2020 (10) TMI 165 - Tri - 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 - time limitation - HELD THAT - It is not in dispute that Corporate Debtor has written a number of letters wherein a request has been made to restructure the loan. In the letter dated 5th March 2018, a reference of letter dated 11th January 2016 on the same subject has been given. We have also perused the contents of this letter wherein the Corporate Debtor has acknowledged the fact of loan taken, non-payment of the same and request for restructuring of the debt. Thus, from the date of NPA or even considering 90 days period prior to that date, the first letter is well within three years period of expiry of limitation. Thereafter, all letters have been written within a period of three years from the date of letter dated 11th January 2016 and, this being an instance of continuing cause of action, so, the limit for filing of application gets extended accordingly - the debt is not barred by limitation. The application filed by the financial creditor under Section 7 of the Insolvency Bankruptcy Code, 2016 for initiating corporate insolvency resolution process against the corporate debtor, Shree Ram Saw Mill Private Limited, is hereby admitted - Moratorium declared.

Issues Involved:
1. Default in payment of outstanding debt.
2. Whether the debt was barred by limitation.
3. Acknowledgement of debt and its implications under Section 18 of the Limitation Act, 1963.
4. Appointment of Interim Resolution Professional (IRP) and initiation of Corporate Insolvency Resolution Process (CIRP).

Detailed Analysis:

1. Default in Payment of Outstanding Debt:
The Financial Creditor, Indian Overseas Bank, filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Shree Ram Saw Mill Private Limited, due to a default in payment of an outstanding debt amounting to ?66,43,73,975.00, including unapplied interest. The loan was initially granted on 30th July 2002, and the account became a Non-Performing Asset (NPA) on 24th September 2014.

2. Whether the Debt was Barred by Limitation:
The primary issue was whether the debt was barred by limitation. The Financial Creditor argued that the debt was not barred by limitation, citing various proposals and letters submitted by the Corporate Debtor, specifically referencing a letter dated 5th March 2018, which mentioned an earlier letter dated 11th January 2016. The Tribunal considered these letters and found that the requirements of Section 18 of the Limitation Act, 1963, were met, as the letters constituted an acknowledgement of debt within the limitation period.

3. Acknowledgement of Debt and its Implications under Section 18 of the Limitation Act, 1963:
The Tribunal examined whether the letters constituted an acknowledgement of debt under Section 18 of the Limitation Act, 1963. The Corporate Debtor argued that the letters were marked "without prejudice" and could not be considered as acknowledgements. However, the Tribunal found that the letters acknowledged the loan taken, non-payment, and a request for restructuring the debt. The Tribunal referred to several judicial decisions, including cases like Asset Reconstruction Co. (I) Ltd. Vs. Raigarh Properties Pvt. Ltd. and Trinetra Electronics Ltd. vs. McNally Bharat Engineering Co. Ltd., which supported the view that such communications constituted an acknowledgement of debt. The Tribunal also noted that the explanation (a) to Section 18 of the Limitation Act, 1963, provides a wide scope for what constitutes an acknowledgement, including communications addressed to persons other than the creditor.

4. Appointment of Interim Resolution Professional (IRP) and Initiation of CIRP:
The Tribunal approved the name of the Interim Resolution Professional (IRP) and ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal declared a moratorium as per Sections 13 and 15 of the IBC, 2016, prohibiting the institution or continuation of suits, transferring or disposing of assets, and other actions against the Corporate Debtor. The IRP was directed to make a public announcement and call for the submission of claims. The Tribunal also specified that the supply of essential goods or services to the Corporate Debtor should not be terminated during the moratorium period.

Order:
1. The application under Section 7 of the IBC, 2016, filed by the Financial Creditor is admitted.
2. A moratorium is declared in accordance with Sections 13 and 15 of the IBC, 2016.
3. The IRP shall make a public announcement and call for the submission of claims.
4. The moratorium prohibits the institution or continuation of suits, transferring or disposing of assets, and other actions against the Corporate Debtor.
5. The supply of essential goods or services to the Corporate Debtor shall not be terminated during the moratorium period.
6. Mr. Kanchan Dutta is appointed as the Interim Resolution Professional (IRP).
7. The Financial Creditor is to pay ?3,00,000 to the IRP as advance fees.
8. The Resolution Professional shall conduct the CIRP in a time-bound manner as per Regulation 40A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016.
9. The matter is listed for the filing of the progress report on 22nd April 2020.
10. The Registry is directed to communicate the order to the Financial Creditor, the Corporate Debtor, and the IRP by Speed Post and email.
11. Certified copies of the order may be issued to all concerned parties upon compliance with requisite formalities.

← Previous Next →