2022 (11) TMI 57 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute 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 - In light of the facts and circumstances, 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 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 application 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 Impex Ferro Tech Limited, the Corporate Debtor, is admitted - Moratorium declared.

Issues Involved:

1. Default in payment by the Corporate Debtor.
2. Applicability of the law of limitation.
3. Binding nature of RBI circulars on banks.
4. Simultaneous proceedings by the Financial Creditor.
5. Pendency of winding-up proceedings.
6. Admission of debt and extension of limitation period.
7. Validity of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Default in Payment by the Corporate Debtor:
The Financial Creditor, Punjab National Bank, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Impex Ferro Tech Limited, for defaulting on a payment of Rs. 40,14,94,934.51. The credit facility was initially sanctioned on 29 September 1997 and subsequently renewed. Despite restructuring efforts and various agreements executed on 16.01.2015, the Corporate Debtor defaulted again on multiple dates between 05.04.2016 and 31.10.2016. The account was declared as NPA on 30.04.2014, and restructuring failed, reverting the NPA to its original date as per RBI Prudential norms.

2. Applicability of the Law of Limitation:
The Corporate Debtor argued that the application was barred by limitation since the default date was 30 April 2014, and the proceedings should have been initiated before or on 01 December 2016. However, the Financial Creditor contended that the revival letter dated 14 December 2017 and the balance sheet for the year 2016-2017 acknowledged the debt, thereby extending the limitation period.

3. Binding Nature of RBI Circulars on Banks:
The Corporate Debtor asserted that the Financial Creditor and other banks were obligated to resolve the stressed assets as per the RBI Circular dated 07 June 2019. The Financial Creditors failed to act in accordance with this mandate, which the Corporate Debtor claimed was binding on all banks.

4. Simultaneous Proceedings by the Financial Creditor:
The Corporate Debtor highlighted that the Financial Creditor had already filed proceedings before the Debt Recovery Tribunal (O.A. No. 218 of 2018) and a winding-up petition (C. P. No. 613 of 2016) before the Hon'ble High Court at Calcutta. They argued that the Financial Creditor could not pursue simultaneous proceedings. However, the Tribunal noted that the winding-up petition had been transferred to the NCLT, Kolkata, and the pendency of actions under the SARFAESI Act or RDB Act does not obstruct filing an application under Section 7 of the Code.

5. Pendency of Winding-Up Proceedings:
The Corporate Debtor argued that due to the pending winding-up proceedings, the application under Section 7 was not maintainable. However, the Tribunal clarified that the winding-up petition had been transferred to the NCLT, Kolkata, and thus, the contention was invalid.

6. Admission of Debt and Extension of Limitation Period:
The Tribunal found clear admission of debt by the Corporate Debtor through the revival letter dated 14 December 2017 and the balance sheet for the financial year ending 2016-2017. These admissions extended the limitation period, making the application under Section 7 timely.

7. Validity of the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal concluded that the transaction between the parties was purely financial in nature, and there was an existence of financial debt. The petition filed by the Financial Creditor was complete in all respects, establishing that the Corporate Debtor was in default of a debt due and payable, exceeding the minimum amount stipulated under Section 4(1) of the Code.

Order:
The Tribunal admitted the application under Section 7 of the Code, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. A moratorium under Section 14 of the IBC was declared, and Mr. Sanjay Kumar Agarwal was appointed as the Interim Resolution Professional (IRP). The Financial Creditor was directed to deposit Rs. 4,00,000/- with the IRP for expenses, and the IRP was instructed to carry out functions as per the Code and submit periodical reports on the CIRP progress. The order was communicated to the relevant parties, and the case was scheduled to come up on 15 December 2022 for filing the periodical report.

← Previous Next →