2019 (10) TMI 1503 - 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 - The only defence taken by the Respondent is that the debt being barred by limitation an application under section 7 of the Code could not be maintained. The debt defined under section 3(11) of the Code means a liability or obligation in respect of the claim which is due from any person and includes a financial debt. Default defined under section 3 (12) of the Code means non payment of debt when whole or any part or instalment of the debt has become due and payable and is not paid by the Corporate Debtor - There is no quarrel that the account of the Respondent had been declared NPA. The Application before the DRT-I Hyderabad was within time. The DRT-I Hyderabad by order dated 06.11.2017 allowed the Application and ordered recovery of the debt with interest pendent lite and future at the rate of 18% per annum. Admittedly the Respondent had committed default in payment of the debt. In view of the orders of the DRT-I Hyderabad the debt became due and payable subsequent to 06.11.2017. Therefore the defence contention that the debt was time barred cannot be accepted. The issue is answered in the negative. In an application under Section 7 of the Code the reason for the inability of the Respondent in paying off the debt is not required to be looked into by the Adjudicating Authority. What is required to be seen is the default. In this case the default has been satisfactorily proved. Thus the petition needs to be admitted - petition admitted - moratorium declared.

Summary

Issues:
1. Whether the Petition is barred by limitation?

Analysis:
The Financial Creditor (FC) sought Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (CD) under Section 7 of the Insolvency and Bankruptcy Code, 2016. The CD had defaulted on loans obtained from IDBI, leading to the present application for CIRP. The CD contested the petition, citing reasons for default related to industry conditions and natural calamities. The CD argued that the debt was time-barred under Section 238A of the Code, referencing a legal case. The Tribunal considered the facts and defenses presented and identified the main issue of whether the petition was barred by limitation.

Issue No. i:
The Respondent had availed credit facilities totaling Rupees Forty Crores between 1997 and 2001, with the debt transferred to the petitioner in 2004. An application for debt recovery was filed in 2004, and the DRT ordered recovery in 2017. The Petitioner claimed the debt was nearly Rupees Five Hundred Crores as of 2018. The Respondent argued that the debt was time-barred, contending that the debt became due and payable in 2017, within three years of the petition filing in 2018. The Tribunal referenced the Limitation Act and a legal precedent to establish the timeline for filing under Section 7. As the debt was declared NPA, the DRT order made it due and payable post-2017, allowing the petition to be within the limitation period. The Tribunal rejected the limitation defense, emphasizing the importance of the default in such cases.

In an application under Section 7, the reason for the debtor's inability to pay is not crucial; the focus is on the default itself. As the default was proven, the petition was admitted. An Interim Resolution Professional (IRP) was appointed, and the CIRP process was initiated, with specific directives for the IRP's actions and the involvement of the CD's management. The moratorium under Section 14 was declared, and cooperation from the CD's management was mandated. The order was communicated to the parties involved for compliance and necessary actions.

This detailed analysis of the judgment highlights the key legal aspects, arguments presented, and the Tribunal's decision on the issue of limitation regarding the petition for Corporate Insolvency Resolution Process.