2022 (3) TMI 1263 - 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 - time limitation - Whether the application is filed within the period of limitation and whether the MoUs between the Financial Creditors and Corporate Debtor are executed under proper authorization? - HELD THAT - Section 18 the acknowledgement of liability should be made before the expiration of the prescribed period for a suit or application in respect of the debt. If the acknowledgement is beyond the said period it does not amount to acknowledgment in terms of Section 18 of the Limitation Act. The Supreme Court held that the statement on which the plea of acknowledgment is founded must relate to a present subsisting liability and indicate the existence of jural relationship between the parties. It is also observed that the debtor and creditor should have an intention to admit such jural relationship, which need not be in express terms but can be inferred by implication from the nature of the admission and surrounding circumstances. It was held that a statement written in the form a cheque will obviously amount to acknowledgement in writing. To disprove the presumption, the drawer of the cheque should bring on record such facts and circumstances, upon consideration of which the Court may either believe that the consideration and debt did not exist or its non-existence was so probable that a prudent man would under the circumstances of the case act upon the plea that they did not exist. Even circumstantial evidence was held as sufficing to rebut the presumption. If the circumstances so relied upon are compelling the burden may shift to the Applicant. Whether there is any debt which is due to be paid to the Financial Creditors and whether any default in terms of Section 3(12) has been committed by the Corporate Debtor? - HELD THAT - There is no doubt that this Tribunal has jurisdiction to lift the corporate veil, to understand the genuineness of the transaction. But for the purpose of understanding the genuineness of the transaction, if evidence need to be taken, the Tribunal would not have jurisdiction. In this case, from the terms of the MoU itself, it can be concluded that there is no concluded contract between the parties and that the due date for the debt has not arrived and consequently no default has been committed - The MoUs which are admitted to have been entered into, in the quash petition, are not filed before this Tribunal. However, even if it is accepted that the MoUs dated 25.10.2015 23.06.2016 are admitted by the Corporate Debtor, since the obligations under the MoUs stand unfulfilled, the right to file this Petition does not arise. Moreover, in the quash petition several disputed facts with regard to the issuance of the cheques are raised, which require a detailed enquiry which is not within the scope of this Tribunal. The angle of debt becoming due and the angle of the commission of default, the Petition is liable to be dismissed. If the Financial Creditor is bent upon realizing the amounts he has to get the performance of the MoUs done by approaching the appropriate Forum, but not by way of an application under Section 7 of IBC, 2016. Petition dismissed.

Summary

Issues Involved:
1. Whether the application is filed within the period of limitation and whether the MoUs between the Financial Creditors and Corporate Debtor are executed under proper authorization.
2. Whether there is any debt which is due to be paid to the Financial Creditors and whether any default in terms of Section 3(12) has been committed by the Corporate Debtor.
3. To what result.

Issue-wise Detailed Analysis:

I. Whether the application is filed within the period of limitation and whether the Memorandums of Understanding (MoUs) between the Financial Creditors and Corporate Debtor are executed under proper authorization.

The claim is based on two MoUs dated 25.10.2015 and 23.06.2016. The first MoU was between Sri Boppana Satyanarayana Rao (Investor) and Sri Ramesh Lingamaneni (Company). The MoU did not specify the company Ramesh Lingamaneni represented, and there was no evidence of authorization for Ramesh Lingamaneni to bind the Corporate Debtor. The second MoU also lacked clarity on representation and authorization. The Tribunal concluded that both MoUs do not bind the Corporate Debtor due to lack of proper authorization and concluded contract terms.

II. Whether there is any debt which is due to be paid to the Financial Creditors and whether any default in terms of Section 3(12) has been committed by the Corporate Debtor.

The MoUs specified various obligations and conditions for repayment, including the provision of collateral security and the creation of a joint venture. The Tribunal noted that the obligations under the MoUs were not fulfilled, making the contracts non-concluded. The default clause in the MoUs only allowed the Investor to proceed against the properties given as security, not to file for recovery. The application was filed after the limitation period, and the cheque issued on 19.11.2020 was considered a prima facie acknowledgment of debt. However, the Tribunal found that the cheque did not establish a nexus with the liability under the MoUs and was issued beyond the limitation period.

III. To what result.

The Tribunal dismissed the application, stating that the Financial Creditor should seek performance of the MoUs through the appropriate forum, not through an application under Section 7 of the IBC, 2016.

Conclusion:

The Tribunal dismissed the application for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to lack of proper authorization, non-fulfillment of obligations under the MoUs, and filing beyond the limitation period.