LORAMITRA RATH VS JM FINANCIAL ASSET RECONSTRUCTION COMPANY LIMITED & ANR.
CA (AT) 1359 of 2023
Facts:
1.The Corporate Debtor-Maa Durga Commotrade Pvt. Ltd. had obtained credit facility from the Karnataka Bank Limited (“KBL” in short) in 2010 for an amount of Rs.1 crore. The loan account of the Corporate Debtor was classified as NPA by the KBL on 05.07.2013 since the Corporate Debtor failed to repay the loan.
2.The KBL subsequently assigned the debt to JM Financial Asset Reconstruction Company Ltd.-present Respondent No.1 on 15.12.2014 by way of an Assignment Deed. The Corporate Debtor submitted an OTS proposal to the Respondent No.1-Financial Creditor on 21.10.2016 for an amount of Rs.7.50 crore which was approved by the Financial Creditor.
3.The Respondent No.1-Financial Creditor filed a Section 7 petition under the IBC for initiation of CIRP of the Corporate Debtor. The matter was heard by the Adjudicating Authority and reserved for orders on 07.08.2023. The orders were pronounced on 25.09.2023. In the interregnum between the conclusion of hearing and the pronouncement of the order on 25.09.2023, the Corporate Debtor filed IA No. 253/CB/2023 seeking recall of the order which had been reserved on 07.08.2023 and to rehear the matter on the basis of additional objections contained in the IA No. 253/2023 filed by them.
4.The IA No.253/2023 was dismissed by the Adjudicating Authority on 25.09.2023 on the ground that it had been filed after the final arguments in the main company petition had been heard and matter reserved for orders.
Issue: Whether the order passed is correct or not?
Arguments:
Appellant:
1.Counsel submitted that Section 7 main company petition was by itself incomplete, the IA No.253/2023 which had been filed by the Appellant for re-hearing the main company petition on questions of law should have been heard by the Adjudicating Authority rather than be rejected on the ground that the main petition stood reserved for orders.
2.It was submitted that the purported assignment of the debt to Respondent No.1 by the KBL, the original Financial Creditor was incomplete as the Assignment Deed assigning the loan was insufficiently stamped and therefore not admissible in evidence. Moreover, the said deed not having been placed on record violated Rule 4(2) of the Insolvency and Bankruptcy Code (Application to Adjudicating Authority) Rules, 2016.
3.In the absence of the Trust Deed, the application under Section 7 should have been treated to be incomplete. Further, the Adjudicating Authority had erroneously admitted the Section 7 application since the date of default being 06.09.2013, the application was barred by limitation.
Respondent:
1.Counsel submitted that AA is required to see whether there is a debt owed by the Corporate Debtor which is due and payable and if so whether any default has been committed in repayment of the debt. It was added that in this case both debt and default stood established and Adjudicating Authority has rightly held that this is a fit case for admission of Section 7 application.
2.It further submitted that The debt had been acknowledged by the Appellant on 06.09.2013 in their reply to the SARFAESI notice and subsequently an OTS proposal had been sent by them to the Respondent No.1 on 21.10.2016. That apart, the balance sheets of the Corporate Debtor for the years 2014-15 and subsequently in 2017-18 and 2018 19 clearly depicts acknowledgment of financial debt.
Decision: NCLAT dismissed the appeal
Rationale:
1.It noted that Appellant was fully aware of the assignment of debt by the original Financial Creditor to the Respondent No.1 which is amply evident from the fact that they had themselves chosen to send the OTS proposal to Respondent No.1 on 21.10.2016 instead of sending the same to the original Financial Creditor.
2.Appellant/Corporate Debtor was not only aware of the assignment of the debt but had accepted and acknowledged this fact by sending the OTS proposal to the assignee. Moreover, the issue of assignment deed was never raised by the Appellant during the hearing of the main petition or at any stage prior to reserving the matter for orders.
3.It held that The balance sheets also reflect that debt is owed by the Corporate Debtor to the original Financial Creditor. Since the Appellant was well aware of the assignment of the debt, they cannot take advantage of the anomaly in the balance sheet with respect to the continuation of the name of KBL as the debtor. There is no material on record to show that this debt had been liquidated by the Corporate Debtor. That being so, the debt was continuing and there was a default in repayment and nothing on record controverts that position
Order Copy:
