Phoenix ARC Private Limited vs Ajanta Paper and General Products Limited

Per: Chandra Bhan Singh, Member (Technical)

This Company Petition is filed by Phoenix ARC Private Limited, Trustee of Phoenix Trust FY 15-14, (hereinafter called “Petitioner”) seeking to set in motion the Corporate Insolvency Resolution Process (CIRP) against Ajanta Paper and General Products Limited (hereinafter called “Corporate Debtor”) alleging that Corporate Debtor committed default on 30.09.2002 in making payment to the extent of Rs. 96,01,67,024/-by invoking the provisions of Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter called “Code”) read with Rule 4 of the Insolvency and Bankruptcy (AAA) Rules, 2016.

The Petitioner submits that the Unit Trust of India (UTI) (Assignor) advanced a financial assistance to the Corporate Debtor in the form of a subscription of 5,00,000 Secured Redeemable Non-Convertible Debentures of face value of Rs. 100 (Rupees One Hundred Only) along with all interest and charges payable under the financial facility. The terms and conditions of the Financial Facility were set out in the Sanction letter dated 16^th February, 1998 and Letter of Modification dated 4^th May, 1998 issued by UTI to Corporate Debtor and Subscription Agreement dated 15^th June, 1998 executed between the Corporate Debtor and UTI. Subsequently, the terms and conditions of the sanction were modified on May, 1998, inter alia, reducing the rate of interest from 19% to 17.5%.

The Petitioner further submits that Bank of Maharashtra was appointed as the Debenture Trustee vide a Debenture Trust cum Mortgage Deed dated 14^th October, 1998 in respect of the Debentures subscribed by the UTI. In the same deed, the Corporate Debtor, inter alia, mortgaged its properties situated at Kalyan, Mumbai, to secure the repayment of financial facility. The Corporate Debtor also created a charge in favour of the Debenture Trustee inter alia over the movable properties situated at Jhagadia Property.

Pursuant to the execution of various documents in respect of the Financial Facility, UTI disbursed the Financial Facility to the Corporate Debtor and the Debentures are as follows:

The Petitioner further submits that vide an Assignment Agreement dated 04^th December, 2014, UTI (Assignor) assigned all the rights, title and interest in the Financial Facility in favour of the Petitioner. Thus, the Petitioner acted in favour of UTI in respect of the debt owned by the Corporate Debtor to UTI. Further, as per the Subscription Agreement dated 15^th June, 1998 executed by the Corporate Debtor in favour of the Assignor, the Corporate Debtor was liable to repay the Financial Facility in 6 annual instalments after the expiry of the second year from the respective dates of allotments.

But the Corporate Debtor failed to repay the Financial Facility as per the agreed terms and conditions. Thus, UTI issued a Recall Notice dated 10^th October, 2002 to the Corporate Debtor calling upon them to repay the entire outstanding amounts under the Financial Facility as on 30^th September, 2002.

Despite receipt of the Recall Notice, the Corporate Debtor failed to repay the outstanding amounts. Therefore, the Petitioner filed this Petition praying for the admission of the Petition and commencement of CIRP against the Corporate Debtor.

The Corporate Debtor in its reply contended that on a careful perusal of the Balance sheets from 2011 onwards shows that Corporate Debtor has never admitted and acknowledged the alleged debt payable to the Petitioner. But it merely records that the Corporate Debtor has defaulted in paying outstanding dues to UTI and a recall notice was issued in relation to the same.

Further, the Corporate Debtor contended that the Petitioner cannot take shelter under Section 18 of the Limitation Act to revive a hopelessly time barred debt as under Section 18 of the Limitation Act a fresh period of limitation shall be computed only before the expiration of the period of limitation, a party in writing acknowledges the debt. But in this Petition, the Petitioner has failed to prove or produce any document to show that Corporate Debtor had acknowledged the alleged debt in writing.

In the present case, the right to sue accrued in 2004 when UTI issued Recall Notice but the Petition was filed only on 6^th November, 2018. Thus, the Corporate Debtor states that the present petition is based on a time barred debt.

The Corporate Debtor has relied upon the judgment of Supreme Court in the case of B. K. Educational Services (P) Limited Vs. Parag Gupta and Associates (2019) 11 SCC 633.

In view of the above, the Corporate Debtor prays that the Present petition to be dismissed with cost.

This Petition has been filed by Phoenic ARC Private Limited (hereinafter referred as “Applicant/Financial Creditor”) against the Ajanta Paper and General Products Limited and Ors. (hereinafter referred as “Respondent/Corporate Debtor”) for 5,00,000 (five Lakhs) 19% Secured Redeemable Non-Convertible Debentures of face value of Rs. 100 (Rupees One Hundred Only) each aggregating to total amount of Rs. 5 crores. The interest due initially was at the rate of 19 % per annum which was in May 1998 modified /reduced to 17 % per annum.

This financial facility has been assigned to Phoenic ARC Private Limited by the Assignee of the Unit Trust of India vide assignment agreement dated 4^th December, 2014. As on 31^st October, 2018, the total outstanding amount as per the Petition is Rs. 97,01,67,024/- and the date of default as per the Petition is 30^th September, 2002.

The facility recall notice was given by the Petitioner to the Respondent on 10.10.2002. The Bench notes that Pari passu charge has also been created on the ownership rights of the Corporate Debtor on 14^th October, 1998. In addition, charge has also been created on all the movable properties of the Corporate Debtor including Plant and Machinery both present and future. The Bench notes that it is admitted position that a Secured Redeemable Non-Convertible Debentures of Rs. 5 crores along with interest has been provided by way of financial facility to the Corporate Debtor. However, the only point of defence raised by the Corporate Debtor is that the Petition is time barred and therefore, should be dismissed.

The Corporate Debtor in his reply mentions that records in the balance sheet does not amount to unequivocal acknowledgment as per provisions of the Section 18 of the Limitation Act.

Since the Corporate Debtor admitted its liabilities towards the financial facilities, the Bench would not dwell on the debt and disbursal aspect of the facility. However, only aspect to be seen by this Bench relates to the limitation aspect and whether the Petition which has been filed on 6^th November, 2018 is as barred by time.

In order to deal with the issue of limitation, the Petitioners have submitted an additional affidavit to the Petition, financial documents of several years where there has been clear cut admission of liability regarding the Financial facility availed the Corporate Debtor from time to time since 2003. Here, it is pertinent to note that the date of default as per the Petition is 30^th September, 2002 and the Bench, based on the submissions made by the Petitioner has tried to arrive at the fact that whether within every three years since the date of default, the Corporate Debtor has admitted to its liability towards the financial facility in its various financial documents filed with the Statutory authorities.

It is on record that the Corporate Debtor was referred to BIFR under Sick Industrial Companies (Special Provisions) Act, 1986 (SICA). The reference of the Corporate Debtor to BIFR was pending until 19^th June, 2008. When, as mentioned by the Petitioner, the reference to BIFR in SICA was abated and accordingly ordered by BIFR. Therefore, the Bench is of the view that as per Section 22 of the SICA, 2003, the Petitioner could not have instituted or prosecuted any proceedings against Corporate Debtor from 2003, when the company was referred to BIFR and till June, 2008 when the said reference was abated by BIFR. Thus, the time period between 2003 to 19^th June, 2008 as per law would stand excluded while computing the period of limitation for filing the petition.

The Petitioner has produced before the Bench the annual returns and the balance sheet filed by the Corporate Debtor before RoC for the financial year ending 31^st March, 2009 where it has been clearly shown the Corporate Debtor who has 5 lakh debentures of the face value of Rs. 100 each of Unit Trust of India. The Snapshot of the same is as follows:

Similarly, in the balance sheet for the period 01^st April, 2011 to 31^st March, 2012 filed by the Corporate Debtor to RoC, the following has been mentioned:

The Petitioner has submitted balance sheet for the year ended 31^st March, 2015 which shows that during the FY 2014-15 (end March), there is a mention of the debentures issued by Unit Trust of India which stood subsequently transferred to Phoenic ARC Private Limited. It clearly mentions amount as on 31^st March, 2017 stands at Rs. 10,62,92,521/- along with Interest. The Snapshot of the same is as follows:

Again, in the balance sheet for the year ended 31^st March, 2017, there is a mention of the outstanding non-convertible debentures of Rs. 5,00,000 having face value of Rs. 100 each outstanding at the end of the year. The snapshot of the same is as follows:

Similarly, for the financial year 1^st April, 2018 to 31^st March, 2019, the details of debentures issued by UTI is mentioned along with the fact that the same was recalled in the Financial Year 2002-2003. Here, the Bench would like to reiterate that the Petition was filed on 6^th November, 2018.

This Bench would like to refer to recent judgement of Hon’ble Supreme Court in the Dena Bank vs. C. Shivakumar Reddy on 4 August, 2021 wherein the Hon’ble Supreme Court has mentioned the following:

This Bench would also like to refer to recent judgement of Hon’ble Supreme Court in the Asset Reconstruction Company vs Bishal Jaiswal on 15 April, 2021 wherein the Hon’ble Supreme Court has mentioned the following:

In view of the above facts and the judgements of Hon’ble Supreme Court, it is clear that there has been acknowledgement of debt as per the financial filings of the Corporate Debtor with RoC regularly and year after year and thus it would fairly constitute as the acknowledgement under Section 18 of the Limitation Act, 1963.

Under these circumstances, this tribunal is of the considered opinion that the above company petition is liable to be admitted and accordingly the same is admitted by passing the following:

Accordingly, CP 4277 of 2018 is admitted.

The Registry is hereby directed to communicate this order to both the parties and the Interim Resolution Professional immediately.