TaxTMI 
TaxTMI 
2020 (2) TMI 1505
X X X X Extracts X X X X
X X X X Extracts X X X X
....ebtor in making repayment of the Cash Credit, Bills purchase, LC, LG facility availed from the Bank. The Applicant (FC), JM Financial Asset Reconstruction Company (Formerly known as JM Financial Asset Reconstruction Company Private Limited) is an Assets Construction Company, acting in its capacity as Trustee of JMFARC-SBI (26/03/2014) II-Trust. The application has been filed by the duly authorised officer, Shri Sanjay Kumar Sipani, Senior Vice President of Financial Asset Reconstruction Company Limited, 3rd Floor, "B" Wing, Suashish IT Park, Plot No. 68E, Off Dattapada Road, Opp. Tata Steel, Borivali (E), Mumbai - 400 026, Maharashtra. 2. The Respondent Corporate Debtor (CD) Company, namely Samay Electronics Private Limited was incorporated on 19/11/1997 with CIN: U33309GJ1997PTC033333. 3. The Authorized share capital of the Respondent (CD) Company is Rs. 10,00,00,000/- (Rupees Ten Crores Only) and the paid-up capital of the company is Rs. 10,00,00,000/- (Rupees Ten Crores Only). The Registered Office of the Corporate Debtor Company is situated at: M.R. Industrial Estate, Morbi-Rajkot Highway, Virpar Morbi Rajkot, Gujarat-363 641. 4. "It is submitted that the Respondent Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before this Adjudicating Authority to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor. 9. The Financial Creditor, to substantiate its claim, has enclosed following documents: - i. Copy of Demand Promissory Note for Rs. 18.50 Crores. (Page No. 72 to 73 of paper book) ii. Copy of Letter of Continuity (Page No. 74 of paper book) iii. Copy of Letter of Hypothecation. (Page No. 75 to 80 of paper book) iv. Copy of Supplemental Letter of Hypothecation of Book-debts and Goods. (Page No. 81 to 83 of paper book) v. Copy of Guarantee Letter for Bills and Hundies. (Page No. 84-85 of paper book) vi. Copy of Pledge Letter in respect of Machine accepted as collateral securities. (Page No. 81 to 91 of paper book) vii. Copy of Balance Confirmation confirming debit balance as on 30/10/2006. (Page No. 92-93 of paper book) viii. Copy of Demand Promissory Note for Rs. 6.00 Crores. (Page No. 94-95 of paper book) ix. Copy of Letter of Continuity. (Page No. 96 of paper book) x. Copy of Agreement for OD/CC (Hypothecation of Debts and Assets). (Page No. 97 to 102 of paper book) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....secure Demand Cash Credit. (Page No. 206 to 211 of paper book) xxxvi. Copy of Guarantee Letter for Bills and Hundies. (Page No. 212-213 of paper book) xxxvii. Copy of Balance Confirmation confirming debit balance as on 30/10/2006. (Page No. 225-226 of paper book) xxxviii. Copy of Memorandum of Deposit of title deeds dated 28/07/1998. (Page No. 227 to 229 of paper book) xxxix. Copy of Confirmation Letter for extension of mortgage dated 20/09/1999. (Page No. 230-231 of paper book) xl. Copy of Confirmation Letter for extension of Mortgage dated 29/03/2000. (Page No. 233-234 of paper book) xli. Copy of confirmation letter for extension of mortgage dated 29/03/2000. (Page No. 235-236 of paper book) xlii. Copy of confirmation letter for extension of mortgage dated 06/04/2002. (Page No. 237-238 of paper book) xliii. Copy of confirmation letter for extension of mortgage dated 02/12/2002. (Page No. 239-240 of paper book) xliv. Copy of confirmation letter for extension of mortgage dated 19/09/2003. (Page No. 241-242 of paper book) xlv. Copy of confirmation letter for extension of mortgage dated 20/03/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r account of Sogo and this is the bone of contention. It is when Notice was served to Corporate Debtor in RP Proceedings, Corporate Debtor became aware of this illegal consent Terms and challenged the same by way of Appeal being Appeal No. 95 of 11 before DRAT, Mumbai. The said appeal is pending. 11.6 It is further submitted that the pursuant to aforesaid, on 08/03/2011, Corporate Debtor wrote to Original Creditor to release title Deeds of the property, if early payment as stipulated in consent Terms was made. However, Original Creditor under pretext of Corporate Guarantee of Corporate Debtor in another account known as Sogo Ceramics P. Ltd. refused to honour letter dated 08/03/2011. Thus, despite offering early payment for release of title deeds, the same was refused by the Original Creditor. 11.7 It is submitted that in light of aforesaid background, MA No. 12 of 11 came to be filed at DRT-2 Ahmedabad which was rejected on 08/04/2011. 11.8 It is further submitted that the pursuant to aforesaid, under Recovery of Debts and Bankruptcy Laws, 1993 as well as Securitisation Act, 2002, jurisdiction of DRAT came to invoked by way of Appeal No. 95 of 11, Misc. Appeal No. 97 of 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....their favour by Corporate Debtor. 13. It is submitted that the State Bank of India (SBI) has assigned its debts to the Applicant vide Assignment Agreement dated 26/03/2014. 14. It is submitted that the Respondent Company is a Principal Borrower with regard to various loans/credit facilities granted by SBI. 15. The Learned Lawyer has also stated that the Respondent Company i.e. Borrower and other Guarantors have failed to honour the terms and conditions of the credit facilities granted by the Financial Creditor and hence, the Applicant Bank classified the account of the Respondent Company as "Non Performing Account" (NPA) on 24/03/2008. 16. It is submitted that the Petitioner issued a Notice under Section 13(2) of the SARFAESI Act on 16/06/2008 demanding the amount outstanding with interest against the Principal Borrower. 17. It is submitted by the Petitioner that the Petitioner has filed O.A. No. 114 of 2010 on 11/09/2010 for claim of Rs. 34,23,40,390.81Ps. (Rupees Thirty Four Crores Twenty Three Lakhs Forty Thousand Three Hundred Ninety and Eighty One Paise Only) with further interest before the Hon'ble Debts Recovery Tribunal-II at Ahmedabad. Consent terms date....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Bank of India on the basis of Deed of Assignment. The Corporate Debtor defendant therein raised various objections including objections based on the judgment of Hon'ble Supreme Court in the case of Chief Controlling Revenue Authorities vs. Coastal Gujarat Power Limited reported in (2015) 10 SCC 700. The Hon'ble DRT by order dated 23.10.2015 allowed the application by rejecting all objections of the Corporate Debtor. The Financial Creditor is allowed to be substituted in place of State Bank of India as secured Financial Creditor based on the subject Deed of Assignment. The said order made by DRT has attained finality. The said order is in force even as on this date. It is thus not open for the respondent Corporate Debtor to raise issues about Deed of Assignment. (b) The Corporate Debtor has filed an additional Affidavit on 04.09.2019 enclosing the Audit Report and Income-tax Returns for the Assessment Year 2007-08, 2008-09 and 2009-10. The said Audit Reports acknowledge the debt of the Applicant. The said Balance-sheets are the latest as per the Corporate Debtors. Thereafter, no Balance-sheet has been filed by the Corporate Debtor. It is presumed that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed law, it is submitted that the Corporate Debtor has not disputed its liability, the application is complete in all respect and there are no disciplinary proceedings pending or initiated against the proposed Interim Resolution Professional. 26. The matter was taken up and heard both sides at this Bench on 03.07.2018, 02.08.2018, 06.09.2018, 22.10.2018, 06.12.2018, 23.01.2019, 12.03.2019, 15.04.2019, 02.05.2019, 26.06.2019, 31.07.2019, 20.08.2019, 17.09.2019 and 11.10.2019. The counsels of the Petitioner and the Respondent were present and put forth their submissions before the Bench. 27. It is a settled legal position that the pendency of SARFAESI proceeding or other disputes do not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is "Remedy in Rem" in respect of the CD. 28. The Petitioner has suggested the name of Insolvency Professional to be appointed, if this petition is allowed and the proposed I.R.P. has also given his affirmation/consent in writing, which is annexed with the present I.B. Petition. Observations 29. The Petitioner has submitted the documents duly executed by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of 2006-2007. It is presumed that the said outstanding is carried forwarded to the next Financial Year till it is repaid. Admittedly, the Corporate Debtor has not disputed the outstanding and hence, if the Corporate Debtor is required to present the latest Balance-Sheets, the said outstanding would be reflected in the latest Balance-Sheet. 29.8 Continuous proceeding for the same debt is going on from 2010 and appeals are still pending with DRAT. 29.9 The letter dated 08/04/2019 signed and submitted to this Adjudicating Authority by; 1) Shri Raghavjibhai Bhanjibhai Patel 2) Shri Rameshbhai Bhanjibhai Patel and Shri Premalbhai Banjibhai Patel are the Directors in the Respondent Company M/s. Samay Electronics Private Limited holdings 50% of shares in the Company, wherein they have stated that they have objection for any sort of Settlement outside the NCLT. They have also stated that if the settlement is done outside the NCLT, they afraid that the other issue of claims/attachment(s) of various departments of the state/central/Local Governments will remain unresolved and hanging. 29.10 The present I.B. Petition is filed by the duly authorised official of the Applican....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Authority declares moratorium with effect from today for prohibiting all of the following, namely:- I. (a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal arbitration panel or other authority. (b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein. (c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. II. The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during the moratorium period. III. The provisions of sub-section (1) shall not apply to (a) such transaction....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... maximum interest at the Applicant Bank's Base Rate (BR) +1% from the date of default to the date of implementation of MCLR and further from the date of implementation of MCLR till the date of approval of the Resolution Plan interest at the rate of Petitioner Bank's One Year MCLR or One Year MCLR + 1% without any penal/overdue interest. 36. The Registry is hereby directed to communicate the authentic copy of this order to the Financial Creditor, Corporate Debtor Company, the I.R.P. and also to the Registrar of Companies, Gujarat immediately through speed post/registered post. 37. Thus the present I.B. petition filed Under Section 7 of the IBC stands admitted with the above direction and observations. C.P. (I.B.) No. 249/7/NCLT/AHM/2018 Harihar Prakash Chaturvedi, Member (J) 1. I have been benefited to peruse the order of the learned Member (Technical) by admitting the present I.B. Petition. However, in the present matter, I express my dissenting view on the question of limitation in succeeding Para(s). 2. As per record, at page No. 4 of the present I.B. Petition the date of default is shown as 26.10.2011, being the last date for making payment of the settl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In the meanwhile, by an assignment dated 28.03.2014, the State Bank of India assigned the aforesaid debt to Respondent No. 1. The Debt Recovery Tribunal proceedings reached judgment on 10.06.2016, the Tribunal holding that the O. As filed before it were not maintainable for the reasons given therein. 2. As against the aforesaid judgment, Special Civil Application Nos. 10621-10622 were filed before the Gujarat High Court which resulted in the High Court remanding the aforesaid matter. From this order, a Special Leave Petition was dismissed on 25.03.2017. 3. An independent proceeding was then begun by Respondent No. 1 on 03.10.2017 being in the form of a Section 7 application filed under the Insolvency and Bankruptcy Code in order to recover the original debt together with interest which now amounted to about 124 Crores of rupees. In the Form-I that has statutorily to be annexed to the Section 7 application in Column II which was the date on which default occurred, the date of the NPA i.e. 21.07.2011 was filled up. The NCLT applied Article 62 of the Limitation Act which reads as follows: Description of suit Period of limitation Time from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional Services Private Limited (supra), suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. 7. This being the case, we fail to see how this para could possibly help the case of the Respondents. Further, it is not for us to interpret, commercially or otherwise, articles of the Limitation Act when it is clear that a particular Article gets attracted. It is well settled that there is no equity about limitation-judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature. 8. This being the case, the appeal is allowed and the judgments of the NCLT and NCLAT are set aside." 7. The Hon'ble Apex Court went further in its another decision in Vashdeo R. Bhojwani Vs. Abhyudaya Cooperative Bank Ltd. & Ors. and thus pleased to held that the limitation/cause of action would start from the date of default by declaring NPA and not from the date of issue of a recovery certificate if issued by a Court and in such case, only Article 137 would apply. Therefore, the Hon'ble Supreme Court p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e applied to condone the delay in filing such application. 4. In order to get out of the clutches of para 27, it is urged that Section 23 of the Limitation Act would apply as a result of which limitation would be saved in the present case. This contention is effectively answered by a judgment of three learned Judges of this Court in Balkrishna Savalram Pujari and Ors. v. Shree Dnyaneshwar Maharaj Sansthan and Ors., MANU/SC/0174/1959 : : [1959] Supp. (2) S.C.R. 476. In this case, this Court held as follows: In dealing with this argument it is necessary to bear in mind that Section 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues then the act constitutes a continuing wrong. In this connection it is necessary to draw ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be Article 61) was stated to be attracted to the facts of the present case, considering that there was a deed of mortgage which was executed between the parties in this case. We may point out that an application Under Section 7 of the Code does not purport to be an application to enforce any mortgage liability. It is an application made by a financial creditor stating that a default, as defined under the Code, has been made, which default amounts to Rs. 1,00,000/- (one lakh) or more which then triggers the application of the Code on settled principles that have been laid down by several judgments of this Court. 3. Article 141 of the Constitution of India mandates that our judgments are followed in letter and spirit. The date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code. Equally, since "applications'' are petitions which are filed under the Code, it is Article 137 of the Limitation Act which will apply to such applications. 4. Accordingly, we set aside the judgment under appeal and direct that the matter be determined afresh. It will be open for both sides to argue the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the prescribed period for a suit or application in respect of any property or right, an acknowledgment 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 acknowledgment was so signed. (2) Where the writing containing the acknowledgment 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 (1 of 1872), oral evidence of its contents shall not be received. Explanation.--For the purposes of this sections,-- (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, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) the word "signed" means signed either personally ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttee 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 principle of law to the Code. 28.2 Further, non-application of the law on limitation creates the following problems: first, it re-opens the right of financial and operational creditors holding time-barred debts under the Limitation Act to file for CIRP, the trigger for which is default on a debt above INR one lakh. The purpose of the law of limitation is "to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party's own inaction, negligence or latches". Though the Code is not a debt recovery law, the trigger being default in payment of debt' renders the exclusion of the law of limitation counter-intuitive.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. That being so, the existence of the suit cannot be construed as having either revived the period of limitation or extended it. It only means that those proceedings are pending but it does not give the party a legal right to institute any other proceedings on that basis. It is well settled law that the limitation is extended only in certain limited situations and that the existence of a suit is not necessarily one of them. In this view of the matter, the second point will have to be answered in favour of the respondents and it will have to be held that there was no enforceable claim in the year 1995, when the present petition was instituted." 14. Likewise, a Single Judge of the Patna High Court in Ferro Alloys Corporation Ltd. v. Rajhans Steel Ltd., MANU/BH/0055/1999 : : (2000) Comp Cas 426 also held: "12.... In my opinion, the contention lacks merit. Simply because a suit for realisation of the debt of the petitioner-company against opposite party No. 1 was instituted in the Calcutta High Court on its original side, such institution of the suit and the pendency thereof in that court cannot ensure for the benefit of the present winding up proceeding. The debt ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he provisions of the Act of 2002. Rather the secured creditor is proceeding, independent of its right to proceed under the Act of 1993, while invoking the provisions of the Act of 2002. This choice of the secured creditor to invoke the Act of 2002 is independent of and despite the pendency of the proceedings under the Act of 1993, has to be looked at from the perspective of whether or not such an action meets the requirement of Section 36 of the Act of 2002, when the secured creditor is proposing to take a measure under Section 13(4) of the Act of 2002. Although, a secured creditor, as held in Transcore (supra), is entitled to take a remedy or a measure as available in the Act of 2002, despite the pendency of other proceedings, including a proceeding under Section 19 of the Act of 1993, in respect of the self-same cause of action, in my view, the invocation of such independent right under the Act of 2002, has to be done within the period of limitation prescribed under the Limitation Act, 1963 in terms of Section 36 of the Act of 2002. The Act of 2002 gives an independent right to a secured creditor to proceed against its financial assets and in respect of which such asset the secur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts Recovery Tribunal vide judgment dated 10th June 2016 held that the waiver was not maintainable. In the said case, this Appellate Tribunal by its judgment held that the limitation for application under Section 7 will be counted only from 1st December, 2016, which is the date on which the I&B Code brought into force. The Appellate Tribunal noted the NCLT Decision that the limitation period for suit was 12 years, their being a mortgage. However, Hon'ble Supreme Court taking into consideration the judgment in "B.K. Education Services Private Limited vs. Parag Gupta and Associates - MANU/SC/1160/2018 : " held that the limitation started from the date of default, i.e., 21st July, 2011 when the account was declared NPA. 11. Admittedly, the Corporate Debtor' the defaulted in making payments on 20th September, 2013 and the Dena Bank declared the account as NPA on 31st December, 2013. Therefore, we hold that the application filed under Section 7 of the I&B Code by the Bank is barred by limitation. 12. From the record, we find that the Respondent Bank ('Financial Creditor') has already filed one OA No. 16 of 2015 before the Debts Recovery Tribunal Bengalur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iew, it cannot be treated as a continuing acknowledgement of the loan liability till the loan is repaid because the Honourable NCLAT has already held in its recent judgement of C. Shivakumar Reddy Vs. Dena Bank and Ors. that, even after acknowledgement made after 3 years in the balance sheet or agreed to pay the debt by way of restructuring of debts cannot be termed to be a document of acknowledgement in terms of Section 18 of the Limitation Act and further the time spent in filing the recovery proceedings before the DRT and DRAT cannot be excluded because these Court cannot be termed as Court having no jurisdiction and proceeding lodged before it were being persuaded bonafidely. 11. Moreover, it is a fact on the record that such proceedings are stated to be still pending. Hence, I am of the considered view that the limitation will commence from the date of default that is last payment made on 26.01.2011 or from the date when the account was declared as NPA by the bank, i.e. on 24.03.2008, which is clearly beyond the prescribed limitation of three (3) years under Article 137 of the Limitation Act when the right of financial creditor sue accrue. Hence it is hit by limitation. ....