2021 (8) TMI 1264 - 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 - HELD THAT - There was OTS proposal dated 28.02.2018 (page 389) between the FC and the CD. From the said proposal it appears that the proposal was sent by the CD on 19.02.2018 for one time settlement of the financial debt. It was considered and accepted by the FC with regard to the existing liability subject to the terms and conditions as contained in the Annexure to the said OTS Proposal dated 28.02.2018. This OTS Proposal has been accepted along with all the terms and conditions by the authorised signatory of the CD - Since the Balance Sheets for Financial Year 2017-18 clearly show the secured borrowings from the Financial Creditors, which constitutes acknowledgment of debt, there are no merit in the contention of the CD as regards the point of limitation. Accordingly, the argument that the petition is filed belatedly and it is barred by limitation, is dismissed. Further the Corporate Debtor has signed and acknowledged One Time Settlement dated 28.02.2018 (page 389) along with its Annexure describing the liability of the CD. The said documents have not been controverted by the CD. However, the OTS Proposal was not complied with by the CD and they failed to pay the OTS amount within the stipulated period and thereby committed a default, as a result of which the OTS was revoked by the FC on 07.06.2018. This Adjudicating Authority admits this petition under section 7 of the IBC, 2016 - petition admitted - moratorium declared.

Summary

Issues:
1. Application under section 7 of the Insolvency & Bankruptcy Code, 2016 for default amount and commencement of Corporate Insolvency Resolution Proceedings.
2. Trustee filing petition on behalf of EARC Trust-SC 130.
3. Default by Corporate Debtor in payment of loans leading to NPA classification.
4. Invocation of Bank Guarantees and issuance of Demand Notice under SARFAESI Act.
5. Revocation of One Time Settlement due to non-payment by Corporate Debtor.
6. Acknowledgment of debt by Corporate Debtor in Annual Reports and Balance Sheets.
7. Contention on limitation period and relevant case laws.
8. Submission of documents proving debt by Financial Creditor.

Detailed Analysis:

1. The petitioner, acting as Trustee for EARC Trust-SC 130, filed an application under section 7 of the Insolvency & Bankruptcy Code, 2016, claiming a default amount against the Corporate Debtor and seeking the commencement of Corporate Insolvency Resolution Proceedings (CIRP). The Corporate Debtor, engaged in pharmaceutical manufacturing, defaulted on loans leading to NPA classification.

2. The Trustee filed the petition based on a resolution passed by the Operations Committee of the Financial Creditor, seeking resolution of the default amount owed by the Corporate Debtor. The Corporate Debtor's failure to honor a One Time Settlement (OTS) agreement led to the revocation of the settlement.

3. The Financial Creditor presented evidence of the debt acknowledgment by the Corporate Debtor in its Annual Reports and Balance Sheets until 2017, emphasizing the liability of the Corporate Debtor towards the Financial Creditor. The Financial Creditor relied on relevant case laws to support the acknowledgment of debt by the Corporate Debtor.

4. The Adjudicating Authority dismissed the Corporate Debtor's contention on the limitation period, citing the acknowledgment of debt in the Balance Sheets for the Financial Year 2017-18. The Authority found no merit in the Corporate Debtor's argument that the petition was filed belatedly and barred by limitation.

5. The Financial Creditor submitted various documents, including Sanction Letters, Loan Agreements, Personal Guarantees, and Statements of Dues, to prove the debt owed by the Corporate Debtor. The arguments from both sides were heard, and the documents on record were thoroughly examined before reaching a decision.

6. The Adjudicating Authority admitted the petition under section 7 of the IBC, 2016, declaring a moratorium and issuing specific directions to protect the interests of both parties during the Corporate Insolvency Resolution Process. An Interim Resolution Professional was appointed to oversee the proceedings, with detailed instructions provided for the resolution process.

This detailed analysis covers the key issues addressed in the judgment delivered by the National Company Law Tribunal, Hyderabad, providing a comprehensive overview of the case and the legal reasoning behind the decision.