AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 20
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....l Creditor' (in short `FC') against `Corporate Debtor' (in short `CD') and `Personal Guarantors' (in short `PG') and initiated `Insolvency & Resolution Process' against `Appellant' under Section 100 of IBC and appointed `Mr. Jossy Steephen Kattur' as `Insolvency Resolution Professional' (in short `IRP'). Since common issues and legal points are involved in both the `Appeals' bearing `Appeal' numbers Company Appeal (AT) (CH) (INS) No. 227 of 2022 & Company Appeal (AT) (CH) (INS) No. 262 of 2022, both are being taken up together and common order is being passed accordingly. Brief Facts: 2. Mrs. Merin Jose- Appellant/PG [MD of ITMA Hotels India Pvt. Ltd. (in short ITMA)] in Company Appeal (AT) (CH) (Insolvency) No. 227 of 2022 and Mr. Jose M.M.- Appellant/PG Director (in ITMA) in Company Appeal (AT) (CH) (Insolvency) No. 262 of 2022 have been involved in hospitality industry since year 2010. A consortium of banks consisting of erstwhile State Bank of Travancore (SBT) along with State Bank of Bikaner & Jaipur (SBBJ) sanctioned term loan facilities of Rs. 74 Crores to CD (ITMA) for construction of a Star Hotel under name "Jomer Symphony". The facility was further renewed in the ye....
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....of Rs.100% cash margin on the first defendant by erstwhile State Bank of Travancore. The last date for deposit of this amount is 25.09.2019." Final Order further stated that in case payments are not effected within stipulated time, the compromise settlement would stand automatically withdrawn / cancelled and the entire amount as claimed in the OA along with the interest and cost shall become payable forthwith and would becomes recoverable from the defendants and mortgaged properties. 6. Admittedly, after the `CD' made an upfront settlement payment of Rs. 12 crore and Rs. 5 crore was paid on 31.12.2019, `CD' failed to make balance payments as per terms in compromise settlement. Aggrieved by this default, `FC' filed an Application bearing No. CP (IB)/30/KOB/2020 before the `National Company Law Tribunal', Kochi Bench, to initiate `Corporate Insolvency Resolution Process', against the `CD' and `PG' under Section 7 of the IBC. 7. Aggrieved by `Impugned Order' dated 24.02.2022, the present two appeals as discussed above, have been filed before this `Appellate Tribunal'. Appellant's Submissions: 8. Learned Counsel for the Appellant brought out the facts of the case during ....
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....when the accounts of `CD' were declared `NPA'. 14. Learned Counsel for the Appellant further argued that Section 238 A of the IBC clearly stipulate that "the provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be." 15. Learned Counsel for the Appellant cited cases of Hon'ble Supreme Court in the matter of Babulal VardharjiGurjar vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Ors. Reported in (2020) 15 SCC 1 and B.K. Educational Services Pvt. Ltd. vs. Paras Gupta & Associates: AIR 2018 SC 5601. 16. Learned Counsel for the Appellant also raised issues regarding debt and dues itself claimed by `FC' stating that these are uncertain, disputed and imaginary claims. 17. Finally, Learned Counsel for the Appellant referred to the Hon'ble Supreme Court of India Judgement in Swiss Ribbons vs. Union of India, 2019 (4) SCC 17, according to which, IBC is a beneficiary legislation to put `CD' back on its feet and not merely `recovery legislation for creditors'. 18. Learne....
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....t with certificate issued under Bankers Books Evidence Act, 1891 to prove the debt which were never disputed by the `Appellant' and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. 22. Learned Counsel for the Respondent assailed the point of limitation prayed by the Appellant and mentioned that subsequent to declaration of account of `CD' as `NPA', `OA' was filed before the DRT, Ernakulam on 27.06.2016 and based on the compromise settlement approved by `FC' on the request of `CD', DRT, Ernakulam passed a decree on 20.09.2019 and Rs. 5 crore was deposited by `CD' on 31.12.2019. The `FC' filed an `Application' under Section 95(1) of IBC on 03.11.2021 within two years from the date of final order of DRT, Ernakulam and from the last payment. Learned Counsel further argued that taking Hon'ble Supreme Court Suo Moto Writ Petition No. 2020 excluding period of limitation from 15.03.2020 to 28.02.2022, the present `Application' was filed within 74 days from the last payment of 31.12.2019 and is well within Limitation period. 23. To buttress his point, Learned Counsel referred to Hon'ble Supreme Court of India Judgment in the matter of CA No. 1650 of 2020 Dena Bank (now ....
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....Issues:- (i) Whether, debt was dues and default took place? 29(a). To understand whether in the present appeal any debt existed at all, which was due and not paid resulting into default. We need to see the exact definitions of relevant sections in the IBC. The `Debt' has been defined in Section 3 (11) of IBC which is as under:- "3(11). "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;" Since, the term `Claim' is mentioned in above definition of debt, we need to refer to definition of `Claim', under Section 3(6) of IBC, which is as under:- "3(6). "claim" means- (a) A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) Right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;" Similarly, `Default' is also defined under Section 3(12) of IBC, which is as under: - ....
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....mount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 29(b) As seen from above, 'financial debt' is an inclusive and non-exhaustive definition given under Section 5(8) of the IBC to mean "a debt alongwith interest, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. 29(c) We have noted from the Written Submissions of Respondent that FC has produced the statement of account with certificate issued under Bankers Books Evidence Act, 1891 to prove the debt which were never disputed by the Appellant and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. While discussions the facts of the case above, it has already been noted that various term loan and working capital facilities were given by SBT & SBBJ which later merged into SBI (FC). This fact was never disputed by Appellant. We also note that subsequent to FC's claim under SARFAESI Act and later before Hon'ble DRT, CD proposed compromise settlement which also clearly stipulated about existence and....
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....1 Application under Section 95(1) filed before Hon'ble Adjudicating Authority 17. 24.02.2022 Impugned Order issued. 30(c). From above it is clear that final order was passed by Hon'ble DRT on 20.09.2019 and the last payment of Rs. 5 crore was made by CD on 31.12.2019, whereas, the Application under Section 95(1) filed before Hon'ble Adjudicating Authority on 03.11.2021. Considering the Hon'ble Supreme Court Suo Moto Writ Petition No. 2020 excluding period of limitation from 15.03.2020 to 28.02.2022 the present application was filed within 74 days from the last payment of 31.12.2019. 30(d). We would like to refer to Judgments of the Hon'ble Supreme Court of India in the matter of Dena Bank (now Bank of Baroda) vs. C. Shivakumar Reddy & Anr. Reported in (2021) 10 SCC 330. The relevant paragraphs of the Judgement is mentioned here as under:- "142. To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the C....
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....ambit of proceedings under the IBC before the NCLT/NCLAT, the expression 'Court' in Section 14(2) would be deemed to be any forum for a civil proceeding including any Tribunal or any forum under the 47 SARFAESI Act." Also referred to the Judgement passed by this Appellate Tribunal in the matter of Atharva Auto Logistics Pvt. Ltd. vs. Intec Capital Ltd. & Anr. in CA (AT) (Insolvency) No. 303 of 2022. The relevant paragraph of the Judgement is mentioned here as under:- "7. Learned Counsel for the Appellant has placed reliance on a Judgment of Hon'ble Supreme Court reported in 2020 (15) SCC 1 in the matter of 'Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr.' and submitted that Hon'ble Apex Court has held that the date of default has to be ascertained on the basis of pleadings in Section 7 Application of the IBC. In the present case, Part-IV of the Section 7 Application of the IBC, 'Date of Default' is dated 25th August, 2017 there is no dispute regarding that but along with the Application the relevant documents including ledger account of the payment were also brought on record where the last payment made by the Corporate Debtor has been men....
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....d for Insolvency Resolution and Liquidation for Corporate Person. Section 2 of IBC described the Applications of IBC Code. Section 2(e) of the IBC which case in force w.e.f. 01.12.2019 in so far as they relate to Personal Guarantor to Corporate Debtor. The new section 2(e) came vide notification dated 15.11.2019. The notification also enforced certain other provisions, namely, Section 78, 79 & 94 to 187 (Part III) which provide for Insolvency & Bankruptcy of Individual and also Section 239 (Power to make rules), Section 240 (Power to make regulations) and Section 249 (Part V) in so far as they relate to PGCD. 31(e). With these amendments through the amended Section 2(e) pertaining to PGCD, it was made possible to subject PGCD to Insolvency Proceedings before same Adjudication Authority (NCLT)/ Appellate Authority (NCLAT) who decides matter related to CD. Thus, if the CD's debt remains unpaid, the personal guarantor would not stand discharged but would himself be forced to face bankruptcy proceedings before the Adjudicating Authority. After going through the various provisions of IBC as well as detailed judgement in the matter of 'Lalit Kumar Jain (Supra)' there is no doubt....
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....ellant' regarding not following clause 3(6) of final order of the DRT, Ernakulam dated 31.12.2019. Learned Counsel further mentioned that according to clause 3(7) of final order of Hon'ble DRT, it was applicant entitlement to obtain recovery certificate and doesn't come in way of his way of Application of IBC. We will like to specifically refer to the concerned paras of final order of the Hon'ble DRT Ernakulam for examination of this issue raised by Petitioners. Para 3(6) & 3(7) which are as herein under:- "3 (6). If the deposits/payments are not effected by the defendants within the time stipulated above, the compromise settlement would stand automatically withdrawn/cancelled and the entire amount as claimed in the OA along with interest and costs as claimed therein shall become payable forthwith and would become recoverable from the defendants and the mortgaged properties. 3 (7). In the event of cancellation of the compromise settlement as stated in clause 6 above and the amount of Rs. 4.63 Crores is not deposited as per clause 5 above, Rs. 4.63 Crores from out of the amount paid by the defendants under the compromise would be set apart for meeting the liabil....
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....endants within the time stipulated above, the compromise settlement would stand automatically withdrawn/cancelled and the entire amount as claimed in the OA along with interest and costs as claimed therein shall become payable forthwith and would become recoverable from the defendants and the mortgaged properties." Learned Counsel stated that `FC' has produced the statement of account with certificate issued under Bankers Books Evidence Act, 1891 to prove the debt which were never disputed by the Appellant and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. From the 'compromise settlement' as mentioned by the DRT, Ernakulam in the final order, it has been made clear that in case of failure of 'compromise settlement' entire amount as claimed in `OA' along with interest and cost shall become payable. We took note from Form C filed by FC before `Learned Adjudicating Authority' about details of Rs. 1,97,54,49,848.81 furnished as herein under in a tabular form:- Due Amount as on 31.07.2021 Principal 67,85,31,257.87 Interest 129,38,65,395.94 Other Charges/ Legal Expenses 30,53,195.00 Total 197,54,49,848.81 In any commercial loan,....