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2024 (9) TMI 1608 - AT - IBCAdmission of Section 7 application filed by the Respondent No.1 - initiation of CIRP - Financial debt - whether the Appellant had a financial debt qua Respondent No.1 which had become due and payable and whether there was an incidence of default thereof? - Time limitation - HELD THAT - In the instant matter, whether on factorising the part payment against the loan on 01.05.2021 or taking into account the email of the Appellant of 11.05.2022 wherein the outstanding debt under the Facility Agreement and Supplementary Facility Agreement has been acknowledged, the present application having being filed within three years from the date of acknowledgement of the debt, it cannot be held to be barred by time. Whether Corporate Debtor was required to be given time to regularise its loan account in terms of RBI circular before declaring the account of the Corporate Debtor to be NPA under the SARFAESI Act? - HELD THAT - There are not much substance in the contention of the Appellant that they were denied adequate opportunity to regularise their loan account. Respondent No.1 on 24.02.2020 vide their letter had accepted to regularise the loan account of the Corporate Debtor subject to payment of an amount of Rs 2.38 Cr. towards the over-due debt on or before 15.03.2020. It is also found that in response to this letter, the Corporate Debtor deposited Rs 1 Cr. in two tranches but failed to pay the balance amount as assured by 15.03.2020 to regularise the loan account. Furthermore, declaration of account as NPA under the SARFAESI Act is an independent proceeding and cannot be adopted as a defence to obstruct the Financial Creditor from proceeding under IBC to initiate CIRP against the Corporate Debtor. Existence of key ingredient of Section 5(8) of the IBC of disbursement of loan against consideration for time value of money by the Financial Creditor qua the Corporate Debtor or not - HELD THAT - In the instant case, the Sanction Letter clearly provides that 15% p.a. floating interest linked to Long Term Reference Rate of the Financial Creditor was applicable. The loan facility having been extended by Respondent No.1 being interest-bearing, this disbursement squarely falls within the purview of Section 5(8)(a) of the IBC and has all the trappings of a financial debt. There are no force in the contention of the Appellant that the disbursal of funds by the Respondent No.1 was without consideration for time value of money. The acknowledgment of debt in the present facts of the case is therefore clear and unambiguous and nothing on record controverts the position that there was a default in repayment. That being the case, there arises no doubt in our minds that there was a debt on the part of the Primary Borrower and the Co-Borrowers qua the Financial Creditor which remained unpaid. The obligation of the Co-Borrower is coextensive and coterminous with that of the Primary Borrower and hence a right or cause of action becomes available to the financial creditor to proceed against the primary borrower, as well as the Co-Borrower in equal measure in case they commit default in repayment of the amount of debt. 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, the Respondent No. 1 was entitled to file the Section 7 application - Section 7 application filed by the Financial Creditor was not barred by time and the debt and default being proven, the Adjudicating Authority did not commit any error in admitting the Section 7 application. There are no error in the judgement of the Adjudicating Authority admitting the Section 7 application. There is no merit in the Appeal - appeal dismissed.
Issues Involved:
1. Whether the Corporate Debtor had a financial debt qua Respondent No.1 which had become due and payable and whether there was an incidence of default thereof. 2. Whether the Facility Agreement was insufficiently stamped and its impact on the admissibility of the Section 7 petition. 3. Whether the Section 7 application was barred by limitation. 4. Whether the Corporate Debtor was given adequate opportunity to regularize its loan account before declaring it as NPA. 5. Whether the disbursement of loan against consideration for time value of money by the Financial Creditor qua the Corporate Debtor was missing. Issue-wise Detailed Analysis: 1. Financial Debt and Default: The Appellant argued that the loan facility was disbursed to Csango Industries Pvt. Ltd. and Pacific Link Exports Pvt. Ltd., not to the Corporate Debtor, and therefore, the Corporate Debtor had no liability to repay the loan. The Respondent No.1 countered that the Corporate Debtor was a Co-Borrower and had signed multiple documents, including the Facility Agreement and Demand Promissory Note, promising to repay the loan jointly and severally. The Tribunal noted that the Corporate Debtor had signed various documents as a Co-Borrower and had acknowledged the debt, thus establishing the existence of financial debt and default. The Tribunal concluded that the Corporate Debtor, as a Co-Borrower, had equal and similar liabilities with the Primary Borrower under the Facility Agreement. 2. Insufficient Stamping of Facility Agreement: The Appellant contended that the Facility Agreement was insufficiently stamped and, therefore, could not be relied upon by the Adjudicating Authority. The Tribunal held that insufficient stamping is a curable defect and does not render the instrument void. The Tribunal cited the Hon'ble Supreme Court's judgment in NN Global Mercantile (P) Ltd. Vs Indo Unique Flame Ltd., which stated that non-stamping or improper stamping does not invalidate an instrument but makes it inadmissible until the defect is cured. Thus, the Tribunal found that the insufficiency of stamping did not affect the admissibility of the Section 7 application. 3. Limitation: The Appellant argued that the Section 7 petition was barred by limitation, having been filed on 16.11.2023 while the date of default was 15.03.2020. The Tribunal referred to the Hon'ble Supreme Court's judgment in Laxmipat Surana Vs Union Bank of India, which held that an acknowledgment of debt within the limitation period extends the limitation period. The Tribunal noted that the Corporate Debtor had made part payments and acknowledged the debt within the limitation period, thus extending the limitation period. Therefore, the Section 7 application was not barred by limitation. 4. Opportunity to Regularize Loan Account: The Appellant contended that the Corporate Debtor was not given adequate opportunity to regularize its loan account before it was declared as NPA. The Tribunal found that the Respondent No.1 had accepted to regularize the loan account subject to payment of an amount by a specified date, but the Corporate Debtor failed to pay the balance amount. The Tribunal held that the declaration of an account as NPA under the SARFAESI Act is an independent proceeding and does not obstruct the Financial Creditor from initiating CIRP under IBC. 5. Disbursement Against Consideration for Time Value of Money: The Appellant argued that the key ingredient of disbursement against consideration for time value of money was missing. The Tribunal noted that the Sanction Letter provided for interest-bearing loan facilities, which falls within the purview of Section 5(8)(a) of IBC, defining financial debt. The Tribunal found that the disbursement of funds by Respondent No.1 was against consideration for time value of money, thus meeting the requirements of a financial debt under IBC. Conclusion: The Tribunal concluded that the Corporate Debtor had a financial debt which had become due and payable, and there was an incidence of default. The Facility Agreement's insufficient stamping did not affect the admissibility of the Section 7 application. The Section 7 application was not barred by limitation, and the Corporate Debtor was given adequate opportunity to regularize its loan account. The disbursement of funds by Respondent No.1 was against consideration for time value of money. Therefore, the Tribunal upheld the Adjudicating Authority's order admitting the Section 7 application and dismissed the appeal.
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