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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + AT Insolvency and Bankruptcy - 2024 (4) TMI AT This

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2024 (4) TMI 239 - AT - Insolvency and Bankruptcy


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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