Asset Reconstruction Company (India) Limited vs Shri PKP Spintex Mills Private Limited

Per: SAMEER KAKAR, MEMBER (TECHNICAL)

This Application has been filed by one ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED (hereinafter referred to as 'Financial Creditor') on 23.06.2021 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against SHRI PKP SPINTEX MILLS PRIVATE LIMITED (hereinafter referred to as 'Corporate Debtor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP).

From Part-I of the Application, it is seen that the Financial Creditor is a ARCIL. The registered office address of the Financial Creditor as per the Application is stated to be situated at The Ruby, 10^th Floor, 29 Senapati Bapat Marg, Dadar (West) Mumbai – 400 028. Further, Part-I lays down the Authorized Representative of the Financial Creditor to be one Mrs. Manjula, Authorised Signatory of the Financial Creditor by virtue of a power of Attorney dated 23.08.2019 which is placed at Page Nos.3 to 5 of the Application typeset.

Part II of the Application lays down the details of the Corporate Debtor. It can be seen that the Corporate Debtor is a Private Limited Company incorporated under the Companies Act, 1956 on 01.06.2006 with CIN: U17111TZ2006PTC012807. The registered office of the Corporate Debtor as per the MCA master data is situated at No.5A, South Railway Road, Kumarasamypet, Dharmapuri, TamilNadu – 636 703.

From Part-III of the Application, it is seen that the Financial Creditor has proposed the name of the Interim Resolution Professional (IRP) viz., Santhanam Rajashree, Reg. No. IBBI/IPA-002/IP-N00330/2017-18/10935.

From Part-IV of the Application, it is seen that the Financial Creditor has claimed a debt amount of Rs.13,00,00,000/- (Rupees Thirteen Crores Only) which is due and payable by the Corporate Debtor. The date of default as averred in Part-IV of the Application is 30.11.2018 and the date of default is available in the clean copy of the Petition by way of a separate typeset in the Present Application as per the order of this Tribunal dated 22.09.2022

Part V of the application describes the particulars of Financial Debt, documents and the list of documents between the Financial Creditor and the Corporate Debtor is reproduced hereunder:

It is submitted by the Learned Counsel for the Financial Creditor that the Corporate Debtor initially availed financial facilities from the State Bank of India. In the year 2010, the Corporate Debtor availed Term Loan to the tune of Rs 12 Crores from State Bank of Mysore. In order to secure the said loan the Corporate Debtor executed various financial documents which includes agreement of guarantee, agreement of hypothecation, Letter of Undertaking, etc. The mortgage created in favour of State Bank of India has been extended to the loan availed from State Bank of Mysore also.

Thereafter, in 2011 the Corporate Debtor availed Rs 1 Crore from State Bank of Mysore. Further, the Corporate Debtor also executed mortgaged deed dated 24.09.2010 in favour of State Bank of Mysore. Therefore, the total amount of debt granted is 13 Crores and the details of disbursement is reproduced in the tabular format hereunder:

It is averred in the application that the operation and conduct of the account was irregular with respect to servicing of interest and repayment of principal. The account of the Corporate Debtor was declared as a Non-Performing Asset on 01.12.2012. As per the Notice, dated 03.07.2014, issued by the State Bank of Mysore under Section 13(2) of SARFAESI Act, 2002, the amount of default as on 30.06.2014 to State Bank of Mysore, Salem was:

The State Bank of Mysore vide assignment deed dated 30.09.2014 has assigned the debts in favour of the Applicant herein viz. ARCIL and the same is annexed as Document No.55 of the application typeset.

Thereafter, the Corporate Debtor approached the Applicant for settlement and issued various letters dated 02.09.2014, 08.06.2015, 14.03.2016, 01.07.2016, 26.09.2018 and 26.12.2019 acknowledging the liability and the same is annexed as Document No 56 to 68 of the application typeset.

It is further averred in the application that Since, the outstanding dues have still not been paid by the Corporate Debtor to the Financial Creditor namely ARCIL as on 12.02.2021 a sum of Rs 59,51,29,538/- (Rupees Fifty Nine Crore Fifty One Lakhs Twenty Nine Thousand Five Hundred and Thirty Eight Only) is due and recoverable from the Corporate Debtor along with pendent-lite and future interest as per the loan documents.

The Learned Counsel for the Respondent had filed a counter wherein it was stated that the present application filed by the applicant is barred by limitation and hence it is not maintainable and liable to be dismissed.

The main bone of contention of the Respondent is that the Applicant/ Financial Creditor has not mentioned the date of default in Form -1 of the Application. For this, the applicant placing heavy reliance on the catena of decisions of the Hon'ble Supreme Court in the matter of Gaurav Hargovindbhai Dave vs Asset Reconstruction Company (India) Limited and Anr 2019 (10) SCC 572, Jignesh Shah vs Union of India 2019 (10) SCC 750, Sagar Sharma vs Phoenix Arc Pvt Ltd. 2019 (11) SCC 633, Babulal Vardharji Gurjar vs Veer Gurjar Aluminium Industries Private Limited and Anr 2020 (15) SCC 1 and Vashdeo R Bhojwani vs Abhyudaya Co-Operative Bank Limited and Anr. 2019 (9) SCC 158 has held that held that the period of Limitation for Section 7 or 9 and Applications under the Insolvency and Bankruptcy Code 2016 would be governed by Article 137 of the Limitation Act, 1963. Therefore, even if the date of default is taken to be the last of the two dates, when the account of the Corporate Debtor was classified as NPA, i.e. 27.01.2013, then also it is clear that default occurred prior to 27.01.2013. As per Article 137 of the Limitation Act, three years period of Limitation ended on 26.01.2016. However, this Application is filed on 23.06.2021, i.e. beyond three years from the time, when account of the Corporate Debtor was classified as NPA on 27.01.2013.

The Learned Counsel for the Applicant had filed the rejoinder wherein it was stated in para 9 that the Respondent vide letter dated 23.11.2018 agreed to pay 13.5 crores as OTS and the said proposal of the Respondent was accepted by the applicant by its Sanction letter dated 23.11.2018. Thereafter, the Respondent was called upon to pay Rs. 1.35 crores within 7 days of issuance of the said letter out of the OTS amount of Rs.13.5 Crores, and the remaining amount to be paid from 30.11.2018 to 31.03.2019.

It was further averred in para 11 of the rejoinder that the Respondent has failed to honour the commitment as stipulated in the Sanction letter and hence the date of default was revoked on 15.01.2019. Thus the date of default by the Respondent is 30.11.2018 by which date the Respondent has failed to make the payment as agreed.

The Learned Counsel for the Applicant further submitted that the Respondent has admitted their liability and has committed default whenever he was asked to make the payment. The following are the events in which the Corporate Debtor committed default and the is reproduced in the tabular format:

It was further averred in the rejoinder that the last default was committed on 30.11.2018 when the Respondent failed to make the payment as per settlement letter dated 26.09.2018 and 23.11.2018 and on 02.01.2020 when the Respondent did not come forward to make 15% of the settlement amount. It is relevant to point out that the present application is filed on 23.06.2021 and therefore it is not barred by limitation.

The Learned Counsel for the Applicant has placed heavy reliance on the decision of Hon'ble Supreme Court in the matter of Dena Bank (Now Bank of Baroda) vs C.Shivakumar Reddy and others and the Hon'ble NCLAT, New Delhi in the matter of Hussan Kadri vs Edelweiss Asset Reconstruction Company Ltd and others has clearly held that the offer of OTS will be construed as an acknowledgment to attract Section 18 of the Limitation Act. Thus it is clear that Application filed by the Applicant is within the period of Limitation.

Heard the submissions made by the Learned Counsel for both the parties and perused the records including the pleadings placed on record. It is seen from the records that on 26.09.2018 the Corporate Debtor had given a OTS proposal the Respondent to make a payment of Rs.1.35 Crores within 7 days of the said letter and remaining amount to be paid between 30.11.2018 and 31.03.2019. Further on 23.11.2018, the said OTS Proposal was agreed by the Applicant and requested the Respondent to make a payment of Rs.1.35 crores within 7 days of the said letter and remaining amount to be paid between 30.11.2018 and 31.03.2019.

In continuum, it is further seen from the records that on 15.01.2019 the Respondent committed default and the sanction was revoked by the Applicant. This manifestly made clear that there is a case of debt and default on the part of the Corporate Debtor. Hence, this Tribunal after comprehensively hearing the said matter is of the view that, the debt and default had been proven beyond reasonable doubt and the application filed by the applicant is well within the limitation period.

With regard to the limitation aspect it is pertinent to mention the Hon'ble Supreme Court Judgement in the matter of Dena Bank(now Bank of Baroda) vs C.Shivakumar Reddy and Anr. wherein it was held in para 126, 127 and 141 of the Judgement as follows:

Apropos, the Hon'ble Supreme Court in the case of Innoventive Industries Limited v. ICICI Bank Limited, where it has discussed extensively the scope of the Adjudicating authority under section 7 of the IBC is limited to assessing the records provided by the financial creditor to satisfy itself that the default has occurred.

In view of the facts as stated supra and also in view of the 'financial debt' which is proved by the Financial Creditor and the 'default' being committed on the part of the Corporate Debtor, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor.

As a consequence of the Application being admitted in terms of Section 7 of the Code, moratorium as envisaged under provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor;

However during the pendency of moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder;

The duration of period of moratorium shall be as provided in Section 14(4) of the Code which is reproduced below for ready reference;

The Financial Creditor has proposed the name of Santhanam Rajashree, (Email id: [email protected]), Reg. No. IBBI/IPA-002/IP-N00330/2017-18/10935 as the Interim Resolution Professional (IRP) who has also filed his consent in Form – 2 and also upon verification from the IBBI website, it is seen that the said person holds valid Authorization for Assignment till 02.12.2022.

Santhanam Rajashree is appointed as the IRP and is directed to take charge of the Corporate Debtor's management immediately. The IRP is also directed to cause public announcement as prescribed under Section 15 of the IBC, 2016 within three days from the date the copy of this Order is received, and call for submissions of claim by the creditors in the manner as prescribed under Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15, 17, 18 of the IBC, 2016. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.

The IRP shall comply with the provisions of Sections 13 (2), 15, 17 & 18 of the Code. The Directors of the Corporate Debtor, its Promoters or any person associated with the management of the Corporate Debtor are directed to extend all assistance and cooperation to the IRP as stipulated under Section 19 of IBC, 2016 for the purpose of discharging his functions.

Based on the above terms, the Application stands admitted in terms of Section 7(5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the Order shall be communicated to the Financial Creditor as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records. Further, the Interim Resolution Professional above named who is figuring in the list of Resolution Professionals forwarded by IBBI be also furnished with copy of this Order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.

The IRP is directed to file the 1^st Progress Report before this Tribunal on or before the 45^th day of initiation of CIRP by this Adjudicating Authority.

Accordingly, the present petition stands admitted.