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2024 (5) TMI 204
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....11.04.2022 in Company Petition CP(IB)153/7/HDB/2021 under section 61 of Insolvency and Bankruptcy Code, 2016. In its order the Adjudicating Authority held that the Financial Creditor (FC) in the present case, M/s. Prithvi Asset Reconstruction and Securitization Company Pvt. Ltd. comes within the definition of 'Financial Creditor', for the purpose of the Code and that the application made by the said Financial Creditor is not barred by limitation laid down in section 238A of the Insolvency and Bankruptcy Code, 2016 r/w Article 137 of the Limitation Act, 1963 and accordingly admitted the Corporate Debtor (CD) into Corporate Resolution Process (CIRP) under section 7 of the said code and declared moratorium for the purpose referred to in section 14 of the said Code Aggrieved by the order of AA, the Appellant has filed this Appeal before this Tribunal, praying that the orders of AA be set aside. 2. The brief facts of the case and the sequence of events necessary to be noted for the purpose of deciding the case are narrated below: i) The Appellant Mr. Virigineni Anjaiah is the Suspended Director of the Corporate Debtor (CD), namely, M/s. Sri Pavana Keerthi Hotels India Pvt. L....
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....n and ordering CIRP against the Corporate Debtor as prayed for. vi) Aggrieved by this order the Appellant being the Suspended Director of the Corporate Debtor has filed this Appeal Petition before this forum to set aside the said order of NCLT, Hyderabad. Contentions of the Appellant: 3. The Appellant contends that NCLT, Hyderabad has passed the Impugned Order without considering the submissions made before it by the CD on the points of maintainability of the Application / Company Petition based on the limitation and the submissions that the Respondent / Financial Creditor cannot assume the character of Financial Creditor under Insolvency and Bankruptcy Code, (IBC) 2016 merely on basis of an Assignment Agreement and a Recovery Certificate issued by Debt Recovery Tribunal, Hyderabad and hence the Impugned Order as above should be set aside. The averments of the Appellant are narrated in brief in underlying paragraphs. 4. It is the contention of the Appellant that the loan taken by CD from Original FC, that is, Andhra Bank was classified as NPA on 31.10.2015 and as per section 238A of Insolvency and Bankruptcy Code, 2016 read with Article 137 of Limitation Act, 1963....
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....e the orders of NCLT, admitting the CIRP. He further states that in a similar case, that is, in the matter of Akram Khan Vs Bank of India & Anr., in CA(AT) (Ins) No.1092/2019, NCLAT has set aside the orders of NCLT in its order dated 19.12.2019 on the grounds that the application under section 7 of Insolvency and Bankruptcy Code, 2016 was filed for the purpose of execution of Decree passed by Debt Recovery Tribunal in favour of Financial Creditor, that is, for a purpose other than Resolution of Insolvency. The Appellant contends that the Respondent in the case does not qualify to be a Financial Creditor within the definition as per section 5(7) of the Insolvency and Bankruptcy Code and that he is a decree holder only and that the claimed amount is an adjudicated amount under a decree and not against a debt disbursed as per the principles laid down in the judgment dated 14.08.2020 of NCLAT in the matter of Sushil Ansal Vs Ashok Tripathy & Ors., in CA (AT) (Ins) No.452/2020. He has also cited the decision of NCLAT dated 12.03.2020 in Ishrat Ali Vs Cosmos Cooperative Bank Ltd. & Anr., in CA(AT) (Ins) No.1121 of 2019 to state that a judgment or a decree passed for recovery of money (PT....
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..../2017 before DRT, Hyderabad-I for recovery of Rs.32,19,88.213/- (inclusive of interest as on date) against the CD and its Guarantors under SARFAESI Act 2002. During the pendency of proceedings before DRT-I, Hyderabad, Respondent -1 became FC of the CD vide Assignment Agreement under section 5 of SARFAESI Act 2002 and initiated steps to enforce the security interests. 10. Respondent No.1 contends that the CD purposefully filed litigations to stall recovery which include WP No.25330/2017 before Hon'ble Telegana High Court challenging taking over of possession and WP No.1658/2021 in the same court challenging the sale notice, both of which were dismissed. Meanwhile DRT Hyderabad-I allowed OA No.403/2017 vide Order dated 19.02.2019 for a sum of Rs.25,71,79,268/- and issued a Debt Recovery Certificate vide DRC No.176/2019 dated 09.07.2019. The Recovery Officer of DRT also issued a Demand Notice dated 22.07.2020 to CD / Judgment Debtors for payment of the said sum. In between the CD did acknowledge the debt owed to the FC by giving a 'One-time Settlement Offer' vide a letter dated 16.01.2020 and also vide its financial statements between 31.03.2019 to 31.03.2020. However, as no paymen....
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.... Balakrishnan (Reported in 2022 9 SCC 186) upheld the judgment of the twojudge bench of the Hon'ble Supreme Court in Dena Bank (Supra) and held that the Recovery Certificate gives rise to fresh cause of action, and the certificate holder is a Financial Creditor under Section 5(7) of the Code. 13. The Respondent further states that the set aside petition in MAIR No.104/2021 has been filed in DRT-I, Hyderabad by 2 guarantors of the CD as an after thought after filing of the Application under section 7 of IBC, 2016 to raise a frivolous defence and with a malafide intent to prolong the proceedings and to escape clutches of law, that too with an enormous delay. However, his contention is that such a challenge to the Decree will not take away the merits of the Decree and he refers to the judgment of the Hon'ble Madras High Court in the case of Pravin Kumar (Minor) Vs R Sivagnanam & Ors. [Reported in 1988 2 Mad LJ 43] wherein the Hon'ble Court while dealing with insolvency proceedings initiated by a Decree Holder under the Presidency Towns Insolvency Act, 1909, has categorically held that the pendency of appeal against the Decree before the Hon'ble Supreme Court won't have a bearing on....
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....equently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, the holder of such certificate would be entitled to initiate the CIRP, if initiated within a period of three years from the date of issuance of the Recovery Certificate. 85. We further find that the view taken by the two-Judge Bench of this Court in the case of Dena Bank (supra) is correct in law and we affirm the same. We further find that in the facts of the present case, the application under Section 7 of the IBC was filed within a period of three years from the date on which the Recovery Certificate was issued. As such, the application under section 7 of the IBC was within limitation and the learned NCLAT has erred in holding that it is barred by limitation." With this ruling it is crystal clear that a liability in respect of a claim arising out of a Recovery Certificate would be a financial debt within the meaning of section 5(8) of IBC and that the holder of such Recovery Certificate would be a financial creditor as per section 5(7) of IBC and would be entitled to initiate CIRP. 16. With regards to point 13 (c) the Ap....
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.... of a Recovery Certificate would be a "financial debt" within the meaning of clause (B) of section 5 of the IBC. Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, the holder of such certificate would be entitled to initiate the CIRP, if initiated within a period of three years from the date of issuance of the Recovery Certificate. 85. We further find that the view taken by the two-Judge Bench of this Court in the case of Dena Bank (supra) is correct in law and we affirm the same. We further find that in the facts of the present case, the application under Section 7 of the IBC was filed within a period of three years from the date on which the Recovery Certificate was issued. As such, the application under section 7 of the IBC was within limitation and the learned NCLAT has erred in holding that it is barred by limitation." This being the correct position in law, the section 7 application of FC / Respondent is clearly not barred by limitation as date of filing is 24.10.2021 which is within the 3 years of the date of decree (19.02.2019) and of date of issue of Recovery Cert....