TaxTMI 
TaxTMI 
2020 (12) TMI 872
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.... (A.A. - in short) which passed the Impugned Order in CP (IB) No. 324/NCLT/AHM/2019 and initiated Corporate Insolvency Resolution Process (CIRP in short). Thus this Appeal has been filed by the Appellants who are Directors of the suspended Board of Directors. 2. It is argued and the Appellants claim in the Appeal that Corporate Debtor had planned to roll out in Surat dedicated dark fibre broadband, Internet, Lease Lines etc. For such purpose, the Corporate Debtor approached the Bank for Loan. The Bank sanctioned Term Loan amounting to Rs. 20 crores 24 lakhs, through three Loan Accounts. The Accounts of the Corporate Debtor were classified as Non-Performing Assets (NPA) on 30th September, 2014, by the Bank. The Bank issued Recall Notice dated 01st October, 2014 demanding the outstanding dues reflected in the Statement of Accounts. The Bank filed DRT Proceeding bearing O.A. No. 656 of 2015 under Section 19 of Recovery of Debts Due to Banks and Financial Act, 1993 (RDDB Act) to recover Rs. 19,78,94,660.32 Paise. The Corporate Debtor disputed the calculations of the principal, quantum of interest and penal interest etc. and wanted the entries to be corrected by the Bank in Statement....
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....ments even after the Account was declared NPA. The Learned Counsel referred to Judgment in the matter of Jagdish Prasad Sarda Vs. Allahabad Bank (Company Appeal (AT) (Ins.) No. 183 of 2020) dated 28th August, 2020 passed by this Appellate Tribunal to submit that the other Bench has held that the payments made after declaration of NPA would not give benefit of Section 19 of the Limitation Act if the NPA had not been regularized by the Bank and the date of default continued to be mentioned as date of NPA. 5. The Learned Counsel further submitted that the Bank has in its reply (Diary No. 22385) referred in Paragraph 7 with regard to the instalments and that the Bank had taken benefit of "cut back offer". It is argued that such arrangement of taking cut back would not give benefit of Section 19 of the Limitation Act. 6. It is argued by the Learned Counsel for the Appellant that the authorization or Power of Attorney of the person signing Application under Section 7 was defective as it was given by the Bank before IBC came into force and nothing was shown that Power was given to take action under Provisions of IBC. 7. In response the Learned Counsel for the Bank relied on the r....
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....r is represented through Learned Counsel and "None appeared on behalf of Respondents despite repeated call". The Order typed and signed by Adjudicating Authority records that the arguments for Learned Counsel for Petitioner are heard and order is reserved. The Impugned Order also in Paragraph 8 shows that the Adjudicating Authority recorded that on the perusal of the record it was observed that despite repeated calls, none appeared on behalf of Respondents and, therefore Final Hearing of the Application is made in the absence of the representative of the Respondent. The Bank, in Reply (Diary No. 22385) - Para 10 has stated that NCLT provided ample opportunities to both sides, but Corporate Debtor avoided its appearance through Counsel making lame and intentional excuses and ultimately preferred not to appear on 11.03.2020, the last date of hearing. We would rather rely on the Adjudicating Authority for the Order which is passed in the proceeding Annexure A8 on 11th March, 2020 and its observations in Paragraph 8 of the Impugned Order rather than accept the allegations now being made by the Appellants merely on the basis that the signature and entry regarding the appearance for Resp....
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....s and any demand touching any matters in which the Bank may or may hereafter be interested or concerned and also, if the said Attorney shall think fit, compromise, etc. It is all comprehensive paragraph which has conferred powers to this Chief Manager. We do not find any substance in the argument that as such General Power of Attorney was executed before coming into force of Insolvency and Bankruptcy Code hence, the said Chief Manager did not have authority. In our view, it is General Power of Attorney and not confined to any particular Act or Acts. We do not find any defect on this account with the Application under Section 7 of IBC. Although the Learned Counsel for Appellants did not turn up to make submissions at the final stage, still the Adjudicating Authority does appear to have considered the objections raised by the Appellants and in Paragraph 12 of the Impugned Order looked into this issue and did not find any substance in the objections raised that the Power of Attorney was not competent to file the Application. Limitation 12. Now the issue regarding the Limitation needs to be looked into. Appellants have filed copy of the Form. We have seen the Form submitted....
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....d 01st October, 2014. 14. In Paragraph 7 of Part V of the Form there is reference to Statements of Loan Account, annexed. Paragraph 8 refers to List of Other Documents Attached to the Application to prove existence of Financial Debt, The Amount and Date of default. There is long list. (Annexure A6, filed by the Appellants as copy has blanks where Annexure Numbers and Page Numbers were to be filled. It is probably copy as they received. It is however no bodies case that Annexure Numbers and Page Numbers are not filled in Original before Adjudicating Authority). The Adjudicating Authority in Paragraph 5 of the Impugned Order has recorded that the Applicant (i.e. the Bank) has submitted copies of the following documents in support of their claim. The same reads as under: "5. The Applicant has submitted copy of the following documents in support of their claim:- Sl. No. Particulars Page Nos. 1 Application by financial creditor for initiation of corporate insolvency against respondent company under Section 7 of IBC and general affidavit 1-9 2 Power of attorney of authorised signatory of the applicant 10-14 3 Form No. 2 - written communication by pr....
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....eport dated 28.12.2018 obtained by applicant 334-360 31 Recall notice dated 01.10.2014 issued by the applicant 361-362 32 Statement of accounts in respect of loan account 363-637 33 Company's master data of corporate debtor 638 34 Corporate debtor's letter dated 09.12.2011 showing change of name 639-652 35 Account-wise simple debit balance confirmation dated 07.04.2016 signed by the corporate debtor 653-657 15. The Adjudicating Authority noticed that the Bank had claimed as Financial Creditor that it has to recover Rs. 24,62,98,391/- which includes the principal amount of Loans sanctioned under different schemes, accrued interest and penal interest as per the calculation in tabular Form annexed to the Application at Page 3. It appears from the Application under Section 7 of IBC that the Corporate Debtor had been extended facility of Loan for working capital, letters of credit as well as Term-Loan. 16. The Learned Counsel for the Appellant referred to the Chart which is part of "Part IV of the Form" to say that for all these nature of loans, the dates of default were shown by the Bank as 30th September, 2014 which is the date of ....
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.... which was filed before Adjudicating Authority by Corporate Debtor Paragraph 29 to 31 may be reproduced. The same are as under: "29. The Respondent states that the Applicant has kept the Hon'ble Tribunal in dark by not informing about the efforts made and steps taken by the respondent after becoming NPA to make the account regular. The Respondent have deposited huge amount with the applicant after becoming the NPA till date. (a) Though declared NPA since 03.11.2014, as a gesture of good relationship & committed integrity, the Respondent deposited Rs. 316.53 lacs till date due to the applicant against principle outstanding as under. (Rs. Lacs) Year Amount Remark 2014-15 25.48 CC-Int. And TL instalment 2015-16 12.39 TL instalment 2016-17 80.26 TL instalment 2017-18 110.12 TL instalment 2018-19 72.11 TL instalment 2019-20 16.17 TL instalment Total 316.53 (b) The Respondent was regularly serving interest and TL repayment up to June 2014. Even after declared NPA, as a gesture of continuing relationship with UBI, The Respondent continued to repay TL instalment, servici....
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....ared LC limit of Rs. 125.00 Lacs after NPA." (Emphasis Supplied) 20. The Learned Counsel for Bank stated that the factor of Corporate Debtor making such payments is also reflected in the accounts maintained by the Bank and when even after declaration of NPA and parties proceeding to DRT the Corporate Debtor made payments on account of debt and interest, Section 19 of Limitation Act is attracted. 21. The Learned Counsel for the Appellant referred to above Para 30 of the Reply which was filed by Corporate Debtor before the Adjudicating Authority to submit that the amounts shown as payment of instalments is in an arrangement of "cut back" which the Appellants agreed even after NPA was declared. It is argued that the Corporate Debtor to maintain good relations accepted that the Bank may deduct particular amount as cut back. Learned Counsel for the parties at the time of arguments submitted that "Cut Back" is an arrangement whereby the Corporate Debtor agreed that from the payments the Corporate Debtor receives from its customers, the Bank could directly deduct particular percentage towards its dues. Learned Counsel for Appellant argued that in this arrangement Bank direc....
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....ittee and Paragraph 6 read as under: "6. Having heard the learned counsel for both sides, it is important to first set out the reason for the introduction of Section 238-A into the Code. This is to be found in the Report of the Insolvency Law Committee of March 2018, as follows: "28 APPLICATION OF LIMITATION ACT, 1963 28.1. The question of applicability of the Limitation Act, 1963 (the Limitation Act) to the Code has been deliberated upon in several judgments of NCLT and NCLAT. The existing jurisprudence on this subject indicates that if a law is a complete code, then an express or necessary exclusion of the Limitation Act should be respected. In light of the confusion in this regard, the Committee deliberated on the issue and unanimously agreed that the intent of the Code could not have been to give a new lease of life to debts which are time-barred. It is settled law that when a debt is barred by time, the right to a remedy is time- barred. This requires being read with the definition of "debt" and "claim" in the Code. Further, debts in winding-up proceedings cannot be time-barred, and there appears to be no rationale to exclude the extension of this pr....
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....ccrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application." (Emphasis supplied) 23.3. From the above it can be seen that there was no intention to give new lease of life to debts which are time-barred. Thus, the consideration is whether a given debt is time-barred. It is also clear from the above that for Applications under Section 7 of IBC the Hon'ble Supreme Court found that residuary Article 137 in the Third Division of Limitation Act dealing with "Applications" was the Article applicable. The Judgment shows that if there is delay in filing of Application one has to go to the Sections where Section 5 would apply. Section 5 would be relevant if an Application which is time-barred and extension of prescribed period is sought showing sufficient cause for not filing the Application within prescribed period. 23.4 In subsequent Judgments in the matter of "Gaurav Hargovindbhai Da....
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....ble. 23.10 This takes us to sections 4 to 24. Relevant for the present matter are Sections 18 and 19 which read as under: " 18: Effect of acknowledgement in writing: (1) Where, before the expiration of the prescribed period for a suit of application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed. (2) Where the writing containing the acknowledgement is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872, oral evidence of its contents shall not be received. Explanation. - For the purposes of this Section,- (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, ....
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....e Learned Counsel for the Appellant has not shown anything from record that the observations of the Adjudicating Authority that the Corporate Debtor had issued Balance Confirmation Letter dated 07th April, 2016 and acknowledged the debt is not correct. The Adjudicating Authority further referred to the account statements showing regular credit entries after 7th April, 2016 till May, 2018. Reference is made to letter dated 17.11.2018 of Corporate Debtor giving details of amounts repaid till 30.09.2018 and acknowledging amount outstanding, in respective accounts as on 30.09.2018. The Appellants have not shown that these findings are incorrect or that they are not borne from Record. Rather the Reply filed by the Appellants before the Adjudicating Authority (Annexure A7) portions of which we have reproduced above in Paragraphs 29 to 31 clearly show that various repayments were indeed made by the Corporate Debtor even after the Bank declared their Accounts as NPA. The Account was declared NPA on 30th September, 2014. There was Balance Confirmation on 07th April, 2016 and the Reply of the Corporate Debtor Paragraph 30 reproduced above claimed that the Appellants offered cut back approxim....