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2022 (4) TMI 707 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Principles of natural justice - one more opportunity to the appellant in this case to amend its pleading on payment of costs, are given or not - time limitation - HELD THAT - As far as issue of MPID Act is concerned, it looks that there is no prohibition under the MPID Act for initiating CIRP process. As and when CIRP is initiated, the Resolution Professional is duty bound to approach the designated court for taking back control and custody of the said property over which the Corporate Debtor has ownership right derived from the legal documents. Hence the attachment of property does not prohibit initiation of CIRP. As far as issue of Balance Sheet is concerned, whether the Balance Sheet acknowledgment will give life to the due debt otherwise payable in law has also been amply clear in Hon ble Apex Judgment in Asset Reconstruction Company (India) Ltd. Vs. Bishal Jaiswal Anr. 2021 (4) TMI 753 - SUPREME COURT , where it was held that the NCLT held that the Section 7 application was not barred by limitation, and therefore, admitted the same. It is very much clear that the debt is due and payable in law - Petition dismissed.
Issues Involved:
1. Whether the debt is time-barred. 2. Whether the proceedings are malicious under Section 65 of the Insolvency and Bankruptcy Code (IBC). 3. Impact of pending proceedings under the Maharashtra Protection of Interest of Depositors (MPID) Act, 1999. 4. Applicability of the IBC as a debt recovery forum. Detailed Analysis: 1. Whether the debt is time-barred: The primary contention was the gap of 17 years from the date of the Non-Performing Asset (NPA) declaration (30.09.2002) to the filing of the petition before the National Company Law Tribunal (NCLT) (25.03.2019). The Tribunal noted that the Financial Creditor had submitted multiple One Time Settlement (OTS) proposals from 10.06.2005 to 14.03.2015, and the Corporate Debtor had acknowledged the debt in its balance sheets up to the financial year 2016-17. According to Section 18 of the Limitation Act, 1963, such acknowledgments reset the limitation period. The Tribunal referred to the Supreme Court's judgment in Asset Reconstruction Company (India) Ltd. Vs. Bishal Jaiswal & Anr. [(2021) 6 SCC 366], which clarified that entries in balance sheets can extend the limitation period. Therefore, the debt was not considered time-barred. 2. Whether the proceedings are malicious under Section 65 of the IBC: The Appellant argued that the Financial Creditor had approached multiple forums for debt recovery, including under the Sick Industrial Companies (Special Provision) Act, 1985, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993. The Tribunal found no evidence of malicious intent, noting that the Financial Creditor was merely exercising its legal rights under various statutes available at different times. The Tribunal did not find the proceedings to be malicious under Section 65 of the IBC. 3. Impact of pending proceedings under the MPID Act, 1999: The Appellant contended that the properties of the Corporate Debtor were attached under the MPID Act, and the Economic Offence Wing, Mumbai Police, was investigating the matter. The Tribunal held that the MPID Act does not prohibit the initiation of the Corporate Insolvency Resolution Process (CIRP). The Resolution Professional is required to approach the designated court to take control and custody of the attached properties. Thus, the pending MPID proceedings did not bar the initiation of CIRP. 4. Applicability of the IBC as a debt recovery forum: The Appellant argued that the IBC is not intended to be a substitute for a debt recovery forum. The Tribunal acknowledged this but clarified that the IBC aims to resolve insolvency and ensure the maximization of asset value. The Tribunal found that the Financial Creditor had followed due process, and the debt was legally due and payable. Therefore, the initiation of CIRP was justified. Conclusion: The Tribunal upheld the order of the National Company Law Tribunal, Amaravati Bench, Hyderabad, which admitted the petition under Section 7 of the IBC. The Company Appeal (AT)(Insolvency) No. 1097 of 2019 filed by the Corporate Debtor was dismissed, confirming that the debt was not time-barred, the proceedings were not malicious, and the pending MPID proceedings did not obstruct the initiation of CIRP. No order as to cost was made.
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