Pegasus Assets Reconstruction Private Limited vs Euro India Cylinders Limited

ORDER

Submissions made by Financial Creditor by way of Application/Petition:

“66.

Similarly under Section 18 of the Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires.

67.

As observed above, Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible.

68.

We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or Section 9 of the IBC. Of course, Section 18 of the Limitation Act is not attracted in this case, since the impugned order of the NCLAT does not proceed on the basis of any acknowledgment.”

“The aforesaid question is no longer res integra as two recent judgments of this Court have applied the provisions of Section 14 and Section 18 of the Limitation Act to the IBC. Thus, in Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd., Civil Appeal No. 9198 of 2019 (decided on 22.03.2021)….”

9.

Nearer home, in Laxmi Pat Surana v. Union Bank of India, Civil Appeal No. 2734 of 2020, a judgment delivered on 26.03.2021, this Court, after referring to various judgments of this Court, including the judgment in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1 [“Babulal”], then held:

“35.

The purport of such observation has been dealt with in the case of Babulal Vardharji Gurjar (II) [Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1]. Suffice it to observe that this Court had not ruled out the application of Section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case so warrants. Considering that the purport of Section 238A of the Code, as enacted, is clarificatory in nature and being a procedural law had been given retrospective effect; which included application of the provisions of the Limitation Act on case-to-case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time barred debts under the Limitation Act. At the same time, accrual of fresh period of limitation in terms of Section 18 of the Limitation Act is on its own under that Act. It will not be a case of giving new lease to time barred debts under the existing law (Limitation Act) as such. 36. Notably, the provisions of Limitation Act have been made applicable to the proceedings under the Code, as far as may be applicable. For, Section 238A predicates that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactment of Section 238A of the Code on 06.06.2018, validity whereof has been upheld by this Court, it is not open to contend that the limitation for filing application under Section 7 of the Code would be limited to Article 137 of the Limitation Act and extension of prescribed period in certain cases could be only under Section 5 of the Limitation Act. There is no reason to exclude the effect of Section 18 of the Limitation Act to the proceedings initiated under the Code. Section 18 of the Limitation Act reads thus:

“18.

Effect of acknowledgement in writing.–(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

(2)

Where the writing containing the acknowledgement is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.–For the purposes of this section,–

(a)

an acknowledgement may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right;

(b)

the word “signed” means signed either personally or by an agent duly authorised in this behalf; and

(c)

an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.”

37.

Ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the financial creditor to initiate action under Section 7 of the Code. However, Section 7 comes into play when the corporate debtor commits “default”. Section 7, consciously uses the expression “default” - not the date of notifying the loan account of the corporate person as NPA. Further, the expression “default” has been defined in Section 3(12) to mean nonpayment of “debt” when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. 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) acknowledgements, 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 acknowledgement 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, acknowledge their liability to pay the debt. Such acknowledgement, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgement of the debt, from time to time, for institution of the proceedings under Section 7 of the Code. Further, the acknowledgement must be of a liability in respect of which the financial creditor can initiate action under Section 7 of the Code.”

16.

An exhaustive judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115 [“Bengal Silk Mills”] held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt as follows:

“9.

In support of the contention that the balance-sheets do not amount to acknowledgements of liability, because they were prepared under compulsion of law Mr. Banerji relies upon the decision in Kashinath v. New Akot Ginning and Pressing Co. Ltd., I.L.R. 1950 Nag. 562 at 568 : A.I.R. 1951 Nag. 255. It is true that the balance-sheets were required to be made both by the Indian Companies Act, 1913 as also by the articles of association of the defendant company. There was a compulsion upon the managing agents to prepare the documents but there was no compulsion upon them to make any particular admission. They faithfully discharged their duty and in doing so they made honest admissions of the Company's liabilities. Those admissions, though made in discharge of their duty, are nevertheless conscious and voluntary admissions. A document is not taken out of the purview of section 19 of the Indian Limitation Act merely on the ground that it is made under compulsion of law, see Venkata v. Partha Saradhi, 1892 I.L.R. 16 Mad. 220 at 222, Udaya Thevar v. Subrahmania Chetti, (1896) 6 M.L.J. 266, 269, Good v. Jane Job, 120 E.R. 810 at 812. I am unable to agree with the reasoning of the Nagpur decision that a balance-sheet does not save limitation because it is drawn up under a duty to set out the claims made on the company and not with the intention of acknowledging liability. The balance-sheet contains admissions of liability; the agent of the company who makes and signs it intends to make those admissions. The admissions do not cease to be acknowledgements of liability merely on the ground that they were made in discharge of a statutory duty. I notice that in the Nagpur case the balance-sheet had been signed by a director and had not been passed either by the Board of Directors or by the company at its annual general meeting and it seems that the actual decision may be distinguished on the ground that the balance-sheet was not made or signed by a duly authorized agent of the company.

10.

Mr. Banerji next contends that none of the balance-sheets contains an admission of liability subsisting on the date of which it is made. According to him the balance-sheet for the year ended 30-11-1936 which was made on 1-6-1937 contains an admission of past liability as on 30-11-1936 but not an admission of liability existing on 1-6-1937. Mr. Banerji contends that such an admission does not satisfy the test of an acknowledgement under section 19 of the Indian Limitation Act. His contention is supported by Jwala Prasad v. Jwala Bank Ltd., A.I.R. 1957 All. 143 at 145. In that case the Allahabad High Court held that the balance-sheet did not contain any acknowledgement of an existing liability and therefore could not be treated as an acknowledgement under section 19. Mr. Banerji also relied upon the decisions in Kandasami Reddi v. Suppammal, I.L.R. 45 Mad. 443, Venkata v. Partha Saradhi, I.L.R. 18 Mad. 220, Rustomji on Limitation, 6th Edition, pages 191–193 and the cases collected therein. Now it is well settled that in order to satisfy the test of an acknowledgement under section 19 the admission of liability must be an admission of subsisting liability. In Kandasami Reddi v. Suppammal, I.L.R. 45 Mad. 443 at 445, Ayling J. said, “Liability can only signify present liability at the time of acknowledgement and this is clearly laid down in Venkata v. Parthasaradhi, (1893) 16 Mad. 220.” In Venkata v. Parthasaradhi, I.L.R. 16 Mad. 220 at 223 Muttasami Ayyar, J. said, “It is therefore necessary that upon a reasonable construction of the language used by the debtor in writing the relation of debtor and creditor must appear to be distinctly admitted, that it must be admitted also to be a subsisting jural relation, and then an intention to continue it until it is lawfully determined must also be evident.” The section requires a definite admission of liability in respect of the debt, but even an admission that the debt existed at a previous date may, having regard to the language used and the surrounding circumstances, amount to an implied representation that the debt is still subsisting (see Maniram Seth v. Seth Rupchand, I.L.R. 33 Cal. 1047 P.C.). In my opinion the balance-sheets satisfy the test of an acknowledgement under section 19. Each of them contains an admission that balances have been struck at the end of the previous year and that a definite sum has been found to be the balance then due to the creditor. The natural inference to be drawn from the balance-sheet is that the closing balance due to the creditor at the end of the previous year will be carried forward as the opening balance due to him at the beginning of the next year. In each balance-sheet there is thus an admission of a subsisting liability to continue the relation of debtor and creditor and a definite representation of a present intention to keep the liability alive until it is lawfully determined by payment or otherwise. There is necessarily a time lag between the date of the signing of the balance-sheet and the end of the previous year. The balance-sheet contains no admission of the amount due on the date of the signature, that amount may be and often is different from the amount shown as due at the end of the previous year, but that fact alone does not take the document out of the purview of section 19. Take the case of a banker and its depositor. Suppose the banker sends to the depositor a monthly statement of account made for the month of February 1961 and signed on March 15, 1961. The statement gives the balance due on February 28, 1961. The amount due on March 15 may be quite different; the banker might have been made payments for the customer, nevertheless the statement amounts to a sufficient acknowledgement under section 19. I am therefore unable to agree with the decision in Jwala Prasad v. Jwala Bank Ltd., A.I.R. 1957 All. 144.

11.

To come under section 19 an acknowledgement of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance-sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgement in respect of a specialty debt under section 5 of the Civil Procedure Act, 1833 (3 and 4 Will — 4c. 42), see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., 1928 Ch. 836 under section 1 of Lord Tentenden’s Act, 1828 (9 Geo. 4, c. 14) read with section 13 of the Mercantile Law Amendment Act, 1856 (19 and 20 Vict. c. 97), see Re: The Coliseum (Burrow) Ltd., (1930) 2 Ch. 44 at 47 and under sections 23 and 24 of the Limitation Act, 1939 (c. 21), see Ledingham v. Bermejo Estancia Co. Ltd., (1947) 1 A.E.R. 749 and Jones v. Bellgrove Properties Ltd., (1949) 2 K.B. 700, on appeal from (1949) 1 A.E.R. 498. Section 5 of the Civil Procedure Act, 1833 did not require that the acknowledgement should be given to the claiming creditor and consequently a balance-sheet containing an admission of indebtedness to the debenture holders was a sufficient acknowledgement of liability in respect of the debentures under that section, though it was sent only to the debenture holders who happened to be the shareholders of the company and not to the other debenture holders, see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., (1928) 1 Ch. 836. Under Tentenden's Act, 1828 as also under the Limitation Act, 1939 (c. 21) the acknowledgement must be made to the creditor or his agent and if the balancesheet is sent to a shareholder who is also a creditor the requirements of those Acts were satisfied, see Re: The Coliseum (Burrow) Ltd., (1930) 2 Ch. 44 at 47, Jones v. Bellgrove Properties Ltd., (1949) 1 A.E.R. 498 at 504 affirmed (1949) 2 K.B. 700. The decision in the last case has been followed in India and it has been held that an admission of indebtedness in a balance-sheet is a sufficient acknowledgement under section 19 of the Indian Limitation Act, see Raja of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd., (1951) 2 M.L.J. 535 at 550-1 : A.I.R. 1952 Mad. 136 at 145, Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla, A.I.R. 1958 Punjab 341 at 347, First National Bank Ltd. v. The Mandi (State) Industries Ltd., (1957) 59 Punjab Law Reports 589 and in an unreported decision of S.R. Das Gupta, J. in matter No. 449 of 1955 Re: Vita Supplies Corporation Ltd. decided on December 7, 1956.”

Importantly, this judgment holds that though the filing of a balance sheet is by compulsion of law, the acknowledgement of a debt is not necessarily so. In fact, it is not uncommon to have an entry in a balance sheet with notes annexed to or forming part of such balance sheet, or in the auditor’s report, which must be read along with the balance sheet, indicating that such entry would not amount to an acknowledgement of debt for reasons given in the said note.

21.

We must now examine the position under the Companies Act, 2013 [“Companies Act”] qua any compulsion of law for filing of balance sheets and acknowledgements made therein. Section 2(40) of the Companies Act defines financial statement as follows:

“2.

Definitions.—In this Act, unless the context otherwise requires,— xxx xxx xxx

(40)

“financial statement” in relation to a company, includes—

(i)

a balance sheet as at the end of the financial year;

(ii)

a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;

(iii)

cash flow statement for the financial year;

(iv)

a statement of changes in equity, if applicable; and

(v)

any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv):

Provided that the financial statement, with respect to One Person Company, small company and dormant company, may not include the cash flow statement; xxx xxx xxx” Under Section 92, every company is to prepare an annual return containing certain particulars as follows:

“92.

Annual return.—(1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding—

(a)

its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;

(b)

its shares, debentures and other securities and shareholding pattern;

(c)

[* * *];

(d)

its members and debenture-holders along with changes therein since the close of the previous financial year;

(e)

its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;

(f)

meetings of members or a class thereof, Board and its various committees along with attendance details;

(g)

remuneration of directors and key managerial personnel;

(h)

penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;

(i)

matters relating to certification of compliances, disclosures as may be prescribed;

(j)

details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors; and

(k)

such other matters as may be prescribed and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice:

Provided that in relation to One Person Company and small company, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company:

Provided further that the Central Government may prescribe abridged form of annual return for “One Person Company, small company and such other class or classes of companies as may be prescribed.

(2)

The annual return, filed by a listed company or, by a company having such paid up capital or turnover as may be prescribed, shall be certified by a company secretary in practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.

(3)

Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board's report

(4)

Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees as may be prescribed.

(5)

If any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default.

(6)

If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be liable to a penalty of two lakh rupees.” Vide Section 128, every company shall prepare and keep at its registered office, books of accounts and financial statements for every financial year, as follows:

“128.

Books of account, etc., to be kept by company.—(1) Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting:

Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place:

Provided further that the company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed. xxx xxx xxx” Section 129, which is of importance, refers directly to financial statements and states as follows:

“129.

Financial statement. — (1) The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under Section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III:

Provided that the items contained in such financial statements shall be in accordance with the accounting standards:

Provided further that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company:

Provided also that the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose—

(a)

in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938 (4 of 1938), or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);

(b)

in the case of a banking company, any matters which are not required to be disclosed by the Banking Regulation Act, 1949 (10 of 1949);

(c)

in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by the Electricity Act, 2003 (36 of 2003);

(d)

in the case of a company governed by any other law for the time being in force, any matters which are not required to be disclosed by that law.

(2)

At every annual general meeting of a company, the Board of Directors of the company shall lay before such meeting financial statements for the financial year. xxx xxx xxx

(5)

Without prejudice to sub-section (1), where the financial statements of a company do not comply with the accounting standards referred to in sub-section (1), the company shall disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation. xxx xxx xxx

(7)

If a company contravenes the provisions of this section, the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirements of this section and in the absence of any of the officers mentioned above, all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Explanation.—For the purposes of this section, except where the context otherwise requires, any reference to the financial statement shall include any notes annexed to or forming part of such financial statement, giving information required to be given and allowed to be given in the form of such notes under this Act.” Likewise, under Section 134, financial statements are to be approved by the Board of Directors before they are signed, and the auditor’s report, as well as a report by the Board of Directors, is to be attached to each financial statement as follows:

“134.

Financial statement, Board’s report, etc.—(1) The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board by the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director, if any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in the case of One Person Company, only by one director, for submission to the auditor for his report thereon.

(2)

The auditors’ report shall be attached to every financial statement.

(3)

There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include— xxx xxx xxx

(f)

explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—

(i)

by the auditor in his report; and

(ii)

by the company secretary in practice in his secretarial audit report;

(g)

particulars of loans, guarantees or investments under Section 186; xxx xxx xxx

Provided that where disclosures referred to in this subsection have been included in the financial statements, such disclosures shall be referred to instead of being repeated in the Board’s report: xxx xxx xxx

(4)

The report of the Board of Directors to be attached to the financial statement under this section shall, in case of a One Person Company, mean a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report. xxx xxx xxx

(7)

A signed copy of every financial statement, including consolidated financial statement, if any, shall be issued, circulated or published along with a copy each of—

(a)

any notes annexed to or forming part of such financial statement;

(b)

the auditor’s report; and

(c)

the Board’s report referred to in sub-section (3).

(8)

If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.”

“137.

Copy of financial statement to be filed with Registrar. —(1) A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed:

Provided that where the financial statements under subsection (1) are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents under sub-section (1) shall be filed with the Registrar within thirty days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose:

Provided further that financial statements adopted in the adjourned annual general meeting shall be filed with the Registrar within thirty days of the date of such adjourned annual general meeting with such fees or such additional fees as may be prescribed:

Provided also that a One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year:

Provided also that a company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India.

Provided also that in the case of a subsidiary which has been incorporated outside India (herein referred to as “foreign subsidiary”), which is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the requirements of the fourth proviso shall be met if the holding Indian company files such unaudited financial statement along with a declaration to this effect and where such financial statement is in a language other than English, along with a translated copy of the financial statement in English.

(2)

Where the annual general meeting of a company for any year has not been held, the financial statements along with the documents required to be attached under sub-section (1), duly signed along with the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar within thirty days of the last date before which the annual general meeting should have been held and in such manner, with such fees or additional fees as may be prescribed.

(3)

If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified therein, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.”

“ 9. The defence raised by the Appellant to the Section 7 application is answered in Para 3 and 4of Judgment of this Tribunal in the matter of “Aditya Kumar” (supra) where it is observed as under:-

“3.

Learned counsel appearing on behalf of the Appellant submitted that the ‘Financial Creditor’ has already taken steps under Section 19 of the ‘Recovery of Debts Due to Banks and Financial Institutions Act, 1933’ (DRT Act. Further, according to him, action has been taken under Section 13 (4) of the ‘Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002’ (the SARFAESI Act). Therefore, according to the Appellant, proceedings under the aforesaid provisions having already initiated, the Application under Section 7 of the ‘I & B Code’ is not maintainable.

4.

However, the aforesaid submissions cannot be accepted in view of the decision of this Appellate Tribunal in “M/s. Unigreen Global Private Limited v. Punjab National Bank & Anr.” Company Appeal (AT) (Insolvency) No. 81 of 2017”, wherein this Appellate Tribunal by its judgment dated 1st December, 2017 held:

“25.

Similarly, if any action has been taken by a ‘Financial Creditor’ under Section 13 (4) of the SARFAESI Act, 2002 against the Corporate Debtor or a suit is pending against Corporate Debtor under Section 19 of DRT Act, 1993 before a Debt Recovery Tribunal or appeal pending before the DebtRecovery Appellate Tribunal cannot be a ground to reject an application under Section 10, if the application is complete.

26.

Any proceeding under Section 13(4) of the SARFAESI Act, 2002 or suit under Section 19 of the DRT Act, 1993 pending before Debt Recovery Tribunal or appeal pending before Debt Recovery Appellate Tribunal cannot proceed in view of the order of moratorium as may be passed.

27.

It is also desirable to refer to Section 238 of the I&B Code, as quoted below:

“238.

Provisions of this Code to override other laws- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.” In view of the aforesaid provision also, I & B Code shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force including DRT Act, 1993; SARFAESI Act, 2002; money suit etc.”

Submissions made by the Advocate of Corporate Debtor by way of Affidavit in Reply: