2024 (2) TMI 202 - AT - Insolvency and Bankruptcy

Admission of application u/s 7 of IBC - Period of limitation - Date of default - Suspension of initiation of corporate insolvency resolution process - barred under Section 10A of IBC - HELD THAT - There is clear acknowledgement by the Corporate Debtor that Rs.64,04,90,697/- is amount due as on 19.02.2020, i.e., the prior to commencement of 10A period. Section 10A period begun on 25.03.2020 and when default has been committed by the Corporate Debtor prior to 10A period, the submission of the Appellant that Application is barred by 10A period cannot be accepted. There being clear acknowledgement of default of Rs.64,04,90,697/-, which is prior to commencement of 10A period, as accepted in the Agreement dated 26.02.2020, it is not open for the Appellant to contend that default occurred only on 25.08.2020, hence, the Application is barred by Section 10A. It is well settled that when default by Corporate Debtor has occurred prior to 10A period, Application shall not be barred. The fact that letter dated 13.01.2022 has not been brought on the record in the Appeal by the Corporate Debtor also supports the submission of the Financial Creditor that letter dated 13.01.2022, records the state of affairs as it existed at the relevant time - the Adjudicating Authority did not commit any error in accepting the date of default as 15.12.2021 as pleaded in Section 7 Application. The Adjudicating Authority has returned a finding that Agreement dated 15.02.2016 was not a joint venture Agreement and further the amount of Rs.34.55 Crores was disbursed. The Corporate Debtor as noted above, on one hand is pleading that Agreement dated 15.02.2016 was entered and on other hand submits that the said Agreement was not to be implemented or acted upon - The endeavour of the Corporate Debtor is to somehow relieve itself from the liabilities, which could not be discharged in pursuance of the Loan Agreement dated 15.02.2016. The Application filed by the Financial Creditor, cannot be thrown on the ground of Section 10A. The Adjudicating Authority has rightly admitted Section 7 Application. There is no merit in the Appeal - Appeal dismissed.

Summary

Issues Involved:
1. Validity of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016.
2. Dispute regarding the date of default and its implications under Section 10A of the Insolvency and Bankruptcy Code, 2016.
3. Acknowledgment and repayment of debt by the Corporate Debtor.

Summary:

1. Validity of the Section 7 Application:
The appeal was filed by a suspended Director of the Corporate Debtor challenging the National Company Law Tribunal (NCLT) order dated 09.11.2023, which admitted the Section 7 Application filed by the Financial Creditor, Emami Realty Ltd. The Corporate Debtor, Fort Projects Private Limited, had entered into an Agreement on 15.02.2016 with the Financial Creditor for a loan of Rs.35 Crores. The Financial Creditor disbursed Rs.34.55 Crores to the Corporate Debtor. Despite several communications and assurances from the Corporate Debtor, the amount was not repaid. A subsequent Agreement dated 26.02.2020 acknowledged a total due amount of Rs.64,04,90,697/- as on 19.02.2020. The Financial Creditor filed an application under Section 7 claiming Rs.91,74,27,304/- due to non-payment.

2. Dispute Regarding the Date of Default and Section 10A:
The Appellant argued that the default occurred on 25.08.2020, during the Section 10A period, thus barring the application. The Financial Creditor countered that the time for repayment was extended till 15.12.2021, and the default date was 15.12.2021. The Corporate Debtor's reply to the Section 7 Application claimed that the Agreement dated 26.02.2020 was never implemented, contradicting the Appellant's argument regarding the default date. The Tribunal found that the Corporate Debtor's acknowledgment of the debt in the Agreement dated 26.02.2020, which was prior to the Section 10A period, invalidated the Appellant's argument.

3. Acknowledgment and Repayment of Debt:
The Tribunal noted that the Corporate Debtor had acknowledged the debt of Rs.64,04,90,697/- in the Agreement dated 26.02.2020. Despite this acknowledgment, no payment was made, and the Financial Creditor extended the repayment period till 15.12.2021. The letter dated 13.01.2022 from the Financial Creditor to the Corporate Debtor, which was not contested, confirmed the extension of the repayment period. The Tribunal concluded that the Corporate Debtor's contradictory pleas and failure to act on the Agreement dated 26.02.2020 invalidated the Appellant's claim that the application was barred by Section 10A.

Conclusion:
The Tribunal dismissed the appeal, upholding the NCLT's decision to admit the Section 7 Application. The Tribunal found no merit in the Appellant's arguments and concluded that the application was not barred by Section 10A.