TaxTMI 
TaxTMI 
2019 (8) TMI 1656
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....and thereby committed default in repayment of Rs. 173,85,76,484.56 (rupees one hundred seventy three crores eighty five lakhs seventy six thousand four hundred eighty four and paise fifty six only) which included interest calculated up to July 31, 2018 along with further interest at 13.85 per cent. per annum from August 1, 2018 till realisation. 2. The averments material for the consideration of this application in brief are the following : (a) On the strength of an application (annexure 1C), the financial creditor had sanctioned cash credit facility of Rs. 250 lakhs and export packing facility of Rs. 400 lakhs on October 15, 2007 against hypothecation over stocks of raw material/stores, stocks in process, finished goods, book debts and other current assets as primary security and mortgage of immovable properties as collateral security upon terms and conditions of the said sanction letter (annexure 1D). On November 17, 2007 to secure repayment of debit balance outstanding from time to time, the corporate debtor executed an agreement of loan-cum-hypothecation along with consent clause (annexure 1E) in favour of SBI. On January 10, 2009 at request of corporate debtor, the....
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....al/ stores, stocks in process, finished goods, books debts and other current assets as primary security and mortgage of immovable properties as col lateral security upon terms and conditions of the said sanction letter in terms of arrangement dated June 22, 2010 (annexure 1-O). On June 22, 2010 in consideration of granting Rs. 12.50 crores credit limit and to secure repayment of debit balance outstanding from time to time, the corporate debtor executed and delivered (i) agreement of loan for overall limit along with consent clause (annexure 1P), (ii) agreement of hypothecation of goods and assets (annexure 1Q), (iii) letter regarding grant of individual limits within overall limits (annexure 1R), and (iv) omnibus counter guarantee (annexure 1S) in favour of SBI. (c) On August 30, 2011 at request of the corporate debtor, the financial creditor sanctioned and/or allowed and/or restructured the aggregate credit limit with renewal with enhancement of credit limits to the tune of Rs. 68.43 crores against hypothecation against entire current assets of the company present and future, entire plant and machinery of the company as primary security and mortgage of immovable propertie....
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....anumanta Engineering P. Ltd.-annexure 2C. A resolution pro fessional Mr. Balasubramanium is proposed as IRP. Form 2 and written consent is also enclosed. Upon the above said contention the financial creditor prays for admission of the application under section 7 of the Code. 3. The corporate debtor entered appearance and filed reply affidavit contending in brief is the following : (a) The corporate debtor states that the financial creditor has sup pressed the following facts, that the corporate debtor had requested the financial creditor on several occasions to reduce the rate of interest as per RBI Guidelines and in spite of the RBI Guidelines for concessional rate of interest, the financial creditor continued to charge the corporate debtor higher rate of interest at 17.75 per cent. However, no interest concession or fund interest term loan (FITL) was granted by the financial creditor. The corporate debtor received a notice dated August 14, 2012 declaring that the account of the corporate debtor was classified as NPA from August 10, 2012. The corporate debtor submits that the NPA notice dated August 14, 2012 is contrary to the prudential norms on income recognition ass....
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....d and illegal in law as the "hold on" operation by the financial creditor was being implemented. It is further stated that in reply dated October 15, 2013 to the said notice the corporate debtor once again requested the financial creditor to restructure the account of the corporate debtor. 4. That the corporate debtor had filed a suit being C. S. No. 191 of 2014 before the hon'ble High Court at Kolkata which is pending till date. An interim order passed against the financial creditor is also in force. An appeal filed by the financial creditor has been disposed of. The financial creditor attempted to issue a notice under section 13(4) of the SARFAESI Act, 2002 which was challenged before the Debts Recovery Tribunal. Thereafter, the corporate debtor filed an application under the Contempt of Courts Act, 1971 being C. C. No. 14 of 2018 before the hon'ble High Court at Kolkata, in view of the alleged flagrant violation of the interim order passed by the hon'ble High Court. The financial debtor has also filed O. A. No. 307 of 2014 against the corporate debtor. The corporate debtor further states that by stopping the account of the corporate debtor the financial creditor h....
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....n denied/refused to participate vide letter dated December 10, 2018. It is denied that the petition suffers from suppression of material facts or that the bank has not come to this court with clean hand. It is incorrect to say that the corporate debtor made considerable repayment to the bank between 2007 and 2011. It is also incorrect to say that the corporate debtor had agreed to charge interest at the rate of 14 per cent. perannum as alleged or at all. It is denied that master circular dated September 12, 2011 has any application to the corporate debtor. It is denied that any assurance was given by the financial creditor to corporate debtor to restructure the account of the corporate debtor as alleged or at all. Contents of letter of the corporate debtor dated January 28, 2013 are denied and disputed. It is denied that the senior officials of the bank visited the office of corporate debtor or assured the corporate debtor that account will be restructured. It is denied that the viability of restructuring was justification of non-payment of dues. The TEV study was done at the behest and instance of the corporate debtor. It is incorrect to say that the proceedings initiated under SA....
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....as the outstanding amount inclusive of interest as on July 31, 2018 totalling a sum of Rs. 173,85,76,484.56. Availing the above said three nature of loan facilities by the corporate debtor and declaration of the above said account as non-performing asset (NPA) on August 6, 2012 is not in dispute. As per the averments in the reply affidavit, the corporate debtor made a request to restructure their accounts which make it apparent that the corporate debtor has admittedly defaulted in repayment. The above said are the admitted facts. The corporate debtor though filed an exhaustive reply affidavit disputing its liability, there is no challenge in regard to the execution of loan agreement, letter of arrangement, agreement of hypothecation of goods and assets, guarantee agreement as referred to in the application as annexure D to annexure X. The disputes raised in the reply can be summarized as shown below : (i) Contractual rate of interest claimed by the financial creditor is not correct. (ii) Entitled to concessional rate of interest. (iii) Notice issued under section 13(2) of the SARFAESI Act is illegal and improper. (iv) Declaring the accou....
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....g cause of action. To strengthen the said argument, he relied upon Babulal Vardhaji Gurjar v. Veer Gurjar Aluminium Industries P. Ltd. (Company Appeal (AT) (Insolvency) No. 549 of 2018) [2019] 7 Comp Cas-OL 72 (NCLAT) ; MANU/NL/0213/2019. Secondly he contends that right to apply under section 7 of the Code accrued to the financial creditor since December 1, 2016 when the I and B Code came into force, filing of this application on August 10, 2018 is within 3 years and therefore, this application is within time limit. He relied upon B. K. Educational Services P. Ltd. v. Parag Gupta and Associates [2019] 212 Comp Cas 1 (SC) and Shankar Vardharajan v. Dewachand Ramsaran Corporation P. Ltd. (Company Appeal (AT) (Insolvency) No. 735 of 2018) MANU/NL/0311/2018 ; [2019] 212 Comp Cas 1 45 (NCLAT) for strengthening the said submissions. Thirdly he submits that in the balance-sheet for the year ending March 31, 2017 the corporate debtor admitted the debt and therefore, filing of this application is not barred by law. He relied upon section 18 of the Limitation Act. Fourthly, he also would submit that the financial creditor being a mortgagee, the period of limitation....
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....sent case. Rather the issue as to whether the lodging of the proceedings under section 19 of the Act of 1993 continues the period of limitation, or in other words, stops the running of the period of limitation on and from the date of lodging of such proceedings has arisen for consideration in the present case . . . 18. Section 14 of the Limitation Act, 1963 saves the period of limitation in the event of a new proceeding being filed when the court in which the former proceeding was being prosecuted suffers from defect of jurisdiction or defect of like nature. It does not contemplate two proceedings on the same cause of action at the same time. In the present case, the bank has not withdrawn the proceeding under section 14 under the RDB Act, 1993, for defect in jurisdiction of the Tribunal to decide the same or otherwise. Rather the bank is proceeding under section 19 of the RDB Act, 1993. It can proceed parallely by under the Act of 2002 provided that the proceedings under the Act of 2002 are within the period of limitation. Pendency of the proceedings before the Debts Recovery Tribunal, under the RDB Act, 1993, will not save the period of limitation for a proceeding under ....
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....g proceedings under the two proceedings already initiated by the financial creditor is different and hence the above said proposition is not at all applicable in the case in hand. The I and B Code is a new Code enacted in the year 2016 and coming into effect on May 28, 2016. By the said enactment, the financial creditor like the financial creditor in the case in hand got an additional remedy and not a parallel remedy as attempted to establish on the side of the corporate debtor. Thus, the said citation has no application to the facts of the case. 13. In view of the abovesaid, we are of the view that the filing of the proceedings before the Debts Recovery Tribunal by the financial creditor under the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, continues the period of limitation, or in other words, stops the running of the period of limitation from March 25, 2014 when the OA was filed by the financial creditor before the Debts Recovery Tribunal, Kolkata. Pendency of a petition under the provisions of the RDDBFI Act, 1993, being not a bar for initiating the proceedings under the I and B Code, filing of this application is within the period of l....
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....case in hand on December 1, 2016 and not on August 30, 2011 as attempted to be established on the side of the corporate debtor. At this juncture it is good to read paragraph 4 of the judgment of the hon'ble National Company Law Appellate Tribunal in Shankar Vardharajan v. Dewachand Ramsaran Corporation P. Ltd. MANU/NL/0311/2018 ; [2019] 212 Comp Cas 145, 148 (NCLAT) : "In the present case, the right to apply under section 9 of the I and B Code accrued to the respondent since December 1, 2016 when the I and B Code came into force. Therefore, we find that for triggering the application under section 9, the application is within the time limit." 17. On a reading of the above said judgments, we are of the view that right to apply under the provisions of the Code started from the date of commencement of the Code and not on the date of default as attempted to be established on the side of the corporate debtor. So the contention on the side of the corporate debtor that second submission of learned senior counsel for the financial creditor is fallacious and unacceptable, and is found devoid of any merit. 18. Coming to the third submission that there is valid acknowledgme....
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.... NPA but on the basis of occurrence of default. It has come out in evidence that no amount was repaid. Admittedly, the loan was availed by the corporate debtor. That being so the recital in the note that declaration of account as NPA is under challenge before the High Court and hence there is no direct admission in writing in the balance-sheet, is found devoid of any merit. In view of the above said we are inclined to hold that the balance-sheet above refereed is an acknowledgment of debt found due to the financial creditor from the corporate debtor and therefore the said ground taken by the corporate debtor is found unsustainable under section 18 of the Limitation Act, 1963. 21. The next submission on the side of the financial creditor is that even if it is found that filing of this application is barred by article 137, or under section 21 of the Limitation Act, 1963, the period of limitation for filing this application being 30 years as per article 63(a) filing of this application is within the period of limitation. According to learned senior counsel for the financial creditor the application filed under section 7 of the Code can be equated to a suit filed by a mortgagee for ....
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....disposal of the appeal preferred by the corporate debtor before the higher authority of the bank/financial creditor. He would further submit that such appeal is still pending and financial creditor has not disposed of the same on merit in terms of the said order and therefore, these proceedings are to be held not maintainable. 25. Learned senior counsel for the financial creditor objected to the said submission on two grounds. Firstly, he submits that the appeal submitted before the higher authority was disposed of and repeated offers in writing were given to it for rehearing if any and therefore, there is no violation of the order by initiating proceedings under the Code. Secondly, he would submit that prohibition order is against taking any further steps relating only to the proceedings pursuant to the NPA date which are of no relevance in the instant case which was filed under section 7 of the Code. 26. We do find some force in the arguments advanced on the side of the financial creditor. A copy of the letter dated October 3, 2018 addressed to the corporate debtor was brought to our notice by learned senior counsel. It was produced along with the rejoinder. This letter was....
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....ission on the side of the corporate debtor. This point is answered accordingly. 29. By answering point Nos. (i) and (ii), we come to a conclusion that filing of the application on August 10, 2018 is within the period of limitation ; that the claim of the financial creditor is not barred by any of the provisions of the Limitation Act, 1963 and that initiating the proceedings under section 7 by the financial creditor as against the corporate debtor is not contrary to the order dated July 12, 2014 passed by the hon'ble High Court, at Calcutta. Therefore, this application filed under section 7 of the I and B Code is found perfectly maintainable. 30. The corporate debtor has miserably failed to substantiate that the dispute it raised in the reply is fit for not to initiate CIRP and also failed to substantiate any reason as to why the application filed under section 7 of the I and B Code, shall not be initiated against the corporate debtor. The application filed is otherwise complete. Though no record with the information utility seen produced in the instant case a copy of report from CIRF High Mark Credit Information Services P. Ltd., as annexure 2B, produced on the side of th....