AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (4) TMI 446
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the other relevant facts including 'One time settlement' (in short 'OTS') proposal of the 'Respondent'. 3. The 'Appellant' also submitted that the 'Respondent' itself had no objection to admission of the Application under Section 7 of the I & B Code, 2016 and initiation of the 'Corporate Insolvency Resolution Process' as the 'Respondent' was inclined for Resolution of the company under I & B Code, 2016. 4. The Counsel for the Appellant stated that the 'Adjudicating Authority' erred in calculating the limitation period. 5. Aggrieved by the 'impugned order' dated 06.01.2021, the present appeal has been filed before this 'Appellate Tribunal'. 6. Heard the Counsel for the Parties and perused the records made available including cited judgments of the Hon'ble Supreme Court of India (and earlier orders of this 'Appellate Tribunal'). 7. It is the case of the 'Appellant' that he is a 'Secured Financial Creditor' in term of Section 5(8) r/w Section 5(7) of the I & B Code, 2016, in respect of 'Corporate Insolvency Resolution Process' of M/s Victory Electricals Ltd. (Principal Borrower). It is further case of the 'Appellant' that as per terms and conditions of the said `Loa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on 28.06.2013 and the other obligors which was not denied by the Principal Borrower or the Respondent herein. 11. The Counsel for the Appellant stated that the Principal Borrower furnished an 'OTS' proposal on 13.03.2014 for Rs. 50 Crores, which was not accepted by the 'Appellant' being a lower offer. Subsequently, the Principal Borrower gave several 'OTS' proposals, modified 'OTS' proposals and each such 'OTS' proposal tantamounted to fresh 'acknowledgment of debt' in terms of Section 18 of Limitation Act, 1963 and further this liability of the 'Respondent' was always coextensive with the Principal Borrower in terms of Section 128 of Indian Contract Act, 1872 and therefore a deemed acknowledgement of liability by the Guarantor/ Respondent herein. 12. The Counsel for the Appellant mentioned that a suit for recovery was filed by the 'Appellant' before the Debt Recovery Tribunal, Hyderabad, being OA No. 925/2014, inter-alia against the Principal Borrower and the 'Respondent'. The Counsel for the Appellant further stated that the 'Respondent' had categorically disclosed in its financial statement for the year 2015 that security has been furnished by the 'Respondent' in favour o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion vide 'impugned order' dated 06.01.2021 only on ground of limitation. 17. The Counsel for the Appellant emphasised that the 'Adjudicating Authority' has committed grave error in reckoning the limitation period taking date of default as 31.05.2012 and erroneously recording 'OTS' letter dated 06.10.2016 as acknowledgment of debt and ignoring various 'OTS' proposals of the Principal Borrower prior to acceptance of the 'OTS'. 18. The Counsel for the Respondent admitted that the 'Respondent' herein along with three Ex- Directors had extended the guarantee on behalf of the Principal Borrower M/s Victory Electrical Ltd. 19. The Counsel for the Respondent stated that the 'Appellant' filed an Application under Section 7 of the I & B Code, 2016 on 27.08.2019 against the 'Respondent' herein, prior to which the moratorium was declared in 'Corporate Insolvency Resolution Process' started against the Principal Borrower M/s Victory Electrical Ltd. under Section 9 of the I & B Code, 2016 in CP/1499/IB/2018 on 24.04.2019. The 'Corporate Insolvency Resolution Process' with regard to holding company M/s Victory Transformers and Switchgears Ltd. (in short 'VTSL') of the Principal Borrower-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er in rem or in personal-Judgment, decree or order obtained by fraud has to be treated as non est and nullity". 24. The Counsel for the Respondent emphasised that in view of the changed circumstances, the 'Respondent' modified its instance now denying, no objection to admission of the 'Application' filed under Section 7 of the 'Appellant' before the 'Adjudicating Authority' agreed earlier. 25. The Counsel for the Respondent submitted that this 'Appellate Tribunal' had also held in Bank of India Chennai vs. Coastal Oil Gas Infrastructure Pvt. Ltd. [(2020) SCC OnLine NCLAT 1095] dated 21.09.2020, where it had remanded case back to the 'Adjudicating Authority' to entertain the Application under Section 7 after issuing notice and examining all other aspects under Section 7 of the I & B Code, 2016. 26. The Counsel for the Respondent stated that in the present changed circumstances, the 'Respondent' requests this 'Appellate Tribunal' to remand the case back to the 'Adjudicating Authority' (NCLT Bench-II, Chennai) directing the 'Adjudicating Authority' to give a fresh opportunity to the 'Respondents' to file its detailed 'Reply Statement' and examine the facts therein, and for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration of the prescribed period for a suit or application in respect of any right, an acknowledgement of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgement was signed. 28. This 'Appellate Tribunal' has gone through all the submissions made by the Counsel for the Parties as well as the 'impugned order' dated 06.01.2021. The 'Adjudicating Authority' has also taken cognizance of various judgments of this 'Appellate Tribunal' held in the matters of :- ➢ Laxmi Pat Surana vs. Union of India, [(2021) SCC OnLine SC 267] (Judgment dated 26.03.2021) ➢ Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal, [(2021) SCC OnLine SC 321) (Judgment dated 15.04.2021) ➢ Manesh Agarwal vs. Bank of India & Anr. [Company Appeal (AT) (Insolvency) No. 1182 of 2019) (Judgment dated 28.02.2020) ➢ Ashish Kumar vs. Vinod Kumar Pukhraj Ambavat & Anr. [Company Appeal (AT) (Insolvency) No. 1411 of 2019) (Judgment dated 17.02.2020) The 'Corporate Insolvency Resolution Process' can be in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing capital facilities on part of the Principal Borrower default occurred on 09.03.2012. This 'Appellate Tribunal' has noticed from the submissions of the 'Appellant' as well as from the 'Respondent' along with documents made available that revival letter dated 01.06.2012 was executed by the Principal Borrower and the Respondent herein. It is also observed that various 'OTS' proposal was furnished by the Principal Borrower w.e.f 13.03.2014 till 18.05.2016 and the liability being admitted by the Principal Borrower and hence the deemed acceptance by the Guarantor/ Respondent herein in terms of provision of Section 128 of the Indian Contract Act, 1872. 33. This 'Appellate Tribunal' also takes into consideration that the 'Respondent' herein acknowledged the liability vis-à-vis guarantee furnished for the loans of the Principal Borrower in its financial statement for the year ending 31.03.2015. Similarly, the 'OTS' proposal was sanctioned by the 'Appellant' on 06.10.2016 (Duly accepted by the Principal Borrower and the Respondent herein) and subsequent cancellation of the same for non-payment vide Appellant's letter dated 03.05.2018. 34. In catena of the Judgments, it has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Services (P) Ltd. vs. Parag Gupta and Associates, (2019) 11 SCC 633], suffice it to say that the Report of the Insolvency Law Committee [Ed.: Report of the Insolvency Law Committee (March 2018), Ministry of Corporate Affairs, Government of India] itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred." (emphasis supplied) (c). In case of Jignesh Shah vs. Union of India, (2019) 10 SCC 750 (2020) 1 SCC (Civ) 48: 2019 SCC OnLine SC 1254 at page 764, the Hon'ble Supreme Court of India held that: "8. ... To my mind, there is a fallacy in this argument because the test that is required to be applied for purposes of ascertaining whether the debt is in existence at a particular point of time is the simple question as to whether it would have been permissible to institute a normal recovery proceeding before a civil court in respect of that debt at that point of time. Applying this test and dehors that fact that the suit had already been filed, the question is as to whether it would have been permissible to institute a recovery proceeding by way of a suit for enforcing that debt in the year 1995,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. ... Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. ... In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. 7.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence of jural relationship between the parties, such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not be in express terms and can be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given...." (emphasis supplied) 36. In above cited judgments, the Hon'ble Supreme Court of India has held that for an 'Application' under Section 7 or 9 of I & B Code 2016 and Artticle 137 of the Limitation Act, 1963 will be applicable and this period of limitation can only be extended in the manner provided in the Limitation Act. For example, an acknowledgement of liability under Section 18 of the Limitation Act would certainly extend the limitation period. 37. This 'Appellate Tribunal' notes that in the present case, the date of default, would automatically get extended from the dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ondent was always co-extensive with debt of Principal Borrower and therefore the acknowledgment of debt by various 'OTS' proposals, as discussed earlier, were also deemed acknowledgements by the Respondent herein of the liability as guarantors on behalf of the Principal Borrowers. 40. This 'Appellate Tribunal' also takes into account the submissions made by the 'Respondent' herein before the 'Adjudicating Authority' whereby they have filed the counter and submitted as under :- Although, now the Respondent herein has taken a plea regarding changed circumstances of failure on part of the IRP/Liquidator in realising the dues and actionable claims of the Principal Borrowers and therefore has taken the stand that he is entitled to change his stand and further taken plea that it was fraud on part of the 'Interim Resolution Professional'/ 'Liquidator' in connivance with the Appellant herein which absorb him of any liability. Without going in detail examination of their submissions, prima-facie these submissions of the 'Respondent' herein do not stand on merit and in any case it is entitled to seek suitable remedy, if any, before the suitable `legal forum', in accordance with the `La....