ASREC (India) Ltd. vs Visakha Prime Properties Constructions Ltd.

The ASREC is the assignee of the debt originally advanced by the UCO Bank (Assignor) by virtue of an Assignment Agreement dated 31.03.2008.

On 09.06.1998, the UCO Bank sanctioned a term loan of Rs.75,00,000/-to the Corporate Debtor. The said loan was secured by an equitable mortgage of immovable properties situated at Dondaparthy Junction, Visakhapatnam, created by way of deposit of title deeds. The facility was further secured by the hypothecation of construction materials, plant & machinery, personal guarantees of the directors & promoters, and duly executed loan documents including the loan agreement, demand promissory note, and supporting letters.

Subsequently, the Corporate Debtor defaulted in repayment of the debt and the loan account was declared as a Non-Performing Asset (hereinafter referred to as the “NPA”) on 30.06.2002 by the UCO Bank. Thereafter, the UCO Bank initiated recovery proceedings by filing Original Application bearing no. 36/2003 (hereinafter referred to as the “OA 36/2003” or the “OA”) before the Hon’ble Debts Recovery Tribunal, Visakhapatnam (hereinafter referred to as the “DRT”), for recovery of its dues along with contractual interest. During the pendency of the said OA, the Financial Creditor, ASREC, continued the proceedings as assignee of the UCO Bank and actively pursued the matter before the Hon’ble DRT.

However, due to delays in adjudication, the Financial Creditor filed a Company Petition bearing no. CP(IB)/82/7/AMR/2020 (hereinafter referred to as the “CP 82/2020”) before this Adjudicating Authority on 27.06.2020 under Section 7 of the IBC for initiation of CIRP against the Corporate Debtor, which was dismissed vide this Adjudicating Authority Order dated 06.12.2021, on the ground of the OA still pending adjudication before the Hon’ble DRT, with the liberty to the Financial Creditor to file a fresh Petition, if an order/ judgment in its favour is passed by the Hon’ble DRT.

After prolonged litigation, the Hon’ble DRT disposed of the OA 36/2003 in favour of the Financial Creditor and passed a final order on 03.08.2024, allowing the claim and directing the Corporate Debtor & the guarantors to pay the outstanding dues. Pursuant to the said decree/ order, the Financial Creditor computed the outstanding liability of the Corporate Debtor as on 31.03.2025 at Rs.55,84,83,415.16, along with future interest at the contractual rate of 18.87% per annum compounded quarterly from 01.04.2025 till realization.

In accordance with the liberty granted by this Adjudicating Authority vide Order dated 06.12.2021 and upon adjudication of the claim/ debt by the Hon’ble DRT, the Financial Creditor has filed the present Petition under Section 7 of the IBC, placing reliance on the DRT decree and other documentary evidence.

The default is well established and substantiated through the Hon’ble DRT’s order dated 03.08.2024, original loan documents, security agreements, assignment deed from the UCO Bank to the ASREC, bank ledgers, acknowledgments of debt, Registrar of Companies charge documents, and proof of mortgage & hypothecation over the assets of the Corporate Debtor.

The Petition is compliant with the procedural requirements of the IBC and is supported by the Form-1, written communication of the Interim Resolution Professional (hereinafter referred to as the “IRP”) in Form-2, and proof of service.

As per the Part IV of the Form-1, the amount claimed to be in default is shown as Rs.55,84,83,415. The relevant extract of the Part IV of the Form-1 is reproduced below:

The Financial Creditor has stated to have enclosed the following documents along with the Petition:

Copy of authorization letter given by the Financial Creditor in favour of the authorized signatory dated 27.05.2021;

Copy of Company Master Data from the MCA Website, Memorandum of Association and Articles of Association of the Corporate Debtor;

Guarantee Agreement between the UCO Bank and guarantors i.e. C. Raghuram Prasad, C. Shobha Raghu Ram and Sri J. Jagan Mohan Rao dated 09.06.1998;

Guarantee Agreement between the UCO bank and guarantors i.e. Smt. G.V. Vijayalakshmi, Sri Godi Venkata Jagadish, Sri G. Satish and Smt. AVL Pratibha dated 09.06.1998;

Guarantee Agreement between the UCO Bank and guarantors i.e. K. Satya Prasad Rao and K. Satyavathi dated 09.06.1998;

Statement of account/ ledger of the Financial Creditor along with supporting affidavit dated 09.11.2002;

Agreement to sell with power of attorney vide Doc. No. 863/1997 dated 31.07.1997;

Agreement for construction and development of property dated 07.08.1997;

Agreement to sell with power of attorney vide Doc. No. 873/1997 dated 24.07.1997;

Agreement for construction and development of property dated 25.07.1997;

Deed of hypothecation of goods dated 09.06.1998;

Deed of hypothecation of plant and machinery as additional security dated 09.06.1998;

Letter confirming the deposit of title deeds dated 30.05.1998;

Letter confirming the deposit of title deeds dated 04.06.1998;

Letter confirming the deposit of title deeds dated 04.06.1998;

Assignment deed dated 31.03.2008between the UCO Bank and the Financial Creditor herein;

Copy of certificate of registration of charge issued by ROC, Hyderabad dated 09.06.1998 and subsequently modified on 31.03.2008;

Final Order of Hon’ble DRT in OA 36/2003 dated 03.08.2024;

Final Orders in WP No. 12867/2018 passed by Hon'ble High Court along with case status dated 20.11.2019;

Demand promissory note for an amount of Rs.75,00,000/- dated 09.06.1998;

Letter of waiver of presentment demand promissory note dated 09.06.1998;

Agreement relating to term loan dated 09.06.1998;

Letter sent to the Managing Director of the Corporate Debtor by the UCO Bank requesting to repay the dues dated 23.10.2000;

Copy of acknowledgement of debt dated 09.04.2001;

Statement of account of the Corporate Debtor showing outstanding dues as on 31.03.2025 dated 31.03.2025;

Daily Order in IA No. 1533 of 2022 in OA 36 of 2003 dated 04.05.2023 passed by Hon’ble DRT impleading the legal heirs of the Managing Director of the Corporate Debtor in the OA;

Final Order dated 06.12.2021 passed by this Adjudicating Authority in CP (IB) No. 82/2020.

The Corporate Debtor is engaged in the business of constructions and civil engineering. In 1998, the Corporate Debtor availed a term loan of Rs.75,00,000/- from the UCO Bank for development of a residential-cum-commercial project at Dondaparthi, Visakhapatnam. The project commenced with substantial promoter investment, however, severe cyclonic conditions, escalation in construction costs, and, most critically, the UCO Bank’s delayed & irregular disbursement of sanctioned funds caused serious cash-flow disruptions beyond the Corporate Debtor’s control.

Despite these difficulties, the Corporate Debtor consistently communicated its constraints to the UCO Bank and sought restructuring of the repayment schedule, additional support, and permission to sell completed units to clear dues. Although the UCO Bank initially permitted sale of certain units, it later delayed and obstructed issuance of NOCs and approvals, depriving the Corporate Debtor of a viable repayment mechanism and contributing to deterioration of the account.

While restructuring discussions were ongoing, the UCO Bank issued SARFAESI notices and filed OA 36/2003 before the Hon’ble DRT. The Corporate Debtor, under protest, complied with settlement terms and paid Rs.20 lakhs upfront under a One Time Settlement (hereinafter referred to as the “OTS”) in 2004, duly recorded by the Hon’ble DRT. However, the UCO Bank withdrew from the OTS, failed to cooperate with completion of construction, and ignored the Hon’ble High Court’s directions in W.P. No. 21415 of 2002 to facilitate sale of units.

In 2008, the debt was assigned to the ASREC, which continued coercive recovery. Thus, the alleged default is a direct result of the UCO Bank’s own breaches and non-cooperation. The Hon’ble DRT’s recovery order dated 03.08.2024 is under challenge before the Hon’ble Debt Recovery Appellate Tribunal, Kolkata (hereinafter referred to as the “DRAT, Kolkata”), and the alleged dues remain seriously disputed. The copy of Appeal Dy. No. 1046 of 2024 has been annexed as Annexure-2 of the Counter.

The present Petition is not maintainable either in law or on facts. The Financial Creditor seeks to initiate the CIRP solely on the basis of order dated 03.08.2024 passed by the Hon’ble DRT in OA 36/2003. The said order has neither attained finality nor crystallised any liability, as it is under challenge in a statutory appeal before the Hon’ble DRAT, Kolkata under section 20 of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as the “RDB Act”). In view of the pending appellate scrutiny, the alleged liability remains sub-judice/ disputed and cannot form the basis for invoking the extraordinary remedy under the Code.

The Financial Creditor has failed to produce any independent and conclusive record of default as required under Section 7 and the Rules framed thereunder. No acknowledgment of debt, undisputed contractual liability, or authenticated default record from an information utility has been placed on record. The Petition rests entirely on a contested recovery decree, which cannot substitute the requirement of proving an unequivocal and subsisting default. The alleged dues exceeding Rs.55.84 crores are also highly inflated, having been computed through retrospective and compounded interest over decades without accounting for sale proceeds realised from project units.

The present proceedings are in substance a recovery strategy, as the Financial Creditor is simultaneously pursuing remedies under the RDB Act on the very same decree, and initiation of parallel insolvency proceedings amounts to forum shopping and abuse of process. An earlier Section 7 Petition filed by the same Financial Creditor was dismissed on 06.12.2021 as time-barred, with limited liberty to proceed only after a final decree of the Hon’ble DRT.

The present Petition is premature, barred by limitation, and unsupported by the proof of a legally enforceable and crystallised financial debt. A recovery order passed under the RDB Act, by itself, does not constitute an established default within the meaning of the Code. For initiation of CIRP, the Financial Creditor must demonstrate the existence of a clear and undisputed debt due and payable as on the date of filing. In the present case, the alleged liability is founded entirely upon a Hon’ble DRT order, which is presently under challenge before the Hon’ble DRAT, Kolkata. A disputed decree cannot constitute a valid foundation for admission of a Section 7 Petition.

The alleged loan transaction pertains to 1998 and the account was declared NPA in 2002. The purported default thus, relates to a period more than two decades prior to the filing of the present proceedings in 2025. In the absence of any legally cognisable acknowledgment within the prescribed limitation period, the claim is patently barred under Article 137 of the Limitation Act. Any alleged acknowledgments relied upon are themselves disputed and cannot revive an extinguished claim. The Financial Creditor is attempting to circumvent the bar of limitation by resorting to the IBC, which cannot be used to revive the stale or time-barred debts.

The alleged outstanding amount of Rs.55.84 crores is also seriously disputed. Disputes persist as to the quantum, rate of interest, mode of computation, and treatment of mortgage-backed realisations, and the alleged debt is neither admitted nor crystallised.

The Corporate Debtor being a solvent and financially sound company, with assets exceeding liabilities and sufficient working capital to meet its obligations, continues its business operations without interruption and is not in the financial distress. The Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353, has categorically held that the IBC is not a substitute for a recovery forum. The present Petition is filed on incorrect premises and to pressurize the Corporate Debtor, hence it constitutes misuse of the insolvency process and deserves to be dismissed with costs.

The various events significant for computation of the limitation period are as under:

The Hon'ble Supreme Court in its Order dated 30.05.2022 in the case of Kotak Mahindra Bank Limited vs. A. Balakrishnan & Anr., (2022) 9 SCC 186, (Three Judge Bench) (annexed as Annexure-2 with the Memo) held that a recovery certificate issued under the RDB Act would qualify as a “financial debt” under the Code and give rise to a fresh cause of action under Section 7 of the IBC. This judgment also upheld an earlier decision of a two-judge Bench of the Hon'ble Supreme Court in the case of Dena Bank (now Bank of Baroda) vs. C Shivakumar Reddy & Anr., (2021) 10 SCC 330, which inter alia held that a fresh period of limitation would accrue for an application under Section 7 of IBC from the date of a recovery certificate. The relevant extract of the Judgement rendered by the Hon’ble Apex Court in Kotak Mahindra Bank Limited vs. A. Balakrishnan & Anr. (supra) is cited below:

Thus, considering the Hon’ble DRT Order dated 03.08.2024 under Section 19(20) read with Section 19(22) of RDB Act and the Recovery Certificate issued vide RC 698/2024 (case status annexed as Annexure-3 with the Memo) and Hon'ble Supreme Court's Judgement mentioned supra, the present Petition e-filed on 08.07.2025 is well within the limitation period.

We note that the Hon’ble NCLAT in the matter of Virigineni Anjaiah vs. Pridhvi Asset Reconstruction and Securitization Company Ltd. & Anr., in Company Appeal (AT) (CH) (Ins) No.224/2022, after referring to the aforesaid two judgments relied upon by the Financial Creditor and several other judgments, has decided on 02.05.2024 that section 7 Petition is not barred by limitation, if the date of filing is within the 3 years of the date of decree and date of issue of Recovery Certificate. The relevant extracts of the above judgment is reproduced below:

In the present case, the Hon’ble DRT vide its order dated 03.08.2024 allowed the OA 36/2003 with cost of Rs.1,15,56,435/- to the Financial Creditor together with future interest @ 18.87% compounded quarterly rests from the date of application till the date of full and final realization minus Rs.20 lakhs to be recovered from the Defendants which includes the Corporate Debtor herein and directed to issue the Recovery Certificate. The relevant extracts of the Hon’ble DRT order dated 03.08.2024 are reproduced below:

In terms of above order of the Hon’ble DRT, the Presiding Officer of the Hon’ble DRT issued the Recovery Certificate dated 19.10.2024 for recovery of the debt amounting to Rs.58,31,95,399.70 due to the Financial Creditor from the Certificate Debtors, which includes the Corporate Debtor herein. The aforesaid Recovery Certificate is reproduced below:

In the present case, the Section 7 Petition has been filed by the Financial Creditor on 11.07.2025 i.e. within the 3 years of the date of decree (03.08.2024) and of date of issue of Recovery Certificate (19.10.2024), and is therefore not barred by limitation.

The Corporate Debtor has contended that the Financial Creditor has filed the Petition solely on the basis of the Hon’ble DRT order dated 03.08.2024, which has neither attained finality nor crystallised any liability, as it is under challenge in a statutory appeal before the Hon’ble DRAT, Kolkata under section 20 of the RDB Act. In view of the pending appellate scrutiny, the alleged liability remains sub-judice/ disputed and cannot form the basis for admission of a Section 7 Petition.

We note that the Hon’ble NCLAT in its order dated 02.05.2024 in Virigineni Anjaiah vs. Pridhvi Asset Reconstruction and Securitization Company Ltd. & Anr. (supra), has held that the pendency of appeal against a Decree will not have any bearing on the finality of the Decree. The relevant extract of the above order is reproduced below:

In view of the above judgment of the Hon’ble NCLAT, we are of the considered view that even if, there is an appeal pending before the Hon’ble DRAT, Kolkata, the same does not bar the admission of the Section 7 Petition filed by the Financial Creditor.

We note from the Hon’ble Supreme Court in the matter of Kotak Mahindra Bank Ltd. vs. A. Balakrishnan & Anr. (supra) has held that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the ambit of its definition under clause (8) of Section 5 of the IBC, as a natural corollary thereof, the holder of such Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, such a “person” would be a “person” as provided under Section 6 of the IBC, who would be entitled to initiate the CIRP, if the dues of the Corporate Debtor to the Financial Creditor, under the judgment and/ or decree and/ or in terms of the Certificate of Recovery, or any part thereof remained unpaid. The relevant extracts of the above judgment are reproduced below:

We note from the Recovery Certificate dated 19.10.2024 that the amount of debt exceeds the threshold limit of Rs. One Crore and the same remained unpaid on the date of filing of the Petition.

In view of the above, we are of the considered view that there is a financial debt and default in repayment thereof, which meets the minimum threshold limit of Rs. One crore as required under Section 4 of the IBC.

We note that the issue as to whether a decree holder or holder of a Recovery Certificate can maintain a Petition under Section 7 of the IBC is no longer res integra. The Hon’ble NCLAT in Virigineni Anjaiah vs. Pridhvi Asset Reconstruction and Securitization Company Ltd. & Anr. (supra), while considering an identical contention, held that a decree holder is entitled to initiate CIRP on the strength of a Recovery Certificate. The relevant extract of the judgment of Hon’ble NCLAT is reproduced below:

We note the settled legal position that for admission of a Petition under Section 7 of the Code, the Adjudicating Authority is only required to examine and satisfy itself that a financial debt exists and there is default in relation thereto. In this regard, we also rely on the judgement dated 24.02.2026 of the Hon’ble Supreme court in the matter of Catalyst Trusteeship Ltd. vs. Ecstasy Realty Pvt. Ltd., 2026 INSC 186 (Civil Appeal No. 7424 of 2025, wherein the Supreme Court has observed as below:

Moratorium under section 14 (1) for prohibiting all of the following, namely:

The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;

Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor.

It is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;

The provisions of sub-section of section 14(1) shall not apply to such transactions, agreements or other arrangement, as may be notified by the Central Government in consultation with any financial sector regulator or any other authority; and also to a surety in a contract of guarantee to a corporate debtor.

The supply of essential goods or services to the Corporate Debtor, as may be specified, shall not be terminated or suspended or interrupted during moratorium period, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period or in such circumstances, as may be specified.

The order of moratorium shall have effect from the date of this order till the completion of the CIRP or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the Corporate Debtor under Section 33 as the case may be.

The term of appointment of Mr. Ganesh Venkata Siva Rama Krishna Remani shall be in accordance with the provisions of Section 16(5) of the Code ;

The aforesaid IRP shall submit an affidavit to this Adjudicating Authority within 7 days of this Order that his existing assignments including the present assignment are within the permissible limit of clause 22 of Code of Conduct specified in First Schedule to IBBI (Insolvency Professionals) Regulations, 2016

The aforesaid IRP shall also submit an affidavit to this Adjudicating Authority within 7 days of this Order that he is eligible to be appointed as IRP under Regulation 3 of IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016;

The IRP in the first meeting of the CoC shall make the requisite disclosure in terms of Regulation 7 of the IBBI (Insolvency Professionals) Regulations, 2016

In terms of Section 17 of the Code, from the date of this appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the IRP and the officers and the managers of the Corporate Debtor shall report to the IRP, who shall be enjoined to exercise all the powers, as are vested with the IRP and strictly perform all the duties, as are enjoined on the IRP under Section 18 and other relevant provisions of the Code, including taking control and custody of the assets, over which the Corporate Debtor has ownership rights recorded in the balance sheet of the Corporate Debtor, etc. as provided in Section 18(1)(f) of the Code. The IRP is directed to prepare a complete list of the inventory of assets of the Corporate Debtor;

The IRP shall strictly act in accordance with the Code, all the rules framed thereunder by the Board or the Central Government and in accordance with the Code of Conduct governing his profession and as an Insolvency Professional with high standards of ethics and moral;

The IRP shall cause a public announcement within three days as contemplated under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 of the initiation of the CIRP in terms of Section 13(1)(b) read with Section 15 of the Code calling for the submission of claims against Corporate Debtor;

The IRP/ RP shall prepare the Audited Financial Statements as on date of the CIRP and shall submit before the CoC for consideration.

The IRP/ RP shall also ensure that all the assets appearing in the Financial Statements on the CIRP date have been considered in the valuation report. The IRP/ RP shall send individual communication through post or electronic means along with a copy of public announcement to all the creditors as per last available books of accounts / financial statements on the CIRP date of Corporate Debtor as prescribed under Regulation 6A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The Corporate Debtor, its Directors, personnel and the persons associated with the management shall extend all cooperation to the IRP in managing the affairs of the Corporate Debtor as a going concern and extend all cooperation in accessing books and records as well as assets of the Corporate Debtor;

The suspended Board of Directors is directed to give complete access to the books of accounts of the Corporate Debtor maintained under Section 128 of the Companies Act, 2013. In case, the books are maintained in the electronic mode, the suspended Board of Directors are to share with the IRP/ RP all the information regarding maintaining the backup and regarding service provider kept under Rule 3(5) and Rule 3(6) of the Companies (Accounts) Rules, 2014 respectively as effective from 11.08.2022, especially the name of the service provider, the internet protocol of the service provider and its location, and also address of the location of the books of accounts maintained in the cloud. In case accounting software for maintaining the books of accounts is used by the Corporate Debtor, then IRP/ RP is to check that the audit trail in the same is not disabled as required under the notification dated 24.03.2021 of the Ministry of Corporate Affairs. A reference is made to the provisions of Section 128(5) of the Companies Act, 2013, whereby every company should maintain its books of accounts for not less than eight financial years immediately preceding a financial year. Minutes and statutory records are the principal documents of the company that should be maintained and preserved since inception.

In view of the above mandatory provisions, the suspended directors of the board will ensure that the books of accounts for the eight previous financial years preceding the date of this order be made available to the IRP/ RP within 15 days of the initiation of the CIRP order. The statutory auditor is also directed to share the records maintained by him in the course of the audit of the accounts of the Corporate Debtor for the period of three years prior to the date of initiation of this CIRP order within the same period of 15 days.

In case of any non-cooperation by the suspended Board of Directors or the statutory auditors, the IRP/ RP may take the help of the police authorities to enforce this order. The concerned police authorities are directed to extend help to the IRP/ RP in implementing this order for retrieval of relevant information from the systems of the Corporate Debtor. The suspended Board of Directors is also directed to hand over all user IDs and passwords relating to the Corporate Debtor, particularly for government portals, for various compliances. The IRP is also directed to make a specific mention of non-compliance, if any, in this regard in his status report filed before this Adjudicating Authority immediately after a month of the initiation of the CIRP.

The IRP/ RP is directed to approach the government departments, banks, corporate bodies and other entities with request for information/ documents available with those authorities/ institutions/ others pertaining to the Corporate Debtor, which would be relevant in the CIRP. The government departments, banks, corporate bodies and other entities are directed to render the necessary information and cooperation to the IRP/ RP to enable him to conduct the CIRP as per law.

The IRP shall, after collation of all the claims received against the Corporate Debtor and the determination of the operational position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying constitution of the Committee to this Adjudicating Authority on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the Committee within seven days of filing the report of constitution of the Committee;

The IRP shall also serve a copy of this order to all relevant statutory departments such as Income Tax, GST (Centre and State), Provident Fund, ESI etc. and also to trade unions, and employee associations to inform them about the commencement of CIRP.

The IRP is directed to file a progress report every month to this Adjudicating Authority.