The NCLAT, Principal Bench, New Delhi has observed that for acknowledgment of debt in the eyes of law, documents such as entries in a Banker’s Book, recall notices and annual reports can be relied on.
It was further observed that Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) nowhere talks about the occurrence of default to be considered from the date of Non-Performing Assets. It was reiterated that the date of default for IBC has to be when there is actual non-repayment of debt repayable by the Corporate Debtor on the date it becomes due and payable.
Brief Facts
The present Appeal is preferred against the order passed by the NCLT vide which the Application filed by Respondent No.1 was admitted.
Contentions of the Appellant
It was submitted that the Respondent Bank granted credit facilities to the Corporate Debtor from time to time. In 2015, the said facility was restructured and subsequently, one Master Restructuring Arrangement was entered into between the Respondent and Corporate Debtor as per which debt payable was restructured. In 2016, Respondent issued a recall notice vide which the said Agreement was revoked and the account of the Corporate Debtor was declared as a Non-Performing Asset. The date recorded for this purpose was 2015.
In 2018, an application under Section 7 of the IBC was filed by the Respondent seeking the commencement of CIRP. The dates shown by the Respondent conflicted and contradicted the dates admitted by the Respondent in the DRT proceedings.
It was contended that the NCLT ought to have dismissed the application as the same was filed beyond the period of limitation. The date shown by the Respondent was only to bring the application within the period of limitation.
Contentions of the Respondent No.1
It was contended that there is only one prerequisite for admitting an application under Section 7 and that is that there must be a debt due. It was argued that when a debt is restructured, the date of default must be under the new repayment schedule.
It was further argued that for the purposes of CIRP, the declaration of the account as a Non-Performing Asset was an irrelevant consideration.
Observations of the Tribunal
It was noted that Respondent No.1 filed an application before NCLT seeking CIRP as the Corporate Debtor defaulted on the repayment.
It was observed that there is enough evidence on record to prove that there was a debt and default on the part of the Corporate Debtor. The documents such as the entries in a Banker’s Book, recall notice, annual report for 2015-2016 etc. proves that there was a debt and default.
For acknowledgment of debt in the eyes of law, the above-mentioned documents can be relied on and hence, the Tribunal held that the Appeal is filed within the limitation.
It was further observed that Section 7 nowhere talks about the occurrence of default to be considered from the date of Non-Performing Assets. It was reiterated that the date of default for IBC has to be when there is actual non-repayment of debt repayable by the Corporate Debtor on the date it becomes due and payable.
Decision of the Tribunal
Based on the abovementioned reasons, the Appellate Tribunal accordingly dismissed the appeal.
Case Title: Mr. Abhay Narendra Lodha v. Bank of Baroda & Anr.
Coram: Mr. Kanthi Narahari (Technical Member), Mr. Barun Mitra (Technical Member), Justice Ashok Bhushan
Case No.: Company Appeal (AT) Insolvency No. 997 of 2022
Advocates for Appellant: Advs. Mr. Nikhil Nayar, Ms. Eshna Kumar, Mr. Aditya Maheshwari, Mr. Devashish Chauhan, Mr. Paras Mithal, Ms. Prachi Bhatia
Advocates for Respondent No.1: Advs. Mr. Ramji Srinivasan, Mr. Bishwajit Dubey, Ms. Surabhi Khattar, Ms. Neha Shivhae, Ms. Shruti Pandey
Advocates for Respondent No.1: Advs. Mr. Kunal Vasant, Mr. Kunal Mimani, Mr. Shubhang Tandon
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