2023 (10) TMI 893 - AT - Insolvency and Bankruptcy

Maintainability of section 7 application - Initiation of CIRP - time barred debt or not - Amended Application filed beyond the statutory period of 3 years. The clear cut stand of the Appellant is that the Adjudicating Authority / Tribunal had failed to appreciate that there was no authorisation to and in favour of Mr. J. Vijay Kumar Asst. General Manager who had signed the amended Petition indeed the requirement of specific authorisation is mandatory to prefer an Application under Section 7 of the I B Code 2016. HELD THAT - An Application under Section 7 of the Code is not to be turned down by an Adjudicating Authority / Tribunal just on technical grounds . The reason for inability of a Corporate Debtor to pay its Debt is not to be looked into by an Adjudicating Authority / Tribunal while dealing with an Application (Filed by a Financial Creditor under Section 7 of the I B Code 2016). To put it differently the situation / circumstances under which a Corporate Debtor could not repay the Financial Debt need not be taken as a Defence in a proceeding under the Code - The Adjudicating Authority / Tribunal need not wait for the determination to be made by the Debt Recovery Tribunal . Although Debt is Disputed if the Amount is more than Rs.1 Lakh ( Rs.1 Crore after amendment to the Code ) the Application under Section 7 is maintainable in Law . It cannot be gainsaid that if a Debtor acknowledge receiving the Payment but chose to amuse itself by denying the liability the document would still be one that would keep the claim alive within the ambit of Section 18 of the Limitation Act 1963 . Also that if the Sum borrowed by the Respondent is shown in the Balance Sheet it may amount to an acknowledgement and the Creditor might have a fresh Period of Limitation on the date on which an acknowledgement was made. As a matter of fact the Balance Sheets of the Corporate Debtor dated 16.08.2014 27.08.2015 and 27.08.2016 the 1st Respondent / Bank unerringly points out the admission of acknowledgment of liability and therefore it is established on the part of the 1st Respondent / Bank that its Claim made in Section 7 Application in CP (IB) No. 645 / 7 / HDB / 2018 dated 06.09.2018 but filed on 12.09.2018 (before the Adjudicating Authority / Tribunal ) is not a Time Barred one - In the instant case on hand this Tribunal points out on 31.08.2018 going by the Application (Filed by the 1st Respondent / Financial Creditor / Bank / Petitioner under Section 7 of the Code vide CP (IB) No. 645 / 7 / HDB / 2018) the Sum claimed to be in Default was Rs.327, 03, 72, 501.81/- (vide Page 76 of the Appellant s Appeal Paper Book Vol-I Form-I Part IV - Particulars of Debt at Page 79) from the Corporate Debtor / Vibha Agro Tech Limited . According to the 1st Respondent / Bank the Outstanding Sum claimed before the Interim Resolution Professional is Rs.1, 061.15 Crores. One cannot remain in oblivion of a vital fact that to commence a Corporate Insolvency Resolution Process proceedings by the Financial Creditor against the Corporate Debtor (under Section 7 of the I B Code 2016) the twin requirements (a) Debt and (b) Default are to be proved and once they are established then the Application which is complete in all respects is to be admitted by the Adjudicating Authority / Tribunal . In the present case on hand the 1st Respondent / Bank had claimed a Sum of Rs.327, 03, 72, 501.81/- as Debt due and payable by the Corporate Debtor as on 31.08.2018 (vide in its Application in CP (IB) No. 645 / 7 / HDB /2018 before the Adjudicating Authority / Tribunal ) this Tribunal keeping in mind of the primordial fact(s) the Corporate Debtor had tacitly Acknowledged its Debt / Liability in its Balance Sheets for the Year ending 2013-14 dated 16.08.2014 for the Year ending 2014-15 dated 27.08.2015 and for the Year ending 2015-16 dated 27.08.2016 the same being not Barred by Time taking note of the entire conspectus of the facts and circumstances of the present case in an encircling manner and exercising its subjective discretion comes to a resultant conclusion that the aspect of Debt and Default committed by the Corporate Debtor have been duly proved by the 1st Respondent / Bank . The impugned order passed by the Adjudicating Authority ( National Company Law Tribunal Bench I Hyderabad) in admitting the Section 7 Application (Filed by the 1st Respondent / Bank / Financial Creditor / Petitioner) is free from any Legal Infirmities . Accordingly the instant Appeal fails. Appeal dismissed.

Summary

Issues Involved:
1. Whether the application under Section 7 of the IBC was barred by limitation.
2. Whether the amendment application relates back to the original filing date.
3. Whether the balance sheets constituted valid acknowledgments of debt.
4. Whether the application was filed with proper authorization.

Summary:

1. Limitation Issue:
The Appellant argued that the application under Section 7 of the IBC was based on a time-barred debt, as the last acknowledgment in the balance sheets was on 27.08.2016, and the amended application was filed on 17.11.2021, beyond the statutory period of three years. The Tribunal held that the date of default, i.e., 30.04.2013, is not the date of commencement of limitation because of the restructuring efforts and acknowledgments in the balance sheets for the financial years 2013-14, 2014-15, and 2015-16. Therefore, the debt was not time-barred.

2. Doctrine of Relation Back:
The Appellant contended that the amendment introducing a new cause of action should not relate back to the original filing date. The Tribunal clarified that generally, an amendment relates back to the date of filing of the original petition unless otherwise specified. The Tribunal found no specific condition imposed by the Supreme Court or itself when allowing the amendment. Thus, the amendment relates back to the original filing date of 12.09.2018.

3. Acknowledgment of Debt:
The Appellant argued that the amounts in the balance sheets differed from the amounts claimed by the Financial Creditor, and hence, there was a dispute regarding the acknowledgment of liability. The Tribunal noted that the balance sheets for the financial years 2013-14, 2014-15, and 2015-16, signed on 16.08.2014, 27.08.2015, and 27.08.2016, respectively, constituted valid acknowledgments of debt, extending the limitation period.

4. Authorization to File Application:
The Appellant claimed that the amended application was filed without proper authorization. The Tribunal referred to the State Bank of India General Regulations, 1955, which authorized the Assistant General Manager to sign and verify pleadings. Therefore, the application was filed with proper authorization.

Conclusion:
The Tribunal dismissed the appeal, holding that the application under Section 7 of the IBC was filed within the limitation period, the amendment related back to the original filing date, the balance sheets constituted valid acknowledgments of debt, and the application was filed with proper authorization. The interim order granted was vacated, and the connected applications were closed.