2021 (7) TMI 1009 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - account of the corporate debtor was classified as NPA - valid power of attorney or not - time limitation - HELD THAT - This case was adjourned from time to time on the ground that the issue of whether entries made in balance sheets amount to an acknowledgement of debt under section 18 of the Limitation Act, 1963 was pending before the Hon'ble Supreme Court. Valid power of attorney or not - HELD THAT - The plea regarding no valid power of attorney is not valid, On perusal as per clauses no. 10, 11 and 12 of the power of attorney mentioned that the applicant is authorized to initiate and prosecute insolvency proceedings by and on behalf of the bank. From the date of authorization to the applicant bank has never revoked the Power of Attorney. Hence, the question that the application is not authorized to file the present application does not arise. Time Limitation - HELD THAT - The other plea regarding the petition is barred by limitation is also not valid, On perusal of balance sheet and auditor's report it is noted that the corporate debtor, has itself acknowledged its liabilities. The recent judgment passed by the Hon'ble Supreme Court in Asset Reconstructions Company India Limited Versus Bishal Jaiswal 2021 (4) TMI 753 - SUPREME COURT held that the entries made in the balance sheet of corporate debtor amount to an acknowledgement of debt under section 18 of Limitation Act, 1963 and, would extend the period of limitation. It is also noted that the amount is due and payable and more than the threshold limit as prescribed under section 4 of the IB Code. The default has occurred. The question of limitation is also not arisen as seen from the record it proves that the CD has already acknowledged the debt in its balance sheet and auditor's report. Hence, considering the facts and circumstances of the case, we hold that the application filed u/s. 7 deserves to be admitted - name of IRP has also been proposed which is mandatory as per the Provision of IB Code, 2016, whose consent is on record. The petition is admitted - moratorium declared.

Summary

Issues:
- Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for corporate insolvency resolution process against a corporate debtor.
- Whether entries in balance sheets amount to an acknowledgment of debt under section 18 of the Limitation Act, 1963.
- Validity of power of attorney to file the application.
- Whether the application is barred by limitation.
- Appointment of an Interim Resolution Professional (IRP).
- Effect of the order on moratorium, suits, proceedings, and asset disposal.
- Duties and obligations of the IRP.
- Payment of fees and expenses to the IRP.
- Communication and commencement of the Corporate Insolvency Resolution Process.

Detailed Analysis:

1. The Applicant, Canara Bank, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking corporate insolvency resolution process against the Corporate Debtor, M/s. Nakoda Ltd., for defaulting on a significant amount along with interest and penal interest. The debt was acknowledged by the Corporate Debtor in its balance sheets and auditor's reports for several years, leading to the admission of the application by the Tribunal.

2. The issue of whether entries in balance sheets amount to an acknowledgment of debt under section 18 of the Limitation Act, 1963 was considered. The Tribunal noted that the Corporate Debtor had acknowledged its liabilities in the balance sheets and auditor's reports, which was supported by a recent judgment of the Hon'ble Supreme Court. This acknowledgment extended the period of limitation, making the application valid and not barred by limitation.

3. The validity of the power of attorney to file the application was challenged by the Corporate Debtor. However, the Tribunal found that the power of attorney authorized the bank to initiate and prosecute insolvency proceedings, and it was never revoked, thus dismissing the plea regarding the lack of authority to file the application.

4. The Tribunal appointed an Interim Resolution Professional (IRP) as mandated by the Insolvency and Bankruptcy Code, 2016, to conduct the Corporate Insolvency Resolution Process in a time-bound manner. The IRP's appointment was made after ensuring no pending disciplinary proceedings against the proposed IRP.

5. The order imposed a moratorium under Section 14 of the Code, prohibiting suits, proceedings, and asset disposal against the Corporate Debtor. The IRP was tasked with managing the operations of the Corporate Debtor as a going concern and protecting its property value.

6. The Financial Creditor was directed to pay the IRP fees and expenses, with further instructions regarding communication of the order and the commencement of the Corporate Insolvency Resolution Process. The Tribunal's decision allowed the application and effectively initiated the resolution process for the Corporate Debtor.