2022 (6) TMI 1086 - 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 - HELD THAT - It is seen that the present application has been filed on 17.05.2021 and the account of corporate debtor was declared NPA on 29.09.2017. However, a recovery certificate of Hon'ble DRT was issued in favour of the financial creditor vide order 04.02.2020, which has given rise to a fresh cause of action to the financial creditor to initiate proceeding under Section 7 of IBC within 3 years from the date of the order. Accordingly, the present application is not barred by limitation. Establishment of 'default' on part of the Corporate Debtor - HELD THAT - It is clearly established that the corporate debtor had approached the applicant for taking loan facility, which was sanctioned by the financial creditor and relevant documents were executed. However, the corporate debtor failed to adhere to terms of the sanction letter and defaulted in repayment of the outstanding financial debt. Therefore their account was declared NPA and from the documentary evidence it is proved that the financial creditor is entitled to recover the outstanding dues from the corporate debtor. It is added that in terms of Section 4 of IBC the corporate debtor has defaulted in payment of more than One Lakh and Hence CIRP must be initiated. The claim of the financial creditor has also been confirmed by the Hon'ble Debt Recovery Tribunal vide order dated 04.02.2020. It is pertinent to mention that the corporate debtor has failed to appear and present its defence; accordingly the present matter has been proceeded ex-parte. On perusal of Form-I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed Interim Resolution Professional - the present application is complete in all respect. The financial creditor is entitled to move the application against the corporate debtor in view of admitted outstanding financial debt and default of the same by the corporate debtor and the financial debt has also not been refuted by the Corporate Debtor. Application admitted - moratorium declared.

Summary

Issues:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.
2. Establishment of default by the Corporate Debtor.
3. Consideration of the issue of limitation.
4. Appointment of Interim Resolution Professional.
5. Compliance with procedural requirements under the Code.
6. Imposition of moratorium and related consequences.

Issue 1: Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process:
The Punjab National Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency Resolution Process against the respondent company, Shri Vishnu Eatables (India) Ltd. The application detailed the financial creditor's relationship with the corporate debtor, including the sanctioning of working capital limits and subsequent default by the corporate debtor. The Tribunal noted the jurisdictional aspect and the appointment of an Interim Resolution Professional as per the requirements of the Code.

Issue 2: Establishment of default by the Corporate Debtor:
The Tribunal found that the corporate debtor had approached the financial creditor for a loan facility, which was granted but subsequently defaulted on repayment obligations. The financial creditor declared the account as Non-Performing Asset (NPA) and initiated recovery proceedings. Documentary evidence supported the financial creditor's claim for outstanding dues, further confirmed by the Debt Recovery Tribunal's order. The corporate debtor's failure to appear and defend strengthened the case for default.

Issue 3: Consideration of the issue of limitation:
The Tribunal addressed the issue of limitation by examining the timeline of events leading to the application under Section 7. Despite the account being declared NPA in 2017, a recovery certificate issued in 2020 provided a fresh cause of action within the statutory limitation period. Citing a relevant Supreme Court judgment, the Tribunal concluded that the application was not time-barred, considering the acknowledgment of debt and subsequent legal actions.

Issue 4: Appointment of Interim Resolution Professional:
In compliance with Section 7 requirements, the financial creditor proposed the appointment of Mr. Himanshu Jaitely as the Interim Resolution Professional. The professional's acceptance, declaration of no pending disciplinary proceedings, and necessary disclosures ensured compliance with the Code's provisions. The Tribunal appointed Mr. Jaitely as the Interim Resolution Professional for the corporate debtor.

Issue 5: Compliance with procedural requirements under the Code:
The Tribunal reviewed the completeness of the application under Section 7 and found no deficiencies. The absence of pending disciplinary proceedings against the proposed Interim Resolution Professional further validated the application's procedural compliance. The financial creditor's entitlement to move the application was affirmed based on the admitted financial debt and default by the corporate debtor.

Issue 6: Imposition of moratorium and related consequences:
In line with the Code's provisions, the Tribunal declared a moratorium under Section 14, imposing restrictions on certain transactions while empowering the Interim Resolution Professional to manage the corporate debtor's affairs. Prohibitions during the moratorium period were outlined, emphasizing the professional's duties and obligations. Additionally, the Tribunal directed the financial creditor to deposit a specified sum with the Interim Resolution Professional for process-related expenses.

This comprehensive analysis of the judgment by the National Company Law Tribunal, New Delhi Bench, highlights the key legal issues addressed, procedural compliance, and the Tribunal's decisions regarding the application under the Insolvency and Bankruptcy Code, 2016.