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2024 (4) TMI 239 - AT - Insolvency and BankruptcyAdmission of Section 7 application - time limitation - arbitral award dated 04.02.2020 needs to be ignored in proceedings under Section 7 or not, objection of the Corporate Debtor being pending before the Delhi High Court in the proceeding for execution of the arbitral award - existence of debt and default or not. Whether the application under Section 7 filed by the Appellant on 31.01.2022 was barred by time? - HELD THAT - Section 3 of the Limitation Act casts an obligation on a Court to consider as to whether application filed is within limitation as prescribed by the Limitation Act, 1963. It is also well settled that even if no defence is raised by the Defendant regarding plea of limitation, the question of limitation has to be looked into and decided by the Court - thus the time being even if 04.02.2020 is not taken as date of default, proceed to examine as to whether application is filed within the limitation. As noted above, the amount was to be paid in 58 instalments. 1st instalment is to be paid in 15.08.2017 and last on 15.05.2022. It is pleaded by the Corporate Debtor itself that it has paid only Rs.40 Lakhs which at best will cover first three instalments. Thus, even if it is taken that the default committed on 15.11.2017, the application filed on 31.01.2022 is well within time - When the entire loan was recalled, the cause of action arose to initiate proceeding and application filed on 31.01.2022 from loan recall notice is also well within time. Thus, from any view of the matter, the application filed by the Financial Creditor on 31.01.2022 was well within time and the Adjudicating Authority did not commit any error in rejecting the submission of the Appellant that the Application is barred by time. Whether the arbitral award dated 04.02.2020 needs to be ignored in proceedings under Section 7, the objection of the Corporate Debtor being pending before the Delhi High Court in the proceeding for execution of the arbitral award? - HELD THAT - The challenge to the arbitral award dated is 04.02.2020 pending before the Delhi High Court with regard to which objections have already been filed by the Corporate Debtor - it is not necessary to express any opinion with regard to rival contentions of the parties in relation to award dated 04.02.2020. Whether debt and default was proved in the proceedings under Section 7? - Whether the Adjudicating Authority committed error in admitting Section 7 application? - HELD THAT - The debt and default is fully established and even if the arbitral award dated 04.02.2020 is not taken into consideration the debt and default is proved on the part of the Corporate Debtor. We may refer to the judgment of the Hon ble Supreme Court in M. Suresh Kumar Reddy vs. Canara Bank and Ors. 2023 (5) TMI 570 - SUPREME COURT where the Hon ble Supreme Court after noticing the earlier judgments had held that when debt and default is proved, the Adjudicating Authority has to admit the application unless it is incomplete - it is found that there was sufficient materials brought by the financial creditor on the record to prove the debt and default, even if the arbitral award is disregarded. The Adjudicating Authority did not commit any error in admitting Section 7 application. Debt and default having been proved on the part of the Corporate Debtor, there are no error in the order passed by the Adjudicating Authority admitting Section 7 application. There is no merit in the appeal - appeal dismissed.
Issues Involved:
1. Limitation of Section 7 application. 2. Consideration of arbitral award in Section 7 proceedings. 3. Proof of debt and default in Section 7 proceedings. 4. Validity of Adjudicating Authority's decision to admit Section 7 application. Summary: Issue 1: Limitation of Section 7 application The Financial Creditor filed the Section 7 application on 31.01.2022. The Corporate Debtor argued that the application was barred by time, but the Adjudicating Authority found that the application was within the limitation period. The loan agreement dated 13.06.2017 required repayment in 58 instalments starting from 15.08.2017. The Corporate Debtor admitted to paying only Rs. 40 lakhs, covering at most three instalments. The default date was considered as 04.02.2020, the date of the arbitral award. Even if this date was disregarded, the application was still within time due to the exclusion period from 15.03.2020 to 28.02.2022 as per the Supreme Court's order in Suo Moto Writ Petition No. 03 of 2020. Thus, the application was timely. Issue 2: Consideration of arbitral award in Section 7 proceedings The Corporate Debtor contended that the arbitral award dated 04.02.2020 was void due to the unilateral appointment of the arbitrator by the Financial Creditor and that it should not be considered in the Section 7 proceedings. The Adjudicating Authority noted that the validity of the arbitrator's appointment could not be adjudicated in summary proceedings. The objections to the award were pending before the Delhi High Court. The Tribunal did not express an opinion on the award's validity but noted that the existence of debt and default was established independently of the award. Issue 3: Proof of debt and default in Section 7 proceedings The Financial Creditor provided sufficient evidence of debt and default, including the loan agreement, repayment schedule, and a loan recall notice dated 24.01.2019, which demanded Rs. 27,03,77,188/-. The Corporate Debtor admitted to paying only Rs. 40 lakhs. The Adjudicating Authority also referred to a Certificate dated 09.03.2022 from the National E-Governance Service Limited evidencing default. The Supreme Court's judgments in "Innoventive Industries Ltd. v. ICICI Bank" and "M. Suresh Kumar Reddy vs. Canara Bank and Ors." were cited, emphasizing that once debt and default are established, the application must be admitted unless incomplete. Issue 4: Validity of Adjudicating Authority's decision to admit Section 7 application The Adjudicating Authority's decision to admit the Section 7 application was upheld. The Tribunal found that debt and default were sufficiently proven, even without considering the arbitral award. The appeal was dismissed, affirming the Adjudicating Authority's order admitting the Section 7 application.
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