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2022 (6) TMI 826 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - during pendency of proceedings under SARFAESI Act, 2002, petition under IBC filed - existence of debt and dispute or not - time limitation - HELD THAT - The date of default in the instant petition is 30 June 2016 i.e. the date on which the accounts of the Corporate Debtor were declared NPA. The date of filing of this petition is 24 October, 2019, which would ordinarily mean that the petition would be barred by limitation. However, in light of the acknowledgement of the Corporate Debtor towards its debt due to the Financial Creditor in its balance sheets for years ending on 31 March 2018 and 31 March 2019 as well the admission of the said fact in the auditor's reports attached to the balance sheets, specifically at pages 36 and 169 respectively of the rejoinder, fresh limitation periods shall ensue from the date of the acknowledgements. As such the instant petition is well within the period of limitation. Further a demand letter under section 13(2) of the SARFAESI Act, 2002 was issued on 8 March 2017. The contention of the Corporate Debtor is that during the pendency of proceedings under SARFAESI Act, 2002, a petition under the Code cannot be filed. The said contention cannot be considered since actions under the Code and the SARFAESI Act are two different legislations in two different fields. The purpose of one is recovery and the purpose of the other is resolution of insolvency. Therefore, proceeding with one course of action cannot hinder with the right of the party to proceed with another. Keeping in view that a default in the payment of a financial debt has occurred and has been acknowledged by the Corporate Debtor, and that the said application is not barred by limitation, the instant application under section 7 of the Code is complete in all respects. Application admitted - moratorium declared.
Issues:
- Maintainability of the application under section 7 of the Insolvency and Bankruptcy Code, 2016 - Barred by limitation or not - Necessity of including State Bank of India as a party - Authorization of the individual signing the application - Acknowledgment of debt by the Corporate Debtor - Relationship between SARFAESI Act proceedings and Insolvency and Bankruptcy Code proceedings Analysis: 1. Maintainability of the Application: The Financial Creditor, UCO Bank, filed a Company Petition under section 7(1) of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Limtex (India) Limited, due to default in servicing interest and principal amounts, leading to the accounts being declared as Non-Performing Assets (NPA). 2. Limitation Issue: The Corporate Debtor argued that the application was barred by limitation as it was filed after the NPA classification in 2016. However, the Tribunal found that fresh limitation periods ensued from acknowledgments made by the Corporate Debtor in its balance sheets for the years ending on 31 March 2018 and 31 March 2019, making the application well within the period of limitation. 3. Inclusion of State Bank of India: The Corporate Debtor contended that the application was not maintainable without including State Bank of India (SBI) as a party, as the loan was granted under a Consortium with SBI. However, the Tribunal held that there was no legal requirement to jointly file the application with SBI, as long as the Financial Creditor met the necessary criteria. 4. Authorization of Signatory: The Corporate Debtor raised concerns about the authorization of the individual signing the application on behalf of UCO Bank. The Tribunal dismissed this argument, stating that the signatory was properly authorized by UCO Bank to file the petition. 5. Acknowledgment of Debt: The Tribunal noted that the Corporate Debtor acknowledged its debt to the Financial Creditor in its balance sheets and auditor's reports, which further supported the maintainability of the application within the limitation period. 6. SARFAESI Act and IBC Proceedings: The Corporate Debtor argued that during the pendency of SARFAESI Act proceedings, an application under the Insolvency and Bankruptcy Code could not be filed. However, the Tribunal clarified that actions under both legislations serve different purposes, with one focused on recovery and the other on insolvency resolution, allowing independent proceedings. In conclusion, the Tribunal admitted the application under section 7 of the Code, appointed an Interim Resolution Professional, declared a moratorium, and directed the Financial Creditor to deposit funds for expenses. The Tribunal emphasized the independence of SARFAESI Act and IBC proceedings, ensuring the resolution process moves forward effectively.
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