TaxTMI 
TaxTMI 
2022 (9) TMI 1165
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....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 debits less other credit Penal interest @ 2% simple To....
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....ply. 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 limitation and by order dated 26.05.2020 admitted the application and CIRP proceeding was initiated. 6. Aggrieved with the impugned order ....
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....e 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 OnLine SC 321. In the written submission dated 25.03.2021 and dated 29.10.2021 of the appellant the following facts have been stated:- "Written submi....
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....he 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 a new lease of life to debts which are time barred. Furthermore, it was held that the Limitation Act is applicable to the applications filed under the Code and Article 137 of the Limitation Act is applicable t....
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....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 creditor is default on the part of the corporate debtor, that is to say, that the right to apply under the Code accrues on the date when default occurs; (f) that default referred to in the Code is that of actual non-payment by the corporate debtor when a deb....
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....tion. 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 Respondent No. 1 on 10.06.2019 and the date of NPA and date of default is shown as 30.09.2013 of the impugned order -. In the said Application, either in Part-IV or Part V thereof or anywhere else, there was no mention of any OTS proposal or acknowledgement of debt. Furthermore, there is no mention of any document which goes to show....
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....i (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 regarding default therein and for want of any other averment in regard to acknowledgement." (Emphasis supplied) 6.Therefore, the law laid down in Babulal Vardharji (Supra) applies to the present case and no benefit of S. 18 could be given to the Financial Creditor/Respondent No.1. 7.The aforesaid view held in Babulal Vardharji (Supra) is also further affirmed by the Hon'....
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....lities, 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 Vardharji Gurjar (Supra) which is as follows:- "17. In distillation of what has been noticed hereinabove, it is apparent that while not disputing the basics on the applicability of law of limitation to the application in question, the main plank of submissions of the learned counsel for respondents has been that the applicability of Section 18 of the Limitation Act, providing for extension of the period of limitat....
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....i 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 Adjudicating Authority rightly looked into the amended pleadings. xxxx 144. There is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in Form-1. In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that th....
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....le 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 financial year 2014-15 and financial year 2015-16 which were submitted by the corporate debtor before the Ministry of Corporate Affairs. 14 Thereafter the corporate debtor through its letter dated 23.02.2017 submitted a proposal for OTS of dues of Financial Creditor, IDBI Bank Ltd. Another such letter with the revised OTS was submitted on 15.09.2018. However, since it was not acceptable to the Financial Creditor the same was informed to the corporate debtor. Subsequent the....
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....f 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. The present petition was filed on 10.06.2019 before this Adjudicating Authority on the ground that the Corporate Debtor failed to make payment of a sum of Rs.1,45,42,74,724.16 (Rupees one hundred and forty-five crore forty-two lakh seventy-four thousand seven hundred and twenty-four and paise sixteen only) as the total claim amount, comprising inter alia of a sum of Rs.35,44,50,688.47 (Rupees thirty-five crore forty-four lakh fifty thousand six hundred and eighty-eight and paise forty seven onl....
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....d 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 Limited as Corporate Guarantor in favour of Punjab National Bank (Lead Bank of the Consortium) is placed as Exhibit I at pp.137-153 of the petition. Further 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 Limited as Corporate Guarantor in favour of Punjab National Bank as security for the Term Loan is placed at pp.154-167 of the Petition. iii) A Deed of Hypothecation dated 17.02.2012 between the Corporate Debtor and the Financial Creditor and a ....
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....ificate 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 limitation. The cause of action arose on 30.09.2013, the day on which the Corporate Debtor was declared as Non-Performing Asset (NPA). The present petition was filed on 10.06.2019, hence the petition is time barred. b) Further the Financial Creditor initiated a recovery action under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 by notice dated 25.10.2013. Pursuant to the initiation of action the Financial Creditor sold a few properties of the Corporate Debtor which were mortgaged as per 'para 1 and 2' at pp. 1-3 of the reply. c) The Corporate Debtor has relied on section 238-A of Insolvency a....
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....bit 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 the rejoinder. f) 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. Three secured assets, one immovable property at Charni Road and two cars are still available with the Financial Creditor against their claims but the claim amount is much greater than the value of these remaining secured assets. Findings: 8. We have heard the arguments of both sides and perused the records. 9. The objection of the Ld. Counsel for the Corporate Debtor is on the ground of Limitation and defences raised can be classified as follows on the subject of limitation: (a) Continuing wrong; (b)Balance confirmation and acknowledgement of liability in t....
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....th 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 application of section 23 of the Limitation Act. 16. The Corporate Debtor has relied on the judgement of the Hon'ble Supreme Court in the case of Vashdeo R Bhojwani V. Abhudaya Cooperative Bank Ltd & anr 79(IBC)10/2019 (Exhibit 'B' pp. 61-63 of the reply) by which it was clarified that a default cannot be regarded as a continuing wrong in para 4 as follows: "4. ..... 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 a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury. It is only in regard to acts which can ....
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....owledgment 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 director of a debt due to himself is the further question posed by the defendant. Reliance is placed on P. S. Thirumalai Iyengar v. Official Liquidator [AIR 1962 Madras 253(DB)] and A. C. K. Krishnaswami v. M/s. Stressed Concrete Constructions Pvt. Ltd. [AIR 1964 Madras 191]. But the precise question has been answered in Re Gee & Co's case (supra) as follows: 'It seems to me plain that an acknowledgment signed by the directors in relation to their own debt would be fully effective if sanctioned by every member of the company............The general meeting of the company at which the accounts were adopted and the state of the Eccles account confirmed was in fact a meeting attended by, or by the representative of, every member of the company............In these circumstances, it seems to me plain that all the corporators must be taken to have agreed to the directors' written acknowledgment of the debt.' Nobody has a case that Ext.A1 bal....
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....rther, 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 to which the signature of the directors relates." In view of the above judgments, it appears to us that the date of signatures of the directors be construed as the date of effective acknowledgement of the state of indebtedness of the company. On the matter of Settlement Offers made: 23. The Financial Creditor has argued by relying on the judgment of the Hon'ble Supreme Court in the case of ITC Limited Vs Blue Coast Hotels Ltd. & Ors 2018 SCC OnLine SC 237 which reads as follows: "Letter of Undertaking 'Without Prejudice' 35. Much was sought to be made of the words "without prejudice" in the letter containing the undertaking that if the debt was not paid, the creditor could take over the secured assets. The submission on behalf of the debtor that the letter of undertaking was given in course of negotiations and cannot be held to be an evidence of the acknowledgement of liability of the debtor, apart from being untenable in law, reiterates the attempt to evade liability and ....
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....ssued by the appellant to the respondent - 'Financial Creditor' for one-time settlement. The aforesaid fact shows that there is a continuous cause of action under Section 19 filed by the respondent - 'Financial Creditor' which is pending before the DRT.... 29. Part V (First Division) of Limitation Act relates to 'Suits relating to immovable property' to recover possession of the property mortgaged and afterwards transferred by the mortgagee for a valuable consideration. The period of limitation is 12 years since the transfer becomes known to the plaintiff [Article 61(b)]. 30. In view of the aforesaid position of law, the property having mortgaged, we also hold that the claim is not barred by limitation as the period of limitation is 12 years with regard to mortgaged property and in terms of Section 5 (7) read with Section 5(8) as the property is mortgaged, Respondent No. 2 also comes within the meaning of 'Financial Creditor'." 26. In view of the law laid down by the Hon'ble Supreme Court in ITC Limited (supra), we hold that the offer of one Time Settlement (OTS) made by the Corporate Debtor to the Financial Creditor constitutes an acknowledgement of liability within the mean....
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....cree or order in any court of law, tribunal, arbitration panel or other authority; (ii) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (iii) 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 (SARFAESI) Act, 2002; (iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. (c) Notwithstanding the above, during the period of moratorium: (i) The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period; (ii) That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator; (d) The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Trib....
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.... through the aforesaid order there is no dispute that the account of corporate debtor was declared NPA on 30.09.2013 . It is also not in dispute that balance sheet for the year 2014-15, 2015-16 showing acknowledgement was brought to the notice of the Adjudicating Authority. It is also not in dispute that on 16.4.2014 the corporate debtor had submitted balance cum security letter acknowledging the debt. The said balance sheet of 2014-2015 and 2015-16 were uploaded by the corporate debtor on the portal of MCA website. Thereafter on 23.02.2017 the corporate debtor vide its letter dated 23.02.2017 submitted proposal for settlement of dues. The said letter was submitted with an offer of an amount of Rs.20 crore in settlement of dues of all the three banks i.e. PNB, IDBI, Edelweisse ARC (assignee of Bank of India). Thereafter on 15th September, 2018 the corporate debtor submitted revised offer for settlement of dues and offered Rs.27 crores. As such on 22nd October, 2018 a joint lender meeting was held wherein the representative of corporate debtor was present. However, after discussions in the meeting revised OTS was also rejected. After rejection of OTS on 27.12.2018 in the Sarfaesi pr....
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....mitation Act on case-to-case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time barred debts under the Limitation Act. At the same time, accrual of fresh period of limitation in terms of Section 18 of the Limitation Act is on its own under that Act. It will not be a case of giving new lease to time barred debts under the existing law (Limitation Act) as such. 42. Notably, the provisions of Limitation Act have been made applicable to the proceedings under the Code, as far as may be applicable. For, Section 238A predicates that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactment of Section 238A of the Code on 06.06.2018, validity whereof has been upheld by this Court, it is not open to contend that the limitation for filing application under Section 7 of the Code would be limited to Article 137 of the Limitation Act and extension of prescribed period in certain cases could be only under Section 5 of the Limitation Act. There is no reason to exclude the effect of Section 18 o....
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....Thereafter in view of acknowledgement made in balance sheet which has been obtained from the website of the MOCA which was for the year 2014-15 and 2015-16 the limitation was extended. Again when the appellant/corporate debtor approached the bank for OTS the date of limitation was further extended from the date of OTS and finally offer of OTS was given. On examination of the chain of events which we have elaborated hereinabove there is no difficulty in coming to the conclusion that the petition under Section 7 was filed within the period of limitation or within extended period of limitation. The Hon'ble Supreme Court in Bishal Jaiswal case has approved and reproduced law laid down in Laxmi Pat Surana case (Supra) which has been incorporated in para 12 of the Judgement:- "43. Ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the financial creditor to initiate action under Section 7 of the Code. However, Section 7 comes into play when the corporate debtor commits "default". Section 7, consciously uses the expression "default" - not the date of notifying the loan account of the corporate person as NPA. Further, th....