2021 (8) TMI 798 - 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 - assignment of debt - time limitation - HELD THAT - The Original Lender, i.e., SBI had granted a loan to the Corporate Debtor to the tune of ₹ 62.73 crores as on 31.03.2011. The Petitioner was assigned this debt as per the deed of assignment dated 19.03.2014 and the original lender had commenced the proceeding under SARFAESI and Debt Recovery Tribunal (DRT). The Debt Recovery Tribunal (DRT) had issued the Recovery Certificate of ₹ 80,67,60,995.92 along with future interest on 22.11.2016. The date of default as mentioned in Part IV of the Petition is 31.03.2009 and the NPA is 30.06.2009. However, the Petitioner also relied upon the Debt of Default as on 28.06.2012 as per NESL filing and SARFAESI Notice. The present Petition is filed on 06.08.2020, however the date of default relied upon the Petition is on the 31.03.2009 and 28.06.2012, therefore, even if we assume that cause of action arose on 28.06.2012, even then the Petition, if filed beyond three years, is time barred - Evidently, there has been restructuring of loan on 07.11.2014 and 30.06.2017, contrary to the terms and conditions of the restructuring package, the Petitioner has revoked the restructuring package on 01.06.2018. The said letter of revocation of restructuring immediately objected/rebutted by the Corporate Debtor. In strict interpretation of law of Contracts, it seems that there was no consensus ad idem and the unilateral revocation was strongly objected by the Corporate Debtor who pointed out that there is no default and payments will have to be made only from operational cash flows. This Bench is of the considered view that the cause of action arose as on 31.03.2009/ 28.06.2012. However, the Petitioner was filed on 08.08.2020 which is beyond three years as contemplated in judgment of Hon ble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT wherein it is categorically held that the Article 137 of the Limitation Act, 1963 mentioned that the right to sue accrues by the Default occurs, the default has occurred over three year prior to the filing of Petition and the Petition is barred by the Limitation under Limitation Act, 1963 - In the instant case, it can be seen from the facts of the given case the default occurred as on 31.03.2009 or on 28.06.2012, a recovery certificate issued by the Debt Recovery Tribunal (DRT) on 22.11.2016, the restructuring package as on 07.11.2014, 30.06.2017. The Petitioner has not been able to demonstrate default of non-payment of monies under the restructuring package and the petition is barred by limitation as the date of default as shown in the petition is of 31.03.2009 as per the original agreement with the Lender SBI - petition dismissed.

Summary

Issues Involved:
- Whether the Petition is barred by Limitation.
- Whether the Petitioner has waived its statutory right by restructuring the loan on 07.11.2014 and 30.06.2017.
- Whether there is any default on the part of the Corporate Debtor in view of the restructuring of the loan.

Issue-wise Detailed Analysis:

1. Whether the Petition is barred by Limitation:
The Petitioner, Edelweiss Asset Reconstruction Company Ltd., filed the Company Petition seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Perfect Engine Components Private Limited (Corporate Debtor) for defaulting on a loan amounting to ?226,77,83,051/-. The Original Lender, State Bank of India (SBI), had extended various credit facilities to the Corporate Debtor, which were secured by personal and corporate guarantees, hypothecation agreements, and mortgage deeds. The Corporate Debtor defaulted on 31.03.2009, and its account was declared as Non-Performing Asset (NPA) on 30.06.2009. The debt was later assigned to the Petitioner on 19.03.2014. The Petitioner argued that the Corporate Debtor acknowledged the outstanding debt through balance confirmation letters dated 31.03.2010, 31.03.2011, and 31.03.2012. However, the Corporate Debtor contended that the Petition is barred by limitation as the default dates back to 2009, and the Petition was filed in 2020, beyond the three-year limitation period prescribed under the Limitation Act, 1963. The Tribunal concluded that the cause of action arose on 31.03.2009 or 28.06.2012, and the Petition filed on 06.08.2020 is time-barred.

2. Whether the Petitioner has waived its statutory right by restructuring the loan on 07.11.2014 and 30.06.2017:
The Petitioner granted a restructuring package to the Corporate Debtor on 07.11.2014 and again on 30.06.2017. The restructuring package included a fixed schedule of repayment and terms and conditions of default interest. However, the Petitioner revoked the restructuring package on 01.06.2018, citing non-compliance with the payment terms. The Corporate Debtor rebutted this revocation, arguing that the restructuring package was acted upon, and several steps were taken pursuant to it. The Tribunal noted that the restructuring package envisaged repayment from operational cash flows, and there was no stipulation requiring the promoters to make up for any shortfall in operating cash flows. The Tribunal found that the unilateral revocation of the restructuring package by the Petitioner, without consensus, indicated that there was no default on the part of the Corporate Debtor as per the restructuring terms.

3. Whether there is any default on the part of the Corporate Debtor in view of the restructuring of the loan:
The Petitioner argued that the Corporate Debtor defaulted on the restructured loan terms. However, the Corporate Debtor contended that there was no fresh default post-restructuring and that payments were made as per the operational cash flows. The Tribunal observed that the restructuring package did not stipulate that the promoters were required to inject additional funds in case of shortfall in operating cash flows. The Corporate Debtor had complied with the restructuring terms by surrendering assets, issuing equity shares, and making payments from operational cash flows. The Tribunal concluded that there was no default as defined under Section 3(12) of the Insolvency and Bankruptcy Code (IBC), which states that default means non-payment of debt when it becomes due and payable. The Tribunal found that the Petitioner failed to demonstrate any default by the Corporate Debtor under the restructured terms.

Conclusion:
The Tribunal dismissed the Petition, holding that it was barred by limitation and that the Petitioner failed to demonstrate any default by the Corporate Debtor under the restructured terms. The Tribunal emphasized that the objective of the IBC is to aid organizations that are insolvent and unable to pay their debts, which was not the case here as the Corporate Debtor had complied with the restructuring terms.