2020 (1) TMI 1592 - 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 Corporate Debtor does not deny that there was a financial debt and that there was default. However, contends that there is no financial debt due and payable on the date of filing of application as the same is barred by limitation. The Corporate Debtor has also placed on record the OTS Agreement, dated 27.03.2018 whereby it says that the contract was novated. The contention of the Corporate Debtor, that the OTS was executed in entirety or defaulted need not be answered as the same has not been brought on record by the Applicant, is untenable. The Corporate Debtor cannot blow hot and cold at the same time - It is to be borne in mind that One time Settlement Agreements are just an opportunity to settle the liabilities at once, however, if there is a default in adhering to the terms of the One time settlement, the Corporate Debtor would be liable to repay the entire contractual dues. The contention of Corporate Debtor that the Applicant has suppressed material facts, and these orders not being placed on record by the Applicant and the date of default as per the application being 2013 the application is barred by limitation is incorrect for the reason that the Corporate Debtor cannot be allowed to take benefit of an inadvertent and bonafide mistake of the Applicant, which does not cause prejudice to the proceeding. The material facts so not placed on record by the Applicant in fact, support the case of the Applicant. The Application is well within the period of limitation as the last payment made was by virtue of order passed by the Debts Recovery Tribunal, Pune - It is seen that the Applicant has initiated proceedings before Dristrict Magistrate and The Debts Recovery Tribunal within the period of limitation and by virtue of orders passed in these proceedings, deposits have been made in the loan accounts in 2018. The Application is well within the period of limitation. It is established that the Corporate Debtor owes financial debt above a sum of ₹1,00,000/- and the default is established on perusal of the Commercial Credit Information Report of the Corporate Debtor and the Balance Sheet. In the facts of the instant Application, amount of default being above a sum of Rupees One Lakh and the Application having filed on proper form, this Application deserves to be admitted - application admitted - moratorium declared.

Summary

Issues Involved:
1. Application under Section 7 of Insolvency & Bankruptcy Code, 2016.
2. Financial debt and default by Corporate Debtor.
3. Limitation period for filing the application.
4. Alleged suppression of material facts by the Applicant.
5. Novation of contract through One Time Settlement (OTS).
6. Admissibility of the application and initiation of Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Application under Section 7 of Insolvency & Bankruptcy Code, 2016:
The application was filed by Bank of Baroda against Renaissance Education Private Limited for initiating Corporate Insolvency Resolution Process (CIRP), claiming an amount of ?11,85,86,518/- as on 04.07.2019. The application was filed by the Chief Manager of the Applicant, duly authorized.

2. Financial Debt and Default by Corporate Debtor:
The Applicant extended financial assistance through various term loans totaling ?9,91,00,000/-. The Corporate Debtor defaulted on 01.07.2013, and the account was classified as Non-Performing Asset (NPA) on 22.09.2013. Statements of accounts and other supporting documents were annexed to the application, establishing the financial debt and default.

3. Limitation Period for Filing the Application:
The Corporate Debtor argued that the application was barred by limitation, citing the default date as 01.07.2013 and the NPA date as 22.09.2013, while the application was filed on 11.07.2019. The Corporate Debtor contended that no document showed the application fell within the limitation period. However, the Tribunal found that proceedings before the District Magistrate and Debts Recovery Tribunal (DRT) were initiated within the limitation period, and payments were made as per orders from these proceedings, thus the application was within the limitation period.

4. Alleged Suppression of Material Facts by the Applicant:
The Corporate Debtor claimed that the Applicant suppressed material facts, including proceedings before the District Magistrate, DRT, and the One Time Settlement (OTS). The Tribunal noted that while the Applicant did not place certain documents on record, these documents supported the Applicant's case, and the omission did not prejudice the proceedings.

5. Novation of Contract through One Time Settlement (OTS):
The Corporate Debtor argued that the OTS dated 27.03.2018 resulted in novation of the original contract, discharging the earlier terms and conditions. The Tribunal found that the OTS did not amount to novation, as the terms stated that in case of default, the entire contractual dues would become payable. The Corporate Debtor's default in adhering to the OTS terms meant the original debt remained enforceable.

6. Admissibility of the Application and Initiation of CIRP:
The Tribunal concluded that the application was complete, the financial debt and default were established, and the application was within the limitation period. The Tribunal admitted the application, declared a moratorium under Section 14 of the I&B Code, and appointed an Interim Resolution Professional (IRP) to carry out the CIRP functions.

Conclusion:
The application under Section 7 of the I&B Code, 2016, filed by Bank of Baroda against Renaissance Education Private Limited, was admitted. The Tribunal declared a moratorium, appointed an IRP, and directed immediate communication of the order to the relevant parties.