The court reaffirmed that the acknowledgment of debt is critical in insolvency proceedings, dispelling claims of novation and confirming the enforcement of existing financial contracts despite a party’s previous status.

JUDGEMENT

(02.07.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Appeal has been filed by Ms. Mausumi Bhattacharjee the Promoter of Arjun Industries Limited (in short Appellant) Ms. Mausumi Bhattacharjee who is the Shareholder and Suspended Board of Director of Arjun Industries Limited (in short Corporate Debtor) under Section 61(1) of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) in Company Appeal (AT) (Insolvency) No. 886 of 2024 against the Impugned Order dated 22.02.2024 passed by the National Company Law Tribunal, New Delhi Bench (Court - II) (in short ‘Adjudicating Authority’) in IB-79/ND/2022, whereby an application was filed under Section 7 of the Code by the Respondent No. 1 was considered and Corporate Insolvency Resolution Process (in short CIRP) of the Corporate Debtor was initiated. Jumbo Chemicals and Allied Industries Private Limited is the Respondent No. 1 here who is Financial Creditor of the Corporate Debtor.

2. Heard the Counsel for the Parties and perused the records made available including the cited judgements.

3. It has been brought out that the Corporate Debtor availed a loan from Industrial Development Bank of India (in short IDBI) of Rs. 3.67 Crores and further entered into agreement for foreign currency loan for Rs. 1.83 Crores. It has been alleged by the Appellant that the entire problem of the Corporate Debtor began since the IDBI release only Rs. 3.29 Crores against sanction loan of Rs. 3.67 Crores and similarly release only Rs. 1.25 Crores (Foreign Currency Loan) against Rs. 1.83 Crores.

4. The Appellant could not service the debt and repay the loan and IDBI issued legal notice on 10.06.1998. The IDBI also filed OA No. 445/1998 before Debt Recovery Tribunal (in short DRT) for recovery of outstanding amount of Rs. 6,19,87,815/- and the Corporate Debtor, during pendency of such proceedings before DRT, approached IDBI for One Time Settlement (in short OTS) and agreed to settle the outstanding at Rs. 2.50 Crores.

5. It has been submitted that the Appellant could not pay even the OTS amount and thus OTS failed. The IDBI assigned its outstanding debts to Kotak Mahindra Bank Ltd. on 31.06.2006 and Kotak Mahindra Bank Ltd. further assigned the debt to the Respondent No. 1 on 16.04.2008 by registered deed of assignment. Thus, the Respondent No. 1 became the Financial Creditor of the Corporate Debtor.

6. It was brought out that the Corporate Debtor filed a Writ Petition before the Hon’ble Delhi High Court for restraining the assignment of loan which was dismissed.

7. We note that the Respondent No. 1 filed a petition before the Hon’ble Delhi High Court for winding up of the Corporate Debtor under Section 433 (e) and 433 (f) and Section 434 r/w Section 439 of Companies Act, 1956 before Single Judge Bench. From the judgement delivered by the Hon’ble Delhi High Court dated 22.05.2014, it is observed that at one time the Delhi High Court asked the Appellant to deposit Rs. 2.5 Crores with the Registry, however, while dismissing the petition for winding up of the Corporate Debtor, the said amount of Rs. 2.5 Crores was ordered to be refunded. The Respondent No. 1 challenged Single Bench Judgement before the Division Bench of Delhi High Court for winding up of the Corporate Debtor which was also dismissed on 02.03.2016.

At this stage, it would be worth noting that these proceedings happened prior to Code came into force.

8. It has been brought out that a meeting was held between the Appellant and the Respondent No. 1 on 12.10.2018 for agreement on