S. Sudeep vs Dhanalakshmi Bank Limited & Ors.

M. Venugopal, J:

The Appellant S. Sudeep has preferred the instant T.A. No. 39 of 2021 (Company Appeal (AT)(CH)(Insolvency) No. 427 of 2020) being aggrieved against the order dated 7^th February, 2020 passed by the ‘Adjudicating Authority’/National Company Law Tribunal, Kochi Bench, Kochi in IBA/51/KOB/19 (filed by the Respondent No. 1/Bank/Applicant under Section 7 of Insolvency and Bankruptcy Code, 2016 (in short ‘IBC’).

The ‘Adjudicating Authority’ while passing the Impugned Order dated 7^th February, 2020 in IBA/51/KOB/19, amongst other things, observed that the Application was filed in the capacity of ‘Financial Creditor’ for final debt of Rs. 14,24,90,488/- (Rupees Fourteen Crores Twenty Four Lakhs Ninety Thousand Four Hundred Eighty Eight) recoverable from the ‘Corporate Debtor’ viz., Trivandrum International Health Services Ltd and that the documents produced on record proved that disbursement of various loan facilities granted by the ‘Financial Creditor’ to the ‘Corporate Debtor’ and consequently in the light of ^{T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020} Page 2 of 17 facts and circumstances, came to the conclusion that existence of ‘debt’ and ‘default’ was reasonably established by the ‘Financial Creditor’ as a major constituent for admission of a petition and admitted the petition by declaring moratorium etc.

According to the Learned Counsel for the Appellant the ‘Corporate Debtor’/ Trivandrum International Health Services Ltd engaged in the business of ‘Health Care Services’ for its expansion under the dream project of Multi-Specialties Cancer Block approached Respondent No. 1/’Financial Creditor’ for financial support in the form of loan and submitted relevant documents. The Respondent No. 1/Bank on the request of the ‘Corporate Debtor’ and upon consideration of relevant documents sanctioned the credit facility through a sanctioned letter dated 13.02.2015.

It is represented on behalf of the Appellant that a Master Credit Agreement dated 31.03.2015 was executed by the Appellant Company in favour of Respondent No. 1 at Trivandrum. Besides this a Term Loan Agreement dated 31.03.2015 and Overdraft Cash Credit dated 31.03.2015 and other documents were executed between the parties.

The Learned Counsel for the Appellant brings to the notice of this Tribunal that a ‘Demand Promissory Notes’ dated 31.03.2015 was executed by the ‘Corporate Debtor’ for Rs. 1 Crore and 15 Crore to and in favour of the ‘Financial Creditor’. That apart, a ‘Corporate Guarantee Deed’ dated 31.03.2015 by M/s ^{T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020} Page 3 of 17 Dr. K.N. Pai, Heart Foundation, a Trust in favour of the Respondent No. 1/Financial Creditor and further that the Deed Guarantor was executed by Mr. Bharat Chandra C, Advocate P.A. Ahmed and Dr. Ashalatha, Directors in favour of Financial Creditor.

It is the stand of the Appellant that the Sanction Letter dated 26.05.2015 issued by the Respondent No. 1/Bank (‘Financial Creditor’) in favour of the ‘Corporate Debtor’ was amended as regards amendment of the securities to be furnished and that it was approved on 30.03.2015, was released by the Respondent No. 1/Bank on 31.07.2015 in trench. In fact, Respondent No. 1 sanctioned a sum of Rs. 7,76,12,971/- out of Rs. 15 Crores due to which the funds of the dream project of Super Specialty Cancer Block came to a standstill.

The Learned Counsel for the Appellant points out that the loan amount of the ‘Corporate Debtor’ was classified as Non-Performing Asset (In short ‘NPA’) through letter dated 02.05.2016 issued by the Respondent No.1/Bank.

A Notice dated 22.07.2017 was also issued under Section 13(2) of the SARFAESI Act by the Respondent NO. 1/Bank as a ‘Financial Creditor’ and that the ‘Possession Notice’ under Section 13(4) of the SARFAESI Act against the ‘Corporate Debtor’ and Guarantors was issued on 09.01.2017 by the Bank. In this connection it is relevant to point out that O.A. No. 156/2018 was filed by the Bank before the Debt Recovery Tribunal, Ernakulam and the same is pending. As a matter of fact, the ‘Corporate Debtor’ had addressed a letter dated ^{T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020} Page 4 of 17 31.07.2017 to the ‘Financial Creditor’ i.e. the Respondent No. 1/Bank with a request to withhold SARFAESI proceedings.

The Learned Counsel for the Appellant proceeds to submit that a meeting was convened on 25.05.2017 by the ‘Corporate Debtor’ and other lenders in the presence of the Hon’ble Finance Minster of Kerala to discuss the restructuring of loan and repayment of arrears and later on, a meeting took place on 15.06.2017 to provide a reasonable opportunity to the ‘Corporate Debtor’ to settle the arrears of the debt. A true copy of ‘One Time Settlement’ (in short ‘OTS’) dated 06.12.2018 was sent by the ‘Corporate Debtor’ to the Financial Creditor and the Respondent No. 1/Bank replied on 12.12. 2018 by expressing its interest in the proposal submitted by the ‘Corporate Debtor’.

The Learned Counsel for the Appellant submits that the ‘Corporate Debtor’ had brought for OTS of credit facility and proposed a final offer of Rs. 8.15 Crores as full and final settlement and the said settlement proposal was dated 11.01.2019, which was approved by the Respondent No. 1/’Financial Creditor’ and a Sanction Letter dated 22.01.2019 was approved by the Respondent No. 1/Bank which was accepted by the ‘Corporate Debtor’ but sought time to pay 5% of the advance.

It transpires that the Respondent No. 1/Bank had filed, before the ‘Adjudicating Authority’ an Application in IBA/51/KOB/2019 (under Section 7 of IBC) seeking to initiate ‘Corporate Insolvency Resolution Proceeding’ (in short ‘CIRP’) against the ‘Corporate Debtor’/Trivandrum International Health Services ^{T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020} Page 5 of 17 Ltd wherein it claimed a total default sum of Rs. 14,24,90,488/- as on 30.11.2019 specifying the date of default as 30.06.2019.

It is brought to the fore that the Memorandum of Deposit of Title Deeds executed by Trivandrum International Health Services Limited, ‘Corporate Debtor’ with respect to 80 cents in Re. Sy No. 588/6, 6.25 Cents in Re. Sy. No. 588/26 and 100 Cents in Re. Sy No. 588/6 in favour of SBT and Memorandum of Deposit of Title Deeds executed by Dr. K.N. Pai Heart Foundation with respect to 1.60 Areas in favour of the Financial Creditor. With respect to 124 Cents covered by Sale Deed No. 4460/2012, the equitable mortgage was created in favour of KFC.

The Learned Counsel for the Appellant contends that the Application in IBA/51/KOB/2019 filed by Respondent No. 1/Bank (Applicant) before the ‘Adjudicating Authority’ was barred by limitation as per Article 137 of the Limitation Act, 1963, Accounts of the ‘Corporate Debtor’ was classified as ‘NPA’ on 30.05.2016, which is beyond three years, prior to the date of filing of the Application on 10.12.2019.

According to the Appellant, the whole reason for failing to pay debt on time is the failure on the part of the ‘Financial Creditor’ to release loan on time. Further, in the instant Appeal, a plea is taken is that the Respondent No. 1/Bank cannot impose/levy exorbitant interest (including penal interest) for the loan disposed against the ‘Corporate Debtor’, which is against the RBI Rules and the same cannot be added as default. ^{T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020} Page 6 of 17

The other plea taken on behalf of the Appellant is that the Section 7 Application before the ‘Adjudicating Authority’ was not maintainable because of the fact that against a loan disbursed to the ‘Corporate Debtor’, the exorbitant interest and penal interest were added and the same cannot be termed as an amount in default.

The Learned Counsel for the Respondent No. 1/Bank submits that the ‘Corporate Debtor’ had addressed a letter dated 11.01.2019 to the Respondent No. 1/Bank proposing a refund of OTS Plan Rs. 1.58 Crore as Full and Final Settlement which is an ‘acknowledgment’ within the meaning of Section 18 of the Limitation Act fresh period of limitation for filing an Application under Section 7 of IBC.

The Learned Counsel for the Respondent No.1/Bank projects an argument that the ‘Corporate Debtor’ after its account was classified as ‘NPA’ on 30.05.2016 and before the lapse of the limitation period had other communications which constitutes an ‘acknowledgment’ for the purpose of Section 18 of the Limitation Act, 1963. Added further, a meeting was convened by the ‘Corporate Debtor’, ‘Financial Creditor’ and other lenders in the presence of Hon’ble Finance Minister, Kerala, to discuss on ‘Restructuring’ of the loan facility and repayment of arrears and thereafter, on 06.12.2018, sent a letter proposing OTS of credit facility, which was approved by the Respondent No. 1/Bank in principle as per Sanction Letter dated 22.01.2019. In this regard, the ^{T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020} Page 7 of 17 Learned Counsel of the Respondent No. 1/Bank contends that these facts clinchingly indicate an ‘acknowledgment’ for the purpose of Article 137 of the Limitation Act, 1963 giving rise a fresh period of limitation, to be reckoned from the date of ‘acknowledgment’. 18. The Learned Counsel for the Respondent No. 1/Bank to lend support to the contention that the revised OTS proposed is clearly acknowledgment of debt, refers to the decision of this ‘Tribunal’ in ‘Gauri Prasad Goenka Vs. Punjab National Bank & Anr.’ (vide Company appeal (AT)(Insolvency) No. 28 of 2018 wherein at paragraph - 10 it is held as under:

The Learned Counsel for the Respondent No. 1 cites decision of the Hon’ble Supreme Court in “Laxmi Pat Surana Vs. Union of India & Anr.” (vide Civil Appeal No. 2734 of 2020) wherein at paragraph 37 it is observed and held as under; …

The Learned Counsel for the Respondent No. 1 refers to the judgment of the Hon’ble Supreme Court in ‘Dena Bank (Now Bank of Baroda) Vs. Shiva Kumar Reddy & Anr in Civil Appeal No. 1650 of 2020 wherein at paragraph114, 116, 141 & 142 it is observed as under: ..

In pith and substance, the submission of the Learned Counsel for the First Respondent/Bank is that the instant appeal preferred by the Appellant is parse not maintainable in the eye of law.

Before the ‘Adjudicating Authority’, the Managing Director of the ‘Corporate Debtor’/ Trivandrum International Health Services Ltd had filed a Reply by taking the stand that the ‘Adjudicating Authority’ has jurisdiction only where loans were availed by the Company and that one of the properties involved in the transaction is a Trust property. In short, the stand of the ‘Corporate Debtor’ was that Trust property cannot be proceeded with by the ‘Adjudicating Authority’ in Insolvency Resolution Process and further that the Company had availed Long Term Fund of Rs. 31.22 Crores from Dr. K.N. Pai and that the assets of the Company include the funds availed from the Trust.

The ‘Corporate Debtor’ took a stand before the ‘Adjudicating Authority’ that the Respondent No. 1/’Financial Creditor’ had approached the Debt Recovery Tribunal, Ernakulam in O.A. No. 156 of 2018 and that the ‘Corporate Debtor’ is very much prejudiced because of the plurality of the proceedings initiated in numerous foras.

As seen from Section 7 Application in IBA/51/KOB/19, filed by the Respondent No. 1/Bank, before the ‘Adjudicating Authority’, on 10.12.2019, it is evident that the Respondent No. 1/Bank had issued sanction letter dated 30.03.2015 in favour of the ‘Corporate Debtor’ approving ‘Cash Credit Facility’ of Rs. 1.00 Crore and Term Loan Facility of Rs. 15.00 Crores subject to the terms and conditions thereof and the said sanction was amended by the letters dated 25.05.2015 and 08.07.2015 respectively. Also, that between the Parties, there is an agreement in respect of the loan and ‘Memorandum of Deposit of Title Deeds’ was executed.

In respect of the ‘Loan Promissory Notes’ were issued by the ‘Corporate Debtor’ for Rs. 1 Crore and Rs. 15 Crore to and in favour of the Respondent No. 1/Bank (‘Financial Creditor’).

There is no denial of the fact that because of the default committed by the ‘Corporate Debtor’ in regard to the repayment of Credit Facility in violation of the sanctioned terms, loan documents, the Respondent No. 1/Bank had classified the accounts of the ‘Corporate Debtor’ on NPA on 30.05.2016. It cannot be ignored that the Respondent No. 1/Bank, after issuing ‘Demand Notice’ and also issued Notice under Section 13(2) of the SARFAESI Act to the ‘Corporate Debtor’ and ‘Guarantors’ requiring them to repay the dues before 22.09.2016. Even after providing reasonable opportunity to the ‘Corporate Debtor’ to settle the arrears and to keep on hold the SARFAESI Act proceeding, which decision was taken on 15.06.2017 at the Meeting of ‘lenders’ there was no concrete proposal from the ‘Corporate Debtor’, the Respondent No. 1/Bank was constrained to file O.A. No. 156 of 2018 on 26.05.2018 to recover its dues.

A mere running of the eye of the OTS proposal dated 06.12.2018, 12.12.2018, 11.01.2019 addressed to the Chief Manager of the Respondent No. 1/Bank, Trivandrum International Health Services Ltd unerringly pointed out that the ‘Corporate Debtor’ had admitted its liability and had prayed for the OTS of Credit Facility and mooted an abnormal offer of Rs. 8.15 Crores on 11.01.2019 towards the ‘Full and Final Settlement’ of all the ‘outstanding liabilities’ with the ‘Bank’, which was approved by the Bank as per its Sanction Letter dated 22.01.2019 which was accepted by the ‘Corporate Debtor’ on 24.01.2019. But the fact of the matter is that the ‘Corporate Debtor’ had prayed for time till 20.02.2019 for payment of 5% advance sum under the OTS scheme and indeed, the ‘Corporate Debtor’ in accordance with the OTS was to repay the liabilities of the Respondent No. 1/Bank by 30.06.2019. Therefore, in the instant case, the default is on 30.06.2019.

At this stage, this ‘Tribunal’ had gone through the contents of the letter dated 11.01.2019 (One Time Settlement offered for credit facility) of the ‘Corporate Debtor’/ Trivandrum International Health Services Ltd addressed to the Chief Manager of the Respondent No. 1/Bank which exhibits that a request was made for fixing ‘OTS’ amount as Rs. 8.15 Crores, which shall be fulfilled within 180 days of sanction, 20% of this amount to be paid within 90 days of the sanction and 5% will be paid on receiving sanction and the balance 15% within 90 days etc.

To put it precisely, the Respondent No. 1/Bank through its letter dated 22.01.2019 (without prejudice) had addressed a communication (without prejudice) to the Managing Director of the ‘Corporate Debtor’ inter alia, stating that in-principle sanction was only valid upon payment of 5% of the OTS and as per the cut off dated 29.01.2019 and further that this sanction letter was issued by it without prejudice to any right and remedies available to it and it reserves its right to proceed accordingly.

It is to be pointed out that an ‘acknowledgement’ must relate to a present subsisting liability. The word ‘occurring’ in Section 18 of the Limitation Act, 1963 means admission of the truth pertaining to one’s own liability, which in turn may be expressed or employed.

In law, a writing to be ‘acknowledgment’ of liability must involve an admission of a subsisting jural relation between the parties and conscious confirmation of an intention of affirming such relation in regard to an ‘existing liability’.

No wonder, an ‘acknowledgement’ is an admission made by the ‘maker’ that there is a ‘debt’ to be paid by him, either to the recipient of the communication/letter or to other individual, on whose behalf the said communication is received.

In so far as filing of O.A. No. 156 of 2018 before the Debt Recovery Tribunal, Ernakulam (in short ‘DRT’) by the Respondent No. 1/Bank is concerned, it is to be pointed out that the filing of an Application under Section 7 of the IBC by the Bank (‘Financial Creditor’) is not barred.

In regard to the plea that when on behalf of the Appellant Section 7 Application filed, Respondent No. 1/Bank is barred by limitation, the same is negatived by this ‘Tribunal’ in view of the fact that the ‘Application’ was filed on 10.12.2019 and that the liabilities of the Respondent No. 1/Bank are to be repaid by the ‘Corporate Debtor’ by 30.06.2019 (the occurrence of date of default being 30.06.2019) which is well within 3 years’ period.

It is well settled that it is not for the ‘Adjudicating Authority’ to arrive at the quantum of the outstanding amount due to be paid by the ‘Corporate Debtor’ to the ‘Financial Creditor’. It is to be remembered that IBC, 2016 is not a ‘Debt Enforcement Procedure’.

To put it precisely, the ‘proceedings’ under IBC are summary in nature and not an adversary one. Suffice it for this ‘Tribunal’ to relevantly point out that the ‘proceedings’ under IBC are not like that of a regular ‘Civil Suit’. As such, the aspects of the exorbitant interest, penal interest, purportedly imposed on the ‘Corporate Debtor’ by the Respondent No. 1/Bank are not gone into by this ‘Tribunal’ in ‘Appeal’.

In view of the aforesaid detailed discussions and this ‘Tribunal’ taking note of the facts and circumstances of the present case, in accumulative manner, comes to a resultant conclusion that the Debt of the ‘Corporate Debtor’ and ‘Default’ committed by it were proved and that the ‘Adjudicating Authority’ on being satisfied with the disbursement of various loans to the ‘Corporate Debtor’ by the Bank came to the right conclusion of admitting the ‘Application’ and declaring Moratorium etc. which in the considered opinion of this Tribunal are free from any patent illegalities. Consequently, the Appeal is devoid of merits.

In fine, T.A. No. 39 of 2021/Company Appeal(AT)(Insolvency) No. 427 of 2020 is dismissed. No costs. Connected I.A. No. 1123 of 2020 seeking stay of the Impugned Order dated 07.02.2020 of the ‘Adjudicating Authority’ is closed.