioned in Form 1 is 12th May 2015, making the Petition time-barred. However, the Tribunal noted that the Appellant acknowledged the debt in writing on 03rd March 2018, which extended the limitation period under Section 18 of the Limitation Act. Thus, the Petition was filed within the extended limitation period.

3. Compliance with Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016:
The Appellant emphasized the non-compliance with Section 7(5)(a) of the I&B Code, which states that the Adjudicating Authority must be satisfied that a default has occurred, the Application is complete, and no disciplinary proceedings are pending against the proposed Resolution Professional. The declaration by the proposed Insolvency Resolution Professional, Mr. Anil Agarwal, was not in the prescribed Form 2, and the Adjudicating Authority did not issue a notice to rectify the Application within seven days as required by the Code. This defect in the Application is curable and should have been addressed by the Adjudicating Authority.

4. Status quo order by the Hon’ble High Court:
The Appellant argued that the Hon’ble Guwahati High Court, in Writ Petition (C) No.6029 of 2019, directed the parties to maintain status quo till 26th August 2019. However, the Adjudicating Authority admitted the Petition on 23rd August 2019, without considering the status quo order. The Tribunal acknowledged that the status quo order was in effect and known to the Adjudicating Authority at the time of passing the Admission Order.

5. One Time Settlement (OTS) proposal and its revocation:
The Appellant contended that the Respondent Bank acted arbitrarily by revoking the OTS on 31st July 2019, despite the Appellant making part payments. The Bank accepted ?1 Crore on 21st August 2019, indicating a willingness to renew the OTS. The Tribunal noted that the Bank received substantial amounts from the Corporate Debtor towards the OTS and accepted ?1 Crore even after revocation. Given the prevailing economic scenario, the Tribunal deemed it appropriate to provide another opportunity for the parties to consider the renewal of the OTS.

Conclusion:
The Tribunal allowed the Appeal, setting aside the Impugned Order and remanding the matter back to the Adjudicating Authority to pass a fresh order after providing an opportunity to the opposite party. The Adjudicating Authority is directed to provide another opportunity for the parties to consider the renewal of the OTS. The parties are directed to appear before the NCLT, Guwahati Bench, on 29th June 2020. No order as to costs.

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