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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 ..... le 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 together with future interest thereon at the contractual rate. Since, the Corporate Debtor has not replied to the demand notice the Financial Creditor had taken possession of the property mortgaged on 28.07.2015 and issued possession notice to the Corporate Debtor, against which the Corporate Debtor has not taken any action, which shows the Corporate Debtor has no grievance against the action of the Financial Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 30.05.2019. DRT held that the Financial Creditor is not entitled to any interest for the financial facilities sanctioned to the Corporate Debtor from the date of sanction till the date of filing OA No.633 of 2016 and directed the Financial Creditor to adjust the payment made by the Corporate Debtor towards the principal amount from the date of sanction of the financial facilities till the date of the order and if there was any balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Creditor', made a 'false reporting' of a 'non-existent account to Credit Information Bureau of India Ltd (CIBIL) which showed the dues of the 'Corporate Debtor' at Rs.32 Crores when the actual dues were only about Rs.14 Crores. Therefore, the 'Corporate Debtor', approached the High Court praying for CBI Investigation and while passing Orders on 13.11.2017 in W.P. No. 1421 of 2017, the Hon'ble High Court held that the Bank was at fault in making the incorrect r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent / 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 'Final Order' of the 'Debt Recovery Tribunal', to that extent and affirmed the 'Dismissal' of the 'Counterclaim', filed by the 'Corporate Debtor'. 12. The Learned Counsel for the Appellant, points out that the 2nd Respondent / Corporate Debtor, in respect of the 'Common Order', passed by the Debt Recovery Appellate Tribunal, Chennai, dated 14.11.2019, had filed W.P. Nos. 33396, 33398 and 33399 of 2019, before the Hon'ble Madras High Court, along with a Miscellaneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 Authority' / 'Tribunal', had failed to consider the subsequent repayments, that cleared the 'Entire Liability', and other factors, such as the 'Financial Position' of the 'Corporate Debtor'. 18. The Learned Counsel for the Appellant submits that in Contempt Petition No. 1260 / 2022, the Hon'ble High Court recorded the earlier 'Order', and an 'Undertaking' of the '1st Respondent / Bank', to maintain 'Status Quo', until 'further orders'. 19. The grievance of the Learned Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant'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 paid prior to an 'Order on Admission', the same automatically renders the Petition under Section 7 of the Code infructuous since, there would not be any amount due (and, therefore, no default), requiring initiation of 'Corporate Insolvency Resolution Process' in terms of Section 7(5) of the Code. 25. The Learned Counsel for the Appellant, points out that as per the 'Debt Recovery Tribunal' and 'Debt Recovery 'Appellate Tribunal' Orders', all the payments, made by the 'Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 Supreme Court's Decisions: 32. The Learned Counsel for the Appellant cites the decision of the Hon'ble Supreme Court of India in Innoventive Industries Limited v. ICICI Bank & Anr., reported in (2018) 1 SCC Page 407, at Spl. Pg. 410, wherein, at Paragraph 28, it is observed as under: 28. "When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclude 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 reference to the triggering of a petition under Section 7 IBC to consider the same as a proceedings in rem, it is necessary that the adjudicating authority ought to have applied its mind, recorded a finding of default and admitted the petition. On admission, third-party right is created in all the creditors of the corporate debtors and will have erga omnes effect. The mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. Hence, the admission of the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. The Learned Counsel for the Appellant, refers to the decision of the Hon'ble Supreme Court of India in Ebix Singapore Pvt. Ltd. v. CoC, Educomp Solutions & Anr., reported in (2022), 2 SCC Page 401, at Spl. Pg. 496, wherein, at Paragraph 130, it is observed as under: 130. "..... A Resolution Applicant, as a third party partaking in the insolvency regime, seeks to acquire the business of the Corporate Debtor without the entirety of its debts, statutory liabilities and avoiding certain transactions with third parties. These benefits are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation 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) of the IBC, the Adjudicating Authority (NCLT) is required to ascertain the existence of a default from the records of the information utility or any other evidence furnished by the financial creditor under sub-section (3) of Section 7 of the IBC, within 14 days of the date of receipt of the application. 56. Section 7(5)(a) of the IBC, on which much emphasis has been placed both by Mr. Gupta and Mr. Mehta, provides that where the Adjudicating Authority (NCLT) is satisfied that a default has occurred and the application under sub-Section (2) of the IBC is comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor 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 Appellate Authority (NCLAT) erred in holding that the Adjudicating Authority (NCLT) was only required to see whether there had been a debt and the Corporate Debtor had defaulted in making repayment of the debt, and that these two aspects, if satisfied, would trigger the CIRP. The existence of a financial debt and default in payment thereof only gave the financial creditor the right to apply for initiation of CIRP. The Adjudicating Authority (NCLT) was require to apply its mind to relevant factors including the feasibility of initiation of CIRP, against an electricity generating com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons 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 furnished by the financial creditor; and under Section 7(5), the adjudicating authority has to be satisfied that a default has occurred, when it may, by order, admit the application, or dismiss the application if such default has not occurred. On the other hand, under Sections 8 and 9, an operational creditor may, on the occurrence of a default, deliver a demand notice which must then be replied to within the specified period. What is important is that at this stage, if an application is filed before the adjudicating authority for initiating the corporate insolvency resolution process, the corporate debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 07.08.2019 have clearly stated that they had the bona fide intention of returning the pending amount'. The case of the Second Respondent is that despite being a viable unit, the Appellant has defaulted in paying these amounts. Having accepted interest at 6% per annum, it is the case of the Appellant that the second Respondent is now claiming an interest at 18% per annum. Be that as it may, the Adjudicating Authority, is not a 'debt collection forum'. The Hon'ble Supreme Court in a catena of Judgements has held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 17. This Tribunal is of the ernest view that seeking to initiate CIRP, in the factual matrix of the attendant case, is only with an intention for 'Recovery' of their dues and opposes the very spirit, point and purpose of the Code. We hold that 'A Recovery Proceeding' of this nature does fall within the scope and ambit of the words 'for any purpose other than Resolution', as defined under Section 65 (1) of the Code. Having regard to the facts and circumstances of the case on hand, this Appeal is allowed and the Order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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', and although, the 2nd Respondent / Corporate Debtor, was very much aware of the 'due dates' of the said 'bills', the 2nd Respondent / Corporate Debtor, had failed to arrange for funds, as a result of which, several bills, drawn under various 'Inland Letters of Credit', devolved necessitating the '1st Respondent / Bank', to debit the 'Cash Credit Limit', and to make the payment, to the 'suppliers'. 41. It is represented on behalf of the 1st Respondent / Bank that the 1st Respondent / Bank, made the payment of Rs.5,94,36,318/- to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 observation: "Whereas Ld. Counsel appearing for the respondent bank has demonstrated that the account number relating to the borrower is properly described in the CIBIL report it appears that there is another account number which is duplicated in the information furnished and which has been since clarified as on 29.12.2015, which information is ensured to have been updated by the CIBIL report by removing duplicated account thereby showing the actual balance and amount due from the appellants herein and their classification of the account as sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel 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 impression that the duplication is not innocuous error crept inadvertently but, with intention to cause wrongful loss to the company, it is always open to the writ petitioner to seek damages under the common law remedy. 22. From the records, it appear that neither RBI nor the IOB nor CBI could find any prima facie material in the complaint given by the writ petitioner to infer any wilful omission or false statement knowing furnished by IOB officials. In such circumstances, this court is not inclined to entertain this writ petition seeking mandamous. 23. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 account of the mistake of the officials of the '1st Respondent /Bank', and as a result of which, the '2nd Respondent / Corporate Debtor', could not get loans from New India Co-operative Bank. Therefore, the 'Tribunal', held that the 2nd Respondent / Corporate Debtor', is entitled to get 'Waiver', of the whole interest, from the 'Date of Sanction of the Loan', in the 'Original Application', till the date of filing of the same and that the said Interest Sum, was treated as 'Compensation' / 'Damage Sum', to the 'Corporate Debtor'. Further, the 'counterclaim', was partly allowed, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 'CIBIL Data', the 2nd Respondent / Corporate Debtor, demonstrated that from 07.10.2013 to 16.11.2016, no one had applied for report and obtained the same and hence, there was no occasion for any financial institution to decline the loan to the 2nd Respondent / Corporate Debtor on account of the said alleged duplicate entry. 53. The Learned Counsel for the 1st Respondent / Bank, points out that the Debt Recovery Appellate Tribunal, overlooking the aforesaid submissions, on an erroneous finding, modified the 'Order' of the ' Debt Recovery Tribunal' dated 30.05.2019 and granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal, had directed the 1st Respondent / Bank, not to charge 'Interest', from the 'Date of Sanction' and the said 'Interest Concession', was directed to be treated as 'Compensation', towards 'counterclaim', in 'Appeal' bearing RA No. 138 of 2019, etc., the said order was modified by the Debt Recovery Appellate Tribunal, directing the 2nd Respondent to pay the principal amount due with 'Simple Interest', at the rate of 9% per annum from the 'Date of Sanction'. 57. According to the Learned Counsel for the 1st Respondent / Bank, the Bank through a 'Memo', filed on 01.03.2022, placed befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. 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(6) "claim" means- (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; (10) "creditor" means 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; (11) "debt" me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 satisfied that- (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5 (21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Inso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating 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 financial debts 52. This Court, in Innoventive Industries6 stated as follows: (SCC pp. 437 -39, paras 27-30) "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 ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Adjudicating Authority. Under sub- section (7), the Adjudicating Authority 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. 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. Identification number of the financial creditor (If an incorporated body, provide identification number and proof of incorporation. If a partnership or individual provide identification records* of all the partners or the individual). Address and email address of the financial creditor for correspondence. Total amount of claim (including any interest as at the insolvency commencement date). Details of documents by reference to which the debt can be substantiated. Details of how and when debt incurred. Details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim. Details of any security held, the value of the security, and the date it was given. Details of the bank account to which the amount of the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnated 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 538 at Spl. Pgs. 550 & 551, wherein, at Paragraph 32 & 35, it is observed as under: 32. " The proposition of law which emerges from Innoventive Industries Ltd.6 is that the Insolvency Resolution Process begins when a default takes place. In other words, once a debt or even part thereof becomes due and payable, the resolution process begins. Section 3(11) defines 'debt' as a liability or obligation in respect of a claim and the claim means a right to payment even if it is disputed. The Code gets triggered the moment default is of Rs.1,00,000/- or more. Once the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted, unless it is otherwise incomplete and not in accordance with the rules......." 35. It was for the applicant invoking the Corporate Insolvency Resolution Process, to prima facie show the existence in his favour, of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argovindbhai 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 7, would fall only within the residuary Article 137." 100. In B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates [B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633 : (2018) 5 SCC (Civ) 528] , this Court speaking through Nariman, J. held : (SCC p. 664, para 42) "42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 would give rise to a fresh cause of action to the financial creditor, to initiate proceedings under Section 7 of the IBC for initiation of the CIRP, 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. 85. To conclude, we hold that a liability in respect of a claim arising out of a Recovery Certificate would be a "financial debt" within the meaning of clause (8) of Section 5 of the IBC. Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thereunder be construed liberally, in a purposive manner to further the objects of enactment of the statute, and not be given a narrow, pedantic interpretation which defeats the purposes of the Act." 66. The Learned Counsel for the 1st Respondent / Bank, adverts to the Judgment of the Hon'ble Supreme Court of India in Tech Sharp Engineers Pvt. Ltd. v. Sanghvi Movers Limited (vide Civil Appeal No. 296 of 2020, dated 19.09.2022), at Paragraphs 17 to 19, it is observed as under: 17. "When an appeal is filed against an order rejecting an application on the ground of limitation, the onus is on the Appellant to make out sufficient cause for the delay in filing the application. The date of enforcement of the IBC and/or the date on which an application could have first been filed under the IBC are not relevant in computation of limitation. It would be absurd to hold that the CIRP could be initiated by filing an application under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters / those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14, is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timeline within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 Order dated 22nd September 2022, this Court held thus: "The elucidation in paragraph 90 and other paragraphs were made in the context of the case at hand. It is well settled that judgments and observations in judgments are not to be read as provisions of statute. Judicial utterances and/or pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute, it may become necessary for the Judges to embark upon lengthy discussions. The words of Judges interpreting statutes are not to be interpreted as statutes." 13. Thus, it was clarified by the order in review that the decision in the case of Vidarbha Industries1 was in the setting of facts of the case before this Court. Hence, the decision in the case of Vidarbha Industries1 cannot be read and understood as taking a view which is contrary to the view taken in the cases of Innoventive Industries3 and E.S. Krishnamurthy2. The view taken in the case of Innoventive Industries3 still holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 'Suspended Directors', before the Hon'ble Madras High Court, a submission was made that the 2nd Respondent, was taking steps to 'alienate' the 'Property', in issue', and by an 'Order', dated 28.11.2022, the Hon'ble Division Bench of the Hon'ble High Court, had directed the 'Parties' concerned, to maintain 'Status Quo', as on date, with regard to the 'alienation' of the 'Property'. 73. On behalf of the 2nd Respondent, it is brought to the fore on 05.12.2022, the '4th CoC Meeting', took place and on 06.12.2022, the 'Adjudicating Authority' / 'Tribunal', was pleased to 'dismiss' the 'Time Exclusion Petition', filed by the 2nd Respondent, but a 'liberty', was granted to the 2nd Respondent, to move for an extension of 'Corporate Insolvency Resolution Process' Period. A 'Revision', was filed before the Hon'ble High Court, and the same is pending consideration. 74. Apart from that, in the '5th Committee of Creditors Meeting', on 05.01.2023, it was noted that since the 'Corporate Insolvency Resolution Process' Period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines 'Financial Debt', meaning, 'a debt along with 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 acceptance under any acceptance credit facility or its dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; 1 [Explanation. - For the purposes of this sub-clause, - (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, "allottee" and "real estate project" sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 7 Application of the I & B Code, 2016, is concerned, where 'Debt and Default', is established. 90. Under Section 7 of the I & B Code, an 'Applicant', has to prove an 'existence of Debt', due from the 'Corporate Debtor'. Undoubtedly, the 'Corporate Debtor' or its 'Directors', can point out that the 'Debt', is not payable by the 'Corporate Debtor' in 'Law' and in 'Fact'. 91. An 'Adjudicating Authority', under the I & B Code, 2016, is not a 'Court of Law', and it does not decide a 'Money Claim' or 'Suit', in a 'Summary Manner'. 92. An 'Application', under Section 7 of the Code, 2016, is to be considered by an 'Adjudicating Authority', on its own merits, taking into 'consideration of Records'. 93. As a matter of fact, an 'Adjudicating Authority', is not to ascertain the 'Quantum of Default', like how much Sum is really due to the 'Financial Creditor'? 94. Under the I & B Code, 2016, the shift is from 'inability to pay', to an 'existence of Default'. The circumstances under which a 'Corporate Debtor', could not repay the 'Financial Debt', need not be taken as a defence in a proceeding, under the I & B Code, 2016. 95. What is essential is to exhibit that the 'Debtor', had commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he '2nd Respondent / Corporate Debtor', was Rs.14,08,75,444.17/- towards MCC Facility as on 15.10.2018 and with future interest at contracted rate payable to the Indian Overseas Bank. Statement of Accounts in respect of each facilities, with Certificates, as required under the 'Banker's Books Evidence Act'. 101. Before the 'Adjudicating Authority' / 'Tribunal', the '2nd Respondent / Corporate Debtor', had filed a 'Counter', to IBA/49/2019 (filed by the 1st Respondent / Bank / Financial Creditor), among other things, stating that the 'mutual liabilities' and 'obligations', were finally determined by the 'Jurisdictional Tribunal', namely 'Debt Recovery Tribunal - II', Chennai, through its 'Order', dated 30.05.2019, in OA No. 633 / 2016 and CC No. 6 / 2018. 102. The stand of the 2nd Respondent / Corporate Debtor, before the 'Adjudicating Authority' / 'Tribunal' was that 'there were no 'Dues', payable by the 'Corporate Debtor' to the 'Financial Creditor', for that the 2nd Respondent / Corporate, had repaid the 'Amounts', in excess of the Principal Amount borrowed, it is the Financial Creditor has to 'Repay', such overpaid monies to the 'Corporate Debtor'. 103. According to the 2nd R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any coercive steps, against the '2nd Respondent / Corporate Debtor' or their 'Properties', pending 'disposals' of the 'Writ Petitions', and they cannot proceed any further in the main IBA/49/2019 which, if 'proceeded with', will be in 'Contempt' of the 'Orders' of the 'Hon'ble High Court'. 108. To be noted, that according to the 1st Respondent / Bank, as per the 'Order' of the 'Debt Recovery Appellate Tribunal', the '2nd Respondent / Corporate Debtor', was 'liable', to pay to the 'Bank', a sum of Rs.3,55,32,235.80/-, as on 14.11.2019. 109. Before the 'Adjudicating Authority' / 'Tribunal', the '1st Respondent / Bank / Financial Creditor', had filed a 'Memo', on 01.03.2022, stating that as per the 'Order' of the 'Debt Recovery Appellate Tribunal', the 'Amount in Default', which was recoverable from the 2nd Respondent, as on 14.11.2019, was a sum of Rs. Rs.3,55,32,235.80/- and that the 'Amount in Default', as on 01.03.2022, was Rs.4,29,94,004/-. 110. On behalf of the Appellant, it is pointed out before this 'Tribunal' that Section 7 (2) of the I & B Code, 2016, requires the '1st Respondent / Bank / Financial Creditor', to submit in the 'Specified Form', and as per ingredients of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether, 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. 117. 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. 118. 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. 119. It is not out of place for this 'Tribunal', to relevantly make a significant mention that not only the 'Corporate Debtor', had filed WP Nos.33396, 33398 & 33399 of 2019, before the Hon'ble Madras High Court, challenging the 'Order', passed by the 'Debt Recovery Appellate Tribunal', but, also the '1st Respondent / Bank / Financial Creditor', had filed WP No. 3412 / 2020, 3419/2020 and 3427 / 2020 (seeking to displace the 'Orders of Tribunal', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the '1st Respondent / Financial Creditor / Bank'. 124. The prime fact to be taken note of in repelling the plea of the 'Appellant' that the 'Liability', has not crystallised in a definite manner is that a 'Final Order', came to be passed by the 'Debt Recovery Appellate Tribunal', as per Section 19 (20) r/w. Section 22 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It cannot be gainsaid that the 'Order' of a 'Court' / 'Tribunal', determining the 'Default', is a 'cementing platform', evidencing 'Financial Debt', as opined by this 'Tribunal'. 125. Be that as it may, as far as the present case is concerned, considering the fact that the 'Due' of the '2nd Respondent / Corporate Debtor', is more than the 'Threshold Limit' of 'Rs.1 Lakh', under Section 4 of the I & B Code, 2016, and the same is to be 'paid', both in 'Law' and in 'Fact', this 'Tribunal' without any 'haziness', comes to a cocksure conclusion that the 'aspect of Debt and Default', committed by the '2nd Respondent / Corporate Debtor', is proved to its subjective satisfaction. Therefore, the '1st Respondent / Bank / Petitioner', has rightly initiated the 'Corporate Insolvency Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X
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