Documentary Evidence like Court of Board Nominees Order, Bank statements Other than IU Records Sufficient to Establish Default Date: NCLT [Read Order]

The Ahmedabad Bench of the National CompanyLaw Tribunal (NCLT) clarified that the date of default can be established by placing reliance on documentary evidence other than a record of default with an Information Utility (IU).

The tribunal admitted a Section 7 application filed by CFM Asset Reconstruction Private Limited and initiated the CorporateInsolvency Resolution Process (CIRP) against Bhagirath Construction Company Private Limited, after finding that the financial default was proved and the petition was filed within the limitation.

CFM Asset Reconstruction Private Limited, the financial creditor, filed the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate CIRP on account of non-payment of dues assigned to it by Mehsana Urban Co-operative Bank Limited. The corporate debtor had availed credit facilities from the bank in 2004 and 2005, which later turned into non-performing assets.

The bank filed recovery suits and obtained decrees in its favour on 5 February 2020, which remained unchallenged. The debt was subsequently assigned to the applicant under an agreement dated 26 March 2021. The applicant argued that the outstanding dues amounted to Rs. 28.48 crore as on 30 July 2023 and placed reliance on the decrees and other documents to establish the default.

The applicant’s counsel relied on Vijay Kumar Singhania Vs Bank of Baroda and others, arguing that the date of default can be proved by relying on other documentary evidence apart from a record of default with an Information Utility. The appellant’s counsel submitted documentary evidence such as Credit Approval Letter, Court of Board Nominees Order, Bank statements etc.,

The two-member bench comprising Shri Pradeep R. Sethi (Judicial Member) and Shri Charan Singh (Technical Member) observed that the decrees passed in favour of the financial creditor constituted a fresh cause of action. The tribunal accepted the applicant’s arguments and the documentary evidence.

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The tribunal explained that the limitation period for filing under Section 7 could be computed from the date of the decree rather than the original NPA dates of 2004 and 2005. As it falls well within the limitation period of the COVID exemption, the tribunal admitted the petition and ordered the initiation of CIRP against Bhagirath Construction Company Private Limited.

It declared a moratorium under Section 14 of the Code and appointed Mr. Dhaval C. Khamar as the Interim Resolution Professional (IRP). The applicant was directed to deposit Rs. 2,00,000 to cover initial CIRP costs. The Registry was directed to send the order to the financial creditor, IRP, the Registrar of Companies, and the Insolvency and Bankruptcy Board of India for compliance.

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