2020 (10) TMI 1037 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Operational Debt or not - time limitation - HELD THAT - It is quite settled that the acknowledgement has to be a conscious acknowledgement of the debt. There could be refusal to pay but it should show that there has been an acknowledgement of the debt outstanding. In the present matter, the endorsement concerned is seriously disputed and even if we are to accept the case of the appellant - even the Appellant is not claiming that Mr. Faruk Qureshi signed it. Who signed, nothing is clear. In the facts of the matter, the contention of the Corporate Debtor that the signature is not of Authorized Representative, cannot be simply brushed aside. From side of Operational Creditor, there is no Affidavit regarding how such endorsement was made. Annexure A/4 does not inspire confidence. We do not find that the Adjudicating Authority erred when it concluded that the debt claimed was time barred. On this count, we did not find any substance in the Appeal. We set aside the Order passed by the Adjudicating Authority in Paragraphs 13 and 14 of the Impugned Order imposing penalty of ₹ 1 Lakh on the Operational Creditor/Appellant. Rest of the Impugned Order of the Adjudicating Authority we maintain - Appeal allowed in part.

Summary

Issues:
1. Application under Section 9 of Insolvency and Bankruptcy Code, 2016 filed by Operational Creditor against Corporate Debtor.
2. Claim of outstanding debt by Operational Creditor.
3. Defense by Respondent on grounds of limitation and disputed acknowledgment.
4. Observations and penalty imposed by Adjudicating Authority.
5. Appeal filed by Operational Creditor challenging the Impugned Order.
6. Arguments and submissions made by both parties regarding acknowledgment and limitation.
7. Dispute over the authenticity of the acknowledgment and its legal implications.
8. Decision of the Appellate Tribunal on penalty imposition and acknowledgment dispute.

Analysis:

The judgment pertains to an Application under Section 9 of the Insolvency and Bankruptcy Code, 2016, where the Operational Creditor filed against the Corporate Debtor, claiming an outstanding debt of ?14,09,449. The Operational Creditor alleged non-payment and sent a notice under Section 8 of the IBC before filing the application. The Respondent raised a defense on the grounds of limitation, disputing the acknowledgment of the debt. The Adjudicating Authority found the operational debt time-barred and imposed a penalty of ?1 Lakh on the Appellant, leading to the Appeal challenging this decision.

The Appellant argued that the coal supply was undisputed, and no payment was made despite claims of payment to the Appellant's agent. The Appellant presented a ledger account and an endorsement allegedly made by the Corporate Debtor acknowledging the debt. However, the Respondent disputed the authenticity of this acknowledgment, claiming the signature did not belong to any authorized signatory. The Adjudicating Authority found the debt time-barred based on the disputed acknowledgment.

The Appellate Tribunal upheld the Adjudicating Authority's decision on the time-barred debt but disagreed on the penalty imposition, finding no evidence of fraudulent intent in initiating the proceedings. The Tribunal partially allowed the Appeal, setting aside the penalty while maintaining the rest of the Adjudicating Authority's Order. The dispute over the acknowledgment's authenticity and the debt's limitation played a crucial role in the Tribunal's decision, emphasizing the importance of clear and undisputed acknowledgments in such cases.

Overall, the judgment highlights the significance of timely and accurate acknowledgments in debt-related proceedings under the IBC, underscoring the need for clear documentation and evidence to support claims and defenses in insolvency cases.