TaxTMI 
TaxTMI 
2023 (9) TMI 874
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....ise to this Appeal are as follows: The Corporate Debtor-Arjun Industries Limited was sanctioned a Rupee Term Loan by the Industrial Development Bank of India (IDBI in short) on 11.09.1996. IDBI disbursed an amount of Rs. 367 Lakhs. IDBI also entered into another Foreign Currency Loan Agreement with Corporate Debtor sanctioning Rs. 183 Lakhs. After availing the above credit facilities from IDBI, the Respondent Company failed and neglected to make the payment. A legal notice dated 10th June, 1998 was given by the IDBI. IDBI filed Original Application being O.A. No. 445/1998 before the Debt Recovery Tribunal, Delhi (DRT in short) for recovery of amount of Rs. 6,19,93,815/- together with pendente lite and future interest. During pendency of the O.A. before the DRT, the Corporate Debtor approached the IDBI offering a One-Time Settlement for a sum of Rs. 225 Lakhs. IDBI asked the Corporate Debtor to increase the amount to Rs. 250 Lakhs out of which Rs. 225 Lakhs was to be paid by a particular date in June, 2006. The amount being not paid by the Corporate Debtor, the OTS was not implemented. IDBI assigned the debt to Kotak Mahindra Ban....
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....y Petition filed by the Appellant and other litigations. The Adjudicating Authority by the Impugned Order dismissed the Section 7 Application as barred by time. The Adjudicating Authority in the Impugned Order held that after notice of winding up petition was given by the Appellant, Reply was given by the Respondent Company on 14.01.2011 and the Settlement Agreement between the parties was entered on 27th August, 2019, limitation of 3 years expired before entering into settlement agreement and there was no acknowledgement after 14.01.2011 hence the case of the Appellant that the date of default is 26th July, 2021 cannot be accepted and Section 7 Application was dismissed as barred by time. The Order was passed by the Adjudicating Authority without issuing notice to the Corporate Debtor. 3. This Appeal was heard by this Tribunal on 10th August, 2021 on which date notices were issued to the Corporate Debtor and following order was passed: "10.08.2022: Appellant has filed application I.A. No. 2689/2022 for condonation of delay. 14 days delay in filing the Appeal is condoned. I.A. No. 2689/2022 stands disposed of. counsel for the Appellant submits that the....
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....when the liability was admitted by the Corporate Debtor. 19. We further observe that after 14.01.2011 and before the date of settlement arrived between the parties on 27.08.2019, there was no acknowledgement of debt on the part of the Corporate Debtor, therefore, the settlement agreement was made much after the expiry of period of 3 years, when the acknowledgement of debt was made by the Respondent. Therefore, we are unable to accept the contention of the Applicant that cause of action arose only when the deed of settlement was cancelled on 25.07.2021 because that deed of settlement was made much after the period of expiry of the limitation. 20. Apart from that, we also notice that the loan was recalled by the IDBI on 26.08.1998, whereas the deed of assignment was executed on 31.03.2006, much after the period of limitation, therefore, we are unable to accept the contention of the Applicant that cause of action arose on 26.07.2021. Hence, we are of the considered view the present application is barred by limitation." 8. We thus need to answer whether limitation for filing Section 7 Application had already come to an end when Section 7 Application was filed by th....
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....d on the issue of balance sheets, the balance sheets cannot be held to contain any acknowledgment within the meaning of Section 18 of the Limitation Act. It is submitted that financial statement which was filed by the Appellant did not contain the notes hence the Respondent has filed all the balance sheets for the financial year 2008-09 till 2021-22 with notes on accounts which need to be perused by this Court. 11. Looking to the aspects which have come up for consideration in this Appeal is question of limitation of Section 7 Application, we have permitted the parties to bring relevant balance sheets on record and permitted them to refer to the relevant balance sheets in respect of their respective contentions. 12. The law is well settled that for finding out acknowledgement within the meaning of Section 18 of the Limitation Act, balance sheets can be looked into. Hon'ble Supreme Court in Asset Reconstruction Company India Limited Vs. Vishal Jaiswal & Anr., (2021) 6 SCC 366 has examined the question in reference to Section 18 of the Limitation Act and held that it depends on the facts of each case as to whether an entry made in a balance sheet made in accordance with law, qu....
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....,747 INTEREST ACCRUED AND DUE 6,768,543 6,768,543 51,486,290 51,486,290 FOR ARJUN INDUSTRIES LIMITED DIRECTOR DIRECTOR" 14. Now we come to the Financial Year 2008-09 which also mentions Rupee Term Loan of Rs. 3,29,00,000/- and Foreign Currency Loan of Rs. 1,18,17,747/- which entries have been continuing from previous year. In the Financial Statement of 2008-09, "NOTES TO THE ACCOUNT" have been relied on by Learned Counsel for the Respondent. We may refer to paragraph 11 which gives the details of loan and the litigation regarding it. Paragraph 11 is as follows: "11. a) That the company is not repaying term loan amount taken from the financial institution and the matter is pending with Debt Recovery Tribunal as well Delhi High Court. b) The company is in dispute with IDBI over the amount of secured loan due to them in the Balance Sheet amounting to Rs. 447 Lacs (Principal Amount), has been reflected as payable. The IDBI was approached for one time settlement (OTS) vide application dated 10.03.2006. The bank did not communicate the decision to the Company and hence, the company approached IDBI under RTI Act, 2005 on 11.09.2006. In repl....
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....Principal Amount), has been reflected as payable. The IDBI was approached for one time settlement (OTS) vide application dated 10.03.2006. The bank did not communicate the decision to the Company and hence, the company approached IDBI under RTI Act, 2005 on 11.09.2006. In reply to the Company's RTI Application, IDBI has furnished the minutes of their Northern Zone Committee dated 27.03.2006 in which OTS proposal of Rs. 250 lacs was sanctioned, but no letter of intent as stipulated in the minutes was issued in favour of the company. In the mean time, IDBI assigned the loan account to Kotak Mahindra Bank Ltd. (KMBL) without any information to the company. Thereafter Kotak Mahindra Bank filed an application before the Debt Recovery Tribunal Delhi for substitutions of their name on place of IDBI. The Hon'ble DRT passed an order on 12.12.2006 substituting the name of KMBL in place of IDBI. The company filed an appeal in DRAT and the DRT order was stayed on 05.02.2007 against the order of DRAT, KMBL filed a writ petition no. 3535 of 2007 in the High Court of Delhi. The Hon'ble High Court passed an order on 23.05.2007 on the above WP No. 3535 of 2007 and issued directions that DRT to exam....
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.... in March, 2012, which was heard on 24.05.2012 by Company Court and a view has been taken by the court that entire claim in the present petition should be restricted to the amount reflected in the minutes of IDBI dated 27.03.2006 i.e. Rs. 250 lacs only. The company has deposited Rs. 250 lacs in favour of Registrar General of Delhi High Court as per order by the Company Court, Delhi High Court. After hearing the honable court dismissed the company petition filed by Jumbo Chemicals and asked the Registry to refund a sum of Rs. 250 Lacs along with interest, which has been received by the company during the relevant previous year. Jumbo Chemicals has filed an appeal before Delhi High Court (Appeal) which is pending. There is also show cause notices from Custom Department, regarding deposit of custom duty, the company is taking appropriate legal actions on that." 18. We may also notice the balance sheets of the Corporate Debtor for the year 2020-21 which was financial year prior to filing of Section 7 Application. In the Director's Report/Statement with respect to financial year 2020-21, following was stated: "RISKS, CHALLENGES AND CONCERNS The Company had availed t....
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....ny and the auditors of the company." 19. The question for consideration is as to whether the "notes to the account" or the "Director's Report/Statement" as relied by Learned Counsel for the Respondent some of which has been extracted above are sufficient to hold that there is no acknowledgement in the balance sheet of the debt. 20. The acknowledgement of debt in the balance sheets from 1998-99 is continuous. Notes to the account and the Director's Report/Statement at best can be treated to be account of litigation emanating from such date. We have noticed that in the notes to the account and the Director's Statement/Report, it has been categorically mentioned that Company failed to repay the loan. In the Financial Year 2020-21, there is reiteration of credit facility availed by the Company from the IDBI. The assignment in favour of Appellant has also been noticed in the notes to the account and director's statement. The notes to the account and director's report has repeatedly referred to that liability is limited to Rs. 250 Lakhs which is on the strength of Order passed in the Company Petition filed by the Appellant where Company Court directed the Respondent to deposit amou....
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....ute was raised. In subsequent to Balance Sheets, the mention regarding their intent for resolution with dispute was indicated and in the Balance Sheet of 2018-19 no apparent dispute was recorded regarding the debt. From the entire series of record of such financial balance sheets from 2007-2008 to 2017-18 it can be presumed that the Corporate Debtor intended from time to time to acknowledge the debt in the Balance Sheet, however we cannot ignore the fact that in 2014-15, 2015-16 and 2016- 17, the Corporate Debtor has disputed claims. On overall basis out of 13 Balance Sheets from 2006-07 to 2018-19, apparently in the three Balance Sheets, disputes were recorded as noted above and based on this, in balanced manner and keeping commercial/judicial fairness, such denial of acknowledgment cannot be taken as stout dispute regarding debt which would tantamount to absolute and continued denial of acknowledgments of debt by the Corporate Debtor. Keeping in view the ratio decidendi of Bishal Jaiswal (Supra), therefore, in light of this detailed analysis, this Appellate Tribunal has to consider that there were acknowledgements of due in the Balance Sheets and the acknowledgement letter of the....
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.... out." 27. We have noticed above that winding up petition filed by the Appellant being Company Petition No. 221/2012 was dismissed on 22nd May, 2014. Judgment of Learned Single Judge has been brought on record in volume II of the Appeal, page 194. Learned Single Judge held that the Company Petition is not the case where High Court should exercise its discretion to wind up the company. In paragraph 17, following observations were made: "17. The respondent has submitted that it could not commence its business on account of failure on the part of the IDBI to adhere to its obligations. The respondent is also pursuing a counter claim against IDBI and it was contended that the company would be able to revive itself, once the said controversy is decided. It is also to be borne in mind that winding up of a company has serious consequences and the Courts have always leaned towards ensuring that the ailing companies are given a fair and reasonable opportunity to revive. In the present case, the company is pursuing its counter claim against IDBI and the question whether the company would be able to revive or not can only be considered after that controversy has concluded. Conceded....