2021 (6) TMI 608 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - mismatch between the date of default and date when OTS entered - date of default if any could be only after the acceptance of this OTS, which is not satisfied in the present case - HELD THAT - The Adjudicating Authority found that there was debt due and default and the Application filed by the Bank was complete and that the same deserves to be admitted. It can be seen that there was an earlier Offer of settlement dated 09th November, 2015 and there was yet another offer by way of OTS on 29th March, 2016. After the grant of Loan, the Corporate Debtor made default in payment of instalments - Considering the record, the Loan Account of the Corporate Debtor was in default on 27th December, 2014 and if on 29th March, 2016, the Corporate Debtor entered into the OTS as at Annexure A-6 that is in the context of the Debt already due and in default. Date of Default will not shift. The OTS is only an Acknowledgment of debt due and arrangement how the debt in default would be paid. Annexure A-6 has one condition of ₹ 60 Lakh to be deposited immediately . On being asked, Learned Counsel for Appellant states that, not ₹ 60 Lakhs, but part of it was paid. There are no substance in the appeal - appeal dismissed.

Summary

Issues:
Admission of Application under Section 7 of Insolvency and Bankruptcy Code, 2016 based on the date of default, application of the Limitation Act, validity of One Time Settlement (OTS) agreement, acknowledgment of debt, and determination of debt due and default.

Analysis:

1. The Appellant filed an Appeal against the Order admitting the Application under Section 7 of IBC by the Adjudicating Authority. The Bank claimed outstanding dues of ?16,15,39,662.27 before the Adjudicating Authority, based on the default date of 27th December, 2014, leading to the initiation of insolvency proceedings.

2. The Appellant argued that the Application should be rejected as the date of default mentioned in the Application was incorrect, citing an OTS agreement dated 29th March, 2016, as evidence of a subsequent arrangement that should shift the default date. The Bank, however, supported the Adjudicating Authority's decision, referring to precedents to establish that the Application was within the limitation period.

3. The Adjudicating Authority considered arguments from both sides, noting that the date of default was crucial in determining the limitation period for the Application. The Authority relied on legal precedents, including the case of Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr., to support its decision.

4. The Adjudicating Authority found that the Bank had established the debt due and default, and the Application was complete and admissible. The Authority took into account previous settlement offers and agreements to determine the acknowledgment of debt and the validity of the Application within the limitation period.

5. The Tribunal rejected the Appellant's argument that the default date should shift post the OTS agreement in 2016, citing the legal precedent and finding that the claim of the Appellant regarding the debt being barred by limitation was not valid. The Tribunal agreed with the Adjudicating Authority's decision that the Application was within the limitation period.

6. Ultimately, the Tribunal dismissed the Appeal, concluding that there was no substance in the Appellant's arguments. The Tribunal upheld the decision of the Adjudicating Authority that the Application was within the limitation period, leading to the admission of the Corporate Debtor in the Corporate Insolvency Resolution Process.