2019 (1) TMI 1889 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The respondent s contentions raised in the Affidavit in reply are short of any merit. The existence of debt is clear from Loan agreements and various documents relating mortgage deed hypothecation deed certificate of creation of charge guarantee agreements both corporate as well as a personal and the promissory note which are undisputed - The Petitioner has proved the existence of debt as well as the default. The Application under sub-section (2) of Section 7 of IBC 2016 is complete. The existing debt of more than one Rs lac against the corporate debtor and its default is also proved. Accordingly the petition filed U/S 7 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency process against the corporate debtor deserves to be admitted - Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Maintainability of the Petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Validity of the assignment of debt and rights of the Petitioner.
3. Impact of proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
4. Classification of the Corporate Debtor's account as a Non-Performing Asset (NPA).
5. Limitation period for filing the Petition.
6. Existence and proof of debt and default.
7. Authority of the Petitioner to initiate proceedings under IBC.
8. Appointment of Interim Resolution Professional (IRP).

Detailed Analysis:

1. Maintainability of the Petition under Section 7 of IBC, 2016:
The Tribunal found that the Petition filed by the Financial Creditor under Section 7 of the IBC, 2016, was maintainable. The Petitioner had submitted all requisite documents, including the assignment agreement and the statement of default, which were in compliance with the provisions of the Code.

2. Validity of the Assignment of Debt and Rights of the Petitioner:
The Tribunal held that the assignment of the impugned loans from Allahabad Bank to the Petitioner was valid. The Petitioner, being the assignee of the debt, had the right to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal relied on the order passed by the Hon’ble NCLT, Principal Bench, New Delhi, which stated that a financial creditor either by itself or jointly with other financial creditors may file an application for initiating CIRP.

3. Impact of Proceedings under SARFAESI Act, 2002:
The Tribunal clarified that proceedings under the SARFAESI Act have no bearing on the proceedings under IBC. The Petitioner’s reliance on the Hon’ble NCLAT judgment in M/s. Unigreen Global Private Limited v. Punjab National Bank & Anr. was noted, which stated that the pendency of proceedings before the Debt Recovery Tribunal (DRT) or Debt Recovery Appellate Tribunal (DRAT) cannot be a ground to reject an application under Section 10 of IBC if the application is complete.

4. Classification of the Corporate Debtor's Account as NPA:
The Tribunal rejected the Corporate Debtor’s contention that the account was not classified as NPA in accordance with RBI guidelines. It was held that the classification of the account as NPA is not relevant for admitting a petition under Section 7 of IBC. The Tribunal relied on the Hon’ble NCLT, Principal Bench, New Delhi’s order, which stated that the adjudicating authority is not supposed to decide the date on which the loan account became NPA.

5. Limitation Period for Filing the Petition:
The Tribunal found that the Petition was filed within the limitation period prescribed for the recovery of money secured by a mortgage, which is twelve years from the time the amount becomes due. Thus, the contention of the Corporate Debtor that the Petition was beyond the prescribed period of limitation was not tenable.

6. Existence and Proof of Debt and Default:
The Tribunal noted that the existence of debt and default was undisputed. The Petitioner had annexed various documents, including loan agreements, mortgage deeds, hypothecation deeds, and the statement of default, which proved the existence of debt and default. The Tribunal held that the Petitioner had proved the existence of debt as well as the default.

7. Authority of the Petitioner to Initiate Proceedings under IBC:
The Tribunal dismissed the Corporate Debtor’s argument that only the lead bank (SBI) was authorized to initiate proceedings under IBC. It was held that the Petitioner, being a financial creditor, had the right to initiate proceedings under Section 7 of IBC individually or jointly on behalf of other financial creditors. The Tribunal relied on the definition of ‘Financial Creditor’ under Section 5(7) of IBC and the decision of the Hon’ble Principal Bench of NCLT in the White Metal Limited case.

8. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Ashok Kumar Dewan as the Interim Resolution Professional (IRP) to carry out the functions as mentioned under IBC. The Petitioner had proposed his name, and his declaration stated that no disciplinary proceedings were pending against him.

Conclusion:
The Tribunal admitted the Petition filed under Section 7 of IBC, 2016, for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. A moratorium was declared under Section 14 of IBC, prohibiting the institution of suits or continuation of pending suits, transferring or disposing of assets, and recovery of property by owners or lessors. The Tribunal directed the immediate communication of the order to the Financial Creditor, the Corporate Debtor, and the Interim Resolution Professional.