Earth Gracia Buildcon Pvt. Ltd. ... vs Connoisseur Infrabuild Pvt. Ltd

Versus Connoisseur Infrabuild Pvt. Ltd. ...Respondent Present: For Appellant : Ms. Varsha Banerjee, Advocate

ORDER

30.01.2020 The Resolution Professional of 'Earth Gracia Buildcon Private Limited' moved an Application under Section 7 of the 'Insolvency and Bankruptcy Code, 2016' ('I&B Code', for short) for initiation of the 'corporate insolvency resolution process' against 'Connoisseur Infrabuild Private Limited' (Corporate Debtor).

2. The Adjudicating Authority (National Company Law Tribunal), New Delhi Bench -V, New Delhi, by impugned order dated 9th December, 2019 rejected the Application as the claim is barred by limitation.

3. The learned counsel for the Appellant submitted that 'Connoisseur Infrabuild Private Limited' (Corporate Debtor) is a group company of 'Earth Gracia Buildcon Private Limited' (Appellant). Without a joint 'corporate insolvency resolution process' of 'Earth Gracia Buildcon Private Limited', which is undergoing 'corporate insolvency resolution process' along with 'Connoisseur Infrabuild Private Limited' (Corporate Debtor), there cannot be a resolution. Therefore, the application under Section 7 of the 'I&B Code' should have been entertained. It is further submitted that if it is not allowed then there will be a 2

liquidation and in such case, there will be no maximization of 'Earth Gracia Buildcon Private Limited' (the Appellant, which is undergoing the 'corporate insolvency resolution process').

4. On the question of limitation, it is submitted that the Application was moved only when the 'Corporate Debtor' defaulted in making the payment after the Demand Notice was issued by the Appellant and, therefore, the Application under Section 7 is not barred by limitation. It is submitted that no Agreement was reached between the parties and there has been no question of declaring the assets 'Non-Performing Assets' (NPA). The amounts were transferred to the Bank or by way of RTGS which are based on record.

5. Form 1 (application under Section 7) filed by the Appellant shows the following particulars of the 'Financial Debt' at part-IV is as under :

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6. Particular evidence of default has been shown at Part-V, which is required

to be given in Part V and no evidence has been brought on record except the

'Audited Balance-sheet' of the financial year ending 31st March, 2015, ledger of

the 'Corporate Debtor' prepared by the 'Financial Creditor' and 'extract of Books

of Account' extracted below:

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7. In "Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407" the Hon'ble

Supreme Court observed and held :

"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

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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

right to payment even if it is disputed. The 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

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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 Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016. Under Rule 4,

the application is made by a financial creditor in

Form 1 accompanied by documents and records

required therein. Form 1 is a detailed form in 5 parts,

which requires particulars of the applicant in Part I,

particulars of the corporate debtor in Part II,

particulars of the proposed interim resolution

professional in part III, particulars of the financial

debt in part IV and documents, records and evidence

of default in part V. Under Rule 4(3), the applicant is

to dispatch a copy of the application filed with the

adjudicating authority by registered post or speed

post to the registered office of the corporate debtor.

The speed, within which the adjudicating authority

is to ascertain the existence of a default from the

records of the information utility or on the basis of

evidence furnished by the financial creditor, is

important. This it must do within 14 days of the

receipt of the application. It is at the stage of Section

7(5), where the adjudicating authority is to be

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satisfied that a default has occurred, that the

corporate debtor is entitled to point 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."

8. In Part - IV of Form 1, we find that the amounts were transferred by the

Appellant to the 'Corporate Debtor' in the years 2013, 2014 and 2015. The last

transfer was made on 29th December, 2015 and before completion of the three

years i.e. 28th December, 2018, the 'Corporate Debtor' has not acknowledged the

'debt' in terms of Section 18 of the Limitation Act, 1963. It is also not the case

of the Appellant that the 'Corporate Debtor' made a part-payment to get

advantage of Section 19 of the Limitation Act, 1963. We hold that the claim of

the Appellant is barred by limitation and, therefore, the claimed amount is not

payable in law.

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9. Part-V of 'Form 1' shows that no evidence of default and no date of default

was shown therein. It was also shown that default date had crossed more than

3 years. In this background, the Adjudicating Authority (National Company Law

Tribunal), New Delhi has rightly rejected the Application under Section 7 and we

find no ground to interfere with the same.

The appeal is dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Shreesha Merla ] Member (Technical)

/ns/gc/

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