2022 (9) TMI 134 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - NPA - Financial Creditors - existence of debt and dispute or not - whether the Petition under section 7 of the Code is barred by limitation or not? - HELD THAT - Upon perusal of the record it is apparent that transaction between the parties was purely financial in nature and there is an existence of Financial Debt. From the above records it is apparent that from time to time the Financial Coeditor under SARAL KARJ BHUGTAN YOJNA extended One Time Settlement offer to the Corporate Debtor and the OTS was accepted by the Corporate Debtor - it is evident that the Corporate Debtor is still acknowledging the debt due to the financial creditor being the Financial Creditor in the instant case. It is seen from the record that the date of default has been mentioned as 30 June, 2011, which stood revived with the acceptance of the OTS proposal by the Corporate Debtor on 28 December, 2018. Moreover, upon perusal of the records at page 231 and 232 of the Petition, it is apparent that the Corporate Debtor also made part payment of the OTS proposed amount. Further, the settlement proposal under the SARAL KARJ BHUGTAN YOJNA provided for the payment of the balance amount within 31 March, 2019. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time - the present petition filed by the Financial Creditor is complete in all respects as required by law - Petition admitted - moratorium declared.

Issues Involved:
1. Whether the Petition under section 7 of the Insolvency and Bankruptcy Code, 2016 is barred by limitation.
2. Whether there exists a financial debt and default by the Corporate Debtor.
3. Whether the Corporate Debtor acknowledged the debt, thereby extending the limitation period.

Issue-wise Detailed Analysis:

1. Whether the Petition under section 7 of the Insolvency and Bankruptcy Code, 2016 is barred by limitation:

19. The principal issue that arises before us is whether the Petition under section 7 of the Code is barred by limitation or not.

23. The Hon'ble Supreme Court in Laxmi Pat Surana V. Union Bank of India & Anr held that the declaration of the loan account as NPA can be reckoned as the date of default. However, Section 7 comes into play when the corporate debtor commits "default." Further, the expression "default" has been defined in Section 3(12) to mean non-payment of "debt" when it becomes due and payable and is not paid by the debtor. The right of the financial creditor to initiate action under Section 7 of the Code is triggered the moment the principal borrower commits default. Section 18 of the Limitation Act gets attracted with acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code enures.

24. In Rajendra Narottamdas Sheth and Another v. Chandra Prakash Jain and Another, the Hon'ble Supreme Court stated that Section 18 of the Limitation Act is applicable to applications filed under Section 7 of the Code. If the application is filed beyond three years from the date of default, and the financial creditor provides acknowledgment of debt in writing by the corporate debtor within the initial three years, a fresh period of limitation commences.

25. The continuous acknowledgment in the Balance Sheet of the Corporate Debtor for the financial years ending 2011, 2012, 2013, and 2018 extends the limitation period from time to time.

26. The date of default mentioned as 30 June 2011 was revived with the acceptance of the OTS proposal by the Corporate Debtor on 28 December 2018. The Corporate Debtor also made part payment of the OTS proposed amount, and the settlement proposal under the SARAL KARJ BHUGTAN YOJNA provided for the payment of the balance amount within 31 March 2019.

27. Therefore, the present petition filed by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable, and the default is more than the minimum amount stipulated under section 4 (1) of the Code.

2. Whether there exists a financial debt and default by the Corporate Debtor:

20. Upon perusal of the record, it is apparent that the transaction between the parties was purely financial in nature, and there is an existence of Financial Debt. The Financial Creditor extended One Time Settlement offers to the Corporate Debtor under SARAL KARJ BHUGTAN YOJNA, which the Corporate Debtor accepted.

21. The balance sheets for the years ending 2014-2015, 2015-2016, 2016-2017, and 2017-2018 reflect that the Corporate Debtor has certain short-term borrowings, showing the existence of cash credit facilities from the Bank. The balance sheets also reflect secured term loans (Long term borrowings), indicating that the Corporate Debtor acknowledges the debt due to the Financial Creditor.

22. The Auditors' Report of the Corporate Debtor for financial years ending 2014-2015, 2015-2016, 2016-2017, and 2017-2018 states that the Corporate Debtor has defaulted in the repayment of loans or borrowings to financial institutions and banks.

3. Whether the Corporate Debtor acknowledged the debt, thereby extending the limitation period:

25. Continuous acknowledgment in the Balance Sheet of the Corporate Debtor for the financial years ending 2011, 2012, 2013, and 2018 extends the limitation period from time to time.

Conclusion:

28. Accordingly, the application bearing CP (IB) No. 1847/KB/2019 filed by IDBI Bank, the Financial Creditor, under section 7 of the Code read with rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP against DP Dutta Agro Mills Private Limited, the Corporate Debtor, is admitted.

29. There shall be a moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016, prohibiting the institution of suits, transferring of assets, foreclosure actions, and recovery of property by owners or lessors.

30. The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan or passes an order for liquidation of the Corporate Debtor.

31. Public announcement of the CIRP shall be made immediately as specified under section 13 of the Code.

32. Mr. Pankaj Kumar Tibrewal is appointed as Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the Code.

33. The Financial Creditor shall deposit a sum of Rs.5,00,000/- with the IRP to meet the expenses arising out of issuing public notice and inviting claims.

34. The officers and managers of the Corporate Debtor shall provide all documents and information to the IRP within one week from the date of receipt of this Order.

35. The IRP/RP shall submit periodical reports with regard to the progress of the CIRP in respect of the Corporate Debtor.

36. The Financial Creditor shall serve a copy of this Order on the IRP and the Registrar of Companies, West Bengal, Kolkata.

37. CP (IB) No. 1847/KB/2019 to come up on 31.10.2022 for filing the periodical report.

38. A certified copy of this order may be issued upon compliance with all requisite formalities.

The Order is pronounced on 26th August, 2022.

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