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TMI Blog2017 (9) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... and not disputed by Respondent - 'Corporate Debtor' that the 'debenture holder' (Appellant) and amount matured in the year 2011, 2012 and 2013 has not been paid. Thus, we find there is a default as defined under section 3(12) of the I & B Code. The 'Corporate Debtor' had a liability and obligation in respect of claim of respondent which includes the 'Financial Debt', including those come within clause (c) of sub-section (8) of Section 5. As per the agreement, the same was liable to be paid from the date of maturity along with interest, if any and the same having not paid, the default of debt is apparent. This apart we find that the amount of debt and interest, as shown by appellant was to be disbursed against consideration for time value of the money. Therefore, it cannot be stated that debentures on maturity do not come within the purview of amount payable against the consideration for the time value of the money.Learned Adjudicating Authority having admitted the application under Section 7, the application being complete, no interference is called for. X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Steel & Agro Industries Ltd." Company Appeal (AT) (Ins.) No. 28 of 2017 to suggest that the provision of sub-section 3(a) of Section 7 is mandatory. 6. It was also submitted that it was the duty of the Insolvency and Bankruptcy Board of India (In short "Board") to specify Regulations and in absence of the same the proceeding under Section 7 of 'I & B Code' cannot be initiated. 7. In support of the second contention it was submitted that the time barred debt cannot be enforced by filing an application for Corporate Insolvency Resolution Process. The claim of the 'Financial Creditor', is completely time barred as the debenture certificates were due for redemption as far back as in the years 2011, 2012 and 2013 respectively. Consequently, the application filed by the 'Financial Creditor' in the year 2017 is hopelessly time barred. 8. It was next submitted that the respondent does not come within the meaning of "Financial Creditor" as defined in sub-section (7) read with sub-section (8) of Section 5 of the 'I & B code'. No 'financial debt' is owed to the Respondent. 9. Counsel for the Appellant further submitted that 'Debenture Cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under Section 7 is maintainable or not? 14. Process of initiation of Insolvency Resolution process by a financial creditor is provided in Section 7 of the I & B Code. As per sub-section (1) of Section 7 of the I & B Code, the trigger for filing of an application by a financial creditor before the Adjudicating Authority is when a default in respect of any financial debt has occurred. Sub-section (2) of Section 7 provides that the financial creditor shall make an application in prescribed form and manner and with prescribed documents, including "record of the default" recorded with the information utility or such other record or evidence of default as may be specified". 15. Once the application is filed by the 'Financial Creditor' with the Adjudicating Authority, the Adjudicating Authority, within 14 days of the receipt of the application under sub-section (2) of Section 8 required to ascertain the existence of default from the records of an information utility or on the basis of other evidence furnished by the 'financial creditor' under sub-section (3)(a) of Section 7. 16. 'Financial Creditor' along with the application required to be furnished informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pending against the proposed resolution professional, it may, by order, reject such application: Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). (7) The Adjudicating Authority shall communicate- (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be." 18. It is well settled that rules of procedure are to be construed not to frustrate or obstruct the process of adjudication under the substantive provisions of law. A procedural provision cannot override or affect the substantive obligation of the adjudicating authority to deal with applications under Section 7 merely on the ground that Board has not stipulated or framed Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , "the documents", 'record' and 'evidence of default' prescribed at Part V of Form-1, of the Adjudicatory Rules 2016 will hold good to decide the default of debt for the purpose of Section 7 of the 'I & B Code'. 21. We further hold that the 'Regulations framed by the Board' being subject to the provisions of 'I & B Code' and rules framed by the Central Government under Section 239, 'Part V of Form - 1' of Adjudicating Authority Rules, 2016 framed by Central Government relating to 'documents', 'record' and 'evidence of default', will override the regulations, if framed by the Board and if inconsistent with the Rule. However, it is always open to Board to prescribe additional records in support of default of debt, such as records of default recorded with the information utility or such other record or evidence of default in addition to the records as mentioned in Part V of Form-I. 22. At this stage, it is pertinent to note that the Board has also framed Insolvency Resolution Process for Corporate Persons, Regulations, 2016 ('Corporate Persons Regulation' for short). It has come into force since Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich includes interest and there is default of debt and having continuous course of action, the argument that the claim of money by Respondent is barred by Limitation cannot be accepted. 25. Next question arises is whether the respondent come within the meaning of 'Financial Creditor' or not. 26. For determination of the aforesaid issue, it is desirable to notice meaning of 'Financial Creditor', as defined in sub-section (7) of Section 5 of I & B Code', and quoted hereunder: - "(7) "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to' 27. 'Financial Debt' means a debt along with interest, if any, which is disbursed against the consideration of time value and money as defined in sub-section (8) of Section 5, as quoted below: - "Sec.5. Definitions - In this Part, unless the context otherwise requires, - XXX XXX XXX (8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in sub-section (12) of Section 3, as below:- "(12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be" 33. The fact as pleaded and not disputed by Respondent - 'Corporate Debtor' that the 'debenture holder' (Appellant) and amount matured in the year 2011, 2012 and 2013 has not been paid. Thus, we find there is a default as defined under section 3(12) of the I & B Code. The 'Corporate Debtor' had a liability and obligation in respect of claim of respondent which includes the 'Financial Debt', including those come within clause (c) of sub-section (8) of Section 5. As per the agreement, the same was liable to be paid from the date of maturity along with interest, if any and the same having not paid, the default of debt is apparent. 34. This apart we find that the amount of debt and interest, as shown by appellant was to be disbursed against consideration for time value of the money. Therefore, it cannot be stated that debentures on maturity do not come within the purview of amount payable against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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