Date of decree cannot be brought forward/substituted with date of default

Cause Title : Venus Buildtech India Private Limited vs Senbo Engineering Limited, C.P. (IB) No. 60/KB/2021, National Company Law Tribunal Kolkata Bench

Date of Judgment/Order : 4/8/2023

Corum : Smt. Bidisha Banerjee, Member (Judicial), Shri Balraj Joshi, Member (Technical)

Citied: 

1. Jignesh Shah and Another v. Union of India and Another, (2019) 10 SCC 750
2. Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal and Another, (2021) 6 SCC 366
3. V. Padamkumar Vs. Stressed Asset Stabilization Fund (SASF) & Anr., C.A.(AT) (Ins) No. 57 of 2020
4. SLB Welfare Assn. v. PSA IMPEX (P) Ltd., Company Appeal (AT) (Insolvency) Nos. 905 and 642 of 2022, decided on 04-11-2022
5. Sri Subhankar Bhowmik v. Union of India and Anr., WP(C)(PIL) No.04/2022 decided on 14 March, 2022

Background

Venus Buildtech had originally filed a suit under order 37 CPC in the month of November, 2010 before the ADJ, Delhi which was decided and decree and as per the said order/judgement dated 12 September, 2017, Venus Buildtech is entitled to recover the Principal Suit amount of Rs.77,10,967/- (Rupees Seventy Seven Lac Ten Thousand Nine Hundred Sixty Seven only) along with interest @ 9% per annum on the money decree from the Senbo Engineering. The same is still outstanding and payable by Senbo Engineering to Venus Buildtech despite repeated follow ups, communications for several months.

Subsequently, Venus Buildtech  filed application as an 'Operational Creditor' before the NCLT on 17 February, 2021 and the date of default is stated to be as on 06 March, 2020 i.e., the date of execution order of the decree.

The Corporate Debtor raised objections stating that the review petition filed by the Corporate Debtor has been registered as Misc. DJ No.66 of 2021 and the same is pending for hearing before the Hon’ble Court  and therefore the debt is not undisputed and has not attained finality, thus, there exists ‘pre-existing disputes’ between the parties.

Judgment

The NCLT observed that two questions need to be answered :-

1) Can the date of default be shifted forward to the date of decree?

2) Can a decree holder file an application under section 9 of the Code?

On the first question, the Ld. NCLT quoting the above judgments, held that a suit for recovery of money can be filed only when there is a default of dues. Even if the decree is passed, the date of default cannot be shift forward to the date of decree or date of payment for execution as a decree can be executed within specified period i.e. 12 years. If it is executable within the period of limitation, one cannot allege that there is a default of decree or payment of dues. Therefore, a Judgment or a decree passed by a Court for recovery of money by Civil Court/ Debt Recovery Tribunal cannot shift forward the date of default for the purpose of computing the period for filing an application under Section 7 of the ‘I&B Code’.

As for the second question, again referring to the judgments the NCLT held that the IBC treats decree holders as a separate class, recognized by virtue of the decree held. The IBC does not provide for any malleability or overlap of classes of creditors to enable decree holders to be classified as financial or operational creditors.