2022 (6) TMI 919 - 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 - date of default - HELD THAT - The Corporate Debtor in its Affidavit in Reply dated 22.11.2021 stated that the Financial Creditor had not provided any documentary evidence which would prove that the initial default i.e. Date of Default had occurred on 01.01.2020. On perusal of the documents submitted by the Applicant Financial Creditor, it is clear that there exists a financial debt and the debt is in default. However, the Bench is of the view that the date of default is 01.10.2020 as mentioned in the NESL Report as annexed by the Financial Creditor himself at p.502 as Annexure N1- N8 of the petition to show the record of default available with the Information Utility as on 01.10.2020 and not 01.01.2020 as mentioned by the Financial Creditor in Part IV of the petition. This petition, therefore, falls within the period of enforceability of Sec. 10A of IBC, 2016. The proviso to the Section 10A of the IBC prescribes that no insolvency proceedings can ever be instituted against any entity whatsoever for the default caused/committed in the period between 25.03.2020 to 24.03.2021. This petition is therefore liable to be dismissed. This Bench is of the view that because of insertion of Sec 10A in IBC, this case is clearly attracted by the provisions of Sec 10A as the date of default in this case is 01/10/2020. As per Sec 10A, no IBC proceedings can be initiated against the Corporate Debtor for the default which has occurred between the period from 25/03/2020 till 24/03/2021, keeping in view of the extended period of Sec 10A, the application filed by the Operational Creditor against the Corporate Debtor cannot succeed and is hereby dismissed.

Summary

Issues:
1. Date of default discrepancy between the Financial Creditor and the Corporate Debtor.
2. Claim amount and Loan Agreement acknowledgment.
3. Application under Section 7 of the Insolvency & Bankruptcy Code, 2016.
4. Financial debt default date and enforceability of Section 10A of IBC, 2016.

Analysis:
1. The Financial Creditor filed an application under Section 7 of the I&B Code against the Corporate Debtor, claiming a total Debt Due of Rs. 494,64,35,548/- outstanding as of 05.04.2021, with a Date of Default discrepancy initially stated as 01.01.2020 but later corrected to 01.10.2020 by the Bench based on evidence provided (Para 3, 10).

2. The Financial Creditor had sanctioned and disbursed various credit facilities to the Corporate Debtor, totaling Rs. 459,81,22,901/-. The Corporate Debtor did not dispute the claim amount or the existence of the Loan Agreement between the parties (Para 2, 8, 9).

3. The Financial Creditor's case was based on the default in payment of interest, while the Corporate Debtor argued that the defaults were funded by the Financial Creditor into new loan accounts, making the initial default date irrelevant for initiating CIRP. The Corporate Debtor also highlighted the involvement of Housing Development of India (HDIL) and the ongoing CIRP against it (Para 5, 10, 11).

4. The Bench analyzed the submissions and documents provided by both parties, ultimately concluding that the date of default was 01.10.2020, falling within the period of enforceability of Section 10A of IBC, 2016. As per Section 10A, no insolvency proceedings can be initiated for defaults between 25.03.2020 to 24.03.2021. Therefore, the application under Section 7 was dismissed, with liberty granted to the Financial Creditor to pursue the case before the appropriate forum (Para 10, 11, 12, 13).

In conclusion, the Tribunal dismissed the application under Section 7 of the I&B Code, 2016, filed by the Financial Creditor against the Corporate Debtor due to the application falling within the period covered by Section 10A of the IBC, 2016. The discrepancy in the default date, financial debt details, and the impact of funding interest payments into new loan accounts were crucial factors in the judgment. The decision highlighted the importance of accurate default dates and the application of relevant provisions of the IBC to determine the validity of insolvency proceedings.