2023 (11) TMI 107 - AT - Insolvency and Bankruptcy

Validity of order if Initiation of CIRP - After the final hearing of the matter, ITAT reserved the order for passing - Thereafter, appellant prayed for recall the reserved order and re-hear the matter on the basis of new facts - Request of the appellant was rejected - Whether rejection of application caused serious miscarriage of justice to the Appellant which warrants the setting aside of both the impugned orders? HELD THAT - The Appellant was fully aware of the assignment of debt by the original Financial Creditor to the Respondent No.1 which is amply evident from the fact that they had themselves chosen to send the OTS proposal to Respondent No.1 on 21.10.2016 instead of sending the same to the original Financial Creditor. The OTS proposal is placed at page 287 of the Appeal Paper Book (APB). It is, therefore, clear that the Appellant/Corporate Debtor was not only aware of the assignment of the debt but had accepted and acknowledged this fact by sending the OTS proposal to the assignee. Moreover, the issue of assignment deed was never raised by the Appellant during the hearing of the main petition or at any stage prior to reserving the matter for orders. It is a well settled proposition of law that the two stages of reserving of judgment and pronouncement of judgment are in a continuum with no hiatus or gap as such in the two stages. That being the well accepted and time-tested practice in court proceedings, subsequent pleadings filed by way of an I.A. after the judgement is reserved is normally not entertained for reasons of procedural propriety - There is no material on record to show that this debt had been liquidated by the Corporate Debtor. That being so, the debt was continuing and there was a default in repayment and nothing on record controverts that position. The Corporate Debtor having accepted the assignment agreement in their OTS proposal has no ground to deny knowledge of the fact that the Respondent No.1 had stepped into the shoes of the original Financial Creditor and therefore it has been correctly concluded by the Adjudicating Authority that the loan facility acknowledged in the name of the Financial Creditor in the balance sheet is to be construed as acknowledgement of debt qua the Appellant. Since in the facts of the present case, a debt has arisen which is due and payable by the Corporate Debtor and a default has occurred, admission of Section 7 application cannot be obfuscated by raising technical pleas and that too after hearing in the main petition stood concluded and matter was reserved for hearing. There are no convincing reasons to interfere with either of two impugned orders - Appeal dismissed.

Summary

Issues Involved:
1. Dismissal of IA No. 253/2023 by the Adjudicating Authority.
2. Admission of Section 7 application and initiation of Corporate Insolvency Resolution Process (CIRP).
3. Validity and acknowledgment of debt and the issue of limitation.

Summary:

Issue 1: Dismissal of IA No. 253/2023 by the Adjudicating Authority:
The appeal challenges the dismissal of IA No. 253/2023, which sought to recall the order reserved on 07.08.2023. The Adjudicating Authority dismissed the IA on the ground that it was filed after the final arguments were heard and the matter reserved for orders. The Tribunal upheld this decision, citing procedural propriety and established legal principles that do not entertain applications after a matter is reserved for orders. The Tribunal referenced the judgments of the Hon'ble Supreme Court in *Arjun Singh v. Mohindra Kumar* and the Hon'ble Rajasthan High Court in *Rajasthan Financial Corporation v. Pukhraj Jain* to support this position.

Issue 2: Admission of Section 7 application and initiation of CIRP:
The Section 7 application was filed by JM Financial Asset Reconstruction Company Limited, the Respondent No.1, for initiating CIRP against the Corporate Debtor, Maa Durga Commotrade Private Limited. The Adjudicating Authority admitted the application, establishing that there was a debt owed by the Corporate Debtor and a default in repayment. The Tribunal affirmed this decision, noting that the debt and default were evident and the Adjudicating Authority correctly admitted the Section 7 application.

Issue 3: Validity and acknowledgment of debt and the issue of limitation:
The Appellant argued that the Section 7 application was barred by limitation, as the date of default was 06.09.2013 and the OTS proposal was made on 21.10.2016, beyond the three-year limitation period. The Tribunal found that the debt was acknowledged by the Appellant in their reply to the SARFAESI notice and in the balance sheets for the years 2014-15, 2017-18, and 2018-19. The Tribunal concluded that the acknowledgment of debt was clear and unambiguous, and the Section 7 application was not barred by limitation. The Tribunal also dismissed the Appellant's arguments regarding the validity of the Assignment Deed and the non-attachment of the Trust Deed, noting that these issues were raised belatedly and lacked merit.

Conclusion:
The Tribunal upheld the Adjudicating Authority's dismissal of IA No. 253/2023 and the admission of the Section 7 application, affirming that there were no convincing reasons to interfere with the impugned orders. The appeals were dismissed with no costs.