TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 430
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.... group Companies and individuals of Lingamaneni family members (herein after referred to as Lingamaneni Group). In lieu of the said financial assistance, both the groups entered into a Memorandum of Understanding (MoU) dated 25.10.2015 for a total debt extended by the BSR Group to Lingamaneni Group. As per the said MoU, BSR Group has advanced an amount of Rs. 219 Crores for acquisition of various companies, since, the BSR group wants to withdraw, as there was no activity of acquisition by Lingamaneni Group, Lingamaneni Group accepted to pay back the total amount of Rs. 219 Crores along with compensation of Rs. 32 Crores on or before 31.01.2016. ii. It was further agreed that a collateral security for the amount should be paid by Lingamaneni Group. They agreed to register the freehold properties and upon fulfilment of the payments to BSR Group as agreed upon, the BSR Group shall re-convey the security to Lingamaneni Group. If Lingamaneni Group fails to pay the amount, BSR Group has absolute right to sell the security to realise the amounts. It was further agreed upon that in case of deficit, Lingamaneni Group would compensate such deficit along with interest from 31.01.2016. Since....
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....or a total debt extended by the BSR Group to the other group and in terms of that MoU, the BSR Group advanced an amount of Rs. 219 Crores to Lingamaneni Group for acquisition of various companies and Lingamaneni Group agreed to repay Rs. 219 Crores with compensation of Rs. 32 Crores on or before 31.01.2016. The Corporate Debtor does not know whether there are two such groups having corporate entity known as BSR Group and Lingamaneni Group. So far as the Corporate Debtor is concerned, it is a Company having individual corporate identity and it did not enter into any MoU either on 25.10.2015 or any time later and never undertook to repay any amount as stated. The binding nature, enforceability and truth of MOU dated 25.10.2015 is denied. A reading of the MOU dated 25.10.2015 reveals that nobody has signed the same on behalf of the Corporate Debtor. It does not indicate that the Corporate Debtor is a party to the said MOU. The said MOU is between two individuals namely Sri Boppana Satyanarayana Rao referred as investor and Sri Ramesh Lingamaneni referred as Company. It does not disclose any involvement of two groups. The description of Sri Boppana Satyanarayana Rao is shown as investo....
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....n money from the Financial Creditor. ii. As regards the limitation, the petition is well within the limitation. Section 18 of the Limitation Act, 1963 was held to be applicable to the proceedings under IBC by the Supreme Court. The Corporate Debtor is one of the Group entities owned by Lingamaneni Family, who has been well acquainted with the family of Dr. B.S. Rao who was the founder of Financial Creditor. Having long standing personal relationship between both the families they did many business transactions over the past 20 years which resulted in personal lending and lending between the Trusts and Companies. The Corporate Debtor in their reply affidavit at para No. 12 admitted the signing and issuance of cheques but at the same time stated that the authorised representative was ignorant of the fact and law. The person signing the reply affidavit is one of the noticee and in his reply dated 08.01.2021 at para No. 4 the same person states that his families and group entities closed all transactions and settled all accounts with Financial Creditor's Families and Group entities by the end of December, 2016. The Director of the Corporate Debtor, Ramesh Lingamaneni and authoris....
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....hether the Memorandums of Understanding between the Financial Creditor and Corporate Debtor are executed under proper authorization. And II. Whether there is any debt which is due to be paid to the Financial Creditor and whether any default in terms of Section 3(12) has been committed by the Corporate Debtor. Both the points are considered together since the discussion on the points overlaps. The claim is based on two Memorandums of Understanding (MoUs) entered into between the parties. The first Memorandum of Understanding (MoU) is dated 25.10.2015 to which the parties are Sri Boppana Satyanarayana Rao resident of Poranki, Vijayawada (hereinafter referred to as "Investor") and Sri Ramesh Lingamaneni resident of Gayathri Nagar, Vijayawada (hereinafter referred to as "Company"). There is no description or there is no name or description of the Company which is mentioned against the name of Sri Ramesh Lingamaneni. The MoU recites that the investor has advanced certain amounts to the Company towards acquiring stakes in various businesses of the Company, through its nominees. The Investor and the Company have mutually agreed for the advancement of the investment made by the Investo....
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.... to enter into any MoU and that the MoU would only reflect that the said Ramesh Lingamaneni has signed on the MoU in his individual capacity and there is nothing in the MoU from which it can be inferred that he signed on behalf of the Corporate Debtor. It is also contended that the mentioning of the name "Company" would not suffice to bind the Corporate Debtor. The Counsel relies on a judgment of the Hon'ble Supreme Court (2010) 5 SCC 306 between Indowind Energy Limited Vs. Wescare (India) Limited and Another, wherein it was held that each Company is a separate and distinct legal entity and the mere fact that the two Companies have common shareholders or common Board of Directors, will not make the two Companies a single entity. Anyhow in this case there are no two Companies. The contention is only that the person who signed on the MoU is not authorised by the Corporate Debtor. It is not disputed that the said person is not authorized and no evidence of due authorization is produced by the Financial Creditor. There is no indication in the MoU that Sri Ramesh Lingamaneni was entering into the MoU on behalf of the Corporate Debtor. Hence, it has to be concluded that the MoU dated....
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....d therein. Party-B undertook to identify and arrange joint venture with the strategic partner before the end of August, 2016 and upon such strategic partnership, the Party-A shall be entitled for a consideration of Rs. 3 Crores per acre for the additional equity to be allotted to him as per Clause 1(d) therein. Clause 4 specifies that if Party-B fails to have strategic partnership and pay Party-A a total amount of Rs. 300 Crores, Party-B has to sell the land either by developing into plots or on as is where basis and pay Party-A an amount of Rs. 300 Crores within a period of 6 months from the date of the said MoU. Party-B will identify the portions of land that will be planned for plotting immediately and attach the property plan to the MoU. Clause 5 specifies that if Party-B fails to dispose of the property and reimburse Party-A within six months from then, the party shall appoint two independent valuers to valuate the property and distribute the property at an average value of the two independent valuations in proportion to their respective stakes in the lands of 20/25 Acre plots each having independent access. Hence, the above terms would show that the failure of Party-B to pay ....
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....d be completed by 23.12.2019. Hence, clearly the limitation for filing a suit, based on the MoUs, stands expired by the date of this application. The contention is that by virtue of the cheque dated 19.11.2020, the debt stands acknowledged and hence, a fresh limitation starts from 19.11.2020. In support of the said contention, the Counsel for the Financial Creditor relies on certain judgments. A judgment of the Hon'ble Supreme Court reported in between Hindustan Apparel Industries Vs. Fair Deal Corporation, New Delhi, in which the Supreme Court considered the judgment of Patna High Court in Rajpatiprasad's Case Vs. Kaushlya Kuer reported in AIR 1981 Pat 187, wherein the view expressed was that all the post-dated cheques in satisfaction of dues would amount to acknowledgment of liability irrespective of the fact whether the cheques were subsequently dishonoured was relied upon. Before proceeding with examining the relevance of the above judgment it would be beneficial to refer to the Judgment of the Supreme Court reported in (2019) 11 SCC 633 between B.K. Educational Services Private Limited Vs. Parag Gupta and Associates, wherein it is held that the limitation act is applic....
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....the part of the debtor to acknowledge the liability/right/debt owing to the person in whose favour the cheque is issued. If the cheque is honoured it would amount to part payment in writing and the same would fall under Section 19 of the Act (Section 20 of the Previous Act). It was held that a cheque would prima facie amount to an admission of debt unless a contrary intention has been expressed by the person issuing the cheque. Such an admission of payment of debt is to be determined with reference to the point of time at which the purported admission was made i.e., when the cheque was issued. What flows from the above judgment is that, by simple dishonour of cheque the acknowledgement of the debt cannot be done away. If the cheque is dishonoured, the date of acknowledgment of debt would be the date of the cheque. The judgment does not discuss about whether such acknowledgement should be before the expiry of the period of limitation construed from the date of the debt i.e., when the jural relationship between the parties is in existence or not. Section 18 of the Limitation Act was discussed by the Supreme Court in the above said judgment and Section 18 discussed therein is Section....
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....The said proposition is observed as being settled in Chintaman's Case. Hence the contention of the Counsel for the Corporate Debtor that unless the acknowledgement is in writing as specified under Section 18(1) it is not a valid acknowledgement as per Section 25(3) of Indian Contract Act, gets nullified since, issuance of cheque is held to be an acknowledgement in writing. Section 25(3) of Indian Contract Act, is as under: "Section 25: Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law. -- An agreement made without consideration is void, unless-- (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits." But however, the said acknowledgement not being during the period when the jural relationship is in existence it cannot be said that the cheque was issued for an enforceable debt. That apart, the cheque issued by the authorize....
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....s evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. There is no doubt that this Tribunal has jurisdiction to lift the corporate veil, to understand the genuineness of the transaction. But for the purpose of understanding the genuineness of the transaction, if evidence need to be taken, the Tribunal would not have jurisdiction. In this case, from the terms of the MoU itself, it can be concluded that there is no concluded contract between the parties and that the due date for the debt has not arrived and consequently no default has been committed. The counsel for the Financial Creditor contends that in the quash petition filed by the Corporate Debtor it is admitted that an MoU was entered between M/s. LEPL Project Limited on 27.08.2012 and hence it amounts to an admission of the MoU, cannot be considered, since, MoU dat....