2017 (12) TMI 1842 - 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 - HELD THAT - A financial creditor falls under section 5(7) can file an application for initiating corporate insolvency resolution process against a corporate debtor before this Adjudicating Authority when the default has occurred. No doubt the debt claimed is a financial debt as defined under section 5(8) of I B Code. Herein this case Annexure T is found a legally executed assignment agreement. It is a registered document, stipulating all the terms and conditions. Being found Annexure T, a document admissible in evidence, this Adjudicating Authority cannot go behind the purpose of execution of the deed. Ld. Counsel for the respondent submits that it is a fraudulent document and that respondent has no knowledge about the execution of the deed. The said contentions are unsustainable in the peculiar circumstances of the case in hand. Annexure T proves that petitioner is an assignee comes under the purview of section 5(7) of I B code. Pursuant to Annexure T, the assignee herein has got right to enforce such security interest, pledges, and/or guarantees and appropriate the amount realized their form towards repayment of loan and to exercise all the rights of Assignor Bank in relation to such security interest, pledges and guarantees. The assignment of debt not at all affect the right of the debtor and therefore, respondent being evident that is a borrower does not have any right to object to the assignment of the debt by the lender. In a recent National Company Law Appellate Tribunal (NCLAT) ruling of Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Ltd. 2017 (9) TMI 1130 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, MUMBAI , one among the issues under consideration was the question of application of Law of Limitation about the Insolvency and Bankruptcy Code, 2016. The issues for consideration before the NCLAT was whether the application under Section 7 of the IBC is time barred, as the debt claim related to the years 2011, 2012 and 2013 and it was held that the Limitation Act, (Limitation Act) does not apply to IBC . So, no doubt the contention of the Ld. Counsel that the application is barred by limitation is also not sustainable under law. In an application of this nature, this Adjudicating Authority is bound firstly to consider as to whether there is existence of default from the records and information utility or based on other evidence furnished by the financial creditor. If the petitioner succeeds in proving default of which the claim put forward by the petitioner and satisfy Sec.7 (5)(a) of the I B Code, this Adjudicating Authority is bound to admit the application. The procedure adopted for the disposal of this application is summery in nature - The petitioner succeeded in establishing that the application is complete in all respects. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Validity of the assignment agreement and status of the petitioner as a financial creditor.
2. Authorization of the individual filing the application.
3. Applicability of the law of limitation.
4. Impact of pending proceedings under the SARFAESI Act, 2002.
5. Allegations of mala fide intention and suppression of material facts by the petitioner.

Issue-wise Detailed Analysis:

1. Validity of the Assignment Agreement and Status of the Petitioner as a Financial Creditor:
The core issue was whether Edelweiss Asset Reconstruction Co. Ltd. (the petitioner) qualifies as a financial creditor under Section 5(7) of the Insolvency and Bankruptcy Code, 2016 (I&B Code) based on the assignment agreement (Annexure T) with Bank of India. The corporate debtor contended that there was no privity of contract between them and the petitioner, and that the assignment agreement was not legally executed. The Tribunal referred to the Supreme Court's judgment in Innoventive Industries Ltd. v. ICICI Bank & Anr., emphasizing that in cases under Section 7, the adjudicating authority only needs to verify the records to confirm a default. The Tribunal found Annexure T to be a legally executed and registered document, thus establishing the petitioner as a financial creditor. The Tribunal cited the Delhi High Court's ruling in Hindon River Mills Ltd. v. IFCI & Anr., which held that the assignment of a debt does not affect the debtor's rights. Consequently, the Tribunal rejected the corporate debtor's challenge to the petitioner's status.

2. Authorization of the Individual Filing the Application:
The corporate debtor argued that Ms. Sukanya Sahani, who filed the application, was not properly authorized as the board resolution was signed by the company secretary rather than a director. The Tribunal examined Annexure A, the certified copy of the board resolution, and found it valid. The resolution authorized Ms. Sahani to file the application, and the Tribunal concluded that there was no defect in the authorization.

3. Applicability of the Law of Limitation:
The corporate debtor claimed that the application was barred by the law of limitation. The Tribunal referred to the National Company Law Appellate Tribunal (NCLAT) ruling in Speculum Plast Pvt. Ltd. vs. PTC Techno Pvt. Ltd., which stated that the Limitation Act does not apply to applications under the I&B Code. Additionally, the Tribunal cited the NCLAT's decision in Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Ltd., which held that the right to apply under the I&B Code accrues from its commencement date (1st December 2016). Therefore, the Tribunal found the contention regarding limitation unsustainable.

4. Impact of Pending Proceedings under the SARFAESI Act, 2002:
The corporate debtor argued that the application should be dismissed because the petitioner had also invoked the SARFAESI Act, 2002. The Tribunal referred to its previous ruling in Edelweiss Asset Reconstruction Company Ltd. Vs Jalan International Hotels Ltd., which established that pending proceedings under the SARFAESI Act do not bar the consideration of a petition under Section 7 of the I&B Code. Thus, the Tribunal held that the initiation of proceedings under the SARFAESI Act did not affect the maintainability of the application.

5. Allegations of Mala Fide Intention and Suppression of Material Facts:
The corporate debtor alleged that the petitioner filed the application with mala fide intentions and suppressed material facts. The Tribunal emphasized that its primary duty was to determine the existence of default based on the records and evidence provided by the financial creditor. The Tribunal found that the petitioner had successfully proven the default through various annexures, including letters from the corporate debtor admitting the default and statements of accounts. Hence, the Tribunal dismissed the allegations of mala fide intention and suppression of facts.

Conclusion:
The Tribunal admitted the application under Section 7 of the I&B Code, declared a moratorium as per Section 14, and appointed Mr. Anil Agarwal as the Interim Resolution Professional (IRP). The Tribunal directed necessary public announcements and scheduled the next hearing for 15-01-2018.