2021 (9) TMI 1395 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - time limitation - Corporate Debtor contends that account of the Corporate Debtor was declared NPA on 15.04.2011, whereas the present application is filed on 25.11.2019, the limitation period ended in 2014 - application is beyond the limitation period and the application is barred by Article 137 of the Limitation Act or not - HELD THAT - Corporate Debtor having submitted OTS proposals on 19.09.2018, 09.11.2018 and 15.07.2019, cannot afford to make such submission. Besides, the Corporate Debtor had entered into Restructuring Package Agreement dated 19.12.2015. Unpaid interest converted into loan - HELD THAT - Since the Corporate Debtor could not pay the interest and it was at the request of the Corporate Debtor enhanced credit facilities were granted while continuing restructuring scheme, the Corporate Debtor cannot raise such contention. Existence of debt and Dispute or not - HELD THAT - Existence of debt and default has duly been established by the above documents albeit the Corporate Debtor has opposed the same without substantial evidence - the Corporate Debtor tried to raise contentions like lack of cooperation from the Financial Creditor in assignment of debt and that the Financial Creditor has filed proceeding before the Debt Recovery Tribunal, Hyderabad, the amounts claimed before the Debt Recovery Tribunal and the amounts claimed before this Adjudicating Authority do not match. Such contentions have no bearing before this Adjudicating Authority in the matter of considering this application under section 7 of the I B Code, 2016. At the time of admission of the petition filed under section 7 of the I B Code, the Tribunal has to consider whether there is debt and default. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Debt and Default
2. Limitation Period
3. Corporate Insolvency Resolution Process (CIRP)
4. Appointment of Interim Resolution Professional (IRP)
5. Moratorium

Detailed Analysis:

1. Debt and Default:
The Financial Creditor, State Bank of India, claimed that the Corporate Debtor, Chadalavada Infratech Limited, defaulted on a financial debt amounting to Rs. 216,95,55,314.55 as of 31.10.2019. The Corporate Debtor had initially approached the Financial Creditor for fund-based and non-fund based credit limits, which were sanctioned and enhanced over time. The Corporate Debtor's accounts became irregular when Bank Guarantees were invoked, leading to the classification of the Cash Credit account as NPA on 15.04.2011. Despite restructuring efforts and enhanced credit facilities, the Corporate Debtor failed to adhere to the terms, resulting in further irregularities and default. The Financial Creditor issued a Demand Notice under section 13(2) of SARFAESI Act, 2002, which the Corporate Debtor failed to comply with. The Tribunal found that the existence of debt and default was duly established by the documents provided, including loan agreements and OTS proposals.

2. Limitation Period:
The Corporate Debtor contended that the application was barred by limitation, as the account was declared NPA on 15.04.2011, and the application was filed on 25.11.2019, beyond the limitation period prescribed under Article 137 of the Limitation Act. However, the Tribunal noted that the Corporate Debtor had submitted OTS proposals on 19.09.2018, 09.11.2018, and 15.07.2019, which constituted acknowledgments of debt and extended the limitation period. The Tribunal relied on various judgments, including those from the Hon'ble Supreme Court, which held that acknowledgments of debt before the expiry of the limitation period give fresh life to the documents and shift the limitation period.

3. Corporate Insolvency Resolution Process (CIRP):
The Financial Creditor filed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of CIRP against the Corporate Debtor. The Tribunal, after considering the evidence and submissions, admitted the petition and initiated the CIRP. The Tribunal declared a moratorium as per Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and other actions against the Corporate Debtor.

4. Appointment of Interim Resolution Professional (IRP):
The Financial Creditor proposed Shri G. Madhusudhan Rao as the IRP, whose credentials and compliance with the relevant provisions were verified. The Tribunal appointed Shri G. Madhusudhan Rao as the IRP to carry out the functions as prescribed under the Insolvency and Bankruptcy Code.

5. Moratorium:
The Tribunal declared a moratorium for the purposes referred to in Section 14 of the Code, with specific directions including the prohibition of suits or proceedings against the Corporate Debtor, the continuation of essential goods or services, and the protection of licenses or permits. The moratorium will remain in effect until the completion of the CIRP, approval of the Resolution Plan, or liquidation order, whichever is earlier.

Conclusion:
The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Chadalavada Infratech Limited, and initiated the CIRP. A moratorium was declared, and Shri G. Madhusudhan Rao was appointed as the Interim Resolution Professional. The Tribunal directed the Registry to mark appropriate remarks against the Corporate Debtor on the Ministry of Corporate Affairs website.