Indian Renewable Energy Development Agency Ltd. vs Shri Sai Kripa Sugars and Allied Industries Ltd.

Per: Shyam Babu Gautam, Member Technical

This Company Petition is filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Indian Renewable Energy Development Agency Limited ("hereinafter referred to as Petitioner"), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Shri Sai Kripa Sugars and Allied Industries Ltd ("hereinafter referred to as Respondent").

The Corporate Debtor is a Limited company incorporated on 16.12.1998 under Companies Act, 1956 and having its registered office situated at Shop No.6, Annasaheb Magar Bhawan,Gultekdi,Market Yard, Pune-411037. Therefore, this Bench has jurisdiction to deal with this Petition.

The present Petition was filed on 16.2.2018 before this Adjudicating Authority on the ground that the Respondent has defaulted in repayment of loan amount of Rs.90,71,78,954 /- (Rupees Ninety Crores Seventy one Lakhs Seventy Eight Thousand Nine hundred and Fifty Four Only) sanctioned by the Petitioner.

The total amount claimed to be in default by the Petitioner is Rs.165,73,07,759/- (Rupees One Hundred and Sixty-Five Crores Seventy Three Lakhs Seven Thousand and Seven Hundred and Fifty Nine Only) as on date of filling the Petition. The date of default in the Petition is stated to be 31.12.2012 and the account was classified as NPA on 31.03.2014.

It is pertinent to note that the Bombay High Court vide order dated 21.4.2017 was pleased to dispose of the Company Petition No.8 of 2017 presented by Allied Blenders and Distillers Private Limited against the present Respondent, in terms of the Consent terms dated 18.4.2017. The Hon’ble Court was pleased to pass the order that in case of any default as contemplated in terms of consent terms, the Company Petition shall stand revived and admitted. In that event, the Official Liquidator shall also be appointed as Provisional Liquidator. Since there was a default, the Official Liquidator of the High Court was requested to proceed as per law. The Official Liquidator thus stands appointed and has conducted several meetings and also taken various steps as stated in his report dated 31.05.2022 filed before this Tribunal. It was further stated that he is in the process of filling Official Liquidators report in the Hon’ble High Court seeking appropriate directions and that this Tribunal may pass such other and further directions that this Tribunal deems fit.

We heard the learned counsel for the Petitioners and the learned counsel for the Ex-Managing Director of the Respondents on 14.11.2022 and directed both parties to file their written submissions, which have been accordingly filed. None appeared for the Official Liquidator.

The Corporate Debtor had approached the Financial Creditor and was granted loan facility of Rs. 121,03,95,000/- (Term loan of Rs. 93,80,00,000/- and Additional/Bridge Loan against SDF of Rs 27,23,95,000/-) for the purpose of already set up of 40 MW Congregation Project at Village Hiradgaon, Taluka Shrigonda, District Ahmednagar, Maharashtra. Later, on several dates several amounts were disbursed under the Loan Agreement to the tune of Rs. 93,80,00,000/-

The Corporate Debtor failed to fulfil its obligations under the loan agreement and defaulted in repayment with the first default occurring on 31.12.2012 (within few months from the disbursement).

For the purpose of debt and default the Petitioner has relied upon;

Accordingly it is sought to be argued that the said facts and documents clearly establish an acknowledgement of the debt on behalf of the Corporate Debtor. According to the Petitioner, such actions of the Corporate Debtor clearly establish the existence of the financial debt as defined under section 5(8) of the Code and default.

We had permitted the Ex-Managing Director of the Respondents pursuant to application made, to submit their written arguments and make brief submissions. The primary contention raised by the Ld. Counsel of the Ex-Managing Director of the Respondent is that the debt as sought by the Petitioner in the Company Petition is barred by the Law of Limitation. It is the contention of the Respondents that as per the Petition, the last date of disbursement was 30.05.2012 and the date of default for the debt mentioned is 31.12.2012 and the number of default days stated in the Petition is 1826 days. The said Company Petition was filed on 12.02.2018. Thus, according to them, time barred debts have been sought by the Financial Creditor in the said Company Petition.

It is further contended that, even as per the Financial Creditor, the loan amounts were to be repaid in installments. The date of payment as to the second installment in the loan agreement and the date of default as stated by the Financial Creditor in the said Company Petition is 31.12.2012 as described in Schedule 5, Amortization Schedule, Loan Agreement dated 02.12.2011. Hence according to them, as per the loan agreement read with the date of default stated by the Financial Creditor, admittedly the alleged default took place on 31.12.2012.

It is further submitted that that the Financial Creditor has sought to use the IBC machinery to give a new lease of life to its time barred debts and an application under Section 7 of the IBC is governed by Article 137 of the Limitation Act and, is therefore three years from the date when right to apply accrues. However, the present Petition has been filed beyond the stipulated period of limitation. Reliance is placed on “Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd. (2020) 15 SCC 1”.

The Respondent submits that based on a letter dated 28.03.2014, the Financial Creditor contended that the loan amount was rescheduled and canvassed an argument debt being acknowledged by the Respondent and even if that is considered, the same would extend limitation till March 2017. However, the Financial Creditor has filed the present Company Petition in February 2018. Hence, evidently, the said Petition is barred by the law of limitation. Further even as per the alleged loan rescheduling letter, particularly the annexure thereto, repayment schedule was revised and it had to start from 2018 up to 2024, however, the said loan rescheduling letter never fructified, and the same is impliedly admitted by the Financial Creditor in the said Company Petition. It is further submitted that thereafter, the Financial Creditor to extend the limitation relied upon some letter dated 2018, which does not form part of the record and is not an annexure of the said Company Petition and these Respondents never had a chance to deal with it and that the document placed by screen sharing does form part of the record and cannot be relied by the Tribunal at this stage of the hearing.

Further it was submitted that limitation is a mixed question of fact and law and the Financial Creditor has not even laid foundation in the said Petition for suggesting any acknowledgment of any other date of default and that when a party seeks application for extension or enlargement of the period limitation, the relevant facts are required to be pleaded and requisite evidence required to be adduced. Hence it is their contention, that the arguments advanced by the Financial Creditor, as to acknowledgment of debt ought to be rejected by this Hon’ble Tribunal as per law laid down in paragraphs 33, 34, 34.1, 35 and 35.1 of the judgement of the Apex Court in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd. (2020) 15 SCC 1.

The ld. Counsel further submitted that in the Financial Creditor’s further quest to extend limitation of its time barred debt, it relied upon some tabulated list of cheques and part payments made by the Corporate Debtor, and contended that the same would further extend limitation. However according to them, the said argument is misplaced for the following reasons:

It is accordingly submitted that the debt is time barred and this Hon’ble Tribunal ought to reject the Company Petition filed under Section 7 of IBC by the Financial Creditor.

An alternate submission was also canvassed by the Ld Counsel whereby was submitted that Liquidated Damages and Penal Interest are being sought by the Financial Creditor which does not fall within the definition of Financial Debt. To substantiate this, it was submitted that the Loan Agreement dated 02.12.2011 stipulated various clauses qua penal interest, incidental charges and liquidated damages. Clauses 2.5,2.6 and 2.7 were highlighted and submitted that the debt claimed by the Financial Creditor viz. liquidated damages and penal interest, does not fall within the definition of Financial Debt i.e. Section 5(8) of IBC. The law is well settled that a claim for unliquidated damages/penal interest does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a civil court or other adjudicatory authority.

As regards the Debt being barred by Limitation, it is submitted that, for the purpose of establishing that the company petition has been filed within limitation (3 years and then reasons for extension of limitation) following may be noted:

an amount of Rs. 5, 09,65,181/-

Therefore, it is contended that the petition filed on 12.02.2018 is well within limitation. It was also sought to be argued that the Corporate Debtor made part payments of Rs. 2 Crore on 14.02.2015 and several other payments towards interest overdue for the period of 01.06.2015 to 18.08.2015 which extends the limitation period till August, 2018 for filing the present company petition.

It was also submitted that the part payments made by the Corporate Debtor automatically extended the limitation period for filing the present company petition under section 19 of the Act of 1963. It was sought to be argued that Sec. 19 of the Act of 1963 shows that the use of the word “shall” automatically extends the limitation period by application of law when any payment is made towards any debt due and payable and the period shall be computed from the date of making the said payments. Furthermore, Sec. 19 does not provide for making of an application before the Court for extension of limitation period.

Without prejudice to the above, it was also sought to be submitted that an application under Section 5 of the Act of 1963 can only be made where the limitation period for filing the application/petition/suit has expired, however, the part payments made by the Corporate Debtor extended the limitation period for filing the present company petition from time to time and the same was filed well within limitation period. Therefore, there is no requirement of making of application under section 5 of the Act of 1963. Furthermore, the Hon’ble Supreme Court in the judgment of Sesh Nath Singh & Anr vs. Baidyabati Sheoraphuli Co-operative Bank Ltd and Anr. (2021) 7 SCC 313 has held that section 5 of the Act of 1963 does not make it mandatory to file an application for condonation of delay in writing before granting such a relief.

As regards liquidated damages and penal interest being sought as financial debt, it was contended that the corporate debtor has ignored the fact that without interest and other claims, the loan amount is approximately Rs. 90 crores.

As regards documents being letter dated 17.04.2018, tendered across the bar to the predecessors of this Bench, it is contended that, the same forms part and parcel of the record of this Hon’ble Tribunal in the present company petition. Reliance is also placed on judgment of Dena Bank vs. C. Shivkumar Reddy & Another (2021) 10 SCC 330 where the Supreme Court has held that the parties can file additional documents in an application under Section 7 of the Code before the pronouncement of the judgment. In light of the said judgment, the Financial Creditor was not barred to tender letter dated 17.04.2018 before this Hon’ble Tribunal merely because the same was not annexed with the present company petition. Moreover, the present company petition was filed on 12.02.2018 whereas the said letter was authored by the Corporate Debtor after filing of the present company petition.

Heard the Ld. Counsel for the parties and perused the records.

The Petitioners in the Petition have categorically stated that as on 31.12.2017 total principal amount of debt was Rs.90,71,78,954/- plus interest thereon at contractual date. The date of disbursements were from 04.04.2012 to 30.05.2012. Further the petition states that the amount claimed to be in default on which the default occurred is Rs.165,73,07,759/- and the date of default is mentioned as 31.12.2012. Further reliance is on post dated cheques issued by the Respondent dated 31.03.2013, 28.03.2013, 30.09.2015, 31.12.2015, 30.06.2017 which were dishonoured and also on loan recall notice dated 05.03.2015 to the Corporate Debtor for repayment of the default amount and that the Corporate Debtor had paid a sum of Rs. 2 Crore on 14.02.2015 as stated in the said loan recall notice. Reliance is also placed on a letter dated 17.04.2018 to the Financial Creditor proposing for debt resolution wherein the Corporate Debtor proposed to pay the principal outstanding amount to the Financial Creditor over a period of 8-9 years provided if the repayment of interest overdue was waived by the Financial Creditor.

Pertinently even after objections raised by the Respondent that this did not for part of the record, no attempt was made by the Petitioners to make a application or file the same with a affidavit so the Respondents could deal with it. Only argument was that a copy of this letter was tendered previously at the time of arguments before the predecessors of this bench.

Reliance is placed by the Petitioners on the judgements of Sesh Nath Singh & Anr vs. Baidyabati Sheoraphuli Co-operative Bank Ltd and Anr. (2021) 7 SCC 313 for the proposition that section 5 of the Act of 1963 does not make it mandatory to file an application for condonation of delay in writing before granting such a relief and also reliance on Dena Bank vs. C. Shivkumar Reddy & Another (2021) 10 SCC 330 where the Supreme Court has held that the parties can file additional documents in an application under Section 7 of the Code before the pronouncement of the judgment.

As regards the judgement of Sesh Nath Singh & Anr vs. Baidyabati Sheoraphuli Co-operative Bank Ltd and Anr. (2021) 7 SCC 313 it can be seen that there has to be sufficient cause and the same has to be placed on record by application or affidavit unless the facts are so compelling that oral application has to be made. Some of the relevant paragraphs of the judgement are as under;

Thus what has to be seen is that if there is sufficient cause made out and if the said reasons have been explained on affidavit or by application. In the instant case the Petition is filed in 2018 and documents sought to be relied for extending limitation are of 2018, however no application or any affidavit is filed placing them on record, which would have given opportunity to the Respondents to respond. Hence this judgement would be of no avail to the Petitioners.

In Sesh Nath Singh & Anr vs. Baidyabati Sheoraphuli Co-operative Bank Ltd and Anr. (2021) 7 SCC 313 similarly also mandate that some application placing such documents on record by way of amendment or otherwise ought to be made which is absolutely lacking in the instant case. Some of the relevant paragraphs are as under;

Thus, it can be seen that to condone delay or take judicial notice of additional documents, the same ought to be placed on record by way of application or amendment or affidavit. Simply by screen sharing, the same cannot be taken on record as the other side has no opportunity to deal with the same.

In this background it is relevant to note the ratio laid down by Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd. (2020) 15 SCC 1 in paragraph;

The said ration has been followed by the NCLAT in Jagdish Prasad Sarada v. Allahabad Bank, Company Appeal (AT) (Insolvency) No.

Thus, for the reasons aforesaid the Petition is barred by limitation and is dismissed.

Registry is hereby directed to communicate the Order to the concerned Registrar of Companies and to both the parties.