2017 (7) TMI 1428 - 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 - mismatch and discrepancies in the alleged amount of claim or not - HELD THAT - There cannot be any dispute that it is prerogative right of a party who has filed a case airing his grievance to convince a court a prima facie case and then it is discretionary power of such court either to admit and pass interlocutory orders or to admit without any interim order or to reject/dismiss such petition/application which is/are not prima facie not maintainable. However in the present case as per the provisions of IBC admission itself would have wide material/legal consequences. There is a legal maxim called ubi jus ubi remedum meaning where there is grievance there is a remedy. Here the applicant/Financial Creditor has substantial grievance against the Corporate Debtor and has thus initiated the present proceedings in accordance with law by submitting that efforts made by it could not succeed to recover public money extended to respondent except a getting a paltry remedy from DRT. Here there is no dispute that various amounts as loans in question were extended to the Corporate Debtor and it is not case of Corporate Debtor that it has entirely paid principal amount or interest thereon. It is not in dispute that debt in question was already declared as NPA as early as on 2012. However without paying any substantial amount of due in question the Corporate Debtor relying on un-tenable grounds which are purely clerical/technical grounds like mistakes/mismatch of calculation wrong quoting of rule/provision of law for issuing certificates in question etc. as detailed are resisting admission of case. The issue in question has to be considered in the light of various provisions of IBC which is a separate act meant for expeditious remedy for aggrieved parties. The financial Creditor has convinced this Tribunal that the present case is a fit case for admission under provisions of IBC 2016 - Whether the Corporate Debtor has complied or not with directions given by DRT is not much relevant here as the Corporate Debtor was admittedly declared as defaulter by placing its debt as Non-Performing Asset and it is not in question before any judicial forum(s). On the other hand the Corporate Debtor is facing proceedings under Negotiable Instruments Act for dishonor of cheques issued by it to Financial Creditor. Apparently the order of DRT is relating to a printing machine which was installed in the Company s Unit situated at Vijayawada A.P. and not for the Company as a whole i.e. Deccan Chronicle Holdings Ltd. It is evident that a default in question has occurred and the petition/application in question is complete in all respects and there are no disciplinary proceedings pending against proposed Interim Resolution professional as per declaration given by him. Hence the present case is fit case to admit. However it does not mean that admission of case would deprive proper opportunity to the respondent to defend its case. A duly qualified Interim Resolution Professional appointed by Tribunal is bound to afford full opportunity to Respondent by duly following principles of natural justice. Though Section mentioned in the certificate of the Financial Creditor is incorrect however the contents of the certificate are in accordance with the prescribed format. Therefore we deem it fit as it is a clerical error/typographical error and on that account the petition cannot be rejected considering the quantum of outstanding amount the Financial Creditor being a public sector bank and amount is due over a long period of time. If adjudicating authority accepts all these kinds of clerical/technical errors which are not affecting in any way and start rejecting/not admitting the cases under IBC the objects for promulgating IBC 2016 would be defeated. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Jurisdiction of NCLT in light of pending winding-up proceedings.
2. Existence of default under Section 3(12) of IBC.
3. Discrepancies in the claimed amount.
4. Record of default as per Section 7(3) of IBC.
5. Completeness of the application.
6. Impact of pending proceedings under Section 391 of the Companies Act.
7. Status quo order by the Supreme Court.

Issue-wise Detailed Analysis:

1. Jurisdiction of NCLT in light of pending winding-up proceedings:
The Corporate Debtor argued that NCLT lacks jurisdiction due to pending winding-up proceedings before the High Court. However, the Tribunal held that the Insolvency and Bankruptcy Code (IBC) 2016 has an overriding effect over other laws, as per Section 238 of IBC. The Tribunal emphasized that the IBC is a special enactment meant for expeditious resolution and that the pendency of winding-up petitions does not preclude the initiation of proceedings under IBC. The Tribunal cited the Supreme Court's judgment in Allahabad Bank Vs. Canara Bank and Mardia Chemicals Limited Vs. Union of India, which support the precedence of special statutes over general laws.

2. Existence of default under Section 3(12) of IBC:
The Financial Creditor provided documentary evidence, including balance sheets, demand notices, possession notices, and statements of account, to establish the default. The Tribunal noted that the Corporate Debtor had been declared a Non-Performing Asset (NPA) as early as 2012 and had not disputed the debt's existence. The Tribunal found the evidence sufficient to ascertain the default and held that the Financial Creditor had made a prima facie case for admission under IBC.

3. Discrepancies in the claimed amount:
The Corporate Debtor pointed out discrepancies in the claimed amount, which varied between Rs. 793.75 crores and Rs. 723.75 crores. The Tribunal acknowledged the discrepancy but deemed it a clerical error. It emphasized that such technical errors should not defeat the purpose of IBC, especially considering the substantial outstanding amount and the public interest involved.

4. Record of default as per Section 7(3) of IBC:
The Corporate Debtor argued that there was no record of default as required by Section 7(3) of IBC. The Tribunal, however, found that the existence of default was sufficiently established through other evidence furnished by the Financial Creditor. The Tribunal referred to Section 7(4) of IBC, which allows ascertaining default from records of an information utility or other evidence provided by the Financial Creditor.

5. Completeness of the application:
The Corporate Debtor contended that the application was incomplete due to unsigned certificates and other technical deficiencies. The Tribunal found that while there were clerical errors, the application was complete in all material respects. It emphasized that minor clerical errors should not lead to the rejection of the application, especially when substantial public funds are involved.

6. Impact of pending proceedings under Section 391 of the Companies Act:
The Corporate Debtor argued that the pending petition under Section 391 of the Companies Act should preclude the current proceedings. The Tribunal disagreed, stating that the IBC proceedings are independent and have an overriding effect due to the non obstante clause in Section 238 of IBC. The Tribunal held that the pendency of a scheme of arrangement does not affect the Financial Creditor's right to initiate IBC proceedings.

7. Status quo order by the Supreme Court:
The Corporate Debtor cited a status quo order by the Supreme Court regarding the subject properties. The Tribunal clarified that its jurisdiction is subordinate to the High Courts and the Supreme Court and that its orders would not interfere with any orders passed by higher courts. The Tribunal assured that the Interim Resolution Professional would follow principles of natural justice and provide the Corporate Debtor with a fair opportunity to defend its case.

Conclusion:
The Tribunal admitted the petition filed by the Financial Creditor under Section 7 of IBC, finding that the application was complete, the default was established, and there were no disciplinary proceedings against the proposed Interim Resolution Professional. The Tribunal directed the case to be posted for consideration of the appointment of the Interim Resolution Professional and imposition of moratorium and public announcements under Sections 13 and 14 of IBC.