2020 (10) TMI 488 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - time limitation - first and foremost objection raised by the respondent is that the present application filed in 29th April, 2019 is time barred as the petition is filed on the basis of the documents which pertain to the period from 2000 to 2014 - suppression of material facts or not - HELD THAT - On perusal of the records it is found that the applicant bank has placed on record simple debit balance confirmation letter dated 07.04.2016 (Annexure A/34 of petition at page No. 653-657) issued by the respondent and addressed to the applicant acknowledging the debt. Moreover, the account statements show that there are regular credit entries after 7th April, 2016 till May, 2018. The corporate debtor by its letter dated 17.11.2018 has also given the details of amount repaid till 30.09.2018 and also acknowledged the amount outstanding in the respective account as on 30.09.2018. Moreover, the corporate debtor in para 29(a) of its reply, has admitted that it has paid ₹ 16.17 lacs during the financial year 2019-20. Further, the records reveal that from time to time the respondent has executed/entered into various documents acknowledging the debt. This itself shows that the respondent company has acknowledged the debt in the financial year 2019-20. Since the application is filed on 29.04.2019, it is well within time. Whether the power of attorney holder is not competent to file an application on behalf of financial creditor? - HELD THAT - It is a matter of record that the seal affixed at the foot of the said power of attorney is the seal of the said bank and the name of signatures of Shri P.Y. Nagar, Shri T.K. Sharma and Shri D.K. Jain thereto subscribed are as those of the General Managers of said Bank of Mumbai are of the proper respective handwriting of the said Shri P.Y. Nagar, Shri T.K. Sharma and Shri D.K. Jain and the power of attorney is granted as per resolution passed by the Board of Directors of the Bank. Failure to establish the default on the part of the respondent - HELD THAT - It is a matter of record that the petition reveals that the corporate debtor had availed term loan, fund/non fund based limits, working capital limits etc. from the petitioner bank and the respondent has acknowledged the debt from time to time - The debt recovery proceedings are initiated by the Financial Creditor to recover the amount. Simply because the Financial Creditor initiated proceedings before the Debt Recovery Tribunal, it does not lie in the mouth of the corporate debtor to say that no default occurred. As such there is no bar in filing IB application during the pendency of DRT proceedings. Moreover, Corporate Debtor did not disclose any bona fide defence based on substantial grounds for the claim made by the Financial Creditor before this Authority. The above said evidence is sufficient to substantiate the plea of the Applicant that a default has been committed by the Corporate Debtor in payment of amount due and payable to the Applicant. In the instant case, the documents produced by the Financial Creditor clearly establish the 'debt'. Section 13(2) Notice issued by the Financial Creditor clearly indicates that entire debt was recalled. There is a default on the part of the Corporate Debtor in payment of the 'financial debt' - the petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted. Application admitted - moratorium declared.

Summary

Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Objection regarding the application being time-barred.
3. Competency of the power of attorney holder to file the application.
4. Establishment of default by the respondent.
5. Pendency of debt recovery proceedings before the Debt Recovery Tribunal (DRT).
6. Appointment of Interim Resolution Professional (IRP).
7. Declaration of moratorium.

Detailed Analysis:

1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petitioner, a financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking reliefs under Section 7(5)(a) and Section 13(1)(a)(b)(c) of the Code. The application was supported by various documents, including sanction letters, board resolutions, demand promissory notes, hypothecation deeds, and a statement of accounts.

2. Objection regarding the application being time-barred:
The respondent argued that the application was time-barred as it was based on documents from 2000 to 2014. However, the Tribunal found that the applicant bank had placed on record a simple debit balance confirmation letter dated 07.04.2016, and regular credit entries were observed till May 2018. The corporate debtor also acknowledged the debt in letters dated 17.11.2018 and in its reply. Thus, the application filed on 29.04.2019 was within the limitation period.

3. Competency of the power of attorney holder to file the application:
The respondent contended that the power of attorney holder was not competent to file the application. The Tribunal found that the power of attorney was duly executed and authorized by the bank's Board of Directors, and the signatures were verified. Thus, the objection was not maintainable.

4. Establishment of default by the respondent:
The respondent claimed that the petitioner failed to establish default. The Tribunal noted that the corporate debtor had availed various credit facilities and acknowledged the debt from time to time. The debt recovery proceedings initiated by the financial creditor further substantiated the default. The Tribunal found sufficient evidence to establish the default by the corporate debtor.

5. Pendency of debt recovery proceedings before the Debt Recovery Tribunal (DRT):
The respondent argued that the pendency of debt recovery proceedings before the DRT made the application under the IBC redundant. The Tribunal clarified that there is no bar on filing an IBC application during the pendency of DRT proceedings. The financial creditor's claim was found to be valid, and the default was established.

6. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Chandra Prakash Jain as the Interim Resolution Professional (IRP). The application was found to be complete, and no disciplinary proceedings were pending against the proposed IRP.

7. Declaration of moratorium:
The Tribunal declared a moratorium under Section 14 of the Code, prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of assets, and recovery actions. The supply of essential goods and services to the corporate debtor was directed to continue during the moratorium period.

Conclusion:
The petition was admitted, and the moratorium was declared. The Tribunal directed the communication of the order to the applicant, respondent, and the IRP. The petition was disposed of with no order as to costs.