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Judgment
Justice M. Venugopal, Member (Judicial):
Background:
Comp. App (AT) (CH) (INS.) No. 261 of 2022:
The `Appellant’ / `Suspended Director and Share Holder’ of the `Corporate Debtor’ / M/s. A.L. Sudershan Constructions Company Limited’, has preferred the instant Comp. App (AT) (CH) (INS.) No. 261 of 2022, as an `Aggrieved Person’, in respect of the `impugned order’, dated 06.05.2022 in CP (IB) No. 324 / 7 / HDB / 2020 (Filed by the `1st Respondent / Petitioner / Financial Creditor’), under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, passed by the `Adjudicating Authority’ (`National Company Law Tribunal’, Hyderabad Bench, Hyderabad).
The `Adjudicating Authority’ (`National Company Law Tribunal’, Hyderabad Bench, Hyderabad), while passing the `impugned order’, dated 06.05.2022, in CP (IB) No. 324 / 7 / HDB / 2020 (Filed by the `1st Respondent / Petitioner / Financial Creditor’), under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, at Paragraph Nos.6 to 8, had observed the following:
6.``It is the case of the Financial Creditor that it has provided various loan facilities to the Corporate Debtor from time to time and that as on date an amount of Rs.239,51,53,055.83/- is in default. The only contention of the Corporate Debtor is that the Application herein has not accounted for the amounts received by way of sale of various assets of the Corporate Debtor and therefore the Application lacks merit. In relation to the said contention, it is settled position of Law than an Applicant under Section 7 of IB Code, 2016 cannot be rejected by the Adjudicating Authority on the ground of existence of dispute about the quantum of claim. It is for the Resolution Professional so appointed to decide the quantum of claim and not this Adjudicating Authority. No doubt, this Authority must look into the amount of the undisputed claim to find out whether after the adjustment of disputed amount, the claim amount shall become lower than the threshold stipulated in Section 4 of the IB Code, 2016. In the instant case, the petition was filed by the Corporate Debtor on 15.07.2020, and even if the amount as alleged against the sale of the assets is considered as non-accounted for by the Applicant, the claim in the instant petition is way higher than the said un-accounted amount. Thus the instant Application easily surpasses the Section 4 threshold limit of Rs. 1 Crore. Under the provisions of the Code, this Adjudicating Authority is required only to adjudicate if there is any `financial debt’ and `default’ in repayment of the same and if the same surpasses the pecuniary jurisdiction or threshold limit as stipulated u/s 4 of the Code. It is pertinent herein to note that the Hon’ble Supreme Court, while deciding the matter in the case of INNOVENTIVE INDUSTRIES LTD. Vs. ICICI BANK & ANR., in Civil Appeal Nos. 8337-8338 of 2017, held as under:
``….. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under subsection (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.’’
7.After hearing both sides and perusing record, we are of the view that in the instant case there is a `financial debt’ and there has been a `default’ in repayment of the same and the said default is far more than Rs. 1 Crore. Thus, this Adjudicating Authority is satisfied that the Financial Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Hence, the contentions of the Corporate Debtor are overruled.
8.Further the Financial Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner / Financial Creditor, this Adjudicating Authority is inclined to admit the instant Application.’’ and finally `Admitted’, the `Application’, by `appointing’ an `Interim Resolution Professional’, and declared `Moratorium’, etc.
Appellant’s Submissions:
The Learned Counsel for the Appellant, contends that the `Adjudicating Authority’ / `Tribunal’, had failed to `appreciate’ that the `Claim’ of the `1st Respondent / Petitioner / Financial Creditor’, was hopelessly barred by `Limitation’.
According to the Appellant, the `period of three years’, as per `Article 137 of the Limitation Act, 1963’, for filing the `Claim’, under Section 7 of the Code, lapsed on 10.06.2009, and that the Section 7 Application, was filed on 29.02.2020, being `Barred by Time’.
The Learned Counsel for the Appellant, points out that the `Default’, in the present case, took place on 11.06.2006, and that, the `1st Respondent / Petitioner / Financial Creditor’, had relied upon the `One Time Settlement Offer’, made without `prejudice to the rights’, that too, `after three years from the date of last acknowledgement’.
It is represented on behalf of the Appellant that the `Adjudicating Authority’ / `Tribunal’, had failed to appreciate that the `Corporate Debtor’s Account’, became a `Non Performing Asset’, in the Year 2006
It is the version of the Appellant, that the `Adjudicating Authority’ / `Tribunal’, had failed to appreciate that the `1st Respondent / Petitioner / Financial Creditor’, had filed an Original Application before the Debt Recovery Tribunal, Hyderabad, in O.A. No. 547 of 2019, and on receipt of the `Reply Statement’, from the `Corporate Debtor’, the `1st Respondent / Petitioner / Financial Creditor’, knowing full well that the `Claim’, will not sustain, before the `Debt Recovery Tribunal’, came out with a `Petition’, being filed under Section 7 of the I & B Code, 2016.
The Learned Counsel for the Appellant, proceeds to point out that the `Adjudicating Authority’ / `Tribunal’, should have seen the `One Time Settlement Letters dated 24.03.2009, 09.12.2010 and 04.06.2012, the `1st Respondent / Petitioner / Financial Creditor’, had agreed that after selling of the `Properties’ of the `Family Members’ of the `Directors’ of the `Corporate Debtor’, the remaining amount, shall be paid, from the `Award’, passed by the `Arbitrators’. As such, the `1st Respondent / Petitioner / Financial Creditor’, should have waited for the `Final Determination’, in the `Arbitration Appeal’ proceedings.
The other contention advanced on behalf of the Appellant is that, the `Adjudicating Authority’ / `Tribunal’, should have seen that the `1st Respondent / Petitioner / Financial Creditor’, filed an `Impleading Petition’, in the pending `Arbitration Suit No. 5 of 2015’, and prayed for, the `Payment of the Sum’, to be recovered, under the `Arbitration Award’, which clearly exhibits that the `One Time Settlement’, agreed on 24.03.2009, still in force, and hence, the `Application’, filed under Section 7 of the `Code’, is `not maintainable’.
The Learned Counsel for the Appellant, contends that the `Adjudicating Authority’ / `Tribunal’, came to a wrong conclusion that the `1st Respondent / Petitioner / Financial Creditor’, had satisfied all the stipulations, as required under the Provisions of the I & B Code, 2016. That apart, the `1st Respondent / Petitioner / Financial Creditor’, had not mentioned the `Date of Default’ in `Form I’, which clearly prove that the `Financial Creditor’, had not fulfilled the stipulations, required under the `Code’.
The Learned Counsel for the Appellant, brings it to the notice of this `Tribunal’ that the `Adjudicating Authority’ / `Tribunal’, should have `rejected’, the `application’, filed under Section 7 of the `Code’, based on the ground that the Financial Creditor’s Claim is `Barred by Limitation’, and also there is a `Dispute’, in regard to the `Invocation of Bank Guarantees’.
Moreover, the `Suit’ in OS No. 7734 of 2014, is pending before the City Civil Court, Bengaluru, in regard to Chitradurga Project and Arbitration Suit No.5 of 2015, is pending on the File of the City Civil Court, Bengaluru (Filed by the National Highway Authority), as against the `Arbitration Award’, issued in favour of the `Corporate Debtor’.
The Learned Counsel for the Appellant, takes a stand that the `Award’ in `Arbitration, was initiated against the National Highways Authority of India, on 06.09.2014 and the said `Award’, is under `challenge’, in COM.A.S. No. 5 of 2015, before an `Appropriate Forum’, and the `1st Respondent / Petitioner / Financial Creditor’, had filed an `Impleading Application’, seeking to protect their interest, so as to recover the Sum, under the `Award’, for `Settlement’ of their `Dues’. As such, the `1st Respondent / Bank’, is not justified in filing `Coercive Petition’, under Section 7 of the Code, against the `Appellant’.
The Learned Counsel for the Appellant, refers to an `Appeal’, in COM. A.P. No. 176 of 2021, before the Hon’ble High Court of Karnataka, where an `Interim Stay’, of the `Arbitral Award’, was granted, with the `conditional offer’ to the `1st Respondent / Petitioner / Financial Creditor’, to deposit a Sum of Rs.36,39,70,467/-.
According to the Appellant, the `Sale Proceeds’, of the `Mortgaged Property’, which was sold, with the consent of the `Bank’, were Credited to the 1st Respondent / Bank’s Account, but the same was not reflected in the `Statement of Accounts’, and in fact, the `Bank’, has come before this `Tribunal’, with `unclean hands’.
Added further, it is projected on the side of the Appellant after the year 2006, when the `Account’, was declared as `Non Performing Asset’, the `Appellant’, has remitted a Sum of Rs.8 Crores to the `Financial Creditor’, on their `Advice and Assurance’, that the `Account’, will be `Restructured’, but failed to do so.
The Learned Counsel for the Appellant, comes out with a stance that the `1st Respondent / Petitioner / Financial Creditor / Bank’, had not given Credit to the Substantial Payments, made by the Appellant, and an `Independent Chartered Accountant’, may be directed to be appointed by the `Bank’, to go into the various Credits and Debits, to satisfy itself, as to the genuineness of Bank’s Claim.
The Learned Counsel for the Appellant, points that the `1st Respondent / Petitioner / Financial Creditor’, after preferring, O.A. No. 547 of 2019, had withdrew the same, before the `Debt Recovery Tribunal’, Hyderabad, for the reasons, best known to it.
The Learned Counsel for the Appellant, refers to the Judgement of the Hon’ble Supreme Court of India, in the matter of Vidarbha Industries Private Limited v. Axis Bank (vide Civil Appeal No.4633 of 2021 dated 12.07.2022), wherein, at Paragraphs 60 & 61, it is observed as under:
60.``The Adjudicating Authority (NCLT) found the dispute of the Corporate Debtor with the Electricity Regulator or the recipient of electricity would be extraneous to the matters involved in the petition. Disputes with the Electricity Regulator or the Recipient of Electricity may not be of much relevance. The question is whether an award of the APTEL in favour of the Corporate Debtor, can completely be disregarded by the Adjudicating Authority (NCLT), when it is claimed that, in terms of the Award, a sum of Rs.1,730 crores, that is, an amount far exceeding the claim of the Financial Creditor, is realisable by the Corporate Debtor. The answer, in our view, is necessarily in the negative.
61.In our view, the Appellate Authority (NCLAT) erred in holding that the Adjudicating Authority (NCLT) was only required to see whether there had been a debt and the Corporate Debtor had defaulted in making repayment of the debt, and that these two aspects, if satisfied, would trigger the CIRP. The existence of a financial debt and default in payment thereof only gave the financial creditor the right to apply for initiation of CIRP. The Adjudicating Authority (NCLT) was required to apply its mind to relevant factors including the feasibility of initiation of CIRP, against an electricity generating company operated under statutory control, the impact of MERC’s appeal, pending in this Court, order of APTEL referred to above and the over all financial health and viability of the Corporate Debtor under its existing management.’’
The Learned Counsel for the Appellant, submits that the `Claim’, made by the `1st Respondent / Petitioner / Financial Creditor’, before the Tribunal, Viz. a Sum of Rs.239.51 Crores, is factually and legally an `incorrect’ one.
The Learned Counsel for the Appellant, submits that the `impugned order’, dated 06.05.2022, passed by the `Adjudicating Authority / Tribunal’ in CP (IB) No. 324 / 7 / HDB / 2020, is an `invalid’ and an `illegal’ one, and therefore, prays for `allowing’, the instant `Appeal’, by `dismissing’, the main `Company Petition’, preferred by the `1st Respondent / Petitioner / Financial Creditor’, to meet the ends of justice.
1st Respondent / Bank’s pleas:
Conversely, it is the submission of the Learned Counsel for the `1st Respondent / Petitioner / Financial Creditor’, that there is an `Admission of Liability’, by the `Appellant’, as seen from the `Reply Notice’, dated 19.06.2019 (for the `Legal Notice’, dated 10.06.2019), issued on behalf of the `1st Respondent / Petitioner / Financial Creditor’, Stressed Assets Management Branch of the Hyderabad, and they run as under:
``…… Similarly, your client is also aware of the financial turmoil faced by our client in the recent past, resulting to non-payment of loan amount and the discussion both had with OTS proposal for Rs.14 Crores which is also under due consideration of our client in pursuance of the OTS, our Client had made certain deposits without prejudice to the proposal for OTS; your client had made certain deposits without prejudice to the proposal for OTS; your client may recall the various other Payments made by our client and the pending discussions of the total balance amount payable.’’
According to the `1st Respondent / Bank, that the `Corporate Debtor’, in terms of the `Work Order’, the `National Highway Authority of India’ (`NHAI’), had not completed the `Contract’, in terms of the `Work Order’, and that the `National Highway Authority of India’ (`NHAI’), had terminated the `Contract’, and invoked a `Bank Guarantee’, issued by the `1st Respondent / Bank’, at the behest of the `Appellant’. In fact, the said fact was admitted in Paragraphs 5 & 6 of the Counter, filed before the `Adjudicating Authority / Tribunal’, in respect of Section 7 Application.
At this juncture, the Learned Counsel for the 1st Respondent / Bank, refers to an `Admission of Liability’, on the part of the `Appellant’ (vide Paragraph 7 of the Counter – Page 104 of the Appeal Paper Book (vide Diary No.455 dated 06.06.2022), which runs as under:
7.``It is submitted that despite of huge pressure from the market, the Director of the Corporate Debtor in the fond hope of reviving the Company in the Year 2008, has approached the Financial Creditor Bank to settle the Liability so as to revive the Company and in pursuance of the same sold all the joint family properties, by convincing the other family members and paid substantial amounts by the end of the year 2013.’’
The Learned Counsel for the 1st Respondent / Bank, cites the Judgment of the Hon’ble Supreme Court of India dated 31.08.2017, in Innoventive Industries Ltd. v. ICICI Bank (vide Civil Appeal Nos.8337-8338 of 2017), reported in India Kanoon, wherein, at Paragraph 28, it is observed as under:
28.``…… The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.’’
According to the 1st Respondent / Bank, the Appellant, had acknowledged the `Debt’, by proposing an `One Time Settlement’ for Rs.14 Crores, through Letter dated 03.03.2018, and also, sent plurality of `One Time Settlement Letters’, to the 1st Respondent / Bank, as per Letters dated 13.07.2021, 03.08.2021, 31.12.2021, 04.01.2022 and 13.01.2022, respectively, and indeed, the said `O.T.S. Letters’, sent by the `Appellant’, were `rejected’, as not `financially viable’.
The Learned Counsel for the 1st Respondent / Bank, refers to the Judgment of the Hon’ble Supreme Court of India dated 04.08.2021, in Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy and Anr., (vide Civil Appeal No. 1650 of 2020), reported in India Kanoon, wherein at Paragraph 118, it is observed as under:
118.``It is well settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act. In Asset Reconstruction Company (India) Limited v. Bishal Jaiswall and Anr. (supra) authored by Nariman, J. this Court quoted with approval the judgments, inter alia, of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff ,18 [“Bengal Silk Mills”] and in Re Pandem Tea Co.19 Ltd., the judgment of the Delhi High Court in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana20 and the judgment of Karnataka High Court in Hegde Golay Ltd. v. State Bank of India 21 and held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt.’’
Also, at Paragraph 141 of the aforesaid Judgment, it is observed as under:
141.``Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave (supra) cited by Mr. Shivshankar, this Court had no occasion to consider any proposal for one time settlement. Be that as it may, the Balance Sheets and Financial Statements of the Corporate Debtor for 2016-2017, as observed above, constitute acknowledgement of liability which extended the limitation by three years, apart from the fact that a Certificate of Recovery was issued in favour of the Appellant Bank in May 2017.’’
The Learned Counsel for the 1st Respondent / Bank, adverts to the Judgment of the Hon’ble Supreme Court of India in Lakshmipat Surana v. Union Bank of India dated 26.03.2021 (vide Civil Appeal No. 2734 of 2020), reported in India Kanoon, wherein, at Paragraphs 37, 41 & 42, it is observed as under:
37.``….. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledged their liability to pay the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 of the Code. Further, the acknowledgment must be of a liability in respect of which the financial creditor can initiate action under Section 7 of the Code.
41.….. Section 18 of the Limitation Act, however, posits that a fresh period of limitation shall be computed from the time when the party against whom the right is claimed acknowledges its liability. The financial creditor has not only the right to recover the outstanding dues by filing a suit, but also has a right to initiate resolution process against the corporate person (being a corporate debtor) whose liability is coextensive with that of the principal borrower and more so when it activates from the written acknowledgment of liability and failure of both to discharge that liability.
42.….. Suffice it to conclude that there is no substance even in the second ground urged by the Appellant regarding the maintainability of the application filed by the respondent−financial creditor under Section 7 of the Code on the ground of being barred by limitation. Instead, we affirm the view taken by the NCLT and which commended to the NCLAT — that a fresh period of limitation is required to be computed from the date of acknowledgment of debt by the principal borrower from time to time and in particular the (corporate) guarantor / corporate debtor vide last communication dated 08.12.2018. Thus, the application under Section 7 of the Code filed on 13.02.2019 is within limitation.’’
That apart, the Learned Counsel for the 1st Respondent / Bank, points out that this `Tribunal’, in its Judgment dated 14.09.2020, in Yogesh Kumar Jashwantlal Thakkar v. Indian Overseas Bank & Anr. (vide Comp. App (AT) (INS.) No. 236 of 2020), had observed that various Confirmation Letters, executed by the `Principal Borrower’, would automatically extend the `Period of Limitation’, as well as `Date of Default’.
The Learned Counsel for the 1st Respondent / Bank, cites the Judgment of this `Tribunal’ dated 24.03.2021, in Kishanlal Likhmichand Bothra v. Canara Bank (vide Comp. App (AT) (INS.) No. 704 of 2020, wherein, at Paragraph 13, it is observed as under:
13.``…. We have no difficulty to state that Section 18 of the Limitation Act is applicable to proceedings under IBC and that if there is acknowledgment of debt in the balance-sheets or the OTS Proposal, the period of limitation would get extended if the acknowledgment is made before the period of limitation expires…..’’
The Learned Counsel for the 1st Respondent / Bank, brings it to the notice of this `Tribunal’ that subsequent to the `Order’, passed by the `Adjudicating Authority’ / `Tribunal’, the Resolution Professional / 2nd Respondent, had conducted the `Committee of Creditors’ meeting, without any let or hindrance from any `Third Parties’, and further that, in as much as the said `Order’, was acted upon the `Appellant’, cannot continue the instant `Appeal’, before this `Tribunal’.
The Learned Counsel for the 1st Respondent / Bank, submits that the Appellant and the Guarantors, had independently, executed an `Acknowledgement of Debt’, and `Security Letters’, on 30.09.2007, 30.06.2008, 01.06.2011, 20.05.2014 and 11.05.2017, for the purpose of Section 18 of the Limitation Act, 1963, and none of the `Acknowledgement of Debts’, were executed beyond the `Expiry of the Period’. Besides this, the `Appellant’, had also furnished `O.T.S. Proposal’, which enure the `Limitation Period’.
While rounding up, the Learned Counsel for the 1st Respondent / Bank, prays for dismissal of the instant `Appeal’, in the interest of justice.
Gist of 2nd Respondent / IRP’s Reply:
According to the 2nd Respondent / Interim Resolution Professional, he had appointed `Transaction Auditors’, to identify and Report the `Avoidance Transactions’, if any, that took place during the relevant period as per the `Code’, through Letter dated 01.08.2022, after securing `Approval’, from the `3rd Committee of Creditors Meeting’, held on 19.07.2022.
Moreover, the 2nd Respondent / IRP, had appointed an `Advocate’, to pursue the pending `Litigations’, filed by the `Corporate Debtor’, before the City Civil Courts at Bangalore and the Hon’ble High Court of Karnataka, as determined by the `Committee of Creditors’. Added further, he had appointed a new `Learned Counsel’, to pursue the `Arbitration Award’.
It is the version of the 2nd Respondent / Interim Resolution Professional, that the `Appellant’, is misusing the `Process of Law’ and in fact, the `Suspended Directors of the Corporate Debtor’, had not furnished the details of `Fixed Assets’, mortgaged to the `Financial Creditors’, in the past.
In reality, the 2nd Respondent / Interim Resolution Professional took control of the Management and securing the `Tally Records’, of the past five years and Audited Balance Sheets from 2014-15 to 2020-21.
I & B Code, 2016:
To maintain an `Application’, under Section 7 of the `Code’, the `Petitioner / Applicant’, must be able to `establish, the existence of a `Debt’, which is due from the `Corporate Debtor’. Undoubtedly, an `Application’, under Section 7 of the `Code’, is only `maintainable’, by a `Financial Creditor’.
It is of no matter that the `Debt’, is `disputed’, so long as the `Debt’, is due i.e., payable, unless `interdicted’, by some `Law’ or has not yet become `Due’, in the sense that `it is payable at some future date’.
An `Application’, under Section 7 of the `Code’, cannot be `rejected’, on the ground that it was made with a `Malice’ or `Bad / Ill Motives’, provided it is lawfully made.
No wonder, the pendency of proceedings, under the `Other Statute’, will not bar the `initiation of Insolvency and Resolution Process Proceedings’, under the `Code’.
The `aspect of Debt and Default’, can be gone into only, if the `Corporate Debtor’, disputes the `Debt’ or takes the plea that there is no `Default’, though, there is a `Debt’, as per decision in R.P. Synthetics & Anr. v. Bee Ceelene Textile Mills Pvt. Ltd., 2018 148 SCL Page 584.
In `Law’, the `Liability of a Guarantor’, is co-extensive with that of the `Principal Borrower’. To put it succinctly, under Section 128 of the Indian Contract Act, 1872, the `Liability of a Guarantor’, is co-extensive with the `Liability of a Principal Debtor’, as per decision in State Bank of India v. Indexport Registered & Ors., reported in A.I.R. (1992) SC 1740.
Discretion:
The term `Discretion’, when `applies’, to a `Court of Law’, it means a `Sound Discretion’, ofcourse guided by `Law’. However, it must not be a `Fanciful’ or `Arbitrary’ one. Per contra, it ought to be a `Legal’ and `Regular’ one and not by `Humour’.
Appraisal:
Before the `Adjudicating Authority’ / `Tribunal’, `1st Respondent / Petitioner / Financial Creditor’, in `Form – I Application’ (vide CP (IB) No. 324 / 7 / HDB / 2020, Filed by the `1st Respondent / Petitioner / Financial Creditor’), under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, under Part – IV (`Particulars of Financial Debt’), it is mentioned as under:
Part – IV
| PARTICULARS OF FINANCIAL DEBT | ||
| 1 | TOTAL AMOUNT OF DEBT GRANTED DATE (S) OF DISBURSEMENT | The following credit facility sanctioned to M/s. A.L. Sudershan Constructions Company Limited. Dated : 21.06.2005 / 19.07.2005 and 15.07.2005 which was accepted. Annexure – 5 (Page No. 82 to 85) SHORT TERM LOAN Rs.400.00 lakhs FACILITY SODH LOAN FACILITY Rs.595.00 lakhs BANK GUARANTEE Rs.4000.00 lakhs LIMIT Amount Sanctioned: SHORT TERM LOAN Rs.400.00 lakhs FACILITY SODH LOAN FACILITY Rs.595.00 lakhs BANK GUARANTEE Rs.4000.00 lakhs LIMIT |
| SHORT TERM LOAN FACILITY | Rs.400.00 lakhs |
| SODH LOAN FACILITY | Rs.595.00 lakhs |
| BANK GUARANTEE LIMIT | Rs.4000.00 lakhs |
| SHORT TERM LOAN FACILITY | Rs.400.00 lakhs |
| SODH LOAN FACILITY | Rs.595.00 lakhs |
| BANK GUARANTEE LIMIT | Rs.4000.00 lakhs |
Amount Disbursed: OSL (Short Term Loan facility) Rs.400.00 Lakhs dated 15.07.2005 SODH facility Rs.595.00 lakhs dated 19.07.2005 Bank Guarantee Limit Rs.4000.00 lakhs Dated 19.07.2005 M/s. A.L. Sudershan Constructions Company Limited entered into General Agreement dated 28.07.2005 Annexure – 6 (Page No. 86 to 90) Composite Hypothecation Agreement executed by Corporate Debtor dated 28.07.2005 Annexure – 7 (Page No. 91 to 120) Omnibus Counter Agreement executed by Corporate Debtor dated 28.07.2005 Annexure – 8 (Page No. 121 to 124) Guarantee Agreement dated 28.07.2005 Guarantee Agreement dated 28.07.2005 Guarantee Agreement dated 28.07.2005 Annexure – 9 (Page No. 125 to 139) Acknowledgement of Debt for all types of facilities by Borrower / Sureties dated 30.09.2007, 30.06.2008, 30.06.2008, 01.06.2011, 01.06.2011, 20.05.2014 and 11.05.2017 Annexure – 10 (Page No. 140 to 146) Copy legal notice dated 10.06.2019 along with postal receipts and acknowledgement Annexure – 11 (Page No. 147 to 154) Copy of reply dated 19.06.2019 to the legal notice Annexure – 12 (Page No. 155 to 181) | ||
| 2 | AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) | The Total Amount due on Loan facility per statement of account dated 29.02.2020 is as follows: Total outstanding Dues : Rs.239,51,53,055.83 ps Annexure – 13 (Page No.182 to 240) |
According to the 1st Respondent / Bank, the amount `Claimed to be in Default’, by the `Corporate Debtor’ / `M/s. A.L. Sudershan Constructions Company Limited’, was Rs.239,51,53,055.83/-, being the total `Outstanding Dues’, based on `Loan Facility’ per Statement of Account, dated 29.02.2020.
Before the `Adjudicating Authority’ / `Tribunal’, the `Corporate Debtor’ / `M/s. A.L. Sudershan Constructions Company Limited’, filed in Counter to CP (IB) No. 324 / 7 / HDB / 2020, stating that the 1st Respondent / Bank / Financial Creditor, claimed that it sanctioned Rs.4,000 Lakhs Bank Guarantee Limit, and ILC / FLC (`Sub Limit’, under `BG’) of Rs.500 Lakhs, but had not disclosed, on what date, the said `Bank Guarantees’, were encashed, and in whose favour the said `Bank Guarantee’, was issued and who had `Invoked’ the said `Bank Guarantees’. Moreover, the `Application’, filed by the `Financial Creditor’, was silent, in regard to the `Date of NPA’ of each `Account’, wherein, there were number of `Bank Guarantees’, but bundled the `Claim Sum’, to Rs.208,02,18,480.21/-, based on a Computer generated Statement of Account, without any details, in regard to the `Interest’, calculated under each `Head’. Further, there was no `Mortgage’, for the alleged Credit Facilities, as claimed by the `Financial Creditor’.
According to the `Corporate Debtor’, it acknowledged the `Liability’, by executing an `Acknowledgement of Debt and Security’, on 30.09.2007, 30.06.2008, 01.06.2011, 20.05.2014 and 11.05.2017, respectively, but, the stand taken by the `Corporate Debtor’, before the `Adjudicating Authority’, was that, the `Acknowledgement Letters’, dated 11.05.2017, 20.05.2014 and 01.06.2011, clearly state that the same are `Shadow Balance’, as per the `Books of the Bank’, and therefore, could not be treated as an `Admission of the Debt’.
It transpires, that the `Corporate Debtor’, in its Counter, before the `Adjudicating Authority’ / `Tribunal’, had averred that the Section 7 `Application’, filed by the `1st Respondent / Petitioner / Financial Creditor / Bank’, is `not maintainable’, as per Section 238A of the I & B Code, 2016.
It is the version of the Corporate Bank that the 1st Respondent / Bank, had filed O.A. No.547 of 2019, before the `Debt Recovery Tribunal – II’, at Hyderabad, for `Recovery of Alleged Dues’, and a `Written Statement’, was filed by the `Corporate Debtor’, denying the `Liability’, however, the 1st Respondent / Bank, as `Financial Creditor’, filed Section 7 Application (CP (IB) No. 324 / 7 / HDB / 2020), before the `Adjudicating Authority’ / `Tribunal’.
On behalf of the Corporate Debtor, before the `Adjudicating Authority’, it was averred in the Counter to the main Company Petition, filed by the 1st Respondent / Bank, that the Director of the Corporate Debtor, in terms of the `Advice’, by the Financial Creditor / Bank, had sold his individual `Properties’, and remitted Rs.800 Lakhs, on 30.10.2006 (through Cheque No.392311), and further, the `Bank’, had declared the `Corporate Debtor’s Company’, as `NPA’, in the year 2006 and made a huge demand of the Amounts, in respect of the `Balance Receivables’, from the `Corporate Debtor’. Also that the Directors of the `Corporate Debtor’, by the end of the year 2013, had sold all the `Joint Family Properties’, which could be sold and paid amounts to the `Bank / Financial Creditor’. Even after that, the liability of the `Corporate Debtor’, according to the 1st Respondent / Bank, was shown as around Rs.200 Crores, without any basis.
The other plea, taken by the `Corporate Debtor’, before the `Adjudicating Authority’, to the Section 7 Application (Filed by the 1st Respondent / Bank) is that, there was no record to show how the Bank had arrived at Claim of Rs.18,80,38,000/-, before the `Hon’ble City Civil Judge’, at Bangalore, wherein, an `Application to Implead’, was filed by the `Corporate Debtor’, in respect of the `Invocation of Bank Guarantee’, etc.
The Corporate Debtor, took a stand before the `Adjudicating Authority’ / `Tribunal’, that the Section 7 Application, was filed by the 1st Respondent / Bank, with a view to harass it, for the fault of choosing the `Financial Creditor’, as its `Banker’. Also that, the Bank / Financial Creditor, without maintaining `Proper Accounts’, had received a `Substantial Sum’, and still making a `huge Claim’, without any basis.
In the instant case, the Corporate Debtor in his Counter to CP (IB) No. 324 / 7 / HDB / 2020, at Paragraph Nos.5 & 6, had admitted its `Liability’, and adverted to the `Appeal’, being filed by the `National Highway Authority of India’, before the `Hon’ble City Civil Court’, at Bangalore, in Arbitration Suit No. 5 of 2015.
That apart, the Corporate Debtor, at Paragraph No.7 of its Counter (vide Page 104 of the Appeal Paper Book – Diary 455 dated 06.06.2022), had clearly mentioned that the `Director’ of the `Company’, in the fond hope of ``Reviving the Company in the year 2008, has approached the Financial Creditor Bank to settle the Liability so as to revive the Company and in pursuance of the same sold all the joint family properties, by convincing the other family members and paid substantial amounts by the end of the year 2013’’. As such, the Corporate Debtor, had clearly `admitted its Liability’, and in fact, this is clearly an `adverse circumstance’, against the `Appellant’.
Dealing with the `aspect of Reply Notice’, dated 19.06.2019, issued on behalf of the `Corporate Debtor’ (for the `Legal Notice’, dated 10.06.2019), issued by the 1st Respondent / Bank / Financial Creditor, the Paragraph 2 of the said `Reply’, makes a reference to the `Financial Turmoil’, faced by the `Corporate Debtor’, in the recent past, resulting to `Non payment of Loan Amount’, and the discussion both had with `O.T.S. Proposal’, for `Fourteen Cr.’, which was under due consideration, etc.
To be noted, an `admission’, is the best peace of evidence, which can be used against the `Maker’, and this can be taken advantage of, by a `Party’, which places reliance, so as to `bind’, the said `Maker’.
Suffice it, for this `Tribunal’, to point out an `admission’, is not a `self serving statement’, but it is a `self harming’ one. An `Admission’, is `Confession’ or `Voluntary Acknowledgement’, made by a `Party’ or `Someone’, identified with him, in `legal interest’, of the `existence of certain facts’, which are in issue or relevant to an issue, in the case, as per decision, in Ajodhya Prasad Bhargava v. Bhawani Shanker Bhargava, A.I.R. 1957, All at Page 1, Spl Pg: 11 (FB).
It cannot be forgotten that the Corporate Debtor, had acknowledged the `Debt’, by offering `One Time Settlement Proposal’ for Rs.14 Crore, through a Letter dated 03.03.2018. Also that the `OTS Letters’ (sent by the `Corporate Debtor’), 13.07.2021, 03.08.2021, 31.12.2021, 04.01.2022 and 13.01.2022, were rejected by the 1st Respondent / Bank / Financial Creditor, as `not Financially viable’.
As regards, the plea taken on behalf of the Appellant, the 1st Respondent / Bank, had filed its `Claim’, after `three years of Date of Default’, and barred by Limitation, this `Tribunal’, pertinently points out that the `Corporate Debtor’ and the `Guarantors’, separately had executed an `Acknowledgement of Debt’ and `Security Letters’, on 30.09.2007, 30.06.2008, 01.06.2011, 20.05.2014 and 11.05.2017 (vide Page 65 to 71 of Appellant’s Appeal Paper Book – Diary No.455 dated 06.06.2022), and these `Acknowledgements of Debt’, were executed well within time and for the purpose of Section 18 of the Limitation Act, 1963, the 1st Respondent / Bank / Financial Creditor is entitled to rely upon the same, much to the detriment to the `Corporate Debtor’, as well as the `Appellant’ herein.
Acknowledgement:
At this juncture, this `Tribunal’, relevantly points out that an `Acknowledgment in Writing’, is to indicate the `Jural Relationship’ of the `Debtor’ and `Creditor’, between the `Parties’.
An `Unconditional Acknowledgment’, is held to `imply’, a `promise’, to pay as per decision of the Hon’ble Supreme Court of India, in Hiralal & Ors. Badkulal, reported in A.I.R. 1953 SC Page 225. An `Acknowledgement’, extends the `Limitation Period’. No wonder, an `Acknowledgement’, contained in the Balance Sheet of the Company, begins a fresh commencing point of Limitation.
Undoubtedly, if any documents is executed, during the subsistence of Limitation, thereby the `Dues’, are / were `acknowledged’, the `Limitation’, will be `revived’, afresh, from the `Date of Acknowledgement’.
To put it succinctly, it is an `admission of a Subsisting Liability’, that is an `Acknowledgement of Liability’, giving rise to fresh start of `Limitation’.
In the instant case, the `Default’, committed by the `Corporate Debtor’, in respect of the `Financial Debt’, is more than `Threshold Limit’ of Rs. 1 Crore (vide Section 4 of the `Code’, after amendment).
It is significantly pointed out by this `Tribunal’, that the 1st Respondent / Bank / Financial Creditor, filed CP (IB) No. 324 / 7 / HDB / 2020, before the `Adjudicating Authority’ / `Tribunal’, in March 2020.
The settled position of `Law’ is that it is for the `Resolution Professional’, to determine the `aspect of Claim’, and it is for him to take a `final call’, in the subject matter in issue.
In the present case, as on date, for the `Loan Facilities’, provided by the 1st Respondent / Bank, to the Corporate Debtor, a Sum of Rs.239,51,53,055.83/-, being the `Due Default Amount’, committed by the `Corporate Debtor’. If there is any `Financial Debt and Default’, in repayment of the same, by the `Corporate Debtor’, then, an `Adjudicating Authority’ / `Tribunal’, by exercising its `Discretion’, after `subjectively satisfying’, itself that a `Default’, was committed by the `Corporate Debtor’, then, the Section 7 Application, filed by the `Financial Creditor’, can be `admitted’, under the I & B Code, 2016.
It is brought to the fore that the `last confirmation’, was on 11.05.2017, made on behalf of the `Corporate Debtor’ / `M/s. A.L. Sudershan Constructions Company Limited’, towards the joint and several liabilities, by the `Borrower / Sureties’. As such, by any means the `Appellant’, cannot `deny’ or `abdicate’, his `responsibility’, under `Cloak of Limitation’. Therefore, this `Tribunal’, without any haziness, comes to a clear cut conclusion that the Section 7 Application dated 19.03.2020 (Filed by the `1st Respondent / Bank’, before the `Adjudicating Authority’ / `Tribunal’), is well within the `Period of Limitation’.
In the instant case on hand, the `Adjudicating Authority / Tribunal’, on the available materials on record, came to an ultimate conclusion that the `Corporate Debtor’, had committed `Default’, in respect of the `Debt’, to be paid by it, to and in favour of the `1st Respondent / Bank’. Indeed, the Section 7 Application, was `admitted’, by the `Adjudicating Authority’ / `Tribunal’, in CP (IB) No. 324 / 7 / HDB / 2020, through its `impugned order’, dated 06.05.2022, and `appointed’, an `Interim Resolution Professional’ and declared `Moratorium’, etc., which is free from any `Legal Infirmities’. Accordingly, the instant `Appeal’ fails.
Conclusion:
In fine, Comp. App (AT) (CH) (INS.) No. 261 of 2022 is `Dismissed’. No costs.
The connected pending Interlocutory Application(s), is / are `Closed’.