TaxTMI 
TaxTMI 
2022 (9) TMI 1165
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....(IB) No.2176/MB/C-IV/2019. By the impugned order the Adjudicating Authority has admitted an application filed under Section 7 of the Code and thereby Corporate Insolvency Resolution Process (CIRP) has been initiated. The application before the Adjudicating Authority was filed by the Financial Creditor, Punjab National Bank, Assets Recovery Management, Mumbai. 2. Short fact of the case is that on 10.06.2019 an application was filed by the Punjab National Bank, which has been arrayed as Respondent No.1 in the present application (Financial creditor) due to the reason that Corporate Debtor i.e. Respondent No.2 failed to make payment of the debt to the tune of Rs.1,45,42,74,724.16 (Rupees One hundred forty five crores forty two lakhs seventy four thousand and seven hundred twenty four and Paise sixteen only) which was inclusive of principal amount plus interest as well as penal interest @ 2%. The credit facilities provided to Corporate Debtor was given in detail in a chart before the Adjudicating authority which is reproduced hereinbelow: Sr. No. Nature of Credit facility Principal outstanding as on 31.05.2019 Normal Interest from 01.10.2014 to 31.05.2019 p.a. Other d....
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.... the application under Section 7 of the Code, the Corporate Debtor appeared before the Adjudicating Authority and filed affidavit in reply. In the reply regarding debt no dispute was raised but only dispute was raised on the ground of limitation. In sum and substance it was pleaded on behalf of the Corporate Debtor before the Adjudicating Authority that the application filed by the Financial Creditor was barred by limitation under Section 137 of the Limitation Act. It was pleaded that admittedly in the present case date of default was to be considered from the date of declaring the account of the Corporate Debtor as NPA which was declared on 30.09.2013. Thereafter affidavit in rejoinder was also filed by the Financial Creditor wherein details were given as to on which date the debt was acknowledged by the Corporate Debtor and also date on which OTS was offered by the Corporate Debtor which was subsequently not accepted by the Financial Creditor. The Learned Adjudicating Authority after considering the facts disclosed in the application filed under Section 7, reply affidavit filed by the Corporate Debtor and also affidavit in rejoinder, finally decided that it was not barred by limi....
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....ember, 2013. Issuance of Notice u/s 13(2) of SARFAESI Act on 30th October, 2013 and the sale of properties for recovery is another event making the injury complete. In any case, by virtue of Article 137 of the Limitation Act, the claims in the present petition have become time barred from September and/or October, 2016. The present petition seems to have been filed sometime in June, 2019. Therefore, it is apparently clear that the claims in the present petition are time barred and the present petition is prima facie barred by the Limitation Act." 8. In the present proceeding besides making oral submissions on behalf of the Appellant two notes of written submission have been filed, one was filed on 25.03.2021 and another was filed on 29.10.2021. However, factually there is no much difference in two notes of written submission. However, in last written submission which was filed on 29.10.2021, besides submission, the appellant has brought on record two judgement passed by the Hon'ble Supreme Court of India one reported in 2021 SCC OnLine SC 543 Dena Bank (Bank of Baroda) Vs C Shivakumar Reddy & anr and Asset Reconstruction Company (I) Ltd Vs Bishal Jaiswal and Another 2021 SCC OnL....
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....al Vardharji Gurjar Vs Veer Gurjar Aluminium Industries Pvt Ltd & Anr. [(2020) 15 SCC 1]. 4.It is submitted that the facts in Babulal Vardharji (Supra) are analogous to the present case. The facts of the said case are mentioned in paras 7.1, 7.2, 7.3, 11.5,11.6, 12 and 17. In the said case, there was acknowledgement of debt in balance sheet of Corporate Debtor therein and the Corporate Debtor therein has given a OTS offer to the Financial Creditor therein. Therefore, the law laid down by the Hon'ble Supreme Court in in Babulal Vardharji (Supra) squarely applies to the present case. In the light of above, the below mentioned exposition of law is relevant for the present case. 5.The Hon'ble Supreme Court in Swiss Ribbons Private Limited and Another Vs Union of India And Others [(2019) 4 Supreme Court Cases 17] in para 64 held that 'Legislative policy now is to move away from the concept of "inability to pay debts" to "determination of default".' (Also observed in Babulal Vardharji (Supra) at para 20.3.2) 6.In B.K. Educational Services Private Limited Vs. Parag Gupta And Associates [(2019) 11 Supreme Court Cases 633] held that the Code does not give ....
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....y to suits and not applications under the Code. The applications filed under the Code would fall only within the residuary Article 137. Furthermore, (in para 7) it was held it is not for the Courts 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. (Also observed in Babulal Vardharji (Supra) at para 30). Also see Sagar Sharma And Another Vs. Phoenix Arc Private Limited and Another [(2019) 10 Supreme Court Cases 353, para 2 & 3] (Also observed in Babulal Vardharji (Supra) at para 31) 10.The Hon'ble Supreme Court after observing aforesaid judgments in Babulal Vardharji (Supra) at para 32 held that:- "(a) ........ (c) that intention of the Code is not to give a new lease of life to debts which are time-barred; (d) that the period of limitation for an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Limitation Act and is, therefore, three years from the date when right to apply accrues; (e) that the trigger for initiation of CIRP by a financial cre....
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....ng of the Hon'ble Supreme Court in para 34-.4.2 that S. 18 of the Limitation Act is not applicable to the Applications under the Code. 14.In view of foregoing law laid down by the Hon'ble Supreme Court it is apparent that the application u/S. 7 filed by Respondent No. 1 is barred by limitation. The OTS proposal or acknowledgement of debt in the balance sheet of the Corporate Debtor or continuing cause of action or S. 18 or S. 23 would not be applicable on the Application u/S. 7 of the Code and the limitation when commenced from the date of default would cannot be stopped or altered, subjected to the exception carved out in sub-para h of para 32 in Babulal Vardharji (Supra). III. The Respondent No. 1 and Respondent No. 2 are collusively against the Corporate Debtor 17.As the Respondent No. 1 (Financial Creditor) and Respondent No. 2 (Resolution Professional) have engaged same advocates the independence of Resolution Professional is highly doubted and is against the ethics of the Code. "Written submission dated 29.10.2021 1.It is undisputed that Application u/S. 7 of the Insolvency and Bankruptcy Code, 2016 ('Code') was filed by Re....
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.... Debtor therein and the Corporate Debtor therein has given a OTS offer to the Financial Creditor therein. Therefore, the law laid down by the Hon'ble Supreme Court in in Babulal Vardharji (Supra) squarely applies to the present case. In the light of above, the below mentioned exposition of law is relevant for the present case. 5.In Babulal Vardharji (Supra), the Hon'ble Supreme Court adverted to the pleadings and the facts of the case in question and answered that even if S.18 of the Limitation Act would have been applicable even then the Application u/S.7 was barred by limitation on the ground of absence of proper pleadings. It is held there in that:- "i.In the Application no other date of default other than 08.07.2011 was mentioned. There was no mention of any acknowledgment of debt anywhere in the Application. ii.Financial Creditor cannot be permitted to develop new submissions at later stage. iii.It also held in para 35.1 that " In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment re....
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....the present case is squarely covered since after the declaration of account as NPA the Financial Creditor in the present case also had issued Notice under SARFAESI Act. Since learned counsel for the appellant heavily placed reliance of para 7.2 it is necessary to reproduce the same as follows:- "7.2.The corporate debtor having defaulted in payment of the amount due against such loans, advances and facilities, its account with Corporation Bank was classified as Non-Performing Asset on 08.07.2011 and that with Indian Overseas Bank was classified as NPA on 05.08.2011. Then, on 15.11.2011, demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 was issued by Indian Overseas Bank to the corporate debtor and its guarantors. These steps were followed up with recovery proceedings against the corporate debtor by the consortium of lenders and respondent No. 2 in OA No. 172/2013 before the Debts Recovery Tribunal, Aurangabad under Section 19 of the Recovery of Debts Due to the Banks and Financial Institution Act, 1993.". 10. He has also referred to para 17 of the same judgement i.e. Babulal Var....
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.... "106. There can be no dispute with the proposition of law laid down in Babulal Vardharji Gurjar (supra) that limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. 107. The judgment of this Court in Babulal Vardharji Gurjar (supra) was rendered in the facts of the aforesaid case, where the date of default had been mentioned as 8.7.2011 being the date of N.P.A. and it remained undisputed that there had neither been any other date of default stated in the application nor had any suggestion about any acknowledgement been made. xxx 134. It is true that, when the petition under Section 7 of IBC was filed, the date of default was mentioned as 30th September 2013 and 31st December 2013 was stated to be the date of declaration of the Account of the Corporate Debtor as NPA. However, it is not correct to say that there was no averment in the petition of any acknowledgment of debt. Such averments were duly incorporated by way of amendment, and the Adjudic....
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..... He submits that the appellant/corporate debtor has only raised an issue of limitation. According to him there was no substance on the objection raised by the corporate debtor raising dispute of limitation. He submits that admittedly the corporate debtor defaulted to pay the debt and as such its account was declared NPA on 30.09.2013. Thereafter under the SARFAESI Act notice was issued and proceeding was also initiated. In the SARFAESI proceeding some of the immovable assets of corporate debtor were sold but it was much lesser amount to the recoverable amount. He submits that before the Adjudicating Authority the Financial Creditor had brought on record number of documents to show that the case was not barred by limitation. He submits that after the account of corporate debtor was declared NPA, Notice under Section 13(2) of the SARFAESI Act was issued by the Financial Creditor and thereafter on 16.04.2014 the corporate debtor submitted balance and security confirmation letter for credit facilities. The Financial Creditor has also brought to the notice of Adjudicating Authority with the liability acknowledgement towards the financial creditor by the corporate debtor for the financi....
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....eshold. It would be appropriate to reproduce the impugned order passed by the National Company Law Tribunal, Mumbai Bench as follows:- "1. This is a Company Petition filed under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) by Punjab National Bank (Financial Creditor), a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, duly represented by Mr. Binod Kumar Sharma, Chief Manager, on the basis of a Power of Attorney dated 02.06.1986 (Exhibit 'A' to the petition at pp.16-21), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against J-Marks Exim (India) Private Limited [CIN: U51311MH2007PTC168736] (Corporate Debtor). 2. The Corporate Debtor is a Private Company limited by shares and incorporated on 14.03.2007 under the Companies Act, 1956, with the Registrar of Companies (RoC), Maharashtra, Mumbai. Its Corporate Identity Number (CIN) is U51311MH2007PTC168736. Its registered office is at Nos. 58 & 59, 1st Floor, Nakshatra Cine Shoppe, Ranade Road, Dadar (W), Mumbai- 400028 within the State of Maharashtra. Therefore, this Bench has jurisdiction to deal with this petition. 3.....
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..../indigenous raw materials, consumables, spares, stock in process, finished goods, packing materials, book debts, etc. and term loan of Rs.2.20 crore by providing first charge on land and building and plant and machinery created out of the said term loan vide sanction letter dated 27.12.2011 which is placed as Exhibit-B at pp.22-33. The aforesaid Working Capital Limit was granted under consortium arrangement dated 17.02.2012 with IDBI Bank Limited, a copy of which is placed as Exhibit E at pp 67-107. The Term Loan Agreement dated 17.02.2012 sanctioned by the Financial Creditor individually is placed as Exhibit D at pp.36-66 of the petition. The undertakings dated 12.01.2012 and 17.02.2012 for the above credit facilities availed by the Corporate Debtor are placed as Exhibit F (Colly) at pp.108-114. Further an Inter Se Agreement between the Financial Creditor and IDBI Bank Limited was executed on 17.02.2012 and the same is placed as Exhibit G at pp.115-134. ii) A Deed of Guarantee dated 17.02.2012 between Mr. Dinesh G. Jaiswal, director of Corporate Debtor, Ms. Sunita D. Jaiswal, wife of director of the Corporate Debtor, as Personal Guarantors, D.J. Exim (India) Private Limit....
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.... vii) On 25.10.2013, the Financial Creditor issued notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. (Exhibit X pp.484-489 of the petition) viii) On 16.04.2014 the Corporate Debtor submitted Balance and Security Confirmation Letters to the Financial Creditor. (Exhibit T (Colly) pp.440-443) ix) Commercial Credit Information Report taken from CIBIL as on 03.05.2019 is also attached to the petition stating the credit facilities taken by the Corporate debtor as Exhibit U at pp.444- 455. x) Further statement of accounts along with Certificate under section 2A of Bankers' Books Evidence Act, 1891 is placed as Exhibit V (Colly) at pp.456-482F. xi) Further, in pursuance of the action initiated by the Financial Creditor under the SARFAESI Act, secured immovable properties were sold between 27.12.2018 and 30.04.2019. Sale Certificates regarding the same are placed as Exhibit Y (Colly) at pp.490-494. 6. In its reply dated 17.09.2019, the Corporate Debtor has set up the following defence: a) The present Petition is barred by the law of li....
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....sue of notice under section 13(2) of the SARFAESI Act, 2002 by the Financial Creditor, the Corporate Debtor on 16.04.2014 submitted balance and security confirmations letters for the credit facilities taken. c) Further the Corporate Debtor in its financials for the year FY 2014- 15 and FY 2015-16 submitted with the Ministry of Corporate Affairs acknowledged the liability towards the Financial Creditor. (Exhibit B pp.14-105 of the rejoinder) d) Further the Corporate Debtor in its letter dated 23.02.2017 submitted a proposal for one time settlement of dues of the Financial Creditor, IDBI Bank Limited and Bank of India. Another letter regarding the same with a revised one time settlement value was submitted on 15.09.2018 (Exhibit C pp. 106-108 and Exhibit E pp. 110-113 of the rejoinder) e) The Financial Creditor as a consortium leader informed the Corporate Debtor that the one time settlement was not acceptable by any party to the consortium. (Exhibit D p. 109 of the rejoinder). Further a Joint Lenders Meeting was held on 22.10.2018 to discuss about the revised proposal. Minutes of meeting rejecting the revised offer is placed as Exhibit F at pp. 114-116 of ....
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....India & Anr (2019) 10 SCC 750 which reads as follows: "10.... With the introduction of Section 238A into the Code, the provisions of the Limitation Act apply to applications made under the Code. Winding up petitions filed before the Code came into force are now converted into petitions filed under the Code. What has, therefore, to be decided is whether the Winding up Petition, on the date that it was filed, is barred by lapse of time. If such petition is found to be time-barred, then Section 238A of the Code will not give a new lease of life to such a time-barred petition...." 13. The Corporate Debtor further relied on the judgment of the Hon'ble Supreme Court in the case of Sagar Sharma & Anr vs Phoenix Arc Pvt. Ltd. & Anr (2019) 10 SCC 353 which reiterated the same principle. 14. There is no quarrel with reference to the applicability of the Limitation Act to IBC proceedings. In considering this aspect, the defences raised by the Corporate Debtor are answered as follows:- On the matter of 'default' not being a continuing wrong. 15. The Corporate Debtor submits a default cannot be regarded as continuing wrong so as to invite the applica....
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.... (emphasis added) 19. The Hon'ble High Court of Delhi in the matter of Bhajan Singh Samra Vs. Wimpy International Limited MANU/DE/6688/2011 reinforced the same view. 20. Further the Financial Creditor submits that the Hon'ble High Court of Kerala in the matter of Al-Ameen Limited Vs. K. P. Sethumadhavan MANU/KE/1189/2017 decided upon the date on which the acknowledgement in the Balance Sheet should be considered and the same reads as follows: "7. The complex question is as to whether Ext.A1 balance sheet and the profit and loss account is an acknowledgment of liability for the period ending 31.3.1995 to which it relates or on 26.3.1997 when it was signed. This assumes significance since the suit for money was filed on 3.1.2000 which is well beyond three years from 31.3.1995 though within three years from 26.3.1997. The period of limitation for filing a suit of the nature is three years from the acknowledgment and there is a cleavage in judicial opinion as to from which date the period will run... 8. ... *** 9. Will not the signing of the balance sheet and the profit and loss account at best be an acknowledgment made by a direct....
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....at the date of the balance-sheet, being the date to which the signature of the directors relates. It's my judgment the balance-sheet of the company as at 31st December 1965, signed by the directors on 25th November, 1966, would have been an effective acknowledgment as at 31st December, 1965, of the liability of the company so as to take the matter out of the statute, if the acknowledgment had not been made by the directors in favour of one of themselves." 22. In view of the above enunciation of law by the Hon'ble High Courts of Andhra Pradesh, Delhi and Kerala, it is clear that an acknowledgement of liability in the balance sheet of the company constitutes an acknowledgment of liability within the meaning of section 18 of the Limitation Act, 1963, with attendant consequences. In the present case, there is acknowledgement in the balance sheet of the corporate debtor as at 31.03.2015 and 31.03.2016, and therefore, a fresh period of limitation began to run from that date. Further, the judgment of the Hon'ble Calcutta High Court recognises the fact that "in an appropriate case, the cause of action will be deemed to have accrued at the date of the balance-sheet, being the date ....
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....ve evidence corroborating that given by the defendant himself. In our judgment this witness's evidence was not admissible. Negotiations were being conducted with a view to settlement, and that being so, we are bound to hold that these negotiations were being conducted without prejudice." In such circumstances it is not open for one of the parties to give evidence of an admission made by another. If negotiations are to result in a settlement each side must give away a certain amount. If one of the parties offers to take something less than what he later claims he is legally entitled, such must not be used against him; otherwise persons could not make offers during negotiations with a view to a settlement." 25. The Financial Creditor has further submitted an order of the National Company Law Appellate Tribunal (NCLAT) in the case of Babulal Vardhaji Gurjar vs Veer Gurjar Aluminium & Anr CP (IB)- 488/I&BP/MB/2018 which reads as follows: "12. The 'Financial Creditor' has also brought on record a letter dated 31st July 2018 issued by the appellant to the respondent - 'Financial Creditor' for one-time settlement. The aforesaid fact shows that there is a continuous c....
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....e lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. 30. The Financial Creditor has proposed Mr. Mukesh Verma as Interim Resolution Professional (IRP) in the matter. 31. It is, accordingly, hereby ordered as follows: - (a) The petition bearing CP(IB) 2176/MB/C-IV/2019 filed by Punjab National Bank, the Financial Creditor, under section 7 of the IBC read with rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against J- Marks Exim (India) Private Limited [CIN: U51311MH2007PTC168736], the Corporate Debtor, is admitted. (b) There shall be a moratorium under section 14 of the IBC, regarding the following: (i) The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other a....
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....anagers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow. (h) The Financial Creditor shall deposit a sum of Rs.3,00,000/- (Rupees three lakh only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC). (i) The IRP/RP shall submit periodical reports to this Adjudicating Authority indicating the progress of the CIRP. (j) The Registry is directed to communicate this Order to the IRP, Financial Creditor, IRP and the Corporate Debtor by Speed Post, email and WhatsApp immediately, and in any case, not later than two days from the date of this Order. (k) A copy of this Order be sent to the Registrar of Companies, Maharashtra, Mumbai, for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of ....
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.... clarified by the Hon'ble Supreme Court that it was clarificatory in nature and it was having retrospective effect. The Hon'ble Supreme Court in Bishal Jaiswal case (Supra) has relied upon its own judgement passed in Laxmi Pat Surana Vs Union Bank of India and the same has been reproduced in para 12 of the Judgement in Bishal Jaiswal case. We may not do better than to reproduce the same:- "12. Nearer home, in Laxmi Pat Surana v. Union Bank of India, Civil Appeal No. 2734 of 2020, a judgment delivered on 26.03.2021, this Court, after referring to various judgments of this Court, including the judgment in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1 ["Babulal"], then held: "41. The purport of such observation has been dealt with in the case of Babulal Vardharji Gurjar. Suffice it to observe that this Court had not ruled out the application of Section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case so warrants. Considering that the purport of Section 238A of the Code, as enacted, is clarificatory in nature and being a procedural law had been given retrospective effect; which inclu....
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....r 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 or by an agent duly authorised in this behalf; and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right." 20. So far as plea of Learned Counsel for the appellant that limitation should be counted from the date of declaration of the account of Corporate Debtor as NPA, it has also been dealt with in the same para by the Hon'ble Supreme Court and it has been clarified that ordinarily a declaration of the loan account/debt as NPA can be reckoned as date of default but it may not be considered as the final date for calculation of the limitation. If we consider the application of Section 18 of the Limitation Act certainly if acknowledgement has been made within the period of three years from the date of declaring the account as NPA, the period of limitation shall be extended from the date of acknowledgement. In the present case the Financial....
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....esolution process under Section 7 of the Code enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgement, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgement of the debt, from time to time, for institution of the proceedings under Section 7 of the Code. Further, the acknowledgement must be of a liability in respect of which the financial creditor can initiate action under Section 7 of the Code." 21. An entry made in the balance sheet of the corporate debtor as to whether amounts to acknowledgement of liability under Section 18 of the Limitation Act has been dealt with in detail in para 16 and 17 of Bishal Jaiswal case (Supra) which is quoted hereinbelow:- "16. The next question that this Court must address is as to whether an entry made in a balance sheet of a corporate debtor would amount to an acknowledgement of liability under Section 18 of the Limitation Act. 17. Several judgments of this Cour....