NCLT Admits HDIL Firm Privilege Power and Infrastructure under Insolvency Process
The Mumbai bench of National Company Law Tribunal (NCLT) has admitted Privilege power and Infrastructure, an affiliate of Housing Development and Infrastructure (HDIL), under the Corporate Insolvency Resolution Process (CIRP), as the Tribunal found that the two essential qualifications, i.e., existence of 'debt' and 'default,' for admission of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'Code') have been met in this for admission.
The Company Petition was originally filed by Punjab and Maharashtra Co-operative Bank Ltd which has now merged with Unity Small Finance Bank (hereinafter called "Petitioner") seeking to initiate CIRP, against Privilege Industries Ltd. (hereinafter called "Corporate Debtor") alleging that the Corporate Debtor committed default on 30.06.2012 to the extent of Rs. 103,52,99,832/- inclusive of interest and charges.
The Petition revealed that the Corporate Debtor is in the business of manufacturing of beverages and had approached the Petitioner with the request for the overdraft facility.
The bench comprising of Justice Kuldip Kumar Kareer (Judicial Member) and Anuradha Sanjay Bhatia (Technical Member) upon perusal of the Petition and after hearing both the parties, found that, it was an undisputed fact that the Petitioner had sanctioned an overdraft facility to the Corporate Debtor vide sanction letter dated 04.11.2011 and 17.01.2013, for an amount of Rs. 35 crores and 10 crores respectively. However, the Corporate Debtor was not able to repay the amount and an amount of Rs. 103,52,99,832.53/- (Including Interest) is due and outstanding.
The learned counsel for the Petitioner submitted that even if there was no acknowledgment of liability, there was promise to pay the debt by executing various documents in the subsequent years i.e., acknowledgment of debt in the form of balance confirmation letters, dated 11.07.2018 and 07.08.2019. Further, the petitioner contended that the documents executed between the Petitioner and the Respondent were in the nature of contract between the parties to pay a time barred debt under Section 25(3) of Indian Contract Act, 1872.
The substantial issue that was to be decided by the Bench, in the matter, was whether the Financial Debt was barred by the limitation.
The Tribunal opined that the date stated in the Petition was correct date of default. However, the default was declared in 2019. Corporate Debtor who had availed the facility, had signed documents after 2012 and had also given acknowledgments after 2012, cannot be now permitted to contend that the default took place in 2012 and therefore the Petition was barred by limitation, stated the bench.
Further the Tribunal was of the view that the petition even otherwise satisfied that there were acknowledgments from time to time. There were acknowledgments in balance sheets as well as balance confirmation letters. Balance Sheet acknowledgment was also admitted in the letter dated 23rd October 2019 addressed by the Corporate Debtor.
The Tribunal held that it was not open for the Corporate Debtor to contend that the liability is not admitted or the same is time barred.
The bench concurred with the case relied by the Petitioner in S.S. Ghulam Mohiuddin Vs. S.S. Ahmed Mohiuddind, (1971), wherein the Supreme Court held that the period of limitation ought to be calculated from the date of discovery of the fraud by the Person affected by the fraud.
The bench observed, "therefore, in view of the above judgement and perusal of Section 17 of the Limitation Act, 1953, coupled with the fact that the transaction documents executed between the parties and the fraud came to be discovered by the Petitioner in the year 2019. Along with this the execution of the transaction documents also obligates the Respondent to pay a time barred debt as per provisions of Section 25 (3) of the Indian Contracts Act, 1872. In view of the above, the Ld. Counsel for the Petitioner has satisfied this Bench that the present Petition is not hit by the bar of limitation."
The Tribunal was of the view that there was an acknowledgement of liability by the Corporate Debtor vide balance confirmation certificate dated 07.08.2019 and 11.07.2018, which were duly signed by the Corporate Debtor. Further, the Corporate Debtor in its reply provided a tabulation chart of the 'regular payments' made by it from July 2012 till September 2018, confirming the payments made on account of the outstanding debt and also issued a letter dated 23.10.2019 for the request of One Time Settlement (OTS) with the Petitioner however the same was rejected by the Petitioner vide letter dated 04.11.2019.
The bench concluded that the nature of Debt is a "Financial Debt" as defined under section 5 (8) of the Code. Further, it was also established that there is a "Default" as defined under section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e., existence of 'debt' and 'default,' for admission of a petition under section 7 of the Code, have been met in this case, stated the NCLT.