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2025 (7) TMI 355
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....D/2022. The said order was passed pursuant to an application filed by the Indian Bank/ Respondent No. 1 herein under Section 95 of the Code, seeking initiation of insolvency resolution process against the Shri Rakesh Jolly/ Appellant, in this case, who stood as a personal guarantor to M/s Aravali Infrapower Ltd./ Principal Borrower. 2. The Adjudicating Authority admitted the application based on the recommendations of the Resolution Professional/ Respondent No. 2 herein, under Section 99 of the Code, thereby initiating insolvency proceedings against the Appellant. Aggrieved by the admission of the said application and alleging that it was filed beyond the prescribed limitation period and without proper cause of action, the Appellant has approached this Hon'ble Appellate Tribunal. Brief facts of the case 3. Brief facts of the case are given below : (i) The Indian Bank, Respondent No. 1, sanctioned a credit facility of Rs. 58.35 crores on 31.10.2012 as part of a Corporate Debt Restructuring (CDR) scheme to M/s Aravali Infrapower Ltd., wherein Shri Rakesh Jolly, the Appellant, executed a Deed of Guarantee dated 13.02.2013 in favour of State Bank of India, the lead ba....
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....eed knowingly, alleging that it was obtained deceitfully, and reiterating that the claim was barred by limitation. The Appellant in his response further submitted that the Guarantee Deed was not validly invoked, and the cause of action, if any, had already lapsed on 13.06.2019, being three years from the SARFAESI notice date of 13.06.2016. (xii) The RP submitted his report vide I.A. No. 4675/ND/2022 on 29.09.2022, recommending the acceptance of the Section 95 application. He rejected the Appellant's limitation objection and upheld the validity and enforceability of the Deed of Guarantee. (xiii) On 24.07.2023, the NCLT passed the impugned order, accepting the RP's report and admitting the application under Section 95 of the IBC, thereby initiating the insolvency process against the Appellant. (xiv) The Appellant, aggrieved by this decision, filed the present Appeal before NCLAT on 29.08.2023, asserting that the claim was time- barred, the Guarantee was not validly invoked, and the RP failed to apply the settled legal principles regarding limitation and the date of default. Submissions of the Appellant 4. ....
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....the right to invoke the personal guarantee by making a demand. The Bank exercised this right on 13.06.2016. The next demand was made after six years, on 10.05.2022. Since no steps were taken to keep the claim alive in the interim, the limitation period had already lapsed long before the application was filed under Section 95. 9. It was further argued by the Ld. Counsel that the Resolution Professional (RP)/ Respondent No. 2, submitted a report under Section 99 without properly applying his mind to the objections raised by the Appellant. The RP merely repeated the Bank's assertions without conducting an independent review. This goes against the purpose of a Section 99 report, which requires the RP to verify facts objectively and give reasoned findings. 10. Ld. Counsel for the Appellant further submitted that the Appellant had clearly stated in his reply to the Demand Notice and to the RP that the Guarantee was not enforceable and that the Bank's claim was time-barred. These objections were not properly considered either by the RP or by the Adjudicating Authority. The RP incorrectly concluded that the limitation started afresh from the 2022 demand, which is legally untenable. ....
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.... is contrary to facts and settled legal principles and therefore deserves to be set aside. Submissions of the Respondent No.1 17. The Respondent No.1 Indian Bank is the answering respondent in this case. The Resolution Professional/ Respondent No. 2 is a proforma party. 18. Ld. Counsel for the Respondent No. 1/ Indian Bank Stated that the Adjudicating Authority in the I.A. No. 4675/2022 filed under Section 99 of the Code by the Resolution Professional passed the Impugned Order dated 24.07.2023. The Adjudicating Authority had accepted the report of the Resolution Professional/ Respondent No. 2, which has recommended for the initiation of the insolvency resolution process of the personal guarantor of the Principal Borrower. The said order has been assailed by the Appellant only on the ground that the application filed by the Respondent Bank was barred by limitation. The basis of the objection taken by the Appellant regarding the limitation was on the basis of the date of NPA which is 29.10.2012 and the application was filed on 19.07.2022. 19. Ld. Counsel submitted that the corporate debtor namely M/s Aravali Infra Power Limited was already enjoying the facility granted by....
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....iability. 22. Ld. Counsel further stated that due to outbreak of Covid 19, the Hon'ble Supreme Court has passed an order dated 10.01.2022 for extending the period of limitation from 15.03.2020 to 31.05.2022 for all purposes. It is submitted by ld. Counsel that before the expiry of the said period the Respondent Bank has issued the Demand Notice dated 10.05.2022 under Rule 7 (2) of the Insolvency and Bankruptcy (Application of Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. In terms of the Demand notice dated 10.05.2022 the Appellant sent a reply dated 23.05.2022 and has failed to make payment of outstanding debt of Rs. 200,90,24,194.19 (Rupees Two Hundred Crores Ninety Lacs Twenty Four Thousand Two Hundred and Seventy One Only). 23. Ld. Counsel submitted that based on the acknowledgement by the Corporate Debtor on 19.03.2018 the limitation period of three years in terms of Article 137 of the Limitation Act would have ended on 18.03.2021. This date was in the Covid exemption period in terms of Hon'ble Supreme Court's suo-motu order which extended the Limitation period in such cases. Ld. counsel submitted t....
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....oth the parties and heard the Ld. Counsels at great length. 27. The first issue raised by the Appellant herein is that the Respondent Bank has introduced fresh document viz. the OTS proposal dated 19.03.2018 submitted by the Principal Borrower /Aravali Infrapower Ltd. Their submission is that this document was not produced before the Adjudicating Authority and the same cannot be taken into consideration at the appeal stage. The OTS was also never accepted by the Bank, and therefore cannot be treated as a valid acknowledgment of debt under Section 18 of the Limitation Act. Since the OTS proposal was not a concluded agreement and did not result in any action or payments, it cannot be treated as valid contract which can be used to extend limitation. 28. The Respondents on the contrary submit that this document is very vital to the proceedings as this was submitted by Rakesh Jolly, the Appellant herein, in his capacity as Director of Principal Borrower/ Corporate Debtor, to the lead Member of consortium of lenders (SBI). Appellant is also the personal guarantor of the Borrower and he cannot deny the submission of the document to the lead member of the consortium SBI. 29. We ta....
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.... As per CDR scheme, the revival of the company was based on acquisition of new profitable EPC contracts in the power transmission & distribution sector. The company had strong technical qualification coupled with large manufacturing base to bid for high value government contracts in power transmission and distribution sector. The CDR package had a cut-off date of 31 Dec 2011 but was approved on 07-11-2012 and the legal documentation was completed on 15.03.13 consuming period of 14.5 months from the cut-off date to start of implementation of CDR package. Effective moratorium of only 6-7 months was available for our company as against 24 months as an envisaged in the TEV study. To achieve the CDR scheme, the Promoters had arranged the equity of Rs. 26.75 crore in the company as well as gave additional collateral security worth Rs. 5 crore to the consortium. Que to delay in implementation of the package, the company could not procure new contracts in the years 2012-13 and 2013-14. Finally, during 2014-15, the company obtained new orders for Rs. 1107 crore which would have resulted in profit of Rs. 165 crore. These contracts were funded by the central governmen....
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....ed the recovery proceeding against the company by invoking the provisions SARFAESI Act and filing recovery suits against the company and the promoters. " ( Emphasis supplied ) 30. We observe the following from the extracted portion of letter and the attachment: (i) The letter is addressed to Asst. General Manager of SBI, which is the lead Bank of a consortium; (ii) States that the company is suffering from huge losses from the last three to four years; (iii) A detailed OTS proposal is attached with the letter; (iv) The letter is signed by Sh. Rakesh Jolly the appellant (personal guarantor herein) in his capacity of Director of the Principal Borrower. (v) In the OTS proposal it is stated that net worth of the company was fully eroded in FY 2014-15. The company had filed a petition before BIFR and under Section 15(A) of the Sick Industrial Companies (Special Provisions) Act, 1985; (vi) The borrower acknowledges the failure of CDR package, and states that the CDR EG, at the instance of the lenders conformed the exit of the company from the CDR mechanism on 27.01.2016; (vii) Thereafter the lenders initiate....
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....consequently the counting of limitation period from that date is not correct and based on the same the appeal needs to be allowed due to such incorrect finding of Adjudicating Authority. The appellant has also relied on the fact that first demand for payment of outstanding debt of Principal Borrower/ CD on him as Personal Guarantor was considered by Adjudicating Authority as 26.05.2016 i.e. the date on which the State Bank of India, the lead member of the consortium issued the notice to him under Section 13 (2) of the SARFESI Act, 2002. The Appellant has stated that a separate notice was issued to him on 13.06.2016 by the respondent bank. The Adjudicating Authority has failed to take the correct notice on record. In view of such patent errors on the part of Adjudicating Authority the Appeal should be allowed. 35. We have seen from the submissions of the Respondent bank that they have relied on their Section 13 (2) notice issued on 13.06.2016 for computation of limitation. A 60 days period was given to the Principal Borrower and the Guarantor to make outstanding payments to the Respondent Bank. The 60 days period ended on 12.08.2016, accordingly the three-year period of limitatio....
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....0 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within whic....