2024 (11) TMI 1352 - AT - IBC

Admissibility of petition - initiation of CIRP - Validity of demand for interest and repayment of principal amount by the Financial Creditor - Existence of debt and default or not - Time limitation - HELD THAT - As per provisions of Section 5(8) of IBC, 2016, financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money. In the present case money has been disbursed to the Corporate Debtor towards time value of money and interest is shown as due in the ledger accounts of the Corporate Debtor. The total interest due is more than Rs. 1 crore and was demanded by the Financial Creditor through letter dated 22.01.2019 which was not paid by the Corporate Debtor. Thus, the debt of above Rs. 1 crore was due, was demanded and was payable which was not paid by the Corporate Debtor. The ingredients of petition under Section 7 of the IBC, 2016, mainly existence of debt, and default are established in this case, and the Corporate Debtor was eligible to be admitted in CIRP on application under Section 7 of IBC, 2016. Time limitation - HELD THAT - The application under Section 7 of the IBC, 2016 was filed on 30.05.2022. The Appellant itself as Director of the Corporate Debtor had acknowledged the debt in the ledger accounts of Financial Year 2016-17, 2017- 18 and 2018-19 through confirmation of accounts including the last dated 01.04.2019 appearing at page 104 of the Appeal Paper Book. The three year period, since the acknowledgement, expired on 31.03.2022. However, as per the direction of the Hon'ble Supreme Court in Suo Moto Writ Petition No. 3 of 2020 decided on 10.01.2022 2022 (1) TMI 385 - SC ORDER , the period from 15.03.2020 till 28.02.2022 is to be excluded for counting of limitation under any law. Excluding the said period, the present petition under Section 7 was filed within the limitation period by the Financial Creditor. The Ld. NCLT has rightly admitted the Corporate Debtor in CIRP on an application under Section 7 of IBC, 2016 filed by the Financial Creditor. We do not find any reason to interfere in the impugned order of Ld. NCLT - The appeal, devoid of merit, is dismissed.

Summary

Issues:
Admission of Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016).
Validity of demand for interest and repayment of principal amount by the Financial Creditor.
Existence of debt, default, and eligibility for admission into CIRP.
Defense raised regarding the limitation period for filing the application under Section 7 of IBC, 2016.

Analysis:
The judgment pertains to an appeal filed by the Suspended Director of a company against an order of the National Company Law Tribunal admitting the company into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Financial Creditor, a Non-Banking Financial Company, disbursed a loan of Rs. 7 crores to the Corporate Debtor, which was partially repaid. The dispute arose regarding the repayment of interest and the demand for the outstanding amount by the Financial Creditor.

The Appellant contended that there was no formal loan agreement, no agreed repayment date, and no demand for the principal amount, making the demand for interest illegal. The Corporate Debtor argued that the TDS deduction was at the request of the Financial Creditor to reconcile accounts. However, the Financial Creditor presented evidence of the loan transaction through ledger accounts and confirmed interest payments by the Corporate Debtor.

The Tribunal noted that the Financial Creditor had established the existence of debt, default, and eligibility for admission into CIRP under Section 7 of IBC, 2016. The debt of over Rs. 1 crore was due, demanded, and remained unpaid, meeting the requirements for initiating CIRP. The Tribunal also addressed the defense of limitation raised by the Appellant, ruling that the application was filed within the limitation period after excluding the period specified by the Hon'ble Supreme Court.

Ultimately, the Tribunal upheld the NCLT's decision to admit the Corporate Debtor into CIRP, finding no grounds to interfere with the order. The appeal was dismissed as lacking merit, and related interim applications were closed, with no costs awarded.