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2021 (1) TMI 1125 - Tri - Insolvency and BankruptcyMaintainability 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 - There is no dispute that the Corporate Debtor has availed various financial facilities from the Financial Creditor and its former associate Banks, now merged into the SBI. Having availed such financial facilities from public sector banks, the Corporate Debtor cannot avoid repayment merely relying on technicalities. While harping on the provisions of Limitation Act, the Corporate Debtor itself has filed Counter only on 27.02.2020, in a petition filed on 06.09.2019. Time for filing Counter was sought on different occasions, viz. 05.12.2019, 23.01.2020 and 07.02.2020. Apart from the technical issues raised, the Corporate Debtor did not dispute existence of debt and default, albeit it may differ dates of default and so on. Public money cannot be squandered away by the Corporate Debtor by finding loopholes. Time Limitation - HELD THAT - It is observed that the OTS proposal was also submitted by the Corporate Debtor and the Financial Creditors have met on 07.02.2020 to discuss about such OTS proposal. The above correspondence and the decrees passed by the DRT in the instant case amply prove that there is financial debt which was due. Thus, by accepting liability vide their letter dated 29.01.2020, agreeing to repay the debt, the Corporate Debtor now cannot take a stand that the debt is barred by limitation. Acknowledgement of debt and agreeing to repay the same amounts to liability and it automatically extends the limitation period. It is not in dispute that the Financial Creditor disbursed various types of loans from time to time and there is default. Other contentions raised by the learned counsel for the Corporate Debtor cannot be entertained since the Financial Creditor is able to establish the debt and default. Therefore, the petition is to be admitted against the Corporate Debtor. After going through the documents filed by the petitioner we are of the view that the petition is liable to be admitted against the Corporate Debtor. The petition is accordingly admitted. Petition admitted - moratorium declared.
Issues Involved:
1. Default in repayment of financial debt by the Corporate Debtor. 2. Barred by limitation. 3. Validity of the petition under RBI Circular dated 12.02.2018. 4. Existence of debt and default. Issue-wise Detailed Analysis: 1. Default in repayment of financial debt by the Corporate Debtor: The petitioner, State Bank of India (SBI), filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor for defaulting on a financial debt of ?222 crores as of 31.07.2019. The Corporate Debtor had availed various financial facilities from SBI and its merged associate banks, including State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Bikaner & Jaipur, and State Bank of Patiala. The accounts of these banks were transferred and merged with SBI, allowing SBI to pursue recovery proceedings. 2. Barred by limitation: The Corporate Debtor contended that the petition was barred by limitation, arguing that the date of default should be the date of Non-Performing Asset (NPA) classification during 2012/2013, making the three-year limitation period expire by 2015/2016. They relied on a Demand Notice dated 16.08.2013 issued by Union Bank of India under SARFAESI Act, asserting that the petition filed on 06.09.2019 was time-barred under Section 137 of the Limitation Act. However, the Tribunal noted that the Corporate Debtor had acknowledged the debt and requested a One Time Settlement (OTS) in a letter dated 29.01.2020, thereby extending the limitation period. 3. Validity of the petition under RBI Circular dated 12.02.2018: The Corporate Debtor argued that the petition was initiated based on an RBI Circular dated 12.02.2018, which the Supreme Court later declared ultra vires of Section 35AA of the Banking Regulation Act. Despite this argument, the Tribunal focused on the existence of debt and default, noting that the Corporate Debtor had acknowledged the debt and sought an OTS, indicating an ongoing obligation to repay. 4. Existence of debt and default: The Tribunal observed that the Corporate Debtor had availed financial facilities and defaulted on repayment. The Debt Recovery Tribunal (DRT) had issued three Recovery Certificates in favor of SBI and its associate banks, confirming the debt and default. The Corporate Debtor's acknowledgment of debt in the letter dated 29.01.2020 further substantiated the existence of financial debt and default. Judgment: The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, declaring a moratorium under Section 14 of the Code. The moratorium prohibits the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of its assets, and recovery actions. The Tribunal appointed Shri G. Satyanarayana Murty as the Interim Resolution Professional (IRP) to carry out the functions under the Insolvency & Bankruptcy Code. The Registry was directed to send a copy of the order to the Registrar of Companies, Hyderabad, for marking appropriate remarks against the Corporate Debtor on the Ministry of Corporate Affairs website. The petition was accordingly admitted.
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