2019 (6) TMI 1075 - AT - Insolvency and Bankruptcy

Maintainability of appeal - Initiation of CIRP - Corporate Debtor - Section 7 of the I B Code - HELD THAT - Section 7 of I B Code providing for initiation of Corporate Insolvency Resolution Process by Financial Creditor came into force on 1st December, 2016. Remedy by way of triggering of insolvency resolution process on the ground of default committed qua the financial debt was admittedly not available to a Financial Creditor prior to such date. It is not disputed by learned counsel for the Appellant that the application under Section 7 of I B Code came to be filed by the Financial Creditor on 12th October, 2018. The triggering of Corporate Insolvency Resolution Process, therefore, cannot be said to be beyond limitation, more so as there has been acknowledgement of debt on 26th February, 2015 and remedy for initiation of Corporate Insolvency Resolution Process in terms of Section 7 of I B Code was not available prior to 1st December, 2016. That apart, there has been continuing cause of action as OA 1194 of 2016 filed by the Financial Creditor against the Corporate Debtor before the Debts Recovery Tribunal, Mumbai on 19th October, 2016 is still pending adjudication. Learned counsel for the Appellant made feeble attempt to contend that the debt acknowledgement letter dated 26th February, 2015 was manipulated and fictitious and same could not be made a basis for either reckoning the period of limitation or for entertaining claim. In absence of such plea having been raised before the Adjudicating Authority besides no complaint alleging forgery, fabrication/ fudging of record being lodged, this argument must be rejected with the contempt that it deserves. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Maintainability of the appeal by the Corporate Debtor.
2. Default alleged by the Financial Creditor and response by the Corporate Debtor.
3. Admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
4. Limitation period for filing the claim by the Financial Creditor.
5. Continuing cause of action and acknowledgment of debt.
6. Allegations of manipulation and fictitious debt acknowledgment letter.

Analysis:

1. The first issue pertains to the maintainability of the appeal by the Corporate Debtor. The Hon'ble Apex Court's dictum in "Innoventive Industries Ltd. Vs. ICICI Bank and Ors." was cited, indicating that the appeal at the instance of the Corporate Debtor may not be maintainable. The Director of the Board of Directors did not file the appeal in his independent capacity, making the appeal not tenable unless proper substitution and transposition of parties occur.

2. The second issue involves the default alleged by the Financial Creditor and the response by the Corporate Debtor. The Financial Creditor claimed a default of ?28,15,26,092 by the Corporate Debtor in repayment of facilities granted, supported by a sanction letter and statement of accounts. The Corporate Debtor made settlement endeavors but did not contest the default or liability.

3. The third issue revolves around the admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by the Adjudicating Authority. Despite the Corporate Debtor's One Time Settlement proposal being rejected, the Adjudicating Authority admitted the application, initiating the Corporate Insolvency Resolution Process.

4. The fourth issue concerns the limitation period for filing the claim by the Financial Creditor. The Financial Creditor's reliance on various security documents and the acknowledgment of debt dated 26th February 2015 supported the claim, making it not barred by limitation as the suit was filed within the prescribed period.

5. The fifth issue addresses the continuing cause of action and acknowledgment of debt. The initiation of the Corporate Insolvency Resolution Process was within the limitation period, considering the acknowledgment of debt in 2015 and the availability of the remedy post-December 2016.

6. The final issue involves allegations of manipulation and a fictitious debt acknowledgment letter by the Corporate Debtor. However, as no such plea was raised before the Adjudicating Authority, and no complaint of forgery or fabrication was lodged, this argument was dismissed, leading to the appeal's dismissal.

In conclusion, the appeal was deemed devoid of merit, and subsequently dismissed, with no orders as to costs. The judgment extensively analyzed the various legal aspects, including maintainability, default, admission of the application, limitation period, acknowledgment of debt, and allegations of manipulation, providing a comprehensive understanding of the case.