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Judgment
[Per: Ms. Shreesha Merla, Member (Technical)]:
Aggrieved by the `Order’ dated 25.01.2023, passed by the `National Company Law Tribunal’, Kochi Bench, Kochi in CP(IBC)/46/KOB/2022, M/s. Air Travel Enterprises India Ltd., a `Shareholder’ of the `Corporate Debtor’/ `M/s Green Gateway Leisure Ltd.’, preferred this `Appeal’, challenging the `Order of Admission’, under Section 7 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as ‘The Code’).
The Learned Counsel for the Appellant submitted that the `Corporate Debtor’, is a `Special Purpose Vehicle’ (`SPV’), created for the purpose of operation of a `Project Act BEKAL’. The `Appellant’, is a promoter of the `Resort Project’, and holds about 25% of the Share Capital. It is submitted that the Appellants have sufficient experience in Hospitality and Health Sector and that the Project undertaken is viable and feasible only when all the `Debts’, are cleared and investment is made. The promoters have made huge investment to the tune of Rs. 225 Crores, which includes borrowed funds from the three `Financial Creditors’, out of which, they have settled with the `State Bank of India’, which is the major `Financial Creditor’, and also made part payments to the `1st Respondent/ Financial Creditor’ / `Union Bank of India’.
It is submitted that the project was technically assessed by Dun and Bradstreet and they have given a detailed `Report’, on 23.12.2016, with respect to every aspect of the `Project’, and that it was only because of change in design and delay in Sanctioning and Disbursal of Additional Loans, the `Corporate Debtor’, was forced to incur Financial Cost of Rs.61.40 Crores till May 2017, against the estimated interest, during the construction period of Rs.19.80 Crores, resulting in an increase of Rs.41.60 Crores, towards payment of interest on the loans alone.
It is submitted by Dr. Ravichandran that the `Corporate Debtor’, was servicing interest upto middle of 2017 and without considering the viability of the Project and various factual aspects and the situation of Pandemic, the `Adjudicating Authority’, had `admitted’, the Section 7 `Application’, which is totally unjustified.
The Learned Counsel for the Respondent submitted that as long as there is a ‘Debt’ and a ‘Default’, there is no `Equity Jurisdiction’, for the `Adjudicating Authority’, to have exercised in this matter.
It is also brought to the notice of this `Tribunal’, that earlier on 15.10.2020, the `Adjudicating Authority’, had `Ordered’ for commencement of the `Corporate Insolvency Resolution Process’, in IBA/01/KOB/2022, against which, an `Appeal’, was preferred and this `Tribunal’, vide `Order’ dated 09.09.2021 in Company Appeal (AT) (Ins.) No. 993 of 2020, had set aside the `Order’, and advised the `Parties’, to settle the matter, which was challenged, before the Hon’ble Supreme Court and the Apex Court vide `Order’ dated 29.11.2021, dismissed the `Appeal’, preferred by the `Financial Creditor’, as withdrawn. It is submitted that despite the time period given to the `Appellant’ herein, the amount was not paid and hence afresh `cause of action’, has arisen and therefore, it cannot be said that the Section 7 `Application’, is barred by `Limitation’.
It is the main case of the Appellant that the previous `Order’ of this `Tribunal’ is dated 09.09.2021, whereby and whereunder `six months’ time was granted and the same ended on 09.03.2022 and this date of 09.03.2022, cannot be taken as the `Date of Default’. Dr. Ravichandran, drew our attention to Para No. 20 of the `Order’, which reads as follows:
“We reiterate, that the scope and objective of the Code is Insolvency & not recovery. The Admission of Section 7 `Application’ is set aside. Keeping in view the peculiar facts of the attendant case, we dispose of this `Appeal’ with a direction that if the ‘`Corporate Debtor’’ fails to settle in 6 months’ time from the date of this `Order’, the Respondent Bank is at liberty to take appropriate steps. Any observations made in this `Appeal’ shall not stand in the way of any further proceedings, if initiated. Needless to add, the period spent in pursuing this `Appeal’ shall be excluded for the purpose of limitation.”
The contention of the Appellant is that, the date of `NPA’, was 30.09.2015 and 30.09.2022, being the date on which the `Application’ first came up, before this `Tribunal’, the `Application’ is time barred, is unsustainable, since clearly the previous `Order’ records that `six months’ time, was being given to the `Corporate Debtor’ to settle, failing which, the `Respondent Bank’, in that matter was at liberty to take appropriate steps.
At this juncture, this `Tribunal’, find it relevant to reproduce paras 42 and 43 of the ‘Laxmi Pat Surana’ Vs. ‘Union Bank of India & Anr.’, (2021) 8 SCC 481 Judgment:
“42.Notably, the provisions of the Limitation Act have been made applicable to the proceedings under the Code, as far as may be applicable. For, Section 238-A predicates that the provisions of the Limitation Act shall, as far as may be, apply to the proceedings or `Appeal’s before the `Adjudicating Authority’, NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactment of Section 238-A IBC on 6-6-2018, validity whereof has been upheld by this Court, it is not open to contend that the limitation for filing `Application’ under Section 7 IBC would be limited to Article 137 of the Limitation Act and extension of prescribed period in certain cases could be only under Section 5 of the Limitation Act. There is no reason to exclude the effect of Section 18 of the Limitation Act to the proceedings initiated under the Code.
43.Ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the financial creditor to initiate action under Section 7 IBC. However, Section 7 comes into play when the `Corporate Debtor’ commits “default”. Section 7, consciously uses the expression “default” — not the date of notifying the loan account of the corporate person as NPA. Further, the expression “default” has been defined in Section 3(12) to mean 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. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a `Corporate Debtor’ (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 IBC ensures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (`Corporate Debtor’), as the case may be, acknowledge their liability to pay the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 IBC. Further, the acknowledgment must be of a liability in respect of which the financial creditor can initiate action under Section 7 IBC.” (Emphasis Supplied)
It is also seen from the record that there is correspondence dated 14.01.2022 and `OTS’ Letter dated 27.11.2019. Apart from the fact that the issue of `Limitation’, is already answered in the previous `Order’ and has attained `finality’, this `Tribunal’, is of the considered view that, it is not the `Date of NPA’, which is 30.09.2015, which is to be taken into consideration, keeping in view the facts of the attendant case, but rather, it is the `Date of Default’, which is `six months’, subsequent to the time given by this `Tribunal’, in the `Order’ dated 09.09.2021, that is to be considered.
This `Tribunal’, does not have any `Equity Jurisdiction’, and also conscious and alive to the candid fact that more than `sufficient’ / `ample’ time, was extended to the `Corporate Debtor’. Besides that, the `Debt’ and `Default’, are clearly demarcated in `Para-IV’ of the `Section 7 Application’ of the I & B Code, 2016, in CP (IBC) 46/KOB/2022, and the available material on record establishes the same. Viewed in that perspective, this `Tribunal’, does not find any ground, much less a valid ground, to interfere in the well considered and reasoned order of the `Adjudicating Authority’ / `Tribunal’.
For all the foregoing reasons, the instant Comp. App (AT) (CH) (INS.) No. 70 of 2023, is `dismissed’. No costs. The connected pending `Interlocutory Applications’, if any, are `closed’.