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TMI Blog2023 (7) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... it is for the Resolution Professional, to quantify the Claim Sum, to be paid. An Adjudicating Authority / Tribunal, under I B Code, 2016, is necessarily to ascertain as to whether, there is any Default, and whether the Liability of the Respondent / Corporate Debtor, is more than the Limit, prescribed under the Section 4 of the Code - Although, the Debt, is Disputed, if the said Sum, is more than the Amount, specified under Section 4 of the I B Code, 2016, an Adjudicating Authority / Tribunal, has to admit the Section 7 Application of the I B Code, 2016, and the said Application, cannot be rejected, merely on technical grounds. No wonder, an Adjudicating Authority/ Tribunal, is to exercise its Judicial Discretion, in dealing with an Application (Filed under I B Code, 2016), in accordance with Law, and based on facts, evidence and circumstances of the given case. In the case on hand, before this Tribunal, although, on the side of the Appellant, a reference is made to the Order in M/S. INMA INTERNATIONAL LTD., G. RATHINAVELU, G. SUNDARAVADIVELU VERSUS INDIAN OVERSEAS BANK [ 2019 (12) TMI 1649 - MADRAS HIGH COURT] , whereby and whereunder, an Order of Ad-interim Injun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant Comp. App (AT) (CH) (INS.) No. 143 of 2022, on being dissatisfied with the impugned order dated 13.04.2022 in IBA / 49 / 2019 (Filed by the 1st Respondent / Financial Creditor / Bank / Petitioner ), under Section 7 of the I B Code, 2016, r/w Rule 4 of the I B (AAA) Rules, 2016, passed by the Adjudicating Authority ( National Company Law Tribunal , Special Bench II, Chennai). 2. While passing the impugned order , dated 13.04.2022 in IBA / 49 / 2019 (Filed by the 1st Respondent / Financial Creditor / Bank / Petitioner - under Section 7 of the I B Code, 2016, r/w Rule 4 of the I B (AAA) Rules, 2016), the Adjudicating Authority ( National Company Law Tribunal , Special Bench II, Chennai), among other things, at Paragraph Nos. 6 to 16, had observed the following: 6. It was submitted by the Learned Counsel for the Applicant that the Financial Creditor had caused demand notice dated 27.01.2015, under SARFAESI, Act to the Corporate Debtor with the request to pay a sum of Rs.16,51,98,135.20/- (Rupees Sixteen Crore Fifty-One Lakh Ninety-Eight Thousand One Hundred Thirty Five and Twenty Paise only) as the outstanding amount as on date of notice toget ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Creditor regarding mistakes in the CIBIL report which were also dismissed by the Hon ble High Court of Madras after rectifying the mistake in the report. In such circumstances, the Financial Creditor preferred this application and sought initiation of CIRP against the Corporate Debtor for the non-payment of the outstanding amount of Rs.14,08,75,444.17/- (Rupees Fourteen Crore Eight Lakh Seventy-Five Thousand Four-Hundred Forty-Four and Seventeen Paise only). 12. On the other hand, the Learned Counsel Appeared on behalf of the Corporate Debtor submitted in the counter that the application OA No.633 of 2016 filed by the Financial Creditor and the Securitization Application filed by the Corporate Debtor were pending before the DRT II, Chennai Bench. 13. It was further submitted that in the writ petition WP No. 1421 of 2017, the Hon ble High Court of Madras has given liberty to the Corporate Debtor to claim damages against the Financial Creditor for the mistake the made in the CIBIL score of the Corporate Debtor. 14. Subsequently, the Corporate Debtor filed a counterclaim in C.C. No.6 of 2018 in OA No.633 of 2016 before DRT II Chennai, wherein vide order dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d defaulted in making payments to the 1st Respondent , as its Vendor , defaulted in their payments. Besides this, in terms of the Demand Notice , dated 27.01.2015, issued by the 1st Respondent / Bank , to the 2nd Respondent / Corporate Debtor , the 2nd Respondent / Corporate Debtor s Account , was declared as a Non Performing Asset , on 30.12.2014. 4. According to the Appellant, the 1st Respondent / Bank, had directed the 2nd Respondent / Corporate Debtor, to clear the Due Outstanding , and that the 2nd Respondent / Corporate Debtor, had approached various Banks, including the New India Co-operative Bank , for taking over the Loan , by clearing the Dues , payable to the 1st Respondent / Bank. 5. It is the version of the Appellant that the 1st Respondent / Bank, had misused the Collateral , provided by the 2nd Respondent / Corporate Debtor , and wanted to ensure that the Loan , is not serviced so that the mortgaged properties can be sold in auction at a throw away price to the land sharks who have a mutual beneficial understanding with the Bank officials. 6. The Learned Counsel for the Appellant points out that the 1st Respondent / Bank / Financial Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Corporate Debtor , had made the payment of Rs.52,93,875/- to the 1st Respondent / Bank , without prejudice to its rights, on 21.08.2019 and from the date of Non Performing Asset , the 2nd Respondent / Corporate Debtor , had paid a Sum of Rs.14.13 Crores and therefore, the entire amount as held to be payable and claimed to be payable by the 1st Respondent / Bank , has been paid in full and there is no aspect of default , on the part of the 2nd Respondent / Corporate Debtor . 11. The Learned Counsel for the Appellant submits that being dissatisfied with the Final Order of the Debt Recovery Tribunal II, Chennai, dated 30.05.2019, the 1st Respondent / Bank , had preferred Appeals , before the Debt Recovery Appellate Tribunal , Chennai, in RA No. 110 and 111 of 2019, and the Corporate Debtor , had also preferred an Appeal , as against the Dismissal of the counterclaim , in RA No.138 of 2019. In fact, on 14.11.2019, the Debt Recovery Appellate Tribunal, Chennai, had passed Final Orders, dated 14.11.2019, holding that the Financial Creditor , is entitled to charge Interest , on the Loan Accounts , from the date of Sanction , @ 9% and thereby modifying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, in Law and in Fact , no Liability existed. 16. The Learned Counsel for the Appellant contends that the Adjudicating Authority , had erroneously admitted the Application , through the impugned order , dated 13.04.2022, at the instance of the 1st Respondent / Bank , without determining, whether any Debt , is Due and Payable . Also that, the Adjudicating Authority , had not even ascertained, whether any Debt existed, and instead presumed the existence of Debt . 17. According to the Appellant , the whole decision, was based on a Stale One Time Settlement Offer , provided by the 2nd Respondent / Corporate Debtor , which was filed in the year 2016, when the 2nd Respondent / Corporate Debtor , had paid huge sums of money, subsequently in numerous proceedings, including the Proceedings, before the Adjudicating Authority , and thus mentioned in the Affidavits , filed by the 1st Respondent / Bank , before the Adjudicating Authority , and in fact, had cleared the Entire Liability (pending determining of the Actual Liability , albeit), and this fact, was taken note of, by the Hon ble High Court in its Order dated 04.12.2019. However, the Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Tribunal , could not have been and ought not to have admitted on 13.04.2022 or any other date after 04.12.2019, when the Order of the Hon ble High Court, interdicting the 1st Respondent / Bank s right to recover, continued and further that the Appellant has filed the instant Appeal , being dissatisfied with the impugned order , dated 13.04.2022 in IBA/49/2019, passed by the Adjudicating Authority ( National Company Law Tribunal , Special Bench II, Chennai). Appellant s Submissions: 23. The Learned Counsel for the Appellant, contends that the 2nd Respondent / Corporate Debtor, had paid amounts, in excess of Rs.1.63 Crores (as on 21.08.2019), upon being declared Non Performing Asset , and much before the impugned order , came to be passed on 13.04.2022. As a matter of fact, the 2nd Respondent / Corporate Debtor , had paid a Total Amount of Rs.14.13 Crores and this amount has to be adjusted to the Principal , in terms of the cumulative reading of the Debt Recovery Tribunal and Debt Recovery Appellate Tribunal s Orders. 24. The Learned Counsel for the Appellant, contends that where in a Petition, the Sum indicated as Amount Due , is admittedly and wholly pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CRP No. 1783 of 2022 (filed in respect of the Order dated 29.04.2022, refusing to grant Interim Stay , in this Tribunal , in the subjective Appeal), by the Hon ble Madras High Court, in dismissing , the Petition , as Withdrawn, does not in any manner preclude the Appellant, canvassing the grounds therein, in the instant Appeal . 31. The Learned Counsel for the Appellant, takes a plea that in as much as the 1st Respondent / Bank, has made substantial recoveries, during the pendency of Legal Proceedings , and until the impugned order , and since the 1st Respondent / Bank, had pursued the Petition , in IBA/49/2019 (filed under Section 7 of the I B Code, 2016), despite, any Order of Injunction , dated 04.12.2019, passed against it, by the Hon ble High Court, it is clear that, Petition under Section 7 of the I B Code, 2016, filed by the 1st Respondent / Bank, to the Fraudulent and Malicious initiation of proceedings , and on this score, the impugned order , dated 13.04.2022, passed by the Adjudicating Authority / Tribunal , in IBA/49/2019, is to be set aside and accordingly, the main Petition , is to be dismissed . Appellant s Decisions: Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnoventive Industries Limited2, this court while considering the scope of the various provisions under the Act and while referring to the procedure contemplated in a petition under Section 7 of the IB Code, which is also extracted supra reads thus: (SCC p. 438, para 28) 28. It is at the stage of Section 7(5), where the Adjudicating Authority is to be satisfied that default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. 21. In such circumstances if the adjudicating authority finds from the material available on record that the situation is not yet ripe to call it a default, that too if it is satisfied that it is profit making company and certain other factors which need consideration, appropriate orders in that regard would be made; the consequence of which could be the dismissal of the petition under Section 7 IBC on taking note of the stance of the corporate debtor. 26. The underlying principle laid down by the Supreme Court in a number of decisions is that the referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance in the defence and to arrive at the conclusion whether there is default. If the irresistible conclusion by the adjudicating authority is that there is default and the debt is payable, the bogey of arbitration to delay the process would not arise despite the position that the agreement between the parties indisputably contains an arbitration clause. 34. In the present case, it would be premature at this point to arrive at a conclusion that there was default in payment of any debt until the said issue is resolved and the amount repayable by Indus Biotech Pvt. Ltd. to KIV with reference to equity shares being issued is determined. In the process, if such determined amount is not paid it will amount to default at that stage. Therefore, if the matter is viewed from any angle, not only the conclusion reached by the adjudicating authority, NCLT insofar as the order on the petition under Section 7 IBC at this juncture based on the factual background is justified but also the prayer made by Indus Biotech Pvt. Ltd. for constitution of the Arbitral Tribunal as made in the petition filed by them under Section 11 of the A C Act, 1996 before the Supreme Court, is justified. 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 17, it is observed as under: 10. The argument of the Learned Counsel for the Appellant that the Notification dated 24.03.2020 issued by the Central Government increasing the threshold to Rs.1 Crore/- is retrospective in nature and is applicable to this case, is untenable as we are of the view that the amounts claimed pertain to the period prior to the date of Notification. We also do not wish to delve into the other submissions of the Appellant regarding the nature of transactions, absence of Financial Contract, non-registration of debt with the information utility whether interest at 18% per annum was ever concluded between the parties except for reference in the legal Notice issued by the second Respondent. This Tribunal is of the earnest view that taking into consideration the facts and circumstances of the attendant case on hand, the issue with respect to Admission of Section 7 Petition is required to be decided on the touchstone of the ratio of the Hon ble Supreme Court in Vidarbha Industries Power Limited Vs. Axis Bank Limited , 2022 SCC OnLine SC 841, wherein the Hon ble Apex Court has observed as follows: 55. When an application is filed under Section 7(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor, who was in the red, indicated that no other extraneous matter should come in the way of expeditiously deciding a petition under Section 7 or under Section 9 of the IBC. 60. There can be no doubt that a Corporate Debtor who is in the red should be resolved expeditiously, following the timelines in the IBC. No extraneous matter should come in the way. However, the viability and overall financial health of the Corporate Debtor are not extraneous matters. 61. The Adjudicating Authority (NCLT) found the dispute of the Corporate Debtor with the Electricity Regulator or the recipient of electricity would be extraneous to the matters involved in the petition. Disputes with the Electricity Regulator or the Recipient of Electricity may not be of much relevance. The question is whether an award of the APTEL in favour of the Corporate Debtor, can completely be disregarded by the Adjudicating Authority (NCLT), when it is claimed that, in terms of the Award, a sum of Rs. 1,730 crores, that is, an amount far exceeding the claim of the Financial Creditor, is realisable by the Corporate Debtor. The answer, in our view, is necessarily in the negative. 62. In our view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority (NCLT) .. 83. The Adjudicating Authority (NCLT) failed to appreciate that the question of time bound initiation and completion of CIRP could only arise if the companies were bankrupt or insolvent and not otherwise. Moreover the timeline starts ticking only from the date of admission of the application for initiation of CIRP and not from the date of filing the same. 84. In Swiss Ribbons (supra) this Court considering the vires of the IBC observed as follows: 43. A financial creditor may trigger the Code either by itself or jointly with other financial creditors or such persons as may be notified by the Central Government when a default occurs. The Explanation to Section 7(1) also makes it clear that the Code may be triggered by such persons in respect of a default made to any other financial creditor of the corporate debtor, making it clear that once triggered, the resolution process under the Code is a collective proceeding in rem which seeks, in the first instance, to rehabilitate the corporate debtor. Under Section 7(4), the adjudicating authority shall, within the prescribed period, ascertain the existence of a default on the basis of evidence fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Respondent submitted that the total debt including interest due @18% p.a. is Rs.87,76,100/- till 26.03.2021, which is the date of initiation of the CIRP. Learned Sr. Counsel for second Respondent strenuously argued that the amount lent is a Financial Debt and that the second Respondent is a Financial Creditor and the debt is acknowledged in the books of accounts and hence the Adjudicating Authority was right in admitting the Section 7 Application, keeping in view the admitted debt default . Reliance was placed on the Judgements of the Hon ble Supreme Court in Innoventive Industries Ltd. (Supra) and Orator Marketing Pvt. Ltd. (Supra). While, we find force in the submissions of the Ld. Sr. Counsel that there is debt and a default what should also be examined is whether the intent for initiation of CIRP is Recovery or Resolution. 13. It is pertinent to mention that the second Respondent in para 14 of their Reply and in para 40 of their objections have never refuted the submission of the Appellant that the Corporate Debtor is a going concern and a viable unit and has great commercial prospects and that the Corporate Debtor in their Reply dated 07.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities Ltd. , 2019 SCC OnLine NCLAT 334, has noted that CIRP cannot be initiated with fraudulent and malicious intent for any purpose other than the Resolution of Insolvency or Liquidation and therefore it is clearly covered under Section 65 of the Code. 16. Though the aforesaid Section does not expressly mention Debt Recovery Action under for any purpose other than resolution of insolvency.. , keeping in view the factual occurrence of the events of this particular matter, we hold that the intent may not be a malafide intent , but is nevertheless a fundamental attempt to obtain an edge/ advantage / an upper hand in recovering their dues . At this juncture we place reliance on the judgment of The Hon ble Madras High Court in S.T. Sahib Vs. Hasan Ghani Sahib , 1956 SCC OnLine Mad 344 , wherein the Hon ble High Court has examined the word malice and observed that malice would mean inappropriate and wrongful motive to use the law in a manner other than its legally appointed and appropriate purpose . The Hon ble Madras High Court has further observed that a wrongful motive need not be a mala fide intent, it could simply be an attempt to attain an advantage. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loans , by executing and delivering the Continuing Personal Guarantee Deeds , on 30.09.2013, for an aggregate amount of Rs.19/- Crores, to and in favour of the 1st Respondent / Bank . 39. The Learned Counsel for the 1st Respondent / Bank, points out that under the Inland Letters of Credit Limit of Rs.6 Crores , the 1st Respondent / Bank , had issued Letters of Credit , to the material suppliers of the 2nd Respondent , to purchase raw materials , required for processing . In terms of the Agreement , upon supplying the materials to the 2nd Respondent / Corporate Debtor , the supplier , has to submit the bills , and the 2nd Respondent / Corporate Debtor , has to arrange for sufficient funds , in its Cash Credit Account , for honouring the said bills , by the Bank . 40. The Learned Counsel for the 1st Respondent / Bank, submits that in the event of Insufficiency of Funds , in Cash Credit Account , on the due date of bill , the 1st Respondent / Bank , would debit , the said Account , and make the payment of the bill , by utilising the said Letter of Credit Limit , the 2nd Respondent / Corporate Debtor, had purchased materials from various Parties , a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor , for Sale , and issued a Sale Notice , on 19.12.2015, determining the Date of E-Auction , on 19.01.2016, which was challenged in SA No. 20 / 2016, before the Debt Recovery Tribunal III, Chennai, by the 2nd Respondent / Corporate Debtor. An Interim Order (in the said Application ), was passed by the said Tribunal , on 13.01.2016, on condition, to Deposit a sum of Rs.4.5 Crores in two instalments, by expressing their willingness to settle the entire Dues , by way of One Time Settlement , by 31.03.2016, and that the Conditional Order , was complied with, but the Undertaking , to settle the Loan Account , was not honoured . 44. It is the version of the 1st Respondent / Bank, during the course of the Hearing of SARFAESI Application, the 2nd Respondent / Corporate Debtor , had alleged that in view of the CIBIL Report , exhibiting the Outstanding Sum , as Rs.32 Crores, as against the Dues , was only a sum of Rs.16 Crores only, they were unable to seek, takeover of their Loan Account , but the said Application bearing No.20 / 2016, came to be dismissed on 09.09.2016, wherein the Debt Recovery Tribunal III, Chennai, made the following observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish in the procedure adopted by the respondent bank in issuance of the subject sale notice. Even otherwise, the subject sale notice has become infructuous for want of bidders. From the above discussion, except for the quantum of money to be paid by the appellants, on an extended time, there are no infirmities established in issuance of the sale notice by the respondent bank in its lawful course of recovery. As the appellants failed to establish any infirmities in the procedure adopted, this SA is liable to be dismissed. 45. The Learned Counsel for the 1st Respondent / Bank, adverts to the Filing of W.P. No. 1421 of 2017, filed by the 2nd Respondent / Corporate Debtor, seeking Mandamus , to take on file the said Complaint , and to investigate the matter, and that the Writ Petition, was dismissed on 13.11.2017, whereby and whereunder at Paragraphs 21 to 23, it is observed as under: 21. Apparently, in this case, a dispute has arose and the communication between the parties since 21/11/2005 till 30/03/2016 centres around the dispute and the settlement of the said dispute. Despite rectification of the duplicate entries, if the writ petitioner is under the impressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 7 of the I B Code, 2016), to trigger the Insolvency Resolution Process , against the 2nd Respondent / Corporate Debtor , and on 30.11.2018, the 2nd Respondent / Corporate Debtor, came out with an Offer , to pay a sum of Rs.11.46/- Crores, under One Time Settlement , which was accepted by the 1st Respondent / Bank, and communicated to the 2nd Respondent / Corporate Debtor , on 21.03.2019, but the 2nd Respondent / Corporate Debtor, had not honoured the said One Time Settlement . 49. The Learned Counsel for the 1st Respondent / Bank, brings it to the notice of this Tribunal , that in May 2019, the OA 633 / 2016 and Counterclaim No. 6 / 2018, were taken up together for Hearing , by the Debt Recovery Tribunal II, Chennai, under a Common Order , was passed on 30.05.2019. In fact, the Debt Recovery Tribunal, found that the Bank had proved its Claim , against the 2nd Respondent / Corporate Debtor, but in regard to the counterclaim , the Debt Recovery Tribunal, came to a conclusion that the Hon ble High Court, had found the 2nd Respondent / Corporate Debtor, is entitled for Damages , on account of duplicate entry in the CIBIL Report , which took place, on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No. 138 / 2019. 51. The Learned Counsel for the 1st Respondent / Bank, points out that the aforesaid Appeals , filed before the Debt Recovery Appellate Tribunal, were Heard , together and they were Disposed of , on 14.11.2019 and that the Appellate Tribunal , in Para 11 of its Order , had observed the following: On 24/11/2015 while CIBIL report was generated, outstanding due amount against company was shown to be Rs.32,11,31,188/- whereas actual due was Rs.15,76,56,258/-. Had it been a mistake of only disclosing the account number in 15 digits or 17 digits, then there should have been no change in the figure of dues The Bank furnished wrong information on CIBIL Report whether deliberately or inadvertently, but it has caused loss and damage to the borrowers to the extent they found it difficult to approach some other bank to take loan to the tune so that dues of the bank can be repaid. 52. The Learned Counsel for the 1st Respondent / Bank, comes out with a plea that the pleadings in WP No. 1421 of 2017, were filed as Documents , before the Debt Recovery Appellate Tribunal, to show how the dual entry, got reflected in CIBIL Reports , and by adverting to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent / Bank, that the amount decided by the Debt Recovery Appellate Tribunal , against the 2nd Respondent / Corporate Debtor , as Due , still subsists. 55. The Learned Counsel for the 1st Respondent / Bank puts forward a plea that although the 2nd Respondent / Corporate Debtor, had paid the Dues , calculated in terms of the Order of the Debt Recovery Tribunal of a sum of Rs.52,93,874.05/-, the said 2nd Respondent / Corporate Debtor, had not chosen to pay the Dues , as calculated, in terms of the Order of the Debt Recovery Appellate Tribunal , of a sum of Rs.3,55,32,235.80/-, as on 14.11.2019. 56. The Learned Counsel for the 1st Respondent / Bank, points out that the 2nd Respondent / Corporate Debtor, had falsely claimed that the Dues , as per the Order of the Debt Recovery Tribunal , was paid and the sum Due , to the 1st Respondent / Bank, is disputed and sought the dismissal of the Application . Moreover, in the Memo , dated 25.02.2022, the 1st Respondent / Bank, before the Adjudicating Authority / Tribunal , had categorically mentioned that though, in the counterclaim , preferred by the 2nd Respondent / Corporate Debtor , the Debt Recovery Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st Respondent / Bank , through Contempt Petition No. 1260 of 2022 , before the Hon ble High Court, alleging Breach of the Order , dated 04.12.2019, in WMP No. 33866 of 2019 in WP No. 33396 of 2019, which was extended until further Orders. As a matter of fact, if the Appellant , is of the view that by proceeding with IBA/49/2019 , the 1st Respondent / Bank, had committed the Contempt of Court , the Appellant , is free to proceed with the Contempt Petition , and in short, the Appellant , is not entitled to get the Order of Admission , dated 13.04.2022, set aside, on the said ground. 1st Respondent s Decisions: Hon ble Supreme Court s Decisions: 61. The Learned Counsel for the 1st Respondent / Financial Creditor cites the decision of the Hon ble Supreme Court of India in Innoventive Industries Limited v. ICICI Bank and Anr., reported in (2018) 1 SCC 407, at Spl. Pgs. 429, 431-432, 437-438 and 439, wherein, at Paragraphs 18, 20, 27, 28 and 30, it is observed as under: 18. There are two sets of definition sections. They are rather involved, the dovetailing of one definition going into another. Section 3 defines various terms as follows: Sec. 3( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess against a corporate debtor before the Adjudicating Authority when a default has occurred. Explanation. For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). (5) Where the Adjudicating Authority is sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operational debt in respect of which the default has occurred. 27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of debt , we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim , we have to go back to Section 3(6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is due i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise. 62. The Learned Counsel for the 1st Respondent / Bank, relies on the decision of the Hon ble Supreme Court of India in Swiss Ribbons Private Limited v. Union of India and Ors., reported in (2019) 4 SCC Page 17 at Spl. Pgs. 70, 71 74, wherein, at Paragraphs, 52, 55(c) and 63, it is observed as under: Notice, hearing and set-off or counterclaim qua financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the Adjudicating Authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the Adjudicating Authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the Adjudicating Authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the ―debt, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode but are preserved for the stage of admission of claims during the resolution plan. Also, there is nothing in the Code which interdicts the corporate debtor from pursuing such counterclaims in other judicial fora. Form C dealing with submission of claims by financial creditors in the CIRP Regulations states thus: FORM C SUBMISSION OF CLAIM BY FINANCIAL CREDITORS [Under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016] [Date] From [Name and address of the financial creditor, including address of its registered office and principal office] To The Interim Resolution Professional/Resolution Professional, [Name of the Insolvency Resolution Professional / Resolution Professional] [Address as set out in public announcement] Subject: Submission of claim and proof of claim. Madam/Sir, [Name of the financial creditor], hereby submits this claim in respect of the corporate insolvency resolution process of [name of corporate debtor]. The details for the same are set out below: Relevant Particulars Name of the financial creditor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim]. 5. I am / I am not a related party of the corporate debtor, as defined under Section 5(24) of the Code. 6. I am eligible to join committee of creditors by virtue of proviso to Section 21(2) of the Code even though I am a related party of the corporate debtor. Date: Place: (Signature of the claimant) VERIFICATION I, [Name] the claimant hereinabove, do hereby verify that the contents of this proof of claim are true and correct to my knowledge and belief and no material fact has been concealed therefrom. Verified at on this day of , 20 (Signature of claimant) [Note: In the case of company or limited liability partnership, the declaration and verification shall be made by the director/manager/secretary/designated partner and in the case of other entities, an officer authorised for the purpose by the entity.] 63. The Learned Counsel for the 1st Respondent / Bank, refers to the decision of the Hon ble Supreme Court of India in Radha Exports (India) Private Limited v. K.P Jayaram Anr., reported in (2020) 10 SCC Page 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority had the power to permit amendment of pleadings or to permit filing of additional documents in a petition filed under Section 7 of the IBC. 25. Though all these issues have been elaborately considered by this Court in the case of Dena Bank (supra), we would only be concerned with the issue, as to whether the issuance of the Recovery Certificate in favour of the financial creditor would give rise to a fresh cause of action to initiate proceedings under Section 7 of the IBC. This Court in the said case after considering various provisions of the IBC as well as the earlier judgments of this Court has observed thus: 99. There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 IBC is three years from the date of accrual of the right to sue, that is, the date of default. In GauravHargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd. [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1] authored by Nariman, J. this Court held : (SCC p. 574, para 6) 6. The present case being an application which is filed under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the issuance of a certificate of recovery in favour of the financial creditor, would give rise to a fresh cause of action for the financial creditor, to initiate proceedings under Section 7 IBC for initiation of the corporate insolvency resolution process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the certificate of recovery, if the dues of the corporate debtor to the financial debtor, under the judgment and/or decree and/or in terms of the certificate of recovery, or any part thereof remained unpaid. [emphasis supplied] 27. It could thus be seen that this Court in the case of Dena Bank (supra) in paragraphs 136 and 141, has in unequivocal terms held that once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate. It has further been held that issuance of a certificate of recovery in favour of the financial creditor woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all creditors of the Corporate Debtor, as also the protection of the livelihoods of its employees/workers, by revival of the Corporate Debtor through the entrepreneurial skills of persons other than those in its management, who failed to clear the dues of the Corporate Debtor to its creditors. It only segregates the interests of the Corporate Debtor from those of its promoters/persons in management. 85. Relegation of creditors to the remedy of Coercive litigation against the Corporate Debtors could be detrimental to the interests of the Corporate Debtor and its creditors alike. While multiple coercive proceedings against a Corporate Debtor in different forums could impede its commercial/business activities, deplete its cash reserves, dissipate its assets, moveable and immoveable and precipitate its commercial death, such proceedings might not be economically viable for the creditors as well, because of the length of time consumed in the litigations, the expenses of litigation, and the uncertainties of realisation of claims even after ultimate success in the litigation. 86. It is, therefore, imperative that the provisions of the IBC and the Rules and Regulations framed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel accepts notice for respondent No. 2. They seek time to get instructions and to file the replies. Replies, if any, be filed before the next date of hearing. List on 5 April, 2021. In the meanwhile, as an ex parte ad interim relief, we direct that no further coercive steps shall be initiated against the appellant by the respondent Bank, insofar as the dispute in question is concerned, till the next date of hearing. 31. Therefore assuming that IBC proceeding initiated by Respondent No.1 bank is not a recovery proceeding, one will have to examine if IBC proceeding initiated by Respondent No. 1 bank is violative of order dated 25 February, 2021. 32. In the opinion of the Court, order dated 25 February, 2021only restrains the Respondent No.1 bank from initiating coercive steps against Appellant zee. It is settled law that IBC proceeding is neither coercive nor adversarial to the interest of corporate debtor and guarantor. The Supreme Court in Swiss Ribbons Private Limited v. Union of India, (2019) 4 SCC 17, has held as under:- 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AVAILABLE TO THE RESPONDENT NO. 1 BANK UNDER APPLICABLE LAWS TO REALISE THE AMOUNT DUE TO IT 35. This Court is in agreement with the submission of Dr. Singhvi that the term recovery used in the order dated 03rd December, 2021 is a generic term to include any or all legal remedies available to the Respondent No.1 bank under applicable laws to realise the amount due to it. After all, the ultimate object of IBC is resolution of insolvency, where commencement of insolvency is determined by occurrence of a payment default and the resolution is achieved through recovery of dues of financial creditors from the proceeds of resolution. 68. The Learned Counsel for the 1st Respondent / Bank, refers to the Judgment of the Hon ble Supreme Court of India, dated 11.05.2023, in M. Suresh Kumar Reddy v. Canara Bank Ors., (vide Civil Appeal No.7121 of 2022), whereby and whereunder, at Paragraphs 12 13, it is observed as under: 12. A Review Petition was filed by the Axis Bank Limited seeking a review of the decision of Vidarbha Industries1 on the ground that the attention of the Court was not invited to the case of E.S. Krishnamurthy2. While disposing of Review Petition by Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Tribunal , that the 2nd Respondent, had conducted the 3rd Committee of Creditors Meeting , on 29.10.2022, after duly complying with the necessary procedures. As a matter of fact, the Representatives of the 1st Respondent / Bank, attended the said Meeting, in which, among other issues, a Proposal , to approach the Ld. Adjudicating Authority / Tribunal , seeking exclusion of 131 days from 08.06.2022 to 16.10.2022, being the timeline , after the Resolution , was passed by the Committee of Creditors , to replace; the Interim Resolution Professional , till the date on which, the Order , was passed by the Adjudicating Authority / Tribunal , appointing the 2nd Respondent , as the Resolution Professional of the Corporate Debtor , was made available, thereby enabling to take charge of the Corporate Debtor , came up for discussion / deliberation , and it was resolved that the 2nd Respondent, ought to approach the Hon ble Adjudicating Authority , in seeking exclusion of the aforesaid timeline , from the Corporate Insolvency Resolution Process Period. 72. The Learned Counsel for the 2nd Respondent, points out that in Cont. Petn. No.1260 / 2022, filed by the Susp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Code, defines Corporate Debtor meaning, a corporate person who owes a debt to any person . Creditor: 78. Section 3 (10) of the Code, defines Creditor meaning, any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder . Debt: 79. Section 3 (11) of the Code, defines Debt meaning, a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt . Default: 80. Section 3 (12) of the Code, defines Default meaning, non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not 1[paid] by the debtor or the corporate debtor, as the case may be . Financial Creditor: 81. Section 5 (7) of the Code, defines Financial Creditor , meaning, any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to . Financial Debt: 82. Section 5 (8) of the Code, defines Financial Debt , meaning, a debt along with interest, if any, which is disbursed against the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right to apply , under section 7 of the Code, accrues to a Person / Entity , only when it came into force. An Application , under Section 7 of the I B Code, 2016, is only maintainable , by a Financial Creditor . 86. Further, a Person , opting to file / preferring of Insolvency Proceedings of the I B Code, 2016, will be his / its conscious decision , who is entitled , to file such an Application / Petition , and to that extent, a Creditor , cannot be restricted , from filing such an Application , in accordance with Law , as opined by this Tribunal . 87. The provisions of I B Code, 2016, can be invoked even when it is known to the Financial Creditor , that there is no possibility of keeping the Company , as a Going Concern . 88. It is not the Property , which is at the foundation of the Code , it is the Cash Liquidity , which is the basis for triggering the Corporate Insolvency Resolution Process . 89. A mere Dispute , about the quantum of payment does not affect the right of a Financial Creditor . Unlike, Section 9 of the I B Code, 2016, there is no ambit of raising a Dispute , as far as Section 7 Application of the I B Code, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word Discretion , implies a vigilant circumspection and care . Moreover, if a Legislature , concedes a wide discretion, then, a heavy responsibility is imposed , as per decision AIR 1933 Sind. Page 49. Discussions: 99. Before the Adjudicating Authority ( National Company Law Tribunal , Special Bench II, Chennai), the 1st Respondent / Bank / Financial Creditor , had filed an Application , seeking to initiate Corporate Insolvency Resolution Process , against the 2nd Respondent / Corporate Debtor / M/s. INMA International Limited (under Section 7 of the I B Code, 2016, read with Rule 4 of the I B (AAA) Rules, 2016, and in Part IV of Form I of the Application , under the Column Total Amount of Debt Granted , it was mentioned that the Corporate Debtor , has lastly availed MCC Facility , to the tune of Rs.13 Crores (combination of existing clean CC of Rs.5 Crores and CCH limit of Rs.8 Crores) with permission to avail LC as sub limit to an extent of Rs.3 Crores and Inland Letter of Credit , to the tune of Rs.6 Crores (renewal with reduction), based on Sanction Letter , dated 27.09.2013. 100. Indeed, the amount claimed to be in Default , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tune of about Rs.2/- Crores, to the 1st Respondent / Financial Creditor / Bank, as per the Debt Recovery Tribunal s Final Order dated 30.05.2019, but the 1st Respondent / Bank / Financial Creditor, had disputed the same and filed a Statement of Accounts , before the Adjudicating Authority , on 03.08.2019, mentioning that Still a sum of about Rs.52 Lakhs, was Due , as per the Final Order of the DRT II , Chennai, in OA No. 633 / 2016 , and a Counterclaim No. 6 / 2018 . 106. It is represented on behalf of the 2nd Respondent / Corporate Debtor that, it had effected the payment of Rs.52 Lakhs to the 1st Respondent / Bank / Financial Creditor , without prejudice to its rights on 21.08.2019. That apart, from the Date of Non Performing Asset , the 2nd Respondent / Corporate Debtor, had paid an amount of Rs.14.13 Crores, and as such the whole amount, was paid in full and this no Event of Default , on the part of the 2nd Respondent / Corporate Debtor . 107. The other contention of the 2nd Respondent / Corporate Debtor, is that, in view of the Order of Injunction , granted by the Hon ble Madras High Court, against the 1st Respondent / Bank / Financial Creditor , prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n , which continues till date. 113. According to the 1st Respondent / Bank / Financial Creditor, the Liability of the 2nd Respondent / Corporate Debtor , as on 15.11.2019, in terms of the Order , of the Debt Recovery Appellate Tribunal , was 3,55,32,235.80/- and the Liability , as on 01.03.2022 was Rs.4,29,94,004/-. 114. Furthermore, it is the stand of the 1st Respondent / Bank / Financial Creditor, that they are entitled, to recover the dues together with contractual rate of interest . If the said rate of interest is applied the amount that would be recovered as on 30.05.2019 itself was Rs.12,88,56,263.18/-. 115. At this stage, this Tribunal , pertinently points out that in a Proceeding (Filed under Section 7 of the I B Code, 2016, by a Petitioner / Financial Creditor), an Adjudicating Authority / Tribunal , is not concerned with the Dispute / Controversy , between the Respondent / Corporate Debtor and the Petitioner / Financial Creditor , as regards the quantum . Ofcourse, when a Claim is made, it is for the Resolution Professional , to quantify the Claim Sum , to be paid. 116. An Adjudicating Authority / Tribunal , under I B Code, 2016, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primarily between the Court , and the Contemner , as per decision in State of Maharashtra v. Mahboob S. Allibhoy Another, AIR 1996 SC 2131. 122. In the case on hand, before this Tribunal , although, on the side of the Appellant, a reference is made to the Order dated 04.12.2019 of the Hon ble Madras High Court in WMP No. 33866 of 2019 in WP No. 33396 of 2019, whereby and whereunder, an Order of Ad-interim Injunction , as prayed for, till 21.01.2020, was granted, and it was made clear that till the Disposal of the Writ Petition , the Writ Petitioners , shall not create any Third Party Rights , in respect of the Properties, in question , this Tribunal , is of the earnest opinion that there was no embargo upon the Adjudicating Authority / Tribunal , in not Proceeding with the IBA/49/2019 (Filed by the 1st Respondent / Bank / Financial Creditor ). 123. One cannot remain in oblivion of a vital fact that the Order of the Debt Recovery Tribunal , between the Parties , indeed, merged with the Order of the Debt Recovery Appellate Tribunal , dated 14.11.2019, and on 15.11.2019, a Sum of Rs.3,55,32,235.80/- was due and payable , being in Default , and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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