Case Title: Rajesh Kedia v. Phoenix ARC Pvt. Ltd.
The National Company Law Appellate Tribunal has held that the only requirement for admitting a petition under Section 7 of IBC is that the minimum outstanding debt should be more than the threshold amount provided for under the IBC. As far as the question of deciding the quantum of debt is concerned it cannot be determined at the admission stage.
The instant appeal had been filed by the aggrieved suspended corporate director who has challenged the impugned order wherein it was observed that in the Balance Sheet for the year ending 31/03/2017 there is a mention of outstanding Non-Convertible Debentures of ₹ 5,00,000/- having a face value of ₹ 100/- each. The said impugned order has a specific finding that states that “there has been ‘acknowledgement of debt’ as contemplated under Section 18 of the Limitation Act, 1963, keeping in view the Financial Statements of the ‘Corporate Debtor’ filed with the RoC till 31/03/2019.”
In this appeal, it is not a question of a dispute as to whether the ‘Corporate Debtor’ has failed to pay the instalment as per the terms of the Financial Facility or not. Even though he has clearly failed, but the only contention for consideration before the Appellate Authority was whether the quantum of debt due owing to the failure in repayment can be decided while admitting a petition u/s 7 IBC.
There have been exhaustive arguments from both sides wherein the Appellant has stated that he has never admitted to the ‘interest’ being due on the debt, which was due back in the year 2002, and as such this issue is barred by limitation. Thereafter, the Appellate Authority proceeded to examine the Financial Statements of the Company and it was revealed that there is an acknowledgement of debentures of the amount of ₹ 5,00,00,000/-. The Auditor’s Report accompanying the Financial Statements and Balance Sheet as on 31/03/2017 show that there is an acknowledgement of debentures and also the default in respect thereof for ₹ 10,62,92,521/- due to be paid to the first Respondent.
It also referred to the impugned order of the Adjudicating Authority wherein it is explicitly recorded that ‘the Counsel for the ‘Corporate Debtor’ accepts the liability as well as default and submits that there is a likelihood of settlement in this matter and seeks time’.
The Appellate Authority in the instant case referred to Dena Bank (erstwhile Bank of Baroda) V. C. Shivakumar Reddy & Anr, wherein the Hon’ble Supreme Court while acknowledging the prescribed time to file claims u/s 7 to 9 IBC is 3 years has also given a liberalised interpretation to the provisions of limitation and held that “Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgement to attract Section 18 of the Limitation Act….”
Thus, it was held that the same is not barred by limitation.
As far as the contention of the Appellant qua the quantum of payment of debt is concerned, the Appellate Tribunal relied upon M/s. Innoventive Industries Ltd. v/s. ICICI & Anr., wherein it has been held that even if the right to pay the debt is disputed the code gets triggered but deciding the quantum at the admission stage cannot be permitted. At the admission stage, the only mandate should be that the minimum outstanding debt should be more than the threshold amount provided for in accordance with the provisions under the Code. The actual amount of ‘Claim’ has to be ascertained by the Resolution Professional after collating data and due verification.