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2023 (1) TMI 302 - AT - Insolvency and BankruptcyInitiation of CIRP - reinstatement of dismissed petition - shadow period - NCLT admitted the application u/s 7 - Appellant submits that the Adjudicating Authority having given Liberty to file a Petition for re-instatement it should be treated to be Liberty to file a fresh Application / Petition as per Section 7 of the I B Code 2016 for same cause of action - HELD THAT - In view of the crystalline fact that a Liberty was granted by the Adjudicating Authority (Tribunal) as mentioned in its Order dated 05.11.2020 obviously based on the Memo filed by the 1st Respondent / Bank to resurrect / revive the IBA/757/2019 to its file in the event of failure of OTS Proposal the Appellant at this distant point of time cannot have a grievance to say that the Order passed on 05.11.2020 was an Ex-parte one because of the latent and patent fact that as per Rule 11 of the NCLT Rules 2016 under the caption Inherent Powers the Adjudicating Authority (Tribunal) has an inbuilt power is empowered to pass necessary orders or issue such directions to meet the ends of Justice or to prevent an abuse of process as the case may be. Viewed in that perspective and also keeping in mind the primordial fact that because of the Default in payment of the amount under the One Time Settlement the act of the 1st Respondent / Bank in filing application and the Logical Corollary Order passed by the Adjudicating Authority (Tribunal) in allowing the said Application and the Order of Restoration by no stretch of imagination cannot be found fault with in the considered opinion of this Tribunal and hence the Plea of the Appellant that there is / was a negation of Rules of Natural Justice has no legs to stand and the same is not acceded to by this Tribunal. Dealing with the Plea of the Appellant that the initiation of Corporate Insolvency Resolution Process by the 1st Respondent / Bank in regard to the shadow period i.e. 25.03.2020 to 25.03.2021 when the restrictions imposed by the ingredients of Section 10A of the I B Code 2016 were in force is bad in Law this Tribunal relevantly points out that the Parliament had intended to impose a prohibition as regards the projecting of the Applications/ Petitions for the start of Corporate Insolvency Resolution Process in respect of a Corporate Debtor for a Default taking place on or after 25.03.2020 and the embargo was for a period of six months extendable for a year. As a matter of fact the words shall ever be filed is a clear pointer that the Statutory Provision ought not to be applicable in respect of any Default prior to 25.03.2020 as opined by this Tribunal. The Appellant cannot fall back upon the ingredients of Section 10A of the I B Code 2016 because of the fact that the Date of Default (Non Performing Asset) in the instant case on hand was on 31.03.2017. In this connection it is not out of place to this Tribunal to make a pertinent mention that the 1st Respondent / Bank (Financial Creditor) filed under Section 7 Application under the I B Code 2016 before the Adjudicating Authority on 03.10.2018. As such the contra plea taken on behalf of the Appellant is unworthy of acceptance. The principle of Waiver or Approbation and Reprobation lies at the root of conduct productive of change of activation and this principle is akin to the Rule of Constructive Res judicata as per Explanation IV of Section 11 of the Civil Procedure Code. It is to be remembered that an Application under Section 7 of the I B Code 2016 can be preferred by a Financial Creditor on the basis of Debt and Default. Even the non-payment of Debt even in entirety or in part or instalment of the Sum of Debt by a Debtor / Person will clothe a Right on a Financial Creditor to prefer an Application when the Debt become due and payable either in Law or in Fact. No wonder the Plea of the Appellant that only a portion / part payment only remains to be paid by the 2nd Respondent / Corporate Debtor is a candid tacit admission of Default and this is a clear adverse circumstance in favour of the Appellant. OTS An Acknowledgement of Debt - HELD THAT - In the present case this Tribunal points out that the OTS is a clear cut admission of the Corporate Debtor (between the Parties ) and it is an Acknowledgement of Debt in terms of the ingredients of Section 18 of the Limitation Act 1963. Appellant s Locus Standi - HELD THAT - The Appellant who has preferred the instant Comp. App (AT) (CH) (INS.) No. 89 of 2022 is the Promoter of the 2nd Respondent / Corporate Debtor and in as much as he is an Investor is not an Aggrieved Person to prefer the instant Appeal before this Tribunal notwithstanding the fact that Section 61 (1) of the I B Code 2016 employs the words any person aggrieved by the order of the Adjudicating Authority under this Part (Chapter VI) of the I B Code 2016 may prefer an Appeal in respect of the Order passed by the Adjudicating Authority as opined by this Tribunal. Hence the instant Appeal filed by the Appellant before this Tribunal is not per se maintainable and answered accordingly. In regard to an Existence of Debt due and payable in Fact and in Law and Default was committed by the 2nd Respondent / Corporate Debtor and the Default took place well before the Covid-19 Pandemic and that the Application filed by the 1st Respondent / Bank / Financial Creditor is complete in all respects. Looking at from any point of view the impugned order dated 04.02.2022 in IBA/757/2019 passed by the Adjudicating Authority (National Company Law Tribunal Division Bench I Chennai) exercising its subjective judicial discretion in admitting the Application (Filed under Section 7 of the Insolvency and Bankruptcy Code 2016 read with Rule 4 of the I B (Application to Adjudicating Authority) Rules 2016) by the 1st Respondent / Bank / Financial Creditor with Moratorium is free from any Legal Infirmities. Resultantly the instant Appeal sans merits. Appeal dismissed.
Issues Involved:
1. Maintainability of the appeal by the Appellant. 2. Validity of the restoration of the application by the Adjudicating Authority. 3. Applicability of Section 10A of IBC during the COVID-19 period. 4. Existence of debt and default by the Corporate Debtor. 5. Validity and impact of the One Time Settlement (OTS) proposal. Issue-wise Detailed Analysis: 1. Maintainability of the Appeal by the Appellant: The appeal was filed by the Appellant, who is a promoter of the Corporate Debtor. The Tribunal held that the Appellant, being an investor, is not an "aggrieved person" under Section 61(1) of the IBC, 2016, and thus, the appeal is not maintainable. The Tribunal cited the case of Amod Amladi v. M/s. Sayali Rane & Anr., where it was established that an investor cannot claim to be an aggrieved person for preferring an appeal against an order admitting an application under Section 9 of the IBC. 2. Validity of the Restoration of the Application by the Adjudicating Authority: The Tribunal noted that the Adjudicating Authority had granted liberty to revive the application if the OTS proposal failed. The restoration of the application was based on the default in payment under the OTS. The Tribunal held that the Adjudicating Authority acted within its inherent powers under Rule 11 of the NCLT Rules, 2016, to meet the ends of justice. Therefore, the restoration order was valid, and there was no violation of natural justice. 3. Applicability of Section 10A of IBC During the COVID-19 Period: The Tribunal clarified that Section 10A of the IBC, which imposed a prohibition on initiating CIRP for defaults occurring during the COVID-19 period, was not applicable in this case. The default date was 31.03.2017, well before the COVID-19 pandemic. The application under Section 7 was filed on 03.10.2018, making the plea regarding Section 10A inapplicable. 4. Existence of Debt and Default by the Corporate Debtor: The Tribunal found that there was an abundance of material evidence proving the existence of debt and default by the Corporate Debtor. The debt was more than Rs. 1 lakh (the threshold limit at the time of filing the application), and the default occurred well before the COVID-19 pandemic. The application filed by the Financial Creditor was complete in all respects, and the Adjudicating Authority was correct in admitting the application and initiating the CIRP. 5. Validity and Impact of the One Time Settlement (OTS) Proposal: The Tribunal held that the OTS proposal was an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The payments made under the OTS were not part of the OTS but were charges on the security. The Tribunal found that the promoters had not paid any sum under the OTS but had arranged Rs. 150 crores from different entities, which was kept in a no-lien account. The failure of the OTS proposal justified the initiation of CIRP by the Financial Creditor. The principle of "Approbate and Reprobate" was not applicable as the Corporate Debtor had accepted the benefits of the contracts and was estopped from denying the liability. Disposition: The appeal was dismissed, and the interim order granted by the Tribunal was vacated. The connected pending applications were also closed. The Tribunal concluded that the Adjudicating Authority's order admitting the application under Section 7 and declaring a moratorium was free from legal infirmities.
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