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2022 (8) TMI 321 - AT - Insolvency and BankruptcyInitiation of CIRP - Period of limitation - It is the case of the Appellant that the date of default of Non-Performing Assets (NPA) on 05.07.2014 and the Bank/ R2 has filed petition under Section 7 of the Code on 11.12.2019 - NCLT admitted the application - HELD THAT - It is not in dispute that the Debt has become NPA on 05.07.2014 and Section 7 application for initiation of Corporate Insolvency Resolution Process has been filed on 11.12.2019 by R2/Bank - It is also not in dispute that the bank/ R2 has filed a petition before the Hon ble High Court of Orissa and the same was transferred to NCLT, Cuttack Bench in terms of Notification dated 07.12.2016 of the Central Government. The Bank/R2 has filed multiple proceedings before the DRT-3 Calcutta and simultaneously persuade for recovery against the CD/ Appellant under Section 138 of the Negotiable Instrument Act, 1881 apart from filing criminal complaint which is barred under Section 18 and 34 of the RDDBFI Act, 1993 . When the OA No. 104 /2016 was filed before the DRT then what was necessity of enforcing criminal complaint and approaching under Negotiable Instruments Act, 1881 - The Appellant was not aware of the winding up petition filed before the Hon ble Orissa High Court on 28.09.2016 and came to know about only when the Adjudicating Authority issued notice to the Appellant. The Bank has already received Rs.1.50 Crore from the builder and Rs. 54,13,999.87 from the CD. The deliberation made by all the parties as one feature common with the loan has been directly disbursed to Builder/R3 and the Bank/R2 as failed to be cautious while releasing the money to the builder without taking NOC from their bankers and has initiated in all these legal proceedings. This case finally reflects that this is a forum shopping being done by a private sector bank which is not healthy. The Code cannot be used a recovery mechanism when the Hon ble High Court of Orissa has already taken a particular view and DRT has also taken appropriate decision to get the amount realized to the Bank the Bank/R2 has realized Rs. 1.5 Crore from Builder/R3 and Rs. 54,13,999/- from CD/R1 against disbursal of Rs. 1.34 Crore. CIRP mechanism is not for a debt recovery as Hon ble Supreme Court has already settled the law on this aspect. Hence, CIRP cannot be used for bringing a Corporate Debtor to liquidation thereby enriching Private Sector Bank. Corporate Debtor, Emerald Mineral Exim Pvt. Ltd is released from the rigour of the Corporate Insolvency Resolution Process - Appeal allowed.
Issues Involved:
1. Legality of the loan disbursement process. 2. Default and Non-Performing Asset (NPA) status. 3. Fraud and misrepresentation allegations. 4. Limitation period for filing Section 7 application. 5. Jurisdiction and forum shopping. 6. Role and conduct of the Resolution Professional (RP). Issue-wise Detailed Analysis: 1. Legality of the Loan Disbursement Process: The Appellant argued that the loan of Rs. 1.34 crore was disbursed to the Builder without obtaining necessary documents, including NOCs from the Builder's bankers. The Bank's failure to secure these documents before disbursing the loan was highlighted as a significant procedural lapse. The Bank, however, contended that the loan was sanctioned and disbursed according to the agreement, which included obtaining a corporate guarantee. 2. Default and Non-Performing Asset (NPA) Status: The Corporate Debtor (CD) was declared an NPA on 05.07.2014. The Appellant contended that the Bank filed the Section 7 application under the Insolvency and Bankruptcy Code (IBC) on 11.12.2019, which was beyond the limitation period prescribed under Article 137 of the Limitation Act, 1963. The Bank argued that the application was filed within the permissible period considering the ongoing legal proceedings and the transfer of the winding-up petition to the NCLT. 3. Fraud and Misrepresentation Allegations: The Appellant accused the Bank and Builder of fraud and misrepresentation. It was argued that the Builder sold the property to a third party without obtaining a 'No Dues Certificate' from the Bank, thereby defrauding the Bank and the CD. The Bank had also initiated multiple legal proceedings, including criminal complaints and actions under Section 138 of the Negotiable Instruments Act, 1881, against the CD for dishonored cheques. The Appellant cited several judgments to support claims of fraud and suppression of material facts. 4. Limitation Period for Filing Section 7 Application: The Appellant emphasized that the application under Section 7 of the IBC was barred by limitation as it was filed more than five years after the NPA date. The Bank's defense was that the winding-up petition filed before the High Court of Orissa and later transferred to the NCLT was within the limitation period, thus justifying the delay. 5. Jurisdiction and Forum Shopping: The Tribunal observed that the Bank engaged in forum shopping by pursuing multiple legal avenues simultaneously, including proceedings before the DRT and filing under the IBC. The Tribunal noted that the Bank had already recovered Rs. 1.50 crore from the Builder and Rs. 54,13,999.87 from the CD, questioning the necessity of initiating CIRP under the IBC. 6. Role and Conduct of the Resolution Professional (RP): The Appellant alleged that the RP was biased and acted in favor of the Bank, failing to represent the CD properly. The Tribunal noted that the RP and the Bank were not maximizing the assets or seeking resolution but rather pursuing liquidation, which was not the intended purpose of the IBC. Conclusion: The Tribunal concluded that the initiation of CIRP was not justified as the Bank had already recovered a significant portion of the dues. The Tribunal set aside the impugned order dated 20.02.2020, releasing the Corporate Debtor from the CIRP. All actions taken by the Interim Resolution Professional/Resolution Professional and the Committee of Creditors were declared illegal and set aside. The Resolution Professional was directed to hand over the records and assets of the Corporate Debtor to its Director immediately. The appeal was allowed, and the interim order, if any, was vacated with no order as to costs.
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