Canara Bank vs M/s SS Realtech Pvt. Ltd.

PER: MS. REENA SINHA PURI, MEMBER (T)

This Application has been filed by Canara Bank (hereinafter referred to as the Financial Creditor or FC/Petitioner) against M/s S S Realtech Pvt. Ltd. (hereinafter referred to as the Corporate Debtor or CD/Respondent), seeking initiation of CIRP^{11.Corporate Resolution Insolvency Process} under section 7 of IBC^{22.Insolvency and Bankruptcy Code, 2016}. The Petitioner claims that the Respondent has committed a default in the repayment of financial debt amounting to Rs. 29,90,08,503.10, along with interest at the contractual rate per annum, compounded monthly, and an additional 2% overdue penal interest until realization^3.

It is submitted that, the Petitioner sanctioned a Term Loan of Rs 18.51 crores to the Respondent on 09.07.2014. The loan was duly secured by a hypothecation agreement and the creation of an equitable mortgage over the immovable property^{44.Immovable property bearing Khata no. 346, Khasra no. 221, 225-228 and Khata no. 345, Khasra no. 222, 225,} of the CD situated at village Bhensia, Rampur road, Moradabad, Uttar Pradesh. A charge was also created over the machineries, equipment, fixtures and other assets acquired or to be acquired by the CD. Security documents were executed by the CD in favour of the FC on

³ Copy of statement of accounts of the CD maintained by FC at Page 331-334 of the Application

227, 235, having total area of 14485 sq m in village Bhensia, Rampur road, Moradabad, UP 12.07.2014. Additionally, the FC obtained personal guarantees from the directors of the CD, namely Sh Vinod Kumar Sharma, Sh Sanjeev Kumar Sharma and Ms Anjali Bhardwaj.

The loan was availed by the CD for the purpose of constructing a 4-star budget hotel in Moradabad, Uttar Pradesh^{55.Suryansh Golf Link, Main Moradabad- Rampur National Highway no. 24, Moradabad, UP}. However, the CD defaulted in the repayment of equated monthly instalments and failed to regularize the loan account despite repeated request from the FC. Consequently, the account of the CD was classified as a Non-Performing Asset (NPA) wef 29.09.2015.

No repayment was made by the CD or the personal guarantors in response to the notice issued by the FC under the SARFAESI^{66.Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002} Act on 01.02.2016. Thereafter, on 30.04.2016, the FC issued a notice under section 13(4) of SARFAESI Act seeking possession of the mortgaged property. Subsequently, on 09.05.2016, the FC filed an application before the Debts Recovery Tribunal (DRT), Delhi, for recovery of the debt from the CD and the personal guarantors. Despite these measures, the CD failed to discharge its outstanding liabilities, leading to the filing of the present Application on 24.09.2024.

The acknowledgement of debt by the CD is evident from its financial statements^{77.Page 256-330 of the Application} for the years ending 31.03.2015 till 31.03.2023 and also the various OTS proposals^{88.One Time Settlement proposals dated 27.07.2016, 03.08.2016, 22.03.2017, 24.02.2023, 21.02.2024 at Pages} dated 27.07.2016, 03.08.2016, 22.03.2017,

336-356 24.02.2023, 21.02.2024 as well as the withdrawal letter^{99.Pages 357-358 of the Application} of 06.12.2018. The debt is authenticated in the Record of Default with the Information Utility^{1010.Pages 361-369 of the Application} also. The index of charges with the MCA^{1111.Page 359 of the Application} also evidences the charge created in favour of the Applicant against the loan amount of Rs 18.51 crores.

The CD in its reply of 20.02.2025, has questioned the maintainability of the Application contending that it is barred by limitation. Placing reliance on the order of Hon’ble NCLAT in Milind Kashiram Jadhav^{1212.Milind Kashiram Jadhav vs State Bank of India & Anr in Company Appeal (AT) (INS) 1589 of 2023}, it is submitted that the Application filed by the FC is barred by limitation, since the alleged default occurred on 29.09.2015, the date on which the account of the respondent was declared as NPA. It is also claimed that considering the OTS proposal of 22.03.2017, the limitation of three years lapsed on 21.03.2020, but considering the exclusion of the limitation period from 15.03.2020 till 28.02.2022, by the Hon’ble Supreme Court in WP No. 3 of 2020 on account of Covid-19 pandemic, the Application could have been filed between 01.03.2022 and 29.05.2022. It was claimed that the OTS offers of 24.02.2023 and 21.02.2024 could not be considered as these were outside the original period of limitation of three years starting from 22.03.2017.

The CD has alleged that the FC is involved in ‘forum shopping’ as it has invoked the jurisdiction under SARFAESI Act and also filed application before DRT. It is also claimed that since annexure number has not been mentioned, the affidavit filed along with the Application is defective.

Further, it is stated that in pursuance of the OTS sanction letter dated 24.12.2024 for Rs 30.25 crores, which was to be fully paid by 23.03.2025 by the CD, its group companies and guarantors, a sum of Rs 3.78 crores had been already paid to the account of the FC. The Application of the FC is sought to be kept in abeyance till 24.03.2025 by referring to the order of NCLAT dated 27.01.2025 in case of Anjali Bhardwaj, Suspended Director of M/s S V Buildcon Pvt Ltd v Canara Bank & Anr^{1313.Company Appeal (AT) (Insolvency) No. 1999 of 2024}, where taking note of the OTS and the assurance of the appellant to pay the entire amount by 23.03.2025, the matter had been adjourned to 24.03.2025.

The submissions of the parties were heard and records carefully perused. On the matter of OTS, it is undisputed that the proposal of 24.12.2024 was withdrawn by the FC on 30.01.2025 as the CD failed to make the repayment as per the sanctioned terms. Though the CD continued to insist before the Authority and also before the Hon’ble NCLAT, that it would make the repayment as per the OTS proposal, FC has reiterated its stand by e-mail of 21.03.2025 and 24.03.2025 that the OTS of 24.12.2024 had stood withdrawn on 30.01.2025 itself.

The case of the CD that the Application is barred by limitation has no merit. Under IBC, the default in payment of a debt triggers the right to initiate CIRP, and the application under section 7 of the IBC is required to be filed within three years from the date of default by virtue of section 238A of the IBC read with Article 137 of the Schedule to the Limitation Act. At this stage, it will be apt to refer to the judgment of the Hon’ble Supreme Court in the case of Dena Bank (now Bank of Baroda) vs C Shivkumar Reddy and Anr^{1414.Civil Appeal No. 1650 of 2020 dated 04.08.2021}, where it was noted:

Furthermore, in the case at hand, the acknowledgement of debt by the CD is evident from its financial statements^{1515.Page 256-330 of the Application} for the years ending 31.03.2015 till 31.03.2023 and also the various OTS proposals^{1616.One Time Settlement proposals dated 27.07.2016, 03.08.2016, 22.03.2017, 24.02.2023, 21.02.2024 at Pages} dated 27.07.2016, 03.08.2016, 22.03.2017, 24.02.2023, 21.02.2024 as well as the withdrawal letter^{1717.Pages 357-358 of the Application} of 06.12.2018. Reference is again made to the judgment of the Hon’ble Supreme Court in Dena Bank (supra), where it was held:

336-356 the right is claimed, has the effect of commencing a fresh period of limitation from the date on which the acknowledgement is signed. Such acknowledgement need not be accompanied by a promise to pay expressly or even by implication. However, the acknowledgement must be made before the relevant period of limitation has expired. ….

In support of its stand, the FC has relied on several other judgments also – Asset Reconstruction Company (India) Ltd vs Tulip Star Hotels Ltd and Ors^{1818.Civil Appeal No. 84-85 of 2020}; Vidyasagar Prasad vs UCO Bank & Anr^{1919.Civil Appeal No. 1031 of 2022}; Laxmi Pat Surana vs Union Bank of India & Ors^{2020.Manu/SC/0279/2021}; Archana Deepak Wani vs Indian Bank^{2121.Company Appeal (AT) (Insolvency) No. 301 of 2023}; and Deepak Kumar vs Phoenix ARC Pvt Ltd^{2222.Company Appeal (AT) Insolvency No. 848 of 2019}.

On the issue of alleged ‘forum shopping’ made by the CD – action taken under SARFAESI Act and application before DRT - the FC has relied on Indian Bank v Infinitas Energy Solutions Pvt Ltd^{2323.CP/558(IB)/CB/2017} and Paras Builders and Promoters v ASREC India Ltd & Ors^{2424.CA(AT)(INS) No. 1016 of 2024}.

In view of the above, there is no doubt in our minds that the Application by the FC is not hit by limitation contemplated in the Limitation Act, as contended by the CD. As indicated in Part-IV of Form-I, the debt of Rs 18.51 crores is undisputed as is the default, which occurred starting from 29.09.2015 and continued to subsist by way of acknowledgements in the form of financial statements and OTS proposals discussed in the preceding paras. Therefore, we have no reservations in accepting this Application under Section 7 of the IBC.

Hence, in view of the admitted debt and default, the application is allowed with the following directions:

The Application is admitted and this Adjudicating Authority orders the commencement of the Corporate Insolvency Resolution Process, which shall ordinarily be completed within the timelines stipulated in the Code, 2016 (as amended), reckoning from the date on which this order is passed.

The Applicant has proposed the name of Ms. Anju Agarwal as the Interim Resolution Professional (hereinafter referred to as the ‘IRP’). The declaration under Rule 9 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, by way of Form 2 indicates that no disciplinary proceedings are pending against her and she is eligible to be appointed as IRP qua the CD^{2525.Page 35-36 of the Application}. Accordingly, this Adjudicating Authority appoints Ms Anju Agarwal, Registration Number: IBBI/IPA-001/IP-P-00106/2017-2018/10213, whose Authorization for Assignment is valid up to 31.12.2025 as per the IBBI IPs Registered List on the website. The IRP is directed to file Authorization for Assignment within three days from the date of this order.

The IRP is directed to take charge of the management of the Corporate Debtor, immediately. She is also directed to cause public announcement as prescribed under Section 15 of the Code, 2016, within three days from the date of receipt of this order, and call for submissions of claims in the manner as prescribed.

Moratorium is, hereby, declared and shall have effect from the date of this order till the completion of the CIRP, for the purposes referred to in Section 14 of the IBC.

It is hereby ordered that all of the following are prohibited:

Notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances 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, concessions, clearances or a similar grant or right during the moratorium period.

The supply of essential goods or services to the Corporate Debtor shall not be terminated, suspended or interrupted during the moratorium period. Further, if the IRP considers supply of any goods or services critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period.

Furthermore, the provisions of Sub-section (1) of Section 14 of the IBC 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 to a surety in a contract of guarantee to a corporate debtor.

The IRP shall comply with the provisions of Sections 13(2), 15, 17 & 18 of the IBC. The Directors, Promoters or any other person associated with the management of Corporate Debtor are directed to extend all assistance and co-operation to the IRP as stipulated under Section 19 of the IBC for discharging her functions under Section 20 of the IBC.

The Corporate Debtor as well as the Registry is directed to send the copy of this Order to the IRP, to enable her to take charge of the assets etc. of the Corporate Debtor, and comply with this order as per the provisions of the IBC.

The Registry is directed to communicate this Order to the Corporate Applicant.

The Registry shall also communicate this Order to the Registrar of Companies, for updating the status of the Corporate Debtor in the website of the Ministry of Corporate Affairs.

Accordingly, this Company Petition is allowed.