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TMI Blog2024 (12) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Rakesh Kumar Jain is impugning the validity of the Order dated 24.04.2023 passed by the Ld. Adjudicating Authority wherein the Ld. Tribunal dismissed the Petition of the Appellant being CP (IB) No. 3083/ND/2019, for initiating the CIRP Proceedings against the Respondent Company. 3. There was some litigation going on between the parties including a suit for recovery of the amount filed by the Appellant/ Financial Creditor against the Respondent before the Hon'ble High Court of Delhi and other courts, wherein the disputes were referred to Mediation before the Mediation and Conciliation Centre Delhi High Court. 4. Appellant and Respondent reached an Agreement and resolved all their disputes in the Mediation Centre and signed a Settlement Agreement detailing terms of the settlement wherein the Respondent agreed to pay an amount of Rs.15,23,00,000/- (rupees fifteen crores and twenty-three lakhs only) to the Appellant and issued four cheques of different amounts, which were to be paid on various dates. The Hon'ble Delhi High Court passed a decree in CS(OS) No. 2183/2013 based on the settlement arrived at between the parties in the Mediation and Conciliation Centre. 5. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has failed to pay and is not able to pay the legitimate debt of the Appellant despite the decree of the Hon'ble Delhi High Court and therefore the Appellant herein proceeded under Section 7 of IBC against the Respondent. 6. The Appellant contends that this Appellate Tribunal, in its various judgments, including in its recent judgement dated 28.02.2022 Swaroop Kumar Huggi, Suspended Director Mahendra Investment Advisors Pvt Ltd vs Simplex Infrastructure Limited (FC) and Ors, Company Appeal (AT) (CH) (INS) No. 144 of 2021 i.e. MANU/NL/0143/2022, has held that a Decree Holder is a Financial Creditor. 7. Appellant also contends that this Petition is within the limitation as the Respondent has admitted its liability to pay the Appellant unequivocally, unconditionally on various occasions. Undisputedly the cause of action arose when the cheque issued by the Respondent got dishonoured on 07.04.2016 and cause of action is continuing one, as the Respondent has admitted its liability before the Hon'ble High Court of Delhi on various dates inter-alia on 23.08.2018 and thereafter on 04.09.2018 and 17.09.2018 which has been recorded in the orders of Hon'ble High Court. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Holder cannot seek initiation of the Corporate Insolvency Resolution Process as Financial Creditor. This Petition was not maintainable on the grounds that a decree cannot be executed by filing an Application under Section 7 of the Code. A Decree Holder does not come under the purview of the definition of a 'Financial Creditor'. 12. The Respondent also relies upon this Appellate Tribunal's judgment in Sh. Sushil Ansal vs Ashok Tripathi and Ors, CA(AT) (Insolvency) No. 452 of 2020, where it was held that: "20. A 'decree-holder' is undoubtedly covered by the definition of 'Creditor' under Section 3(10) of the 'I&B Code' but would not fall within the class of creditors classified as 'Financial Creditor' unless the debt was disbursed against the consideration for time value of money or falls within any of the clauses thereof as the definition of 'financial debt is inclusive in character. A 'decree is defined under Section 2(2) of the Code of Civil Procedure, 1908 ("CPC" for short) as the formal expression of an adjudication which conclusively determines the rights of the parties with regard to the matters in controversy in a lis. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "26. By filing an application under Section 7 of the I&B Code, a Decree cannot be executed. In such case, it will be covered by Section 65 of the I&B Code, which stipulates that the insolvency resolution process or liquidation proceedings, if filed fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, attracts penal action." 13. Further the Respondent also relies on this Appellate Tribunal's judgment in Digamber Bhondwe vs JM Financial Asset Reconstruction Company Limited in Company Appeal (AT) (Insolvency) No. 1397 of 2019, [2020] 157C LA 237, where it was held that Decree Holder, although mentioned in Section 3(10) of the Code, does not give cause to initiate application under Section 7 of the I&B Code. The relevant paragraph of the judgement is herein reiterated as; "19. We further reject the submission that because in Section 3(10) of I&B Code in definition of "Creditor" the "decree holder" is included it shows that decree gives cause to initiate application under Section Z of I&B Code. Section 3 is in Part I of I&B Code. Part II of I&B Code deals with "Insolvency Resolution and Liquidation for Corporate Perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard counsels of both sides and perused all documents on record and orders were reserved on 03.10.2024. The matter was heard again on 21.11.2024 and 12.12.2024 for seeking some clarifications and reserved for orders on 12.12.2024. 16. In this Appeal, Rakesh Kumar Jain as a Financial Creditor has sought to initiate the CIRP against the Respondent, ADTV Communications Pvt Ltd under Section 7 of the IBC. The NCLT, rejected the Appellant's Petition for initiation of CIRP, holding that the Appellant did not fall within the definition of a "Financial Creditor" and that the Petition was time-barred. 17. The Appellant and the Respondent were involved in a long-standing litigation, including a suit for recovery of dues before the Hon'ble Delhi High Court. The disputes between the parties were referred to mediation, resulting in a Settlement Agreement dated 11.09.2014. As per the terms of this Settlement Agreement, the Respondent agreed to pay the Appellant an amount of Rs.15,23,00,000/- (rupees fifteen crores and twenty-three lakhs only) in four separate instalments through cheques issued for different dates. A decree based on this Settlement Agreement was passed by the Hon'ble Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Baroda) vs. C. Shivakumar Reddy & Anr., (supra), wherein it was held that a Decree Holder falls within the purview of a "Financial Creditor" under the IBC, if the decree is based on a financial debt. The relevant extracts of the judgment which deals with this issue and also the issue of limitation and a Decree Holder are as follows: "140. While it is true that default in payment of a debt triggers the right to initiate the Corporate Resolution Process, and a Petition Under Section 7 or 9 of the IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238A of the IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a Petition in the NCLT is condonable Under Section 5 of the Limitation Act unlike delay in filing a suit. Furthermore, as observed above Section 14 and 18 of the Limitation Act are also applicable to proceedings under the IBC. 141. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPA that date can be reckoned as the date of default to enable the financial credit to initiate action under section 7 IBC. However, section 7 comes into play when the corporate debtor commits "default". Section 7, consciously uses the expression "default" into the date of notifying the loan account of the corporate person as NPA. Further, the expression "default" has been defined in section 3 (12) to mean non-payment of 'debt" when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to no-payment of debt. Thus, when the principal borrower and/or the (corporate guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing pan-India recession..." Further, in the Order dated: 04.09.2018, the Respondent admitted and acknowledged the claim/debt of the Appellant and the said Order reads as under: "Mr. Sanjay Aggarwal, authorized representative of judgment debtor No.1 appears and submits that judgment debtor no.1 seeks six months' time to clear off the debt and that within three months they shall make some payment to the decree holder....." Also in Order dated: 17.09.2018: "as per the submission made by learned counsel for judgment debtors that they are seeking six months' time to clear off the debt, Learned counsel for judgment debtor no.1 and Mr. Sanjeev J. Aeren who was erstwhile Director at the time of cause of action has also appeared today and the learned counsel for judgment debtors say they are in the possession of the property but with encumbrances and rather the property is attached by this court too till the payment per settlement agreement dated: 11.09.2014 is made. The modalities need to be culled out for payment hence as requested by judgment debtors the parties to appear before the organizing secretary, Delhi High Court Mediation and Conciliation center on 24.09.2018 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed by the Respondent is that the Appellant has filed the execution proceedings and IBC proceedings cannot be used to convert this Tribunal into an Execution Court needs to be tested. We note that IBC is a complete Code in itself and in view of the provisions of Section 238 of the Code, the provisions of the IBC would prevail, notwithstanding anything inconsistent therewith in any other law for the time being in force. Section 238 of the Code contains the non-obstante clause of the widest terms possible and therefore the code will prevail over other provisions. The fact that the Appellant/Financial Creditor had also taken other steps of execution proceedings before the Hon'ble High Court of Delhi is no ground to not accept the Section 7 Petition. Thus, the Appellant is indeed a Financial Creditor within the meaning of Section 5(7) and Section 5(8) of the IBC. 29. The Respondent has placed reliance on Sh. Sushil Ansal vs Ashok Tripathi (supra) vis-à-vis which it claims that a Decree Holder would not fall within the definition of Financial Creditor. This issue has been dealt in Dena Bank (supra) and is now a settled law that a Decree Holder falls within the purview of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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