TaxTMI 
TaxTMI 
2022 (11) TMI 954
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....] 1. Challenge in this Appeal namely Company Appeal (AT) (Insolvency) No. 644 of 2019 is to the Impugned Order dated 03.06.2019 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) in C.P. (IB) No. 4135/I&B/MB/2018, whereby the Learned Adjudicating Authority has admitted the Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as 'The Code'), preferred by the first Respondent/'M/s. USV Private Limited'. The Adjudicating Authority in the Impugned Order has observed as follows: "3. The Petitioner submitted that the debt is arising out of a Financial transaction wherein the Corporate Debtor borrowed money from the petitioner for repayment of loan taken by the Corporate Debtor from a third party namely Vipal Healthcare Pvt. Ltd. Hence the debt is a financial debt within the meaning of Section 5(8) of the Code and the petitioner is a financial creditor as provided under Section 5(7) of the Code. 4. This Petition was listed on 20.11.2018, 11.12.2018 and 10.01.2019 wherein the Corporate Debtor failed to appear. On 24.01.2019, one Mr. G.S. Sethi, Advocate had undertaken to file vak....
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.... Hon'ble Bombay High Court on the basis of these cheques and it was subsequently transferred to the City Civil Court, Mumbai, whereunder the Respondent took fresh summons for Judgement. However, no Financial Agreement evidencing the same was placed on record. The City Civil Court on 17.11.2017 observed that the cheques given were a non-gratuitous act and was covered under Section 17 of the Indian Contract Act, 1872. It was also observed that the suit was maintainable under Order 37 Rule 1(2)(ii). The Learned Court inter alia granted conditional leave to the 'Corporate Debtor' to defend the suit on deposition of an amount of Rs.52.07 Lakhs/- on or before the next date. A decree was passed directing USV to recover the amount of Rs.52.07 Lakhs/- along with interest at 9% p.a. from the date of the suit to its actual realization. It is submitted that no execution proceedings have been initiated against the 'Corporate Debtor' till date. * On 29.10.2018, the first Respondent filed an Application under Section 7 of the Code relying on the decree of the Ld. City Civil Court dated 19.12.2017. The Adjudicating Authority gave time to the parties for settling the matter from November 2018 to....
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....Corporate Debtor' as per the provisions of the Code. A 'default' can only be said to occur when the decree is rendered as non-executable for the want of monies or funds of the Judgement debtor. It is argued that in this case, the 'Corporate Debtor' had offered to secure the debt by offering its Assets which are of greater value than the purported claim. * The right to sue under the Code occurs from the date when the default occurs, which in the present case is beyond the Limitation period prescribed. Learned Counsel placed reliance on the following Judgements in support of his case that the period of Limitation is three years from the date when the right to apply accrues and in the present case, the account of the 'Corporate Debtor' was declared as NPA in 2002 which is the relevant date for calculating the Limitation period: o 'Babulal Vardharji Gurjar' Vs. 'Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr.' 2020 SCC OnLine SC 647. o 'Vashdeo R. Bhojwani' Vs. 'Abhyudaya Co-operative Bank Ltd. & Anr. Civil Appeal No. 11020 of 2018. o 'B.K. Educational Services Pvt. Ltd.' Vs. 'Parag Gupta & Associates' 2018 SCC OnLine SC 1921. o 'Stressed Assets....
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.... which this Tribunal has observed that 'the written contract cannot be treated as an essential element to prove the 'Financial Debt' if the transaction's nature is proved otherwise'. Moreover, the City Civil Court Order conclusively establishes existence of 'debt' and 'default'. * As regarding Limitation, the Learned Counsel submitted that the suit was decreed on 19.12.2017 and the debt has been acknowledged by the 'Corporate Debtor' in their Balance Sheets 2014-15 and the Section 7 Application was filed in the year 2019 and therefore it cannot be said to be 'barred by Limitation'. * As regarding breach of principles of Natural Justice, it is submitted by the Learned Counsel that the 'Corporate Debtor' was given several opportunities to file their Reply from 10.01.2019 to 01.05.2019, but they failed to do so and therefore the right to file Reply was forfeited. Hence, it cannot be said that there was any breach of principles of Natural Justice. * Learned Counsel placed reliance on the Judgement of the Hon'ble High Court in 'Videocon Industries Ltd.' Vs. 'Intesa Sanpaolo S.P.A.' APPEAL (L) No. 29 of 2014 by which Order, the Hon'ble Bombay High Court has rejected the argument....
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.... 9.95 6.72 3.36 27.04.1995 31.08.1998 TOTAL 29.90 26.35 13.17 * It is submitted that the Appellant submitted a compromise proposal on 08.06.2006 and on 13.08.2012. Another settlement was advised by the Applicant SBI vide letter dated 25.04.2015 which again failed due to non-payment by the Appellant. SBI also initiated action under SARFAESI Act 2002 and issued Notice under Section 13(2) on 31.03.2009 and possession Notice under Section 13(4) on 05.09.2010. The Appellant filed a Writ Petition No. 2366/2009 before the Hon'ble High Court of Bombay challenging the SARFAESI action taken by the Appellant. The Hon'ble High Court of Bombay has stayed the action initiated by the Applicant under SARFAESI Act. Two more suits for recovery were filed by SBI before Hon'ble High Court of Bombay on 17.10.2003 for Rs.68.43Crs./- and before the Hon'ble High Court of Calcutta on 09.06.2003 for Rs. 33.77 Crores against the Appellant. * After initiation of CIRP against the 'Corporate Debtor' vide Order dated 03.06.2019, on the basis of the Public Announcement, SBI filed a claim Form-'C' on 25.06.2019 before the IRP for Rs.796,61,89,624.40/- and the sa....
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.... the Applicants Mr. Hitesh Ramji Javeri and Ors. seeking intervention on the ground that they are 4.92% Shareholders of the total paid up capital of the 'Corporate Debtor'. It is submitted that the Applicants had invested a sum of Rs.5,05,55,481/- towards subscription of 23Lakhs Equity Shares and it is only due to their deliberate non-compliance and indulgence by the Promoters of the 'Corporate Debtor', that the Bombay Stock Exchange suspended the trading of Equity Shares on the Stock Market. By an Order passed by the Bombay Stock Exchange under Regulation 22(i) of the SEBI Regulations, 2009, the Equity Shares were directed to be delisted. In accordance with Regulation 23(3) of the delisting Regulations, the Promoters of the 'Corporate Debtor', were duty bound to acquire the delisting Equity Shares from the Shareholders by making payment of the fair value determined by the valuer as declared in the Public Notice dated 22.11.2018. * The Applicants corresponded with the IRP and also had personal meetings with the Promoters of the 'Corporate Debtor' seeking clarification regarding the steps taken towards acquisition of the delisted Equity Shares of the 'Corporate Debtor', but have ....
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....RC. It is also submitted that they have already filed their claims on 25.06.2019 before the RP. It is also submitted that the Appellant is disqualified as Director of the 'Corporate Debtor', in view of continued defaults in compliance with the SEBI Regulations, SEBI had delisted the Company on 05.11.2018, to other Directors who have resigned in the year 2017 itself and the accounts of the 'Corporate Debtor' have not been audited for the last five years and have not been filed as per the Company Master Data of the 'Corporate Debtor' available on the Ministry of Corporate Affairs ('MCA') portal. A large part of the assets of the 'Corporate Debtor' might have been diverted during the last five years. During which period no Audit has been done and this would have a direct bearing on the recovery of the amounts due to the intervener. It was argued that it is necessary for the I.A. to be allowed and the Applicant to be impleaded as one of the parties. * Learned Counsel for the Appellant reiterated that this Applicant is not a necessary party and claims if any are to be made before the Resolution Professional and denies that any amount might have been diverted by the 'Corporate Debtor'....
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....med by the 'Corporate Debtor', and therefore the absence of any Written Agreement cannot be said to be an essential element to prove the 'Financial Debt', as the nature of transaction has been established that there was a 'debt' and 'default' thereof. The City Civil Court Order passed a decree confirming the debt. At this juncture, we place reliance on the Judgement of this Tribunal in 'M/s. Urgo Capital Ltd.' Vs. 'M/s. Bangalore Dehydration and Drying Co. Pvt. Ltd.' Comp. App. (AT) (Ins.) No. 984 of 2019 wherein this Tribunal has held as follows: "Based on the decree of the Court this Petition was filed under Section 7 of the Code. Since the definition of the word creditor in I&B Code includes decree-holder, therefore if a petition is filed for the realization of decretal amount, then it cannot be dismissed on the ground that applicant should have taken steps for filing execution case in Civil Court." 14. In the facts of this case, we are of earnest view that a 'Decree' in respect of a financial claim is an established proof of 'debt' and 'default', and does not require any further Agreements in writing. 15. Next, we address ourselves to the contention of the Learne....
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.... law in B.K. Educational Services (supra). As noticed, in the case of Vashdeo R. Bhojwani (supra), this Court rejected the contention suggesting continuing cause of action for the purpose of application under Section 7 of the Code while holding that the limitation started ticking from the date of issuance of recovery certificate dated 24.12.2001. Again, in the case of Gaurav Hargovindbhai Dave (supra), where the date of default was stated in the application under Section 7 of the Code to be the date of NPA i.e., 21.07.2011, this Court held that the limitation began to run from the date of NPA and hence, the application filed under Section 7 of the Code on 03.10.2017 was barred by limitation. 34.2. In view of the above, we are not inclined to accept the arguments built up by the respondents with reference to one part of observations occurring in paragraph 21 of the decision in Jignesh Shah (supra). 35. Apart from the above and even if it be assumed that the principles relating to acknowledgement as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said p....
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....ts that the rules of limitation are not meant to destroy the rights of the parties and reference to the decision in N. Balakrishnan (supra) are also misplaced. Application of the rules of limitation to CIRP (by virtue of Section 238-A of the Code read with the above-referred consistent decisions of this Court) does not, in any manner, deal with any of the rights of respondent No. 2; it only bars recourse to the particular remedy of initiation of CIRP under the Code. Equally, the other submissions made on behalf of the respondents about any stringent application of the law of limitation which was introduced to the Code only after filing of the application by respondent No. 2; or about the so called prejudice likely to be caused to other banks and financial institutions are also of no substance, particularly in the light of the principles laid down and consistently followed by this Court right from the decision in B.K. Educational Services (supra). These contentions have only been noted to be rejected. Needless to add that when the application made by the respondent No. 2 for CIRP is barred by limitation, no proceedings undertaken therein after the order of admission could be of any ....
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....s adjourned several times on request of the 'Corporate Debtor', on the ground that the matter would be settled. The record shows that on 24.01 2019, 'Corporate Debtor' was directed to file the Reply on or before 31.01.2019. On 31.01.2019 the matter was adjourned on request of both parties on the ground of settlement. On 14.02.2019, the matter was again adjourned and the 'Corporate Debtor' did not file their Reply. On 06.03.2019, one more request was made that they would settle the matter. On 25.03.2019, once again, the 'Corporate Debtor' was directed to file their Reply. On 08.04.2019, once again liberty was given for settlement. On 15.04.2019, the 'Corporate Debtor' was directed to file their Reply within a week. On 01.05.2019, the 'Corporate Debtor' failed to file their Reply and the right to file their Reply was forfeited. These dates show that ample opportunities were given to the 'Corporate Debtor' both to file their Reply and also to settle the matter. The 'Corporate Debtor' has not adhered to any of the above, and therefore the argument that there was a breach of Principles of Natural Justice, is unsustainable. 19. Learned Counsel for the Appellant also placed reliance on....
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....mpanies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of Section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; (8) "corporate debtor" means a corporate person who owes a debt to any person; * * * (10) "creditor" means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; (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; (12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be; * * * 4. Application of this Part.-(1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh ru....
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....orporate insolvency resolution process by financial creditor.- (1) A financial creditor either by itself or jointly with other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government, may file an application for initiating corporate insolvency resolution process against a corporate debtor before the adjudicating authority when a default has occurred. Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6-A) of Section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent of the total number of such creditors in the same class, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent of the total number of such ....
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....fessional, it may, by order, reject such application: Provided that the adjudicating authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the adjudicating authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). (7) The adjudicating authority shall communicate- (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be." 21. At the cost of repetition, we refer to the Judgement dated 17.11.2017 passed by the City Civil Court and summons for Judgement No. 16 of 2017. The City Civil Court has noted in para 10 of the Judgement that 'the 'Corporate Debtor' has not denied the transactions. On the contrary, it is admitted that there was a Tri-partite Arrangement between the Plaintiff, Defendant and VHPL. Defendant has not denied th....
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....om being a financial debt even if reduced to Judgement by way of a recovery certificate. 22. For all the aforenoted reasons, we are of the considered view that there is no illegality or infirmity in the Impugned Order, passed by the Adjudicating Authority in admitting the Section 7 Application, keeping in view the ratio laid down by the Hon'ble Supreme Court in 'M/s. Innoventive Industries Ltd.' (Supra). Hence, this Appeal fails and is accordingly dismissed. We are also conscious of the fact that several opportunities were given before the Adjudicating Authority to settle the matter on behest of the Appellant/'Corporate Debtor', but the same was not adhered to. This is an Appeal of the year 2019 and we do not wish to set the clock back in this time bound IBC process. 23. All the Intervention Applications are being disposed of with a liberty to the Applicants/Interveners to approach the Resolution Professional and submit their claims in accordance with law. It is to be taken note that we have not expressed any view on the merits of the Intervening Applications regarding the admission/rejection or otherwise of their 'Claims', which is the domain of the Resolution Professional. ....
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....e for the above period at 24% will be Rs. 10,00,000. If you agree for the above, then we will request USV Ltd to give one more ICD of Rs. 10,00,000 which can be utilised for payment of the interest. We appreciate the efforts taken by you in repayment of the outstanding liability. We hope all your efforts will bear fruits and the total outstanding will be cleared at the earliest. With in regards. R SUNDARAM in not a Document 2 LOK HOUSING AND CONSTRUCTIONS LTD. ENGINEERS 871 लोक SHELTER FOR THE PEOPLE BUILDERS ARCHITECTS LOK GROUP LHCL/FIN/STFRP/ 655/98 15th April, 1998. USV Lid Mumbai. Dear Sirs, Sub: Short Term Finance Refund Plan (STFRP) Please refer to our letter ref. LHCL/FIN/STFRP 555 198 dated 31st December, 1997 alongwith a cheque from the first realisation under the Scheme. We are pleased to inform you that we have now concluded the sale of the part of the land at Cochin to S.I. Property Development Ltd. (SIPD) and we have received the balance sale consideration as detailed below: Balance sale consideration: Less: 1) paid directly to Greater Cochin Development Authority....