2022 (11) TMI 954 - AT - Insolvency & Bankruptcy
Initiation of CIRP - financial debt or not - Decree Holder - no written contract and no consideration for time value of money - It is contended that there was no agreed rate of interest, and therefore there is no time value of money and further that seeking execution of decree does not define the first Respondent as a Financial Creditor and a Decree Holder can be defined as a Creditor, but not a Financial Creditor - it is also contended that suit was filed in the year 2001 and is time barred.
HELD THAT:- The existence of ‘Financial Debt’ and its default has been admitted and confirmed by the ‘Corporate Debtor’, and therefore the absence of any Written Agreement cannot be said to be an essential element to prove the ‘Financial Debt’, as the nature of transaction has been established that there was a ‘debt’ and ‘default’ thereof - In the facts of this case, we are of earnest view that a ‘Decree’ in respect of a financial claim is an established proof of ‘debt’ and ‘default’, and does not require any further Agreements in writing.
Time Limitation - HELD THAT:- The Hon’ble Supreme Court in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. [2021 (8) TMI 315 - SUPREME COURT] while discussing at length Sections 14 & 18 of the Limitation Act, 1962 has also observed that the Judgement and/or decree for money in favour of the Financial Creditor, passed by DRT, or any other Tribunal or Court, or the issuance of a certificate of recovery in favour of the Financial Creditor, would gave rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the Code, if the dues of the Corporate Debtor under the Judgement/decree or any part thereof remained unpaid.
Breach of Principles of Natural Justice - HELD THAT:- The matter was adjourned several times on request of the Corporate Debtor, on the ground that the matter would be settled. The record shows that on 24.01 2019, Corporate Debtor was directed to file the Reply on or before 31.01.2019. On 31.01.2019 the matter was adjourned on request of both parties on the ground of settlement. On 14.02.2019, the matter was again adjourned and the Corporate Debtor did not file their Reply. On 06.03.2019, one more request was made that they would settle the matter. On 25.03.2019, once again, the Corporate Debtor was directed to file their Reply. On 08.04.2019, once again liberty was given for settlement. On 15.04.2019, the Corporate Debtor was directed to file their Reply within a week. On 01.05.2019, the Corporate Debtor failed to file their Reply and the right to file their Reply was forfeited. These dates show that ample opportunities were given to the Corporate Debtor both to file their Reply and also to settle the matter. The Corporate Debtor has not adhered to any of the above, and therefore the argument that there was a breach of Principles of Natural Justice, is unsustainable.
It is clear that the debt in this case arising out of a decree, is a Financial Debt. Section 5(10) of the Code provides that Creditor means any person to whom a debt is owed and includes a Financial Creditor, Operational Creditor, Secured Creditor, Unsecured Creditor and a Decree Holder. As the definition of the word Creditor in the Code includes a Decree Holder if a Petition is filed for realisation of the decretal amount, it cannot be dismissed on the ground that the Section 7 Application should have been taken steps for filing execution case in the Civil Court. Section 3(11) of the Code defines debt as a liability in respect of a claim, and Section 3(6) of the Code defines term claim to mean a right to payment, whether or not such right has been reduced to judgement. Therefore, if the submission on behalf of the ‘Corporate Debtor’ is accepted, it would mean that a claim is excluded from being a financial debt even if reduced to Judgement by way of a recovery certificate.
There is no illegality or infirmity in the Impugned Order, passed by the Adjudicating Authority in admitting the Section 7 Application - Appeal dismissed.