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2020 (5) TMI 393 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Applicability of time limitation - time barred debt or not - Whether Limitation Act is applicable in this matter as the Petition is filed on 29.09.2017? - HELD THAT - The issue is now well settled in view of B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT , that section 238A of the IBC is applicable from the commencement of the Code i.e. 01.12.2016 irrespective of the fact that this section has been added in the second amendment to the code on 06.06.2018. Hence, if a claim is hit by limitation, the same will not survive in the light of provisions of Limitation Act, 1963 as well as section 238A of the IBC - this Bench is of the View that the provisions of Limitation Act do apply while implementing the provisions of Insolvency Code. So, the outcome of this discussion is that if the facts of the case narrates that twelve years is to apply instead of three years, the applicability of those provisions of the limitation act are to be examined in the light of the facts and circumstances of a particular case. Whether the debt is time barred in the present case in hand? - HELD THAT - As per article 62 of the Limitation Act, 1963, the limitation period is twelve years from the date when the money sued for becomes due. Here, the Date of Default is 11.03.2015 as per Form I annexed to the petition and the petition is filed on 29.09.2017. In the absence of any specific denial or evidence from the side of the Debtor, it is unreasonable and unjustifiable not to believe the date of default as 11-3-2015. Hence, this Bench is of the view that in either case, i.e. three years or twelve years, this petition is well within limitation and the contention of the respondent that the debt is time barred is rejected. A defaulter cannot dictate a term on the creditor to choose its line of action for due security of the debt. The decision of the creditor to form a consortium of lenders or to join a lending forum is a prerogative of the lender which cannot be intervened by the borrower. In this case, it is also important to place on record that at that point of time when this decision was taken by the petitioner/lender, there was no resistance or objection from the side of the Corporate Debtor. Since as long as there is a 'debt' and a 'default', this Tribunal is inclined to admit the petition - Furthermore, it is considered by this Bench that the debt is undisputedly unpaid with regard to Term Loan III in view of the Demand Promissory Note dated 24.05.2012 issued by the Corporate Debtor to the Financial Creditor. The Financial Creditor has established that the loan was duly sanctioned and duly disbursed to the Corporate Debtor but there has been default in payment of Debt on the part of the Corporate Debtor - thus, the nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that admittedly there is a Default as defined under section 3 (12) of the Code on the part of the Debtor. The Petition is hereby Admitted - The commencement of the Corporate Insolvency Resolution Process shall be effective from the date of the Order.
Issues Involved:
1. Whether the debt is time-barred under the Limitation Act. 2. Whether the statement of accounts filed by the Petitioner is false and incomplete. 3. The relevance of the Joint Lenders' Forum (JLF) in the proceedings. 4. Whether the debt has been repaid and the validity of the assignment of the debt. Detailed Analysis: 1. Whether the debt is time-barred under the Limitation Act: The primary issue is whether the debt is time-barred. The Tribunal examined if the Limitation Act applies, concluding that it does, based on the precedent set by B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates. The Tribunal determined that the limitation period for enforcing payment of money secured by a mortgage is twelve years from the date the money becomes due, as per Article 62 of the Limitation Act, 1963. The date of default was 11.03.2015, and the petition was filed on 29.09.2017, which is within the twelve-year limitation period. Thus, the contention that the debt is time-barred was rejected. 2. Whether the statement of accounts filed by the Petitioner is false and incomplete: The Corporate Debtor argued that the statement of accounts was not in accordance with the Bankers' Book Evidence Act, 1891, and was incomplete. The Tribunal referred to Standard Chartered Bank v. Ruchi Soya Industries Ltd., stating that it is sufficient if a copy of the entry in the Bankers' Book is attached with Form No. 1, without needing a certified copy. The Tribunal found that the Petitioner had complied with the requirements, and the argument of the Corporate Debtor was dismissed. 3. The relevance of the Joint Lenders' Forum (JLF) in the proceedings: The Corporate Debtor contended that the Petitioner obstructed the formation of the JLF and did not abide by its decisions. The Tribunal, referencing Innoventive Industries Ltd. v. ICICI Bank, clarified that the adjudicating authority is not required to consider the JLF's decisions when admitting a petition under Section 7 of the IBC. The Tribunal emphasized that the existence of a debt and default are the primary considerations, and the JLF's relevance was dismissed. 4. Whether the debt has been repaid and the validity of the assignment of the debt: The Corporate Debtor claimed that Term Loan II had been fully repaid and questioned the assignment of the debt. The Tribunal found that the debt related to Term Loan III was undisputedly unpaid, supported by the Demand Promissory Note dated 24.05.2012. The Tribunal rejected the argument that Term Loan II had been fully repaid and upheld the validity of the assignment of Term Loan III to the Petitioner by IDFC. The Tribunal concluded that the Corporate Debtor was obligated to repay the debt. Conclusion: The Tribunal found that the Financial Creditor had established the existence of a financial debt and default by the Corporate Debtor. The petition was deemed complete, and the Tribunal admitted the petition. The Tribunal appointed an Interim Resolution Professional and declared a Moratorium under Section 14 of the IBC, prohibiting the institution of suits and the transfer of assets of the Corporate Debtor. The Corporate Insolvency Resolution Process was to commence from the date of the order.
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