2024 (5) TMI 1507 - Tri - IBC

Maintainability of application filed under Section 7 of the Insolvency and Bankruptcy Code 2016 (IBC) - application within time limit or not - existence of a financial debt and default - all sanction letters and loan agreements allegedly have signatures of Sh. Sushil Mittal who passed away on 28.04.2020 due to COVID - differences in the claimed amount and the amount awarded by the Debt Recovery Tribunal (DRT) affect the insolvency proceedings or not. Existence of debt and default or not - HELD THAT - The Applicant has annexed various documents to prove the existence of debt and default on behalf of the Corporate Debtor Company. Time limitation - HELD THAT - The date of NPA is 31.08.2017 as the date of default for the purpose of calculating limitation - the present application filed by the Applicant Bank is well within the limitation period. All sanction letters and loan agreements allegedly have signatures of Sh. Sushil Mittal who passed away on 28.04.2020 due to COVID - HELD THAT - There are no force in the argument of the Respondent that the authenticity of the documents of the present case against the Corporate Debtor Company becomes questionable merely because the signing member has expired. As per the documents on record the loan has been availed by the Corporate Debtor Company which is in existence. Difference in the amount of Rs. 193, 41, 71, 512.52 claimed by the ATpplicant herein and the amount of award for Rs. 49, 44, 65, 248/- by DRT - HELD THAT - The Applicant has clarified in its rebuttal that the award by DRT is in relation is in relation to a different case being OA No. 3000/2018 titled as Central Bank of India VS M/s Kaur Sain Spinners Ltd and Others . Further in any case the amount of default is much above than the minimum threshold limit applicable to the present case. Conclsuion - The Applicant Bank has been able to successfully establish the debt and default beyond doubt on the part of the Respondent-Corporate Debtor in repayment of its financial debt. The present Application being complete and the Applicant having established the default on the part of the Respondent in payment of the Financial Debt for an amount being above the minimum threshold limit the present Application is admitted in terms of Section 7(5) of the IBC and accordingly the Moratorium is declared in terms of Section 14 of the Code. Application admitted.

2025 (1) TMI 951 - AT

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

Whether the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by the Applicant Bank is within the limitation period?
Whether the Applicant Bank has successfully established the existence of a financial debt and default by the Respondent?
Whether the authenticity of the loan documents is questionable due to the death of a signatory, and if this affects the validity of the claim?
Whether the differences in the claimed amount and the amount awarded by the Debt Recovery Tribunal (DRT) affect the insolvency proceedings?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation Period

Relevant legal framework and precedents: The limitation period for initiating insolvency proceedings is governed by the IBC and relevant judicial precedents, including the NCLAT judgment in Milind Kashiram Jadhav vs State Bank of India & Anr.
Court's interpretation and reasoning: The Tribunal considered the date of Non-Performing Asset (NPA) classification as the date of default, following the precedent that the NPA date serves as a valid "Date of Default" for initiating insolvency proceedings.
Key evidence and findings: The account was classified as NPA on 31.08.2017, and the application was filed on 18.02.2020, within the three-year limitation period.
Application of law to facts: The Tribunal found the application to be within the limitation period, as the filing date preceded the expiration of the limitation period.
Treatment of competing arguments: The Respondent did not specifically contest the limitation issue.
Conclusions: The application is within the limitation period.

Issue 2: Existence of Financial Debt and Default

Relevant legal framework and precedents: Section 7 of the IBC requires the existence of a financial debt and a default for initiating insolvency proceedings.
Court's interpretation and reasoning: The Tribunal examined the documents submitted by the Applicant, including agreements, sanction letters, and account statements, to establish the existence of debt and default.
Key evidence and findings: The Applicant provided comprehensive documentation proving the debt and default, including agreements and CIBIL reports.
Application of law to facts: The Tribunal found that the Applicant had established the debt and default beyond doubt.
Treatment of competing arguments: The Respondent questioned the authenticity of documents but did not deny the existence of debt and default.
Conclusions: The Applicant successfully established the existence of a financial debt and default by the Respondent.

Issue 3: Authenticity of Documents

Relevant legal framework and precedents: The legal personality of a corporate entity is distinct from its directors or members.
Court's interpretation and reasoning: The Tribunal held that the authenticity of documents is not affected by the death of a signatory, as the corporate debtor remains a distinct legal entity.
Key evidence and findings: The Tribunal relied on the corporate structure of the Respondent to dismiss concerns about document authenticity.
Application of law to facts: The Tribunal found no merit in the argument that the documents were questionable due to the death of a signatory.
Treatment of competing arguments: The Respondent's argument was rejected based on the distinct legal personality of the corporate debtor.
Conclusions: The authenticity of the documents stands unaffected.

Issue 4: Discrepancy in Claimed Amount

Relevant legal framework and precedents: The IBC requires only a default of Rs. 1,00,000/- to initiate proceedings.
Court's interpretation and reasoning: The Tribunal noted that the discrepancy in amounts did not affect the insolvency proceedings, as the default exceeded the minimum threshold.
Key evidence and findings: The Applicant clarified that the DRT award related to a different case.
Application of law to facts: The Tribunal found that the discrepancy in amounts was irrelevant to the proceedings.
Treatment of competing arguments: The Respondent's argument was dismissed as the default amount exceeded the statutory threshold.
Conclusions: The discrepancy in amounts does not impact the proceedings.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The date of NPA classification serves as the valid 'Date of Default' for initiating insolvency proceedings."
Core principles established: The classification of an account as NPA can serve as the date of default; the distinct legal personality of a corporate entity is unaffected by changes in its management.
Final determinations on each issue: The application is within the limitation period; the Applicant established the existence of a financial debt and default; the authenticity of documents is not compromised; discrepancies in claimed amounts do not affect the proceedings.

← Previous Next →