2021 (1) TMI 110 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Financial Creditor or not - existence of debt and dispute or not - HELD THAT - The Applicant has filed the present Application for the alleged breach of Share Purchase Agreement dated 21.11.2012. Under the agreement the amount of ₹ 30,00,00,000/- was agreed to be paid by the Financial Creditor to Corporate Debtor for acquiring the Company. On the above said date an addendum to the agreement was also executed wherein the Financial Creditor agreed to make payment to the creditors of the Corporate Debtor. On 27.11.2012 the Corporate Debtor issued a letter requesting to hand over an advance amount of ₹ 1,00,00,000 to Dr. J. J R Justin. Thereafter on 05.09.2014 and 17.03.2015 Financial Creditor issued letter agreeing to refund of the advance amount. It can be seen that the Corporate Debtor acknowledged the debt of the Financial Creditor lastly on 28.11.2018. Hence, the instant application filed under Section 7(4) of the I B Code on 21.01.2020 is not barred by limitation - Objection of the Corporate Debtor regarding the validity of Share Purchase Agreement due to non -registration is not under our jurisdiction. Hence, the Tribunal need not delve into that issue. Further, the objection of the Corporate Debtor regarding there being no common seal of the company and hence the said agreement is invalid document, even assuming without a common seal of the company the Managing Directors agreed into an agreement, the Company is liable for the acts committed by its directors and is bound to honour the agreement entered by the Directors on behalf of the Company. This Application is filed by the applicant for alleged breach of Share Purchase Agreement dated 21.11.2012. Corporate Debtor failed to honour the share purchase Agreement, and no payment was made - ince the present debt arises out of the Share Purchase agreement dated 21.11.2012, the said amount is a debt disbursed against the consideration for advance payment as per the agreement and hence is covered under the definition of financial debt and Applicant will be treated as Financial Creditor. Application on behalf of Financial Creditor/ Applicant filed U/S 7 of the I B Code 2016 for initiation of Corporate Insolvency Resolution Process is admitted - the order of moratorium u/s 14 shall have effect from the date of this order till the completion of corporate insolvency resolution process or until this Bench approves the resolution plan under Sub Section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33.

Summary

Issues Involved:
Application for Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016 based on default in payment. Contentions regarding limitation period, validity of Share Purchase Agreement, and authority of signatory.

Detailed Analysis:

1. Alleged Default and Application for CIRP:
The Financial Creditor filed an application seeking CIRP against the Corporate Debtor for defaulting on a payment of &8377; 4,25,32,016.405/- as per a Share Purchase Agreement. The Financial Creditor argued that the debt became due as per the agreement, and the Corporate Debtor acknowledged the liability multiple times, making the application within limitation.

2. Contentions Raised by Corporate Debtor:
The Corporate Debtor contended that the application was time-barred and raised objections regarding the validity of the Share Purchase Agreement, including non-registration and lack of common seal. They also questioned the authority of the signatory of the application.

3. Tribunal's Findings:
The Tribunal examined the case records and documents. It noted that the Corporate Debtor acknowledged the debt lastly on 28.11.2018, making the application timely. The Tribunal clarified that issues like agreement validity fall outside the IBC's scope, focusing on debt due and defaults.

4. Classification of Debt as Financial Debt:
The Tribunal referred to Section 5(8) of the Code, defining financial debt, and concluded that the amount arising from the Share Purchase Agreement qualified as financial debt disbursed against advance payment, making the Financial Creditor eligible. The proposed Interim Resolution Professional was deemed suitable.

5. Decision and Moratorium Order:
The Tribunal admitted the application for CIRP under Section 7 of the I&B Code, initiating a moratorium under Section 14. The moratorium prohibited various actions against the Corporate Debtor, ensuring continuity of essential services. The appointment of the Interim Resolution Professional was confirmed, and necessary communication directives were issued.

This comprehensive analysis covers the key issues, arguments, findings, and decisions outlined in the judgment by the National Company Law Tribunal, Kochi Bench.