2020 (8) TMI 385 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Opportunity of filing reply not provided - principles of natural justice - HELD THAT - It is beyond doubt that there was an admission of debt and default of more than ₹ 1,00,000/-. Still, despite taking several opportunities from the Adjudicating Authority for settlement with the Financial Creditor, the Corporate Debtor defaulted in making the payment. Therefore, the contention of the Appellant that Order has been passed without affording an opportunity for filing Reply, in violation of the principle of natural justice is without any basis. It is the admitted position that for the same Financial Debt the earlier Company Petition No.1788 of 2018 was filed against the Corporate Debtor, which was not opposed and the Corporate Debtor offered One Time Settlement. Based on that offer the Adjudicating Authority permitted the withdrawal of the earlier Petition by its Order dated 25th September 2018 - It is also apparent that the Corporate Debtor in compliance of OTS issued post-dated cheques which were returned, dishonoured and Petitioner was constrained to file fresh proceeding under Section 7 of the Code, which was numbered as 27 of 2019. In the second Petition again, the Adjudicating Authority provided several opportunities to the Corporate Debtor considering the scope of the settlement. However, after the failure of any hope of settlement, the Order of admission was passed against the corporate debtor. It is pertinent to mention that statutory provision under the Insolvency and Bankruptcy Code, 2016 does not permit to provide several opportunities to Corporate Debtor in hope of the settlement. However, the Adjudicating Authority has tried his best to afford ample opportunity to both the parties to settle the matter amicably. But despite that, the Corporate Debtor has failed to make the payment or arrive at a settlement. In this case debt is of more than Rupees One Lac; default in repayment of such debt is admitted and application in Form-1 is also complete. Therefore the Adjudicating Authority has admitted the Petition by the impugned Order. Appeal dismissed.

Summary

Issues: Violation of Principles of Natural Justice, Completeness of Application under I&B Code, Opportunity to File Reply

Violation of Principles of Natural Justice:
The appeal stemmed from an order admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against a corporate debtor. The appellant contended that the order violated the Principles of Natural Justice by not allowing them to submit a reply to the company petition. However, the judgment highlighted that the corporate debtor had multiple opportunities to file a reply but chose not to do so. The court noted that the debtor expressed the ability and desire to make payments, and various extensions were granted to facilitate a settlement. The court found that the order was not passed without affording an opportunity for filing a reply, as claimed by the appellant.

Completeness of Application under I&B Code:
The appellant argued that the application under Section 7 of the I&B Code, along with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, was incomplete. Additionally, the appellant raised concerns about the initiation of proceedings by one bank without the consent of other banks party to a common loan agreement. The court examined these contentions but found that the application was complete, and the debtor had sufficient opportunities to address the issues raised.

Opportunity to File Reply:
The appellant further contended that the adjudicating authority did not allow the corporate debtor to file a reply, thus denying them a chance to present their case. The judgment detailed the series of events where the debtor was given multiple chances to settle the matter, with extensions granted for payment in response to settlement offers. Despite these opportunities, the debtor failed to honor the commitments made, leading to the admission of the petition against them. The court emphasized that the debtor had ample opportunities to engage in the process and settle the outstanding debt but failed to do so, leading to the admission of the petition.

In conclusion, the court found no grounds for interference against the impugned order dated 20th August 2019, as the debtor had multiple opportunities to address the issues raised, settle the matter, and comply with the obligations under the I&B Code.