2022 (12) TMI 775 - 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 - whether the Petition under Section 7 is maintainable on the ground of Limitation? - HELD THAT - It is seen from the records that the cause of action arose on 04.07.2014 wherein the Financial Creditor issued a demand recall notice and called upon the Corporate Debtor to repay the dues and the Petition is filed in the year 2019. To corroborate the same, the Financial Creditor has placed on record Financial Statements for the period 01.04.2014 to 31.03.2015, 01.04.2018 to 31.03.2019 Annual Report for period 2019 to 2020 and Annual Report for period 2020 to 2021 wherein the Corporate Debtor has acknowledged the debt owed to the Financial Creditor and the amount therein is set out as Principal amount as secured loan owed by the Corporate Debtor - It is clear that the petition filed is well within Limitation period and the same has been demonstrated vide the Financial Statements as annexed to the petition. There were no cogent evidence to show that the Application is barred by Limitation as alleged by the Corporate Debtor - Further, it is seen from the records available that the Financial Creditor has established that the various term loans/Credit facilities were duly sanctioned and duly disbursed to the Corporate Debtor but there is no payment of Debt on the part of the Corporate Debtor. Hence, owing to the inability of the Corporate Debtor to pay its dues, this is a fit case to be admitted u/s 7 of the I B Code. Considering the above facts and on perusal of documents/ papers placed before the Bench, it is concluded that the nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that there is a Default as defined under section 3 (12) of the Code on the part of the Debtor. The two essential ingredients, i.e. existence of debt and default , for admission of a petition under section 7 of the I B Code, have been met in this case - it is found that the Petitioner has not received the outstanding Debt from the Respondent and that the formalities as prescribed under the Code have been completed by the Petitioner, we are of the conscientious view that this Petition deserves Admission . Petition admitted - moratorium declared.

Summary

Issues:
1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on the ground of Limitation.
2. Validity of the debt owed by the Corporate Debtor to the Financial Creditor.
3. Admissibility of the petition and initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

Issue 1: Maintainability of the petition under Section 7 based on Limitation:
The Financial Creditor filed a Company Petition under Section 7 of the IBC against the Corporate Debtor for defaulting on a financial debt of over Rs. 167 crores. The Corporate Debtor argued that the petition was barred by limitation as the cause of action arose in 2014, and the petition was filed in 2019. However, the Tribunal found that the Financial Creditor had provided sufficient evidence, including financial statements and a one-time settlement offer letter, to establish that the debt was acknowledged within the limitation period. The Tribunal concluded that the petition was not barred by limitation.

Issue 2: Validity of the debt owed by the Corporate Debtor:
The Financial Creditor had sanctioned and disbursed various credit facilities to the Corporate Debtor, who failed to make payments, leading to the classification of the account as a Non-Performing Asset (NPA). The Corporate Debtor argued that there were no pleadings regarding the balance sheet in the petition and that the petition was filed to take advantage of a Supreme Court ruling on limitation. However, the Tribunal noted that the debt was acknowledged through various agreements, letters, and balance sheets, establishing the existence of the debt and default by the Corporate Debtor.

Issue 3: Admissibility of the petition and initiation of CIRP:
After considering the submissions and evidence presented, the Tribunal concluded that the petition met the requirements for admission under Section 7 of the IBC. The Tribunal found that the debt qualified as a "Financial Debt" under the Code, and the default by the Corporate Debtor warranted the initiation of the Corporate Insolvency Resolution Process. The Tribunal admitted the Company Petition, ordered the initiation of CIRP against the Corporate Debtor, and appointed an Interim Resolution Professional to oversee the process.

In conclusion, the Tribunal found that the petition was not barred by limitation, the debt owed by the Corporate Debtor was valid, and the petition met the criteria for admission under the Insolvency and Bankruptcy Code. As a result, the Tribunal admitted the petition, initiated the Corporate Insolvency Resolution Process against the Corporate Debtor, and appointed an Interim Resolution Professional to manage the proceedings.