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2021 (6) TMI 166 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - non-payment of installments/interest/principal debt, the account of the corporate debtor has been classified as non performing asset - Section 13(2) of SARFAESI Act, 2002 - HELD THAT - It is beyond doubt that the default has occurred with respect to the payment of the financial debt due to the Applicant. Debt is confirmed as per the confirmation letter issued by the corporate debtor on 01.12.2016 and also the debt is authenticated as per the records of the information utility services (the certificates annexed),there is no doubt left that the debt is due. Even after issuance of notice under section 13 (2) of SARFAESI Act, the debt is not serviced and proceedings before DRT were initiated. Though the DRT has declared that the declaration of account of corporate debtor as NPA was illegal and the same was quashed, but the fact still remains that the debt is unpaid. That in the present case, the date of default was mentioned as the date of declaration of NPA as 02.12.2016. In view of the quashing of the declaration of the account of the corporate debtor as NPA, the date of default now can be considered as date of default as recorded in the certificate of information utility services which is 03.09.2016. The application is filed on 12.03.2019, which is well within the period of limitation and not barred by law - The Applicant is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt. Application admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Process under Section 7 of IBC, 2016. 2. Classification of the Corporate Debtor's account as Non-Performing Asset (NPA). 3. Allegations of unlawful NPA declaration and subsequent legal proceedings. 4. Validity and timeliness of the application under Section 7 of IBC, 2016. 5. Jurisdiction of the Tribunal. 6. Appointment of Insolvency Resolution Professional (IRP). Issue-Wise Detailed Analysis: 1. Initiation of Corporate Insolvency Process under Section 7 of IBC, 2016: The application was filed by Punjab National Bank (Applicant) under Section 7 of the Insolvency and Bankruptcy Code, 2016, along with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The applicant sought to establish the occurrence of default in payment of financial debt. 2. Classification of the Corporate Debtor's account as Non-Performing Asset (NPA): The Applicant classified the Corporate Debtor’s account as NPA on 02.12.2016 due to non-payment of installments/interest/principal debt, following Reserve Bank of India guidelines. The Corporate Debtor contested this classification, arguing that the action was illegal and contrary to RBI Guidelines, and claimed that their accounts were regular and within limits on the date of NPA declaration. 3. Allegations of unlawful NPA declaration and subsequent legal proceedings: The Corporate Debtor challenged the NPA classification and subsequent proceedings under Section 13(2) and 13(4) of the SARFAESI Act before the Debt Recovery Tribunal (DRT), which ruled that the account was wrongly declared as NPA and quashed the proceedings initiated by the Applicant. However, the Applicant filed a statutory appeal against this decision, which was pending before the Debt Recovery Appellate Tribunal. 4. Validity and timeliness of the application under Section 7 of IBC, 2016: The Corporate Debtor raised the issue of limitation, arguing that the application was time-barred. However, the Tribunal noted that the date of default, as recorded in the information utility services (03.09.2016), was within the limitation period, making the application timely. The Supreme Court's judgment in 'Laxmi Pat Surana Vs. Union Bank of India' was referenced, clarifying that the relevant factor is the occurrence of default, not the NPA classification date. 5. Jurisdiction of the Tribunal: The registered office of the Corporate Debtor is situated in Delhi, granting the New Delhi Bench of the National Company Law Tribunal jurisdiction to entertain and adjudicate the application. 6. Appointment of Insolvency Resolution Professional (IRP): The Applicant proposed Mr. Vijay Kumar Gupta as the IRP, who was appointed by the Tribunal, subject to the condition that no disciplinary proceedings were pending against him. The financial creditor was directed to deposit ?2 lacs with the IRP to cover initial expenses, subject to adjustment by the Committee of Creditors. Conclusion: The Tribunal found that the default in payment of financial debt was established beyond doubt, despite the DRT's quashing of the NPA declaration. The application under Section 7 of IBC, 2016, was deemed complete and timely. Consequently, the Tribunal admitted the application, initiated the CIRP, and imposed a moratorium as per Section 14(1) of IBC, 2016. The order was communicated to relevant parties and authorities, and the IRP was instructed to commence the resolution process.
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