2020 (10) TMI 382 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make the repayment of its dues - time limitation - amount due and payable by the Corporate Debtor to the Financial Creditor or not - whether petition has been preferred for the purposes other than resolution of the Corporate Debtor? - incompleteness of Form 1 filed by the Financial Creditor in terms of its Part IV. Time Limitation - also alleged that the petition has failed to establish that the outstanding amount is within period of limitation - HELD THAT - This contention of the Corporate Debtor does not stand upon a careful reading of the Annual Report of the Corporate Debtor for the year ended on 31/03/2017 wherein it is evident that the first default occurred on 23/09/2016 and the said petition has been filed in the month of August, 2019. Moreover, the Balance Sheet, of the Corporate Debtor dated 06/05/2019 also clearly mentions that the amount is due upon them, which is a clear admission on their part. Also, during assignment of the loan by State Bank of India to the Financial Creditor, there has been an acknowledgement by the Corporate Debtor vide their letter dated 18/11/2016. Therefore, it can be safely concluded that any problem regarding the issue of limitation does not arise as the petition was filed on 9/08/2019 and thus, is well in time i.e. before the completion of three years. Amount due and payable by the Corporate Debtor to the Financial Creditor or not - HELD THAT - This contention raised by the Corporate Debtor that no amount is due and payable by the Corporate Debtor to the Financial Creditor also does not survive because the Annual Report of the Corporate Debtor for the year ended on 31/03/2019 itself acknowledge the outstanding loan payable to the Financial Creditor. Also, it is to be noted that at the time of assignment of the matter to the Financial Creditor, the loan account of the Corporate Debtor in the books of the assignor was a Non-Performing Asset (NPA). There is no doubt that the Adjudicating Authority needs to satisfy itself that the default has occurred before admitting an application under Section 7 of the IBC, 2016. Therefore, after perusing the documents, it has become crystal clear that the Corporate Debtor is liable to pay the outstanding dues to the Financial Creditor. Whether petition has been preferred for the purposes other than resolution of the Corporate Debtor? - HELD THAT - The Corporate Debtor has relied upon the minutes of the Joint Lenders Meeting dated 17/05/2018 and 23/07/2018 and contended this petition is merely an arm twisting method on the part of the Financial Creditor. Also, it can be made out from the past conduct of the Financial Creditor that they made efforts to restructure the debt of the Corporate Debtor and therefore, this cannot be used by them to shield themselves from their existence liability. In this present matter, this Bench has already established the existence of debt and the default on the part of the Corporate Debtor and therefore, this Bench is of the opinion that only because of this, the present petition has been preferred by the Financial Creditor against the Corporate Debtor. I ncompleteness of Form 1 filed by the Financial Creditor in terms of its Part IV wherein it is necessary to provide the date from which the debt fell due - HELD THAT - This contention is merely technical in nature which can be easily rectified if the Bench directs so. Also, it was stated that the petition is to be dismissed for the reason that the petitioner failed to submit information from Information Utility. But we are of the opinion that while dealing with these objections this Bench finds no cogent reason/ground for rejecting this petition on such minor technical issues particularly when the existence of debt and default is established - There was also a Demand Notice dated 17/06/2019 sent by the Financial Creditor to the Corporate Debtor demanding the outstanding amount along with interest amounting to ₹ 68,10,47,170/- there was neither any reply to this notice nor was any payment made by the Corporate Debtor. Also, it is to be noted that this petition fulfils all the requisite conditions to admit a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 and therefore, the petition deserves to be admitted. This Adjudicating Authority, on perusal of the documents filed by the Creditor, is of the view that the Corporate Debtor defaulted in repaying the loan availed. In the light of above facts and circumstances, the existence of debt and default is reasonably established by the Financial Creditor as a major constituent for admission of a petition under section 7 of the I B Code. Therefore, the Application under sub-section (2) of Section 7 is taken as complete, accordingly this Bench hereby admits this Petition - application admitted - moratorium declared.

Summary

Issues Involved:
1. Whether the petition is time-barred by the law of limitation.
2. Whether the Corporate Debtor owes any amount to the Financial Creditor.
3. Whether the petition is filed for purposes other than resolution of the Corporate Debtor.
4. Whether the petition is technically incomplete due to missing details in Form I.

Detailed Analysis:

1. Whether the petition is time-barred by the law of limitation:
The Corporate Debtor contended that the petition is time-barred, arguing that the Financial Creditor failed to mention the date of default, thus misleading the Tribunal. They cited the Supreme Court judgment in Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd., which mandates filing an application under Section 7 of the IBC within three years from the date of default. However, the Tribunal found this contention unsubstantiated. The Annual Report of the Corporate Debtor for the year ended 31/03/2017 indicated that the first default occurred on 23/09/2016, and the petition was filed in August 2019, within the three-year limitation period. Additionally, the Corporate Debtor's Balance Sheet dated 06/05/2019 acknowledged the debt, confirming its admission. Thus, the petition was deemed timely filed.

2. Whether the Corporate Debtor owes any amount to the Financial Creditor:
The Corporate Debtor argued that no amount was due and payable, but the Tribunal dismissed this claim. The Annual Report for the year ended 31/03/2019 acknowledged the outstanding loan. The Tribunal noted that the loan account was classified as a Non-Performing Asset (NPA) at the time of assignment to the Financial Creditor. The Tribunal emphasized that the existence of debt and default must be established before admitting an application under Section 7 of the IBC. Upon reviewing the documents, the Tribunal concluded that the Corporate Debtor was liable to pay the outstanding dues to the Financial Creditor.

3. Whether the petition is filed for purposes other than resolution of the Corporate Debtor:
The Corporate Debtor claimed that the petition was filed to take over the company, which is against the IBC's intent. They argued that the Financial Creditor, being a shareholder, had previously offered to buy out the loans and was using the petition as leverage. However, the Tribunal clarified that the primary considerations under Section 7 of the IBC are the disbursement of the loan and the occurrence of default, irrespective of any ongoing disputes. The Tribunal found that the Financial Creditor's past efforts to restructure the debt did not absolve the Corporate Debtor of its liability. Therefore, the petition was deemed valid and not an abuse of the IBC process.

4. Whether the petition is technically incomplete due to missing details in Form I:
The Corporate Debtor argued that the petition was incomplete because Form I did not specify the date from which the debt fell due. The Tribunal considered this a minor technicality, referencing the NCLAT judgment in Satyaprakash Aggarwal v. Vistar Metal Industries (P) Ltd., which held that technical defects should not lead to rejection without an opportunity for rectification. The Financial Creditor clarified the default dates in their rejoinder, which were also reflected in the Corporate Debtor's Balance Sheet. The Tribunal found no substantial reason to reject the petition based on this technical issue, as the existence of debt and default was established.

Findings:
The Tribunal concluded that the Corporate Debtor defaulted in repaying the loan, and the existence of debt and default was reasonably established. The petition fulfilled all conditions for admission under Section 7 of the IBC. Consequently, the Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) and imposing a moratorium on actions against the Corporate Debtor.

Order:
The Tribunal admitted the petition, prohibiting suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and actions to enforce security interests. The supply of essential goods or services to the Corporate Debtor was to continue uninterrupted. The Tribunal appointed an Interim Resolution Professional and directed immediate public announcement of the CIRP.

Conclusion:
The petition was admitted, and the CIRP was initiated against the Corporate Debtor, with the Tribunal finding the Financial Creditor's claims substantiated and the Corporate Debtor's objections unmeritorious.