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2023 (1) TMI 302 - AT - Insolvency and BankruptcyInitiation of CIRP - reinstatement of dismissed petition - shadow period - NCLT admitted the application u/s 7 - Appellant submits that the Adjudicating Authority, having given Liberty, to file a Petition, for re-instatement, it should be treated, to be Liberty, to file a fresh Application / Petition, as per Section 7 of the I B Code, 2016, for same cause of action - HELD THAT - In view of the crystalline fact that a Liberty, was granted by the Adjudicating Authority (Tribunal) as mentioned in its Order dated 05.11.2020, obviously based on the Memo, filed by the 1st Respondent / Bank to resurrect / revive the IBA/757/2019, to its file, in the event of failure of OTS Proposal, the Appellant at this distant point of time, cannot have a grievance to say that the Order, passed on 05.11.2020, was an Ex-parte one, because of the latent and patent fact that as per Rule 11 of the NCLT Rules, 2016, under the caption Inherent Powers, the Adjudicating Authority (Tribunal), has an inbuilt power, is empowered, to pass necessary orders or issue such directions, to meet the ends of Justice or to prevent, an abuse of process, as the case may be. Viewed in that perspective and also keeping in mind the primordial fact that because of the Default, in payment of the amount, under the One Time Settlement, the act of the 1st Respondent / Bank, in filing application and the Logical Corollary Order, passed by the Adjudicating Authority (Tribunal) in allowing the said Application, and the Order of Restoration, by no stretch of imagination, cannot be found fault with, in the considered opinion of this Tribunal, and hence, the Plea of the Appellant, that there is / was a negation of Rules of Natural Justice, has no legs to stand and the same is not acceded to, by this Tribunal. Dealing with the Plea of the Appellant that the initiation of Corporate Insolvency Resolution Process, by the 1st Respondent / Bank, in regard to the shadow period, i.e., 25.03.2020 to 25.03.2021, when the restrictions imposed, by the ingredients of Section 10A of the I B Code, 2016, were in force, is bad in Law, this Tribunal, relevantly points out that the Parliament, had intended to impose a prohibition, as regards the projecting of the Applications/ Petitions, for the start of Corporate Insolvency Resolution Process, in respect of a Corporate Debtor, for a Default, taking place on or after 25.03.2020 and the embargo was for a period of six months, extendable for a year. As a matter of fact, the words, shall ever be filed, is a clear pointer that the Statutory Provision, ought not to be applicable, in respect of any Default, prior to 25.03.2020, as opined by this Tribunal. The Appellant cannot fall back upon the ingredients of Section 10A of the I B Code, 2016, because of the fact that the Date of Default (Non Performing Asset), in the instant case on hand, was on 31.03.2017. In this connection, it is not out of place to this Tribunal, to make a pertinent mention that the 1st Respondent / Bank (Financial Creditor), filed under Section 7 Application, under the I B Code, 2016, before the Adjudicating Authority, on 03.10.2018. As such, the contra plea, taken on behalf of the Appellant, is unworthy of acceptance. The principle of Waiver or Approbation and Reprobation, lies at the root of conduct, productive of change of activation, and this principle, is akin to the Rule of Constructive Res judicata, as per Explanation IV of Section 11 of the Civil Procedure Code. It is to be remembered that an Application, under Section 7 of the I B Code, 2016, can be preferred by a Financial Creditor, on the basis of Debt and Default. Even the non-payment of Debt, even in entirety or in part or instalment of the Sum of Debt, by a Debtor / Person, will clothe a Right, on a Financial Creditor, to prefer an Application, when the Debt, become due and payable, either in Law or in Fact. No wonder, the Plea of the Appellant that only a portion / part payment only, remains to be paid, by the 2nd Respondent / Corporate Debtor, is a candid tacit admission of Default, and this is a clear adverse circumstance in favour of the Appellant. OTS An Acknowledgement of Debt - HELD THAT - In the present case, this Tribunal, points out that the OTS is a clear cut admission of the Corporate Debtor (between the Parties ), and it is an Acknowledgement of Debt, in terms of the ingredients of Section 18 of the Limitation Act, 1963. Appellant s Locus Standi - HELD THAT - The Appellant who has preferred the instant Comp. App (AT) (CH) (INS.) No. 89 of 2022, is the Promoter of the 2nd Respondent / Corporate Debtor, and in as much as he is an Investor, is not an Aggrieved Person, to prefer the instant Appeal, before this Tribunal, notwithstanding the fact that Section 61 (1) of the I B Code, 2016, employs the words, any person aggrieved by the order of the Adjudicating Authority, under this Part (Chapter VI) of the I B Code, 2016, may prefer an Appeal, in respect of the Order, passed by the Adjudicating Authority, as opined by this Tribunal. Hence, the instant Appeal, filed by the Appellant, before this Tribunal, is not per se maintainable, and answered accordingly. In regard to an Existence of Debt, due and payable in Fact and in Law, and Default was committed by the 2nd Respondent / Corporate Debtor, and the Default took place, well before the Covid-19 Pandemic, and that the Application, filed by the 1st Respondent / Bank / Financial Creditor, is complete in all respects. Looking at from any point of view, the impugned order dated 04.02.2022 in IBA/757/2019, passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench I, Chennai), exercising its subjective judicial discretion, in admitting the Application (Filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the I B (Application to Adjudicating Authority) Rules, 2016), by the 1st Respondent / Bank / Financial Creditor with Moratorium, is free from any Legal Infirmities. Resultantly, the instant Appeal, sans merits. Appeal dismissed.
Issues Involved:
1. Maintainability of the appeal by the Appellant. 2. Validity of the restoration of the application by the Adjudicating Authority. 3. Applicability of Section 10A of IBC during the COVID-19 period. 4. Existence of debt and default by the Corporate Debtor. 5. Validity and impact of the One Time Settlement (OTS) proposal. Issue-wise Detailed Analysis: 1. Maintainability of the Appeal by the Appellant: The appeal was filed by the Appellant, who is a promoter of the Corporate Debtor. The Tribunal held that the Appellant, being an investor, is not an "aggrieved person" under Section 61(1) of the IBC, 2016, and thus, the appeal is not maintainable. The Tribunal cited the case of Amod Amladi v. M/s. Sayali Rane & Anr., where it was established that an investor cannot claim to be an aggrieved person for preferring an appeal against an order admitting an application under Section 9 of the IBC. 2. Validity of the Restoration of the Application by the Adjudicating Authority: The Tribunal noted that the Adjudicating Authority had granted liberty to revive the application if the OTS proposal failed. The restoration of the application was based on the default in payment under the OTS. The Tribunal held that the Adjudicating Authority acted within its inherent powers under Rule 11 of the NCLT Rules, 2016, to meet the ends of justice. Therefore, the restoration order was valid, and there was no violation of natural justice. 3. Applicability of Section 10A of IBC During the COVID-19 Period: The Tribunal clarified that Section 10A of the IBC, which imposed a prohibition on initiating CIRP for defaults occurring during the COVID-19 period, was not applicable in this case. The default date was 31.03.2017, well before the COVID-19 pandemic. The application under Section 7 was filed on 03.10.2018, making the plea regarding Section 10A inapplicable. 4. Existence of Debt and Default by the Corporate Debtor: The Tribunal found that there was an abundance of material evidence proving the existence of debt and default by the Corporate Debtor. The debt was more than Rs. 1 lakh (the threshold limit at the time of filing the application), and the default occurred well before the COVID-19 pandemic. The application filed by the Financial Creditor was complete in all respects, and the Adjudicating Authority was correct in admitting the application and initiating the CIRP. 5. Validity and Impact of the One Time Settlement (OTS) Proposal: The Tribunal held that the OTS proposal was an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The payments made under the OTS were not part of the OTS but were charges on the security. The Tribunal found that the promoters had not paid any sum under the OTS but had arranged Rs. 150 crores from different entities, which was kept in a no-lien account. The failure of the OTS proposal justified the initiation of CIRP by the Financial Creditor. The principle of "Approbate and Reprobate" was not applicable as the Corporate Debtor had accepted the benefits of the contracts and was estopped from denying the liability. Disposition: The appeal was dismissed, and the interim order granted by the Tribunal was vacated. The connected pending applications were also closed. The Tribunal concluded that the Adjudicating Authority's order admitting the application under Section 7 and declaring a moratorium was free from legal infirmities.
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