Canara Bank vs Supreme Best Value Kolhapur (Shiroli) Sangli Tollways Private Limited

This is an application filed by the Applicant- Canara Bank (hereinafter also referred to as the “Financial Creditor” or “Petitioner”), against the Respondent- Supreme Best Value Kolhapur (Shiroli) Sangli Tollways Private Ltd (hereinafter also referred to as the “Corporate Debtor”), under Section 7 of the Insolvency & Bankruptcy Code 2016 (in short, ‘the Code’) r/w Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 on 29.11.2024 seeking commencement of the Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor, appointment of Interim Resolution Professional (‘IRP) and declaration of moratorium. The amount claimed to be in default is Rs. 346,83,19,536.66/-.

From Part-I of Form 1, it is seen that the present application is filed by Canara Bank and the person authorised to file this application is one Mr. Gaurav Pareek, who is posted as the Manager of the Applicant Bank and in whose favour the Applicant Bank has issued an Authority Letter dated 21.11.2024.

Part II of the application in Form 1 reveals that the Respondent/Corporate Debtor i.e. Supreme Best Value Kolhapur (Shiroli) Sangli Tollways Pvt Ltd is a Special Purpose Vehicle (SPV) incorporated on 31.12.2011 by Supreme Infrastructure India Limited (“SIIL”) for the sole purpose of executing the four-laning project from Shiroli to Sangli, having its registered office at Supreme City, Hiranandani Complex, Powai, Mumbai-400076.

Part-III of the application in Form 1, reveals that the Applicant has proposed the name of Mr. Rajesh Jhunjhunwala, to be appointed as the IRP of the Corporate Debtor in the event that this petition gets admitted. The Applicant has also obtained the Written Consent from the proposed IRP above-named in Form 2, the copy of which is annexed to this application as Annexure ‘GG’.

Part IV of the application vide Form 1 reveals that the amount claimed to be in default by the Applicant/Financial Creditor is Rs. 346,83,19,536.66/-. As evident from Part IV of the Application, the total amount of debt granted was Rs. 85,80,00,000/-.

The date of default stated by the Applicant in Part IV of the application is 30.04.2017. The account of the Respondent was declared as NPA on 30.07.2017 and the date of default after considering the acknowledgement in the balance sheet is 31.03.2022.

The facts narrated by the Applicant in Part IV of the Application are stated hereinbelow:

Reply Affidavit dated 28^th May, 2025: Ms. Janhvi Nagi, has filed an affidavit-in-reply on behalf of the Respondent, which was solemnly affirmed, notarised and verified on 28.05.2025. The contentions of the Respondent in the aforesaid Affidavit are summarised hereinbelow:

The Public Works Department (PWD) has challenged the said arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Hon’ble Bombay High Court. However, the Respondent has also initiated execution proceedings before the Hon’ble Bombay High Court. As no stay has been granted on the award, the same remains valid and enforceable.

In view thereof, the Respondent (SPV):

As recorded in the minutes of the Joint Lenders’ Meeting held on 09.05.2018, it was expressly agreed that:

The Respondent submits that no technical or legal “default” can be said to exist in view of the express terms recorded in the Joint Lenders’ Meeting held on 09.05.2018. As per the mutual understanding of all consortium lenders, the repayment obligation stood contractually linked to the proceeds of the arbitral award. Since the said award is presently under challenge before the Hon’ble Bombay High Court, the debt cannot be treated as “due” or payable until the award is enforced.

The Respondent has not committed any wilful default. The inability to repay arises solely from the unilateral takeover of the project by the PWD and its failure to issue the Provisional Completion Certificate (PCOD), which directly disrupted the Respondent’s sole revenue stream, resulting in cessation of toll/annuity-based income and, consequently, disabling its repayment capacity.

The Respondent has acted in good faith at all times and has invested substantial resources to achieve approximately 98% physical completion of the project. The delays and financial constraints are attributable entirely to governmental actions and administrative lapses, and not to any wilful or negligent conduct on the part of the Respondent.

The Petitioner is not entitled to unilaterally initiate recovery or enforcement proceedings without prior notice and coordination, as such action is contrary to the binding terms of the Joint Lenders Agreement (JLA) and the minutes of the Joint Lenders Meeting (JLM) dated 9.05.2018. Under the JLA, all lenders agreed to act collectively, and no individual lender was authorised to enforce or recover independently without prior consensus of the consortium. Accordingly, Canara Bank’s unilateral enforcement action, undertaken without adherence to the agreed inter-creditor mechanism, is in violation of the JLA and the collective understanding among the consortium lenders.

The present Company Petition is barred by time as the pleaded dated of alleged date of default is 30.04.2017. it is submitted by the Petitioner that the last revival letters was issued by the Respondent on 11.08.2018. Further, the balance sheets of the Respondent do not constitute acknowledgement of debt and therefore no extension of period of limitation is available to the Petitioner. Since the Petition has been filed beyond the prescribed three-year period without any legally valid extension or acknowledgment of debt under the Limitation Act, the proceedings are ex facie time-barred and liable to be dismissed on this ground alone.

It is submitted that the principles of Order 7 Rule 6 of the Code of Civil Procedure, 1908 provides that a plaint shall necessarily show the ground upon which exemption from the law of limitation is sought, if the plaint is being filed after the expiration of the limitation period.

It is submitted that the present Petition has been filed after eight years from the alleged date of default i.e. 30.04.2017. The vague and unsubstantiated averments made by the Petitioner regarding alleged “acknowledgment of debt” are devoid of any supporting evidence or material. The Petition is clearly barred by limitation, having been filed well beyond the statutory period of three years prescribed under Article 137 of Schedule I of the Limitation Act, 1963, and therefore deserves to be dismissed with costs.

It is further submitted that under Section 7(2) of the Insolvency and Bankruptcy Code, 2016, an application under Section 7(1) shall be filed in the manner as prescribed in the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Rule 4 of the said Rules requires the application to be filed in Form 1, along with all documents and records specified therein. Part V of Form 1 mandates the submission of documents, records and evidence in support of the alleged default.

However, the Petition lacks proof of the alleged debt and default. In the absence of evidence establishing sanction, disbursement and default by the Corporate Debtor, the Petition under Section 7 of IBC, 2016, is liable to be dismissed.

In light of the above submissions, the Respondent prays for dismissal of the present Company Petition with heavy costs.

Affidavit-in-Rejoinder dated 17.06.2025: Mr. Gaurav Pareek, has filed an affidavit-in-rejoinder on behalf of the Petitioner, which was solemnly affirmed, notarised and verified on 17.062025. The contents of the aforesaid rejoinder are hereinbelow summarised:

It is submitted that the Respondent’s claim of no default, based on the JLM meeting dated 09.05.2018, is false and misconceived. The assertion that recovery was to be made solely through the Escrow/TRA account and directly from PWD does not absolve the Respondent of its repayment obligations and cannot be a defence to default.

At the outset, the Respondent has not placed on record the minutes of the JLM Meeting and therefore cannot rely on the same. In any event, the Petitioner has never agreed to recover dues directly from PWD through the TRA mechanism. The Respondent remains in default of amounts due and payable. Without prejudice, it is further submitted that the Petitioner has not received any payment from the Respondent and/or through the TRA Account, and accordingly, the Respondent continues to be in default.

It is further submitted that the Respondent is neither financially sound nor commercially viable, as it admittedly has no revenue stream or income source other than the toll/annuity-based receipts under the Concession Agreement. In the absence of any alternate means of repayment, the Respondent is unable to discharge its admitted liability. Accordingly, the Respondent is liable to be admitted into the Corporate Insolvency Resolution Process (“CIRP”) under the Code.

The Arbitral Award is under challenge before the Hon’ble Bombay High Court under Section 34 of the Arbitration and Conciliation Act, 1996, and remains pending. There is no certainty of receipt of the awarded amount. In any event, the Petitioner’s claim of INR 346.83 crores exceeds the Award of INR 318 crores; hence, even if the Award is received, a sum of over INR 1 crore would still remain due and payable.

It is denied that any Joint Lenders Agreement exists which bars the Petitioner from initiating proceedings under Section 7 of the IBC. It is further denied that the lenders had agreed to act collectively or that individual enforcement was prohibited. The present proceedings are not recovery proceedings, but initiation of insolvency proceedings due to the Respondent’s admitted debt and default.

It is further submitted that the statutory right of a financial creditor to initiate proceedings under the IBC cannot be overridden or restricted by any inter se contractual arrangement among lenders. Accordingly, the Respondent’s contention deserves to be rejected at the threshold.

In the present case, the date of default is April 30, 2017.

The Respondent has acknowledged the debt due and payable to the Petitioner in its balance sheets for the financial years ending March 31, 2019; March 31, 2021; and March 31, 2022. Such acknowledgments constitute valid acknowledgments under law and extend the period of limitation.

It is denied that the Petitioner has failed to plead extension of limitation. The Company Petition specifically pleads acknowledgment of debt by the Respondent in its balance sheets, thereby extending the limitation period. Further, the Respondent’s reliance on the Code of Civil Procedure, 1908 is misplaced, as it does not apply to IBC proceedings.

Accordingly, the present Petition is within limitation and is maintainable.

In response to the Reply, wherein the Respondent alleges absence of proof of disbursement and default, it is submitted that the Statement of Accounts annexed to the Company Petition clearly evidences both the disbursement of funds to the Respondent and the default committed by it. Accordingly, the said contention is baseless, misconceived, and deserves to be rejected by this Tribunal.

In view of the aforesaid facts, the present petition be admitted.

We have heard the learned Counsel for the Petitioner and the learned Counsel for the Respondent. We have perused the materials and documents placed by both the parties on record of this Tribunal.

The Financial Creditor has sanctioned (i) Term Loan Facility of Rs. 73.75 crores and (ii) Cost Overrun Facility of Rs. 12.05 crores; thus, sanctioning facilities amounting to Rs. 85.80 crores in favour of the Corporate Debtor. The total claim of the Financial Creditor is Rs. 346.83 crores as of 31.10.2024.

In the present case, we find that the Financial Creditor had disbursed various credit facilities to the Corporate Debtor in the form of credit facility and term loans. The consolidated particulars of claim, are given by the Applicant in exhibit DD.

The Financial Creditor has sanctioned and disbursed term loans aggregating to Rs. 85.80 crores to the Corporate Debtor as part of a consortium financing arrangement for the road infrastructure project under a Concession Agreement dated 30.12.2011.

The Corporate Debtor has not denied the execution of various security document or the receipt of financial assistance from the Applicant. Rather, the Corporate Debtor justifies its inability to repay on grounds of delayed land acquisition, non-availability of clear right of way, delay in approvals and utilities shifting, non-receipt of toll revenues and financial distress caused due to government action of cancelling the concession agreement.

Several security documents were executed by the Corporate Debtor which establish that Corporate Debtor has obtained debt.

Therefore, the existence of a financial debt, as defined under Section 5(8) of the IBC, 2016 stands established.

The Financial Creditor has annexed statement of accounts and a recall of notice dated 26.02.2020, evidencing persistent non-payment despite repeated reminders. Further, classification of the account as NPA on 30.07.2017 is not disputed.

The Applicant has sent recall notice dated 26.02.2020 to the Respondent which was acknowledged by the Respondent. The Applicant had called upon the Respondent to clear the entire outstanding liability with upto date interest, penal interest and other charges within 10 days from the date of this letter

The Corporate Debtor contended that no default can be said to have occurred due to express terms agreed upon between all consortium lenders and repayment obligation was contractually shifted to the arbitral award . The arbitral award in its favour amounting to Rs. 318.94 crore is under challenge before the Hon’ble Bombay High Court. Hence, the debt is not due or payable till the award is enforced.

We find that the contractual repayment obligations under the loan agreements are binding and default has occurred. The mere pendency of arbitration or enforcement proceedings does not suspend liability under the IBC.

Further, the minutes of the Joint Lenders Meeting (JLM) dated 09.05.2018 have not been placed on record by the Corporate Debtor, and the Financial Creditor has categorially denied any such inter-creditor restriction.

Respondent has failed to produce any document before us through which Respondent could establish contention that debt obligations as per the loan agreement were suspended pending the recovery through the arbitral award. On the other hand Applicant has placed the security documents/ loan agreement to prove the existence of default.

Further, the Corporate Debtor contested that the pleaded date of default is 30.04.2017 and the last revival letter was issued by the Corporate Debtor on 11.08.2018 also the balance sheets of the Corporate Debtor do not constitute an acknowledgment of debt and therefore no extension of period of limitation is available to the Financial Creditor.

The Corporate Debtor has relied upon the judgment of the Hon’ble Supreme Court of India in the matter of Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., reported as (2020) 15 SCC 1 wherein inter alia a petition under section 7 of the Code was rejected as being barred by limitation.

The date of default is 30.04.2017. The Petition has been filed on 29.11.2024. The Financial Creditor relies on:

It is well-settled that the entry in the balance sheet amounts to an acknowledgment of liability under section 18 of the Limitation Act, 1961 in view of the judgement of the Hon’ble Supreme Court in the Matter of Assets Reconstruction (India) Limited versus Bishal Jaiswal and others, MANU/ SC/ 0279/2021. In view of the above, the petition is filed within the period of limitation.

In support of existence of debt and default, the Applicant has also attached NeSL Record of Default in Form D, as Exhibit EE, which states the status of authentication of default as “deemed to be authenticated.”

The Corporate Debtor seeks rejection based on pendency of arbitration and financial distress. The Corporate Debtor has relied upon the judgment of the Hon’ble Supreme Court of India in the matter of Vidarbha Industries Power Limited v. Axis Bank Limited (reported at 2022 SCC Online SC 841), wherein it is held that:

It is submitted by the Financial Creditor that the Vidarbha Judgment is not applicable to the present case. The Hon’ble Supreme Court, in subsequent decisions, has clarified that the discretion under Section 7(5)(a) of the IBC is narrow and conditional. Once the existence of a financial debt and default is established, the Adjudicating Authority is bound to admit the petition unless exceptional and legally justifiable grounds are made out.

Applicant relies on the judgement of Hon’ble Supreme Court in M. Suresh Kumar Reddy v/s. Canara Bank and others (2023) 8 SCC 387 and the relevant para is reproduced below:

The Applicant has also relied on the judgement of the Hon’ble NCLAT, New Delhi in Company Appeal (AT) (Insolvency) No. 2261 of 2024 Edelweiss Asset Reconstruction Company Limited v/s Takshashila Heights India Pvt. Ltd. where it was held that:

Therefore, in view of the aforesaid judgment, we rely upon the Hon’ble Supreme Court’s judgment in M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr. (Judgment dated August 31, 2017 in Civil Appeal Nos. 8337-8338 of 2017) wherein it has been held as follows:

We find that mere pendency of challenge to an arbitral award or expectation of future realisations does not constitute a valid ground to reject an application under Section 7. The Applicant has submitted as follows:

Upon perusal of the records and hearing the submissions, this Tribunal is satisfied that a financial debt exists; there has been a default in repayment; the petition is within limitation, Petition is complete as all the required documents have been attached along with the Petition, all procedural requirements under Section 7 of the IBC, 2106 and Rule 4 of the Adjudicating Authority Rules are satisfied.

In the instant case, we are satisfied that the Corporate Debtor has committed a default in repayment of financial debt to the Financial Creditor for the reasons stated hereinbefore. Therefore, applying the ratio of the Supreme Court judgments in Innoventive Industries Ltd. Vs. ICICI Bank (supra), we are of the considered view that the present application filed u/s 7 of the Code must be admitted. Accordingly, we pass the following orders:

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

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

c. 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;

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

e. The provisions of sub-section (1) shall however, not apply to such transactions, agreements as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to the Corporate Debtor.