2020 (2) TMI 1505 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - default committed by the Corporate Debtor in making repayment of the Cash Credit Bills purchase LC LG facility availed from the Bank - Remedy in Rem - existence of debt and dispute or not - HELD THAT - It is a settled legal position that the pendency of SARFAESI proceeding or other disputes do not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is Remedy in Rem in respect of the CD. This Adjudicating Authority is satisfied that the Corporate Debtor availed the loan/credit facilities from the Financial Creditor - Existence of debt is above Rs. One Lac - Debt is due - Default has occurred on 26/10/2011 - petition admitted - moratorium declared.

Summary

Issues Involved:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of debt and default by the Corporate Debtor.
3. Validity of the Assignment Agreement and legal standing of the Financial Creditor.
4. Objections raised by the Corporate Debtor including limitation and suppression of facts.
5. Admissibility of the petition under the IBC and compliance with procedural requirements.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):

The Financial Creditor, JM Financial Asset Reconstruction Company, filed the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor, Samay Electronics Private Limited, for default in repayment of various credit facilities. The credit facilities included Cash Credit, Bills purchase, LC, and LG facility. The authorized officer of the Financial Creditor, Sanjay Kumar Sipani, filed the application.

2. Existence of Debt and Default by the Corporate Debtor:

The Corporate Debtor defaulted on payment, with the date of default being 26/10/2011. The Financial Creditor provided evidence of the debt and default, including statements of accounts, certificates under the Banker’s Book of Evidence Act, and various loan documents. The total amount claimed by the Financial Creditor was ?44,72,65,054 as of 15.04.2018. The Corporate Debtor had acknowledged the debt in its balance sheets for the years 2006-2007, 2007-2008, and 2008-2009.

3. Validity of the Assignment Agreement and Legal Standing of the Financial Creditor:

The State Bank of India (SBI) assigned its debts to the Financial Creditor through an Assignment Agreement dated 26/03/2014. The Corporate Debtor challenged the validity of this assignment, arguing it was illegal and lacked proper stamp duty. However, the Hon’ble DRT allowed the substitution of the Financial Creditor in place of SBI, and this order attained finality.

4. Objections Raised by the Corporate Debtor:

The Corporate Debtor raised several objections:
- Limitation: Argued the petition was time-barred as the default occurred on 26/10/2011, and more than three years had lapsed. The Financial Creditor countered that the limitation period was extended due to continuous legal proceedings and the consent decree passed by DRT.
- Suppression of Facts: Claimed the Financial Creditor suppressed various court orders and ongoing legal proceedings.
- Validity of Assignment: Argued the assignment was illegal and not compliant with RBI guidelines.
- Certificate from Information Utility: Claimed the absence of a certificate from an Information Utility to prove default.
- Pending Appeals: Noted several appeals were pending before DRAT, which should prevent the initiation of CIRP.

5. Admissibility of the Petition under the IBC and Compliance with Procedural Requirements:

The Adjudicating Authority considered whether the debt was due and payable, and if there was a default. The Tribunal found the application complete and within the limitation period, considering the continuous legal proceedings and the consent decree. The Corporate Debtor’s objections were deemed devoid of merit. The Tribunal emphasized that the pendency of SARFAESI proceedings or other disputes does not prevent a Financial Creditor from triggering CIRP under the IBC.

Observations and Final Judgment:

The Tribunal admitted the petition, satisfied that:
- The Corporate Debtor availed the loan/credit facilities.
- The existence of debt was above ?1,00,000.
- Debt was due and default occurred on 26/10/2011.
- The petition was filed within the limitation period, considering the exclusion of time spent in DRT and DRAT proceedings.
- The application was complete and met all procedural requirements.

The Tribunal appointed Mr. Chandra Prakash Jain as the Interim Resolution Professional and declared a moratorium as per Sections 13 and 14 of the IBC. The Corporate Debtor was directed to cooperate with the Interim Resolution Professional.

Separate Judgment by Member (J):

One member dissented on the issue of limitation, arguing that the petition was time-barred as the right to sue accrued from the date of default (26.10.2011) and the petition was filed beyond the prescribed period. The member opined that time spent in DRT and DRAT proceedings could not be excluded for limitation purposes, and the petition should be dismissed as time-barred.

Conclusion:

The majority judgment admitted the petition and initiated CIRP against the Corporate Debtor, while the dissenting opinion held the petition was time-barred.