Naresh Kumar Dhingra & Ors vs Indian Overseas Bank & Anr

IN THE MATTER OF: Naresh Kumar Dhingra & Ors. ...Appellants Vs Indian Overseas Bank & Anr. ....Respondents

Present:

For Appellants: Mr. Amit Dhall and Mr. Neeraj Malik, Advocates.

For Respondents: Mr. Kunal Tandon, Ms. Niti Jain and Ms. Richa, Advocates.

ORDER

04.02.2019: This appeal has been preferred by 'Mr. Naresh Kumar Dhingra

and Others', Director of 'M/s JMD Oil Pvt. Ltd.' (Corporate Debtor) against order

dated 11th December, 2018 passed by the Adjudicating Authority (National

Company Law Tribunal), Principal Bench, New Delhi whereby and whereunder

the application under Section 7 filed by 'Indian Overseas Bank' (Financial

Creditor) as member of consortium of the banks has been admitted, order of

moratorium passed and Interim Resolution Professional has been appointed.

2. Learned counsel appearing on behalf of the Appellant submits that the

person who signed the Form-1 has signed in personal capacity. However, such

ground is not acceptable as the Form-1 being submitted by authorized officer of

the Indian Overseas Bank. It is further contended that date of default as shown

is wrong as in terms of subsequent development date of default goes to some

other date. However, such submission also cannot be accepted in view of -2-

decision of Hon'ble Supreme Court in "Innoventive Industries Ltd. Vs. ICICI Bank

and Ors. - (2018) 1 SCC 407", wherein the Hon'ble Supreme Court observed and

held as under:-

"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 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

Company Appeal (AT) (Insolvency) No. 73 of 2019 -3-

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 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

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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 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

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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."

3. As it is apparent that there is debt due payable by the Corporate Debtor

in fact and they have not disputed it and the records being complete, we hold

that the Adjudicating Authority rightly admitted the application under Section 7

of I&B Code. In absence of any merit, the appeal is dismissed. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial) am/uk

Company Appeal (AT) (Insolvency) No. 73 of 2019