2020 (3) TMI 1105 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Time Limitation - HELD THAT - The Corporate Debtor /Respondent has neither challenged the decree as mentioned earlier nor filed any review till the date of the filing of the petition under Section 7 of the I B Code. It is also clear that the Defendant No.1 to 5 in the said suit were jointly and severally liable to discharge their obligations of the decree above leaving it to the sole discretion of the Plaintiff/Appellant to recover the said amount from any of the said Defendants. Time Limitation - HELD THAT - The Corporate Debtor /Respondent made a false statement before the Adjudicating Authority, and the Adjudicating Authority had no reason to disbelieve such a statement. The Adjudicating Authority had failed to appreciate that the Corporate Debtor /Respondent had mischievously not placed any record about the alleged Review Application. In the circumstances, the impugned order dated 05th July 2019 regarding the rejection of the Application filed under Section 7 of the I B Code deserves to be rejected. Since all the ingredients of Section 7 of the, I B Code 2016 are satisfied and the Application for initiation of the corporate insolvency resolution process is complete, therefore, the Appeal is allowed.

Issues Involved:
1. Validity of the rejection of the Company Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Alleged misleading statements by the Respondent regarding the review application.
3. The applicability of the Law of Limitation to the proceedings under the I&B Code.
4. The Adjudicating Authority's observations on selective prosecution by the Petitioner.
5. The status of the decree and the alleged pending review application.

Detailed Analysis:

Issue 1: Validity of the Rejection of the Company Application
The Appellant questioned the correctness of the impugned order dated 05th July 2019, passed by the Adjudicating Authority, rejecting the Company Application filed under Section 7 of the I&B Code. The Appellant contended that the rejection was based on an incorrect belief that a review application of the judgment and decree dated 22nd May 2015 and 06th August 2015 was pending before the Hon'ble Delhi High Court. The Appellant argued that no such review application was pending, and the Adjudicating Authority was misled by the Respondent.

Issue 2: Alleged Misleading Statements by the Respondent
The Appellant asserted that the Respondent committed perjury by claiming that a review application was pending before the Hon'ble Delhi High Court. The Respondent's misleading averments were not supported by any document or evidence. Upon inspection, it was found that the review application filed on 13th December 2018 was withdrawn on 17th December 2018 and never re-filed. The Respondent's false statements led to the rejection of the application under Section 7 of the I&B Code.

Issue 3: Applicability of the Law of Limitation
The Adjudicating Authority raised concerns about the Appellant's delay in prosecuting the judgment and decree obtained in 2015. However, the period of limitation of three years starts from the date of the final decree, 06th August 2015. The petition filed on 27th June 2019 was within the statutory period of limitation. The Hon'ble Supreme Court's judgment in B.K. Educational Services Private Limited Vs. Parag Gupta & Associates clarified that Article 137 of the Limitation Act applies to proceedings under Section 7 of the I&B Code.

Issue 4: Selective Prosecution by the Petitioner
The Adjudicating Authority questioned why the Appellant selectively chose to prosecute only the Corporate Debtor, leaving out the personal guarantors and the principal borrower. The Appellant argued that the liabilities of the Corporate Debtor, personal guarantors, and principal borrower were joint and several. The Appellant had the discretion to recover the amount from any of the defendants and chose to file the petition under Section 7 of the I&B Code against the Corporate Debtor.

Issue 5: Status of the Decree and Alleged Pending Review Application
The decree dated 22nd May 2015 and 06th August 2015 awarded a sum of ?8,04,43,637 along with interest to the Appellant. The Respondent misled the Adjudicating Authority by claiming that a review application was pending. The Adjudicating Authority's rejection of the application was based on this incorrect belief. The Corporate Debtor's failure to provide proof of the pending review application and the Appellant's timely filing of the petition under Section 7 of the I&B Code indicated that the rejection of the application was unjustified.

Conclusion:
The Appellate Tribunal found that the Adjudicating Authority was misled by the Respondent's false statements about the pending review application. The Appellant's application under Section 7 of the I&B Code was filed within the statutory period of limitation. The Tribunal concluded that the rejection of the application was incorrect and directed the Adjudicating Authority to admit the petition under Section 7 of the I&B Code. The parties were directed to be present before the Adjudicating Authority on 27th January 2020. The Appeal was allowed, and the impugned order dated 05th July 2019 was set aside.

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