2020 (3) TMI 1350 - 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 - Time limitation - date of default from the date of non-performing asset - time limitation of 3 years fulfilled or not - HELD THAT - It is now undisputed legal position that, while, filing the present Petition under Section 7 of the I.B. Code, only article 137 of the Limitation Act would attract which provides that the application can be filed within three years from the right to sue accrue i.e. the date of default from the date of non-performing asset declared by the lender bank. Undisputedly, in the present matter, the date of default is 01.01.2008, while the present I.B. petition came to be filed before this Bench on 19.01.2019. However, by a careful examination of such issue of limitation, it is evident and the matter of record as being admitted position that the Corporate Debtor itself had wrote a letter offering one time settlement ( OTS ) to the present Financial Creditor on 19.03.2005 and such proposal was got approved by the Financial Creditor vide its letter dated 20.04.2005 for payment of 100% of principal amount of ₹ 300 Lakh within three months. It is also evident that the Corporate Debtor duly accepted by signing the above stated one-time proposal. This fact has been further admitted by the Corporate Debtor vide its reply dated 26.08.2008 to the statutory demand notice (under Section 13(2) of the SARFAESI Act) by the Petitioner, wherein, the Corporate Debtor took such plea that company is still keen for OTS and was looking for alternative source of funding including sale of its surplus land. It has held that the Corporate Debtor has accepted the settlement proposal OTS and again confirmed its debts due as per terms of OTS in its reply dated 26.08.2008 which can be considered as valid acknowledgement of its debt liability to the extent of certain sum of ₹ 300 Lakhs which is obviously more than of rupees one lakh. Hence, the Corporate Insolvency Resolution Process (C.I.R.P.) can very well be triggered in respect of the Corporate Debtor provided that such petition is filed within the limitation period. The commencement of limitation for the present matter would start from the date acknowledgement for debts due and payable under one time settlement, i.e. 26.08.2008 (the date of reply admitting of debt) or 20.04.2005 the date of OTS which was assured to be complied with by the Corporate Debtor. Further, the period spent in during the pendency of SICA proceedings is required to be excluded. It is further found that the present petition is filed within the remaining period of three years from 01.12.2016. Admittedly, the Petitioner/Financial Creditor has filed the present petition on 10.01.2019, which is found to be filed within three years after exclusion of such period consumed in the SICA proceedings. Petition is maintainable and is admitted - moratorium declared.

Summary

Issues Involved:
1. Triggering the Corporate Insolvency Resolution Process (CIRP)
2. Status and role of the Petitioner as a Financial Creditor
3. Default and classification of debt as Non-Performing Asset (NPA)
4. One-Time Settlement (OTS) and its implications
5. Proceedings before the Board of Industrial and Financial Reconstruction (BIFR)
6. Limitation period for filing the Insolvency Petition
7. Validity of the transfer/assignment deed
8. Computation of the debt amount
9. Declaration of moratorium and appointment of Interim Resolution Professional (IRP)

Detailed Analysis:

1. Triggering the Corporate Insolvency Resolution Process (CIRP):
The Petitioner, M/s. Stressed Assets Stabilization Fund (SASF), filed an I.B. Petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) to initiate CIRP against the Corporate Debtor, M/s. Hotline Glass Limited. The petition was filed to recover outstanding dues amounting to ?600,10,01,165 as on 01.12.2018.

2. Status and Role of the Petitioner as a Financial Creditor:
SASF, constituted by the Government of India, is recognized as a Financial Institution under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the SARFAESI Act, 2002. The Petitioner claims its status as a Financial Creditor based on these provisions and a Central Government Notification dated 29.09.2004.

3. Default and Classification of Debt as Non-Performing Asset (NPA):
The Respondent, M/s. Hotline Glass Limited, defaulted on the payment of interest and loan installments, leading to the classification of its loan account as an NPA on 01.01.2008. A statutory notice was issued under Section 13(2) of the SARFAESI Act on 17.06.2008, demanding ?56,14,70,352.

4. One-Time Settlement (OTS) and Its Implications:
The Petitioner offered an OTS to the Respondent for ?3011 Lakhs on 20.04.2005, which the Respondent failed to comply with, resulting in the revocation of the settlement on 17.08.2006. The Respondent's subsequent attempts to settle the dues through the sale of surplus land were unsuccessful.

5. Proceedings Before the Board of Industrial and Financial Reconstruction (BIFR):
The Respondent filed a reference before the BIFR in February 2007 under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), which was registered as Case No. 20/2007. The BIFR proceedings continued until SICA was repealed on 01.12.2016. The period spent in BIFR proceedings was excluded from the limitation period for filing the present petition.

6. Limitation Period for Filing the Insolvency Petition:
The crucial issue of limitation was addressed, considering the date of default (01.01.2008) and the subsequent OTS proposal. The Petitioner argued that the right to sue accrued from 01.12.2016, the date SICA was repealed. The present petition was filed on 10.01.2019, within the three-year limitation period after excluding the time spent in BIFR proceedings.

7. Validity of the Transfer/Assignment Deed:
The Respondent challenged the legality and validity of the transfer/assignment deed executed by IDBI in favor of SASF. The Petitioner countered that the deed was duly executed, signed, and registered with the appropriate authorities, making it enforceable.

8. Computation of the Debt Amount:
The Petitioner clarified that the financial assistance was restructured into non-convertible debentures (NCDs) of ?31.71 Crores, with interest and penalties accruing to ?563,39,01,165 over 17 years, totaling ?600,10,01,165. The computation was based on the terms of the sanction letter accepted by the Respondent.

9. Declaration of Moratorium and Appointment of Interim Resolution Professional (IRP):
The Tribunal admitted the petition, declared a moratorium under Section 13(1)(a) of the IBC, and appointed Mr. Jigar Pradipchandra Shah as the Interim Resolution Professional. The moratorium prohibits suits, asset transfers, and recovery actions against the Corporate Debtor, ensuring the supply of essential goods and services continues.

Conclusion:
The Tribunal admitted the I.B. Petition filed by SASF, triggering the CIRP against M/s. Hotline Glass Limited. The period spent in BIFR proceedings was excluded from the limitation period, and the petition was deemed filed within the prescribed time. The moratorium was declared, and an IRP was appointed to oversee the resolution process. The Tribunal emphasized the importance of a viable resolution plan considering the competitive market conditions and interest rates.