2023 (7) TMI 66 - AT - Insolvency and Bankruptcy

Initiation of CIRP - NCLT admitted the application - 1st Respondent / Bank has made substantial recoveries during the pendency of Legal Proceedings - Dues or Outstandings payable by the Corporate Debtor to the 1st Respondent / Bank / Financial Creditor or not. The stand of the 2nd Respondent / Corporate Debtor before the Adjudicating Authority / Tribunal was that there were no Dues payable by the Corporate Debtor to the Financial Creditor for that the 2nd Respondent / Corporate had repaid the Amounts in excess of the Principal Amount borrowed it is the Financial Creditor has to Repay such overpaid monies to the Corporate Debtor. HELD THAT - This Tribunal pertinently points out that in a Proceeding (Filed under Section 7 of the I B Code 2016 by a Petitioner / Financial Creditor) an Adjudicating Authority/ Tribunal is not concerned with the Dispute/ Controversy between the Respondent / Corporate Debtor and the Petitioner / Financial Creditor as regards the quantum. Ofcourse when a Claim is made it is for the Resolution Professional to quantify the Claim Sum to be paid. An Adjudicating Authority / Tribunal under I B Code 2016 is necessarily to ascertain as to whether there is any Default and whether the Liability of the Respondent / Corporate Debtor is more than the Limit prescribed under the Section 4 of the Code - Although the Debt is Disputed if the said Sum is more than the Amount specified under Section 4 of the I B Code 2016 an Adjudicating Authority / Tribunal has to admit the Section 7 Application of the I B Code 2016 and the said Application cannot be rejected merely on technical grounds. No wonder an Adjudicating Authority/ Tribunal is to exercise its Judicial Discretion in dealing with an Application (Filed under I B Code 2016) in accordance with Law and based on facts evidence and circumstances of the given case. In the case on hand before this Tribunal although on the side of the Appellant a reference is made to the Order in M/S. INMA INTERNATIONAL LTD. G. RATHINAVELU G. SUNDARAVADIVELU VERSUS INDIAN OVERSEAS BANK 2019 (12) TMI 1649 - MADRAS HIGH COURT whereby and whereunder an Order of Ad-interim Injunction as prayed for till 21.01.2020 was granted and it was made clear that till the Disposal of the Writ Petition the Writ Petitioners shall not create any Third Party Rights in respect of the Properties in question this Tribunal is of the earnest opinion that there was no embargo upon the Adjudicating Authority / Tribunal in not Proceeding with the IBA/49/2019 (Filed by the 1st Respondent / Bank / Financial Creditor). The prime fact to be taken note of in repelling the plea of the Appellant that the Liability has not crystallised in a definite manner is that a Final Order came to be passed by the Debt Recovery Appellate Tribunal as per Section 19 (20) r/w. Section 22 of Recovery of Debts Due to Banks and Financial Institutions Act 1993. It cannot be gainsaid that the Order of a Court / Tribunal determining the Default is a cementing platform evidencing Financial Debt as opined by this Tribunal. Considering the fact that the Due of the 2nd Respondent / Corporate Debtor is more than the Threshold Limit of Rs.1 Lakh under Section 4 of the I B Code 2016 and the same is to be paid both in Law and in Fact this Tribunal without any haziness comes to a cocksure conclusion that the aspect of Debt and Default committed by the 2nd Respondent / Corporate Debtor is proved to its subjective satisfaction. Therefore the 1st Respondent / Bank / Petitioner has rightly initiated the Corporate Insolvency Resolution Process before the Adjudicating Authority / Tribunal (under Section 7 of the I B Code 2016) and the same was rightly admitted by the Adjudicating Authority (National Company Law Tribunal Special Bench II Chennai) exercising its Judicial Discretion based on the attendant facts and circumstances of the case which is free from any legal infirmities. Appeal dismissed.

Summary

Issues Involved:
1. Existence of Debt and Default
2. Maintainability of Section 7 Application
3. Effect of Interim Orders and Contempt Proceedings
4. Quantum of Debt and Interest Calculation

Summary:

Existence of Debt and Default:
The Appellant challenged the impugned order dated 13.04.2022, where the Adjudicating Authority admitted the application under Section 7 of the I & B Code, 2016, initiated by the 1st Respondent (Financial Creditor) against the 2nd Respondent (Corporate Debtor). The Financial Creditor had issued a demand notice under SARFAESI Act on 27.01.2015, demanding Rs.16,51,98,135.20/- and subsequently took possession of the mortgaged property. The Corporate Debtor failed to settle the dues, leading to the declaration of the account as a Non-Performing Asset (NPA) on 30.12.2014. The Adjudicating Authority observed that the debt and default were clear, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP).

Maintainability of Section 7 Application:
The Appellant argued that the application under Section 7 was not maintainable as the debt had been repaid in excess, and there were no dues payable. The Appellant also contended that the Financial Creditor had suppressed the date of default and the exact amount in default, rendering the application incomplete. However, the Tribunal held that the existence of debt and default was established, and the application was rightly admitted by the Adjudicating Authority.

Effect of Interim Orders and Contempt Proceedings:
The Appellant pointed out that the Hon'ble Madras High Court had granted an interim injunction on 04.12.2019, restraining the Financial Creditor from taking coercive steps against the Corporate Debtor. Despite this, the Financial Creditor proceeded with the Section 7 application, leading to contempt proceedings. The Tribunal noted that the interim order did not bar the Adjudicating Authority from proceeding with the application under Section 7.

Quantum of Debt and Interest Calculation:
The Appellant argued that the Debt Recovery Tribunal (DRT) had determined that the Financial Creditor was not entitled to any interest from the date of sanction till the date of filing the application, and the Debt Recovery Appellate Tribunal (DRAT) had modified this to allow simple interest at 9% per annum. The Appellant claimed that the dues had been paid as per the DRT's final order, and there was no default. However, the Tribunal held that the order of the DRT merged with the order of the DRAT, and the amount decided by the DRAT remained due and payable.

Conclusion:
The Tribunal concluded that the debt and default were established, and the application under Section 7 of the I & B Code, 2016, was rightly admitted by the Adjudicating Authority. The appeal was dismissed, and the connected interim application for stay was closed.