Tirupati Infra Project Pvt. Ltd. & ... vs Bank Of India

COMPANY APPEAL (AT) (INSOLVENCY) No. 99 of 2017 [Arising out of judgement dated 3rd July, 2017 passed by the National Company Law Tribunal, Principal Bench, New Delhi in C.P. No. IB- 104(PB)/2017]

IN THE MATTER OF:

Tirupati Infra Project Pvt. Ltd. & Another .. Appellants Versus

Bank of India Respondent

Present: For Appellants: Shri Manoj K. Singh, Shri Vijay K. Singh and Shri Vineet Arora, Advocates

For Respondent: Shri Sanjay Bhatt, Advocate

JUDGEMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by Appellants-Tirupati Infra Projects

Pvt. Ltd. (hereinafter referred to as 'Corporate Debtor') and another against

judgement dated 3rd July, 2017 passed by the Learned Adjudicating

Authority (National Company Law Tribunal), Principal Bench, New Delhi

(hereinafter referred to as 'Adjudicating Authority'), whereby and

whereunder the application preferred by Respondent-Bank of India

(hereinafter referred to as 'Financial Creditor') under Section 7 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B

Code') was admitted, 'Corporate Insolvency Resolution Process' initiated and consequent order of 'Moratorium' has been passed under Section 14

of the I&B Code. The Interim Resolution Professional has also been

directed to perform all his functions contemplated under Sections 15, 17,

18, 19, 20and 21 of the I&B code.

2. Learned counsel for the Appellants has submitted that there is a

mismatch between amount of debt shown in the original application and

the amount shown in record submitted after rectification of defect.

Reliance was placed on decision of this Appellate Tribunal in 'MIs. Starlog

Enterprises Limited Vs. ICICI Bank Limited' - [Company Appeal (AT)

(Insolvency) No. 5 -of 2017], wherein, taking into consideration the

mismatch of amount shown in notice under Rule 4(3) of Insolvency and -

Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and the

amount of default mentioned in the application under Section 7, this

Appellate Tribunal, by judgement dated 24th May, 2017, held:

"20.1 The ascertainment of existence of. default by

the 'adjudicating authority' which under the provisions

of Sub-Section (4) of Section 7 of the I&B Code has to

be based on the application/ other evidence submitted

by the financial creditor, suffers from non-application

of mind given the apparent and conspicuous mismatch

between the amount demanded by the Respondent

from the Appellant in its demand notice dated 6th 3

February 2017 and the amount stated to be in default

in the said application."

w w

"21. Showing an incorrect claim, moving the

application in a hasty manner and obtaining an ex-

parte order from the 'adjudicating authority' which

admitted such an incorrect claim, the Financial

Creditor cannot disprove its mala fide intention by

stating that the claim submitted is correct amount. The

I&B Code does not provide for any such mechanism

where post-admission, the applicant financial creditor

can modify their claim amount.

22. In some of the cases, an insolvency resolution

process can and may have adverse consequences on

the welfare of the company. This makes it imperative

for the 'adjudicating authority' to adopt a cautious

approach in admitting insolvency applications and

also ensuring adherence to the principles of natural

justice."

3. Learned counsel for the Appellants referring the application

submitted that Rs.82.37 Crores (Rupees Eighty Two Crore Thirty Seven

Lakhs only) was the amount of default shown therein, but after rectification of defect, the amount of default has been shown to the extent

to Rs.1,09,32,72,312.86p. (Rupees One Hundred and Nine Crores Thirty

Two Lakhs Seventy Two Thousands Three Hundred & Twelve and Eighty

Six Paise only). It was further contended that the Learned Adjudicating

Authority though allowed seven days' time to make necessary corrections,

but correction was made beyond the period of seven days.

4. Learned counsel for the Respondent-'Financial Creditor' (Bank of

India) submitted that the original amount of default of Rs. 82.37 Crores

was shown calculating the interest upto 31st March, 2012. Subsequently,

statement of uncharged/ differential interest combined with the defaulting

amount for the period from 1st April, 2012 to 14th May, 2017 was added

which comes to Rs. 1,09',32,72,312.86p. It was contended that the

supplementary statement filed by the 'Financial Creditor' (Bank of India)

cannot be termed to be 'removal of defects'. It was further contended that,

in any case, even if the amount of default as shown in original application

is taken into consideration, the 'Corporate Debtor' has a right to claim total

amount with interest before the 'Interim Resolution Professional'.

5. For the purpose of determination of the objection as raised by

appellant, it is desirable to refer Section 7, which is as follows:

7. Initiation of corporate insolvency resolution 11

process by financial creditor.--(1) A financial, creditor

either by itself or jointly with other financial creditors

may file an application for initiating corporate insolvency resolution process against a corporate debtor before the

Adjudicating Authority when a default has occurred.

Explanation. --For the purposes of this sub-section,

a default includes a default in respect of a financial debt

owed not only to the applicant financial creditor but to

any other financial creditor of the corporate debtor.

(2) The financial creditor shall make an application

under sub-section (1) in such form and manner and

accompanied with such fee as may be prescribed.

(3) The financial creditor shall, along with the

application furnish--

(a) record of the default recorded with the

• information utility or such other record or

evidence of default as may be specified;

(b)- the name of the resolution professional

proposed to act as an interim resolution

professional; and

(c) any other information as may be specified by

the Board.

(4) The Adjudicating Authority shall, within

fourteen days of the receipt of the application under sub-

section (2), ascertain the existence of a default from the

records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-

section (3).

(5) Where the Adjudicating Authority is satisfied

that--

(a) a default has occurred and the application

under sub-section (2) is complete, and there

is no disciplinary proceedings pending•

against the proposed resolution professional,

it may, by order, admit such application; or

(b) default has not occurred or the application

under sub-section (2) is incomplete or any

disciplinary proceeding is pending against

the proposed resolution professional, it may,

by order, reject such application:

Provided that the Adjudicating Authority shall,

before rejecting the application under clause (b) of sub-

section (5), give a notice to the applicant to rectify the

defect in his application within seven days of receipt of

such notice from the Adjudicating Authority.

(6) The corporate insolvency resolution process

shall commence from the date of admission of the

application under sub-section (5).

7

(7) The Adjudicating Authority shall

communicate--

(a) the order under clause (a) of sub-section (5)

to the financial creditor and the corporate

debtor;

(b) the order under. clause (b) of sub-section (5)

to the financial creditor,

within seven days of admission or rejection of such

application, as the case may be."

6. From sub-section (5) of Section 7, it is. clear that once the

Adjudicating Authority is satisfied that a default has occurred and the

application under sub-section (2) is complete, and no disciplinary

proceeding is pending against the proposed interim resolution

professional, it may, by order, admit the application. Only in case(s) where

there is no default or the application under sub-section (2) is incomplete

or any disciplinary proceeding is pending against the proposed resolution

professional, the Adjudicating Authority may reject such application, but

before passing such order of rejection, the Adjudicating Authority is

required to give a notice to the applicant to rectify the defect, if any, within

seven days.

7. A defective application can be corrected by removing the defect.

Similarly, if an application is incomplete, it can be completed, but if any

misleading statement is made in an application no time can be granted to recall the misleading statement and such application is fit to be rejected.

This is the essence of the judgement of this Appellate Tribunal in MIs.

Starlog Enterprises Limited Vs. ICICI Bank Limited. In the said case,

the Adjudicating Authority held that it was satisfied that there is a default

of Rs. 27.77 Crores. Such finding being contrary to the application filed

by the 'Financial Creditor' itself and in complete disregard to the apparent

and conspicuous mismatch between the amount shown in the notice

under Rule 4(3) and the amount shown in the ex-parte order of the

Adjudicating Authority, the Appellate Tribunal set aside the order of

admission.

8. In the present case, it is not the case of the Appellants that there is

a mismatch between the amount shown in the notice under Rule 4(3) and

the amount of default shown by the 'Financial Creditor' in its original

application under Section 7. On the other hand, the 'Corporate Debtor'

has explained that the amount of interest as was calculated upto 31 t

March, 2012, if further calculated for the period from 1St April, 2012 to

14th May, 2017, then the total debt comes to Rs. 1,09,32,72,312.86p. The

default amount as on 31st March, 2012 remains constant. Thus we find

that neither any misleading statement was made by the 'Financial

Creditor' nor any misleading statement of default was made. The case of

the Respondent-'Financial Creditor', being different from the case of 'ICICI

Bank Limited' (the 'Financial Creditor' of M/s. Starlog Enterprises

Limited), the plea taken by the Appellants cannot be accepted.

9. Another ground taken by Learned Counsel for the Appellants is that

the person, who filed the application under Section 7 was not authorised

by the Board of Directors of the Bank of India ('Financial Creditor').

10. The Respondent has brought to our notice that the person who has

filed the petition under Section 7, is an officer of Bank of India (Financial

Creditor) and was authorised by the Board of Directors to do so. Therefore,

the impugned judgement cannot be interfered with on such ground.

11. In view of the discussions as made above and in absence of merit,

we are not inclined to interfere with the impugned judgment dated 3rd July,

2017 passed in C.P. No. IB-104(PB)/2017 and, accordingly, dismiss the

appeal.

However, in the facts and circumstances of the case, the parties shall

bear their respective costs.

[Balvinder Singh] [Justice S.J. Mukhopadhayaj Member (Technical) I Chairperson

NEW DELHI

23rd August, 2017

/ng/