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Judgment
Per: Pradeep R. Sethi, Member(Technical)
CP IB No.375/Chd/Pb/2018 is filed by State Bank of India (State Bank) under Section 7 of the Insolvency & Bankruptcy Code, 2016 (Code) read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (Rules 2016) for initiation of Corporate Insolvency Resolution Process (CIRP), in the matter of Jindal Medicot Limited (Jindal Medicot). The application is filed in Form 1 and is signed by Shri Baljit Singh, Assistant General Manager, Sate Bank. His affidavit verifying he contents of the application is at page 21 of the petition.
The address of Jindal Medicot is stated to be V.P.O. Jugiana, GT Road, Ludhaina, Punjab. Therefore, the jurisdiction lies with this Bench of the Tribunal.
In Part IV of the application, it is stated that the loan amounts were disbursed between 04.11.2008 to 28.09.2012. The amount claimed to be in default is given in Column 2 of Part IV of the application, as follows:
| Account No. | Amount claimed to be in default (In (Rs.) |
| 32572840677 | 36,20,81,817 |
| 31817372619 | 18,96,77,076 |
| 32571403808 | 8,68,69,177 |
| 32571933132 | 3,57,10,912 |
| 31175550056 | 69,30,000 |
| Uncharged interest from 01.01.2014 to 31.08.2018 | 64,16,86,798 |
| Total | Rs.1,32,29,55,780.00 |
The days of default are stated to be 1704 and calculated from 01.01.2014.
Part V of the application inter alia gives the particulars of the security including first and second charge on entire current assets of the company both present as well as future, second charge on entire fixed assets of the company, both present and future, EM of land and building on first pari-passu basis measuring 07-69-47 Hects. (200 Kanals) standing in the name of Himachal Textile Park Limited vide sale deed no.2034 dated 27.09.2010, sale deed no.2038 dated 27.09.2010 and sale deed no. 280/2011 dated 14.02.2011 situated at UP Mahal Ram Nagar, Thathal, Tehsil Amb, Distt. Una, HP, and personal guarantees of promoter directors: Yash Paul Jindal, Ramesh Jindal, Rajinder Jindal, Sandeep Jindal, Corporate Guarantee of holding company, i.e. Jindal Cotex Limited and Corporate Guarantee of HTPL.
In Part III of Form 1, Parveen Bansal, registration number IBBI/IPA-001/IP-P00175/2017-2018/10344, address: E-104, Kailash Colony, Greater Kailash-I, New Delhi-110048, email: [email protected], mobile No.9971593217 has been proposed as Interim Resolution Professional (IRP) and the copy of his consent in Form 2 along with certificate issued by Insolvency and Bankruptcy Board of India is stated to be enclosed as Annexure A-4.
Order dated 30.11.2018 states that the learned counsel for the petitioner sought time to place on record certain documents with regard to the competency of the person through whom the instant petition has been filed. Compliance thereof was made by Diary No. 4880 dated 12.12.2018. Vide order 20.12.2018, notice of the petition to Jindal Medicot was directed to be issued to show cause as to why the petition be not admitted. The reply was filed by Diary No.4307 dated 26.08.2019. It was averred that the petition is not supported by valid authorisation, certificate under Bankers Books Evidence Act, 1891 was not compliant with the requirements, the consent form of the proposed IRP is false, recoveries were made in the account of Jindal Medicot on 02.12.2016, whereas while calculating the amount claimed on Annexure-5, such credit has not been reflected in the calculation sheet, there are differences between the details given in the enclosures to the petition with regard to the amount claimed.
The rejoinder has been filed by Diary No. 5014 dated 23.9.2019.
CA No.1161/2019 has been filed by Jindal Medicot on 29.11.2019 stating that the date of default mentioned in the application is 01.01.2014 and that according to the rejoinder filed by State Bank, the date on which the account of Jindal Medicot was declared as NPA is back dated to 30.09.2012 and therefore, the petition dated 11.10.2018 be dismissed, being time barred.
Vide order dated 06.12.2019, opportunity was given to State Bank to file reply/objections to CA No.1161/2019. The reply has been filed by State Bank by Diary No. 7356 dated 23.12.2019.
We have carefully heard and considered the arguments of the learned counsel for State Bank and Jindal Medicot and have also perused the record. The major contention raised by Jindal Medicot is that the date of default mentioned in the application is 01.01.2014 and that as per rejoinder filed by State Bank, the date on which the account of Jindal Medicot was declared as NPA is 30.9.2012 and therefore, the petition under Section 7 of the Code filed on 11.10.2018 (should be 03.10.2018) is time barred.
It is submitted by State Bank that Jindal Medicot in its balance sheet as on 31.03.2015 dated 30.5.2015 and as on 31.03.2016 date 30.5.2016 respectively prepared by Raj Gupta & Company Chartered Accountant Firm Regn. No.000203N duly signed by the Director of Jindal Medicot clearly shows at note No.3, "long term borrowing" at point (a) that there are term loan and short term borrowings from State Bank. It is pleaded that it is well settled law that the liability shown in the balance sheet is a clear acknowledgement of debt by the corporate debtor and that the date of signing of the balance sheet by the Director of Jindal Medicot started a fresh period of limitation as per Section 18(1) of the Limitation Act, 1963. Reliance was placed on Vijaya Kumar Machinery & Electrical Stores Vs. Alaparthi Lakshmikanthamma Manu/AP/0150/1968. It was pleaded that it was held therein that the date of signing the balance sheet by the second defendant started a fresh period of limitation and the suit filed within three years from the date on which the balance sheet was filed was within time.
The learned counsel for Jindal Medicot has relied on the judgements of the Hon'ble National Company Law Appellate Tribunal (NCLAT) in the cases of Akram Khan v. Bank of India Limited & Anr. Company Appeal (AT) (Insolvency) No.1092 of 2019 and C. Shivakumar Reddy vs. Dena Bank & Anr. Company Appeal (AT) (Insolvency) No.407 of 2019. It is pleaded that it was held therein that the balance sheet of the corporate debtor cannot be termed to be a document of acknowledgement in terms of Section 18 of the Limitation Act, 1963.
We find that in para no. 7 of the judgement in C Shivakumar Reddy Vs. Dena Bank and Anr. supra, the Hon'ble NCLAT held that there was nothing on record to suggest that the corporate debtor or its authorised representative by its signature has accepted or acknowledged the debt within three years from the date of default or from the date when the account was declared as NPA i.e. on 31.03.2013. It was further held that the balance sheet of the corporate debtor for the year 2016-17 filed after 31.03.2017 cannot be termed as a document of acknowledgement in terms of Section 18 of the Limitation Act. It was held in para 8 thereof that any dues payable, even if acknowledged after 3 years of limitation period, cannot be taken into consideration for the purpose of deriving conclusion under Section 18 of the Limitation Act.
Similar order has been passed by the Hon'ble NCLAT in para nos. 6 & 7 of their judgement in C Shivakumar Reddy Vs. Dena Bank & Anr. supra.
It has been held in A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642 at para 5: AIR 2002 SC 985 that if the amount borrowed by the respondent is shown in the balance sheet, it may amount to acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made.
In the present case, even if the date of default is taken as 30.09.2012, the acknowledgement in the balance sheet as on 31.03.2015 dated 30.05.2015 is within the period of 3 years. Therefore, in view of Section 18 of the Limitation Act 1963, a fresh period of limitation shall be computed from the date of 30.05.2015. The balance sheet as on 31.03.2016 dated 30.05.2016 is within the period of three years from 30.05.2015 and gives a fresh period of limitation from 30.05.2016. The application under Section 7 of the Code is filed on 03.10.2018 and is therefore, well within the period of limitation.
Alternatively, reference is made to the judgement of Hon'ble Bombay High Court in M/s R. Sureshchandra & Co. vs. M/s Vadnere Chemical Works AIR 1991 Bom 44 and to para 10 thereof which reads as follows:-
"10.There is another reason why the claim is good in law even if we assume that Ex. D was not executed before the expiry of period of limitation. Section 25(3) Contract Act validates a promise to pay a debt barred by limitation. This, it was argued, is not the stand of the plaintiff and cannot therefore be taken into consideration. The pleadings do not have to reflect legal submissions. They are to incorporate only the material facts. The making of the acknowledgment has been pleaded and this is cited as a reason for the claim in suit being within time. Not describing the acknowledgment as a promise would not deprive plaintiff of the right to have recourse to the legal provision applicable. I understand that after the expiry of the period of limitation nothing short of a clear promise can provide a fresh period of limitation. But such a promise can also be inferred by necessary implication. The Supreme Court in Hiralal v. Badkulal quoted with approval a Privy Council decision in Maniram v. Seth Rupchand 33 Ind Appeals 165 (PC) (C), that an unconditional acknowledgment was sufficient to furnish a cause of action for it implied a promise to pay. A decision of the Allahabad High Court to the contrary (AIR 1935 All 129), was held as not laying down good law. There is nothing ambiguous about Ex.D. It Says that as on 13-11-1974 defendant 1 is indebted to the plaintiff to the extent of Rs. 3,40,652,26 ps. The balance sheet is signed by defendant 3 who is a partner of the firm. Her competence to bind the firm is not disputed. Being thus clear, it amounts to a promise within the meaning of Section 25(3) of the Contract Act. If so, the suit is plainly within time".
The facts are similar in the present case where the balance sheets as on 31.03.2015 and 31.03.2016 are signed by a Director of Jindal Medicot and his competence to bind the company is not disputed and therefore, it amounts to a promise within the meaning of Section 25(3) of the Contract Act, and the application is within the period of limitation.
In view of the above discussion, the contention raised by Jindal Medicot that the application under Section 7 of the Code is not within limitation is rejected.
Jindal Medicot has pleaded that no specific authorisation has been granted to Shri Baljit Singh, Assistant General Manager and that the petition does not disclose any decision that may have been taken by State Bank to pursue the petition against Jindal Medicot.
In the rejoinder, State Bank has submitted that vide Diary No.4880 dated 12.12.2018, authority letter authorising Shri Baljit Singh, Assistant General Manager to file the present application was submitted. It is pleaded that para 76 and 77 of the State Bank of India General Regulations, 1955 (Annexure R-1 of the rejoinder) read with notice of State Bank of India published in Part III Section IV of the Gazette of India dated 02.05.1987 (Annexure A-1 of the petition) establish the authority of the officer to sign the application. Reference has also been made to Palogix Infrastructure Private Limited vs. ICICI bank Ltd. Company Appeal (AT) Insolvency No.30 of 2017 and it is pleaded that the Hon'ble NCLAT held as under:-
"In so far as, the present case is concerned, the 'Financial Creditor'- Bank has pleaded that by Board's Resolutions dated 30th May, 2002 and 30th October, 2009, the Bank authorised its officers to do needful in the legal proceedings by and against the Bank. If general authorisation is made by any 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant' in favour of its officers to do needful in legal proceedings by and against the 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant', mere use of word 'Power of Attorney' while delegating such power will not take away the authority of such officer and 'for all purposes it is to be treated as an 'authorization' by the 'Financial Creditor'/'Operational Creditor'/' 'Corporate Applicant' in favour of its officer, which can be delegated even by designation. In such case, officer delegated with power can claim to be the 'Authorized Representative' for the purpose of filing any application under section 7 or Section 9 or Section 10 of 'I&B Code'".
In view of the submissions made, the plea of Jindal Medicot challenging the authorisation cannot be accepted.
It has been pleaded that the consent form of the proposed IRP is false, since the proposed IRP has not revealed that he is IRP/RP in the CIRP of two other corporate debtors. Section 7(3)(b) of the Code requires that the financial creditor shall, along with the application furnish the name of the Resolution Professional (RP) proposed to act as an IRP. The proposal has accordingly been made in Form No.1. Section 7(5)(a) inter alia states that for the purpose of admitting the application, the Adjudicating Authority (AA) should be satisfied that there are no disciplinary proceedings pending against the proposed RP. The objection raised by Jindal Medicot is not with regard to pendency of disciplinary proceedings. Therefore, the claimed fallacy in Form 2 cannot affect the admission of the application. However, the same will be considered while discussing the appointment of IRP.
Jindal Medicot has pleaded that as per statement of account attached by State Bank, the bank has made recoveries in the account of the corporate debtor on 02.12.2016, whereas while calculating the amount claimed on Annexure-5, such credit has not been reflected in the calculation sheet. Discrepancies are also pleaded to be present with reference to Annexure A-20 compared to the petition as well as on a comparison between the details in Part IV of Form 1 Column 2 and Annexure-5.
We find that the Hon'ble NCLAT in Gouri Prasad Goenka ex Chairman of NRC Ltd. Vs. PNB & Anr. (2020) 154 CLA311, has held in para 10 thereof that in so far as joining of issue by the corporate debtor qua the quantum of payable debt is concerned, the same does not fall for consideration of the AA at the stage of admission of the application under Section 7 of the Code and the only requirement is that the minimum outstanding debt should be to the tune of ₹1.00 lac. It was further held that the actual amount is to be ascertained by the RP after collating the same and their verification which comes at a later stage.
The plea raised by Jindal Medicot is therefore, not accepted.
Section 7(5)(a) of the Code is as follows:
"5)Where the Adjudicating Authority is satisfied that—
(a)a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application."
The occurrence of default is revealed by the application filed as well as the statement of account along with certificate under Bankers Books Evidence Act, 1891 filed as Annexure A-20 and A-21 of the petition. Moreover, notice dated 14.06.2014 and 27.09.2014 under Section 13(2) of SARFAESI Act 2002 are stated to be issued by State Bank to Jindal Medicot and reply is stated to be received from Jindal Medicot to the notice dated 14.06.2014. Possession notice dated 07.01.2016 is stated to be issued by State Bank to Jindal Medicot and symbolic possession of the property taken. It is submitted that State Bank also moved an application under Section 14(a)(i) of the SARFAESI Act 2002 before the office of the District Magistrate, Una District, Una seeking permission to take the physical possession of the property of Jindal Medicot and the District Magistrate vide order dated 30.11.2016 ordered the Tehsildar cum Executive Magistrate to hand over the possession to State Bank. Therefore, the occurrence of default is proved.
The objections raised by Jindal Medicot with regard to the completeness of the application in Form No.1 have been discussed above. The objections were rejected. We find that the application in Form 1 is complete.
We have discussed the consent form submitted by the proposed IRP above and have noted that the form No.2 does not show any disciplinary proceeding pending against the proposed IRP.
In view of the satisfaction of the conditions under Section 7(5)(a) of the Code, we admit the application and direct the initiation of CIRP in the matter of Jindal Medicot Ltd. Directions with regard to moratorium and appointment of IRP are discussed below.
We declare the Moratorium in terms of sub-section (1) of Section 14 of the Code as under:-
(a)the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b)transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
(c)any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(d)the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
It is further directed that the supply of essential goods or services to the corporate debtor as may be specified, shall not be terminated or suspended or interrupted during moratorium period. The provisions of Section 14(3) shall however, not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to a corporate debtor.
The order of moratorium shall have effect from the date of this order till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33 as the case may be.
We have discussed above that in Form No.1, State Bank has proposed Shri Parveen Bansal as IRP. We have also discussed above that Jindal Medicot has raised objection that the consent form of the proposed IRP is false since he has stated therein that as on 08.08.2018 (date of Form No.2) he was serving as IRP/RP for "Nil proceedings" whereas a perusal of the list of CIRP matters across the country revealed two companies with which Shri Parveen Bansal was involved. It is stated by Jindal Medicot that these two companies are Tehri Iron & Steel Casting Ltd. in Delhi and Andaman Sea Foods Pvt. Ltd. in Kolkata. It has been submitted that Sh. Parveen Bansal is IRP/RP in these two CIRP companies as on 08.08.2018 (para No.10 of reply filed by Jindal Medicot vide Diary No. 4307 dated 26.08.2019).
The rejoinder has been filed by State Bank by Diary No.5014 dated 23.9.2019. It is stated in para No.7 thereof as follows:-
"7.That the contents of para 10 are vehemently and specifically denied on the ground that the consent form (Form-2) filed by the IRP dated 08.08.2018 is devoid of any defect and any allegation made by the Corporate Debtor is baseless, concocted and misleading and thus to be denied at the very outset. Also, as per the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, Notification No. IBBI/2016-17/GN/REG003, Dated 23-11-2016, an Insolvency Professional must refrain from accepting too many assignments for the purpose of being able to devote adequate time to each of his assignments. It is pertinent to mention herein that there has been no restriction on the number of assignments taken up by the Insolvency Professionals if the same are performed diligently and in an efficient manner by the Insolvency Professional."
We note from the above reply that the objections raised by Jindal Medicot that the proposed IRP has falsely stated in form No.2 that he was serving as IRP/RP for "Nil proceedings" has not been denied in the rejoinder. We therefore, direct that a copy of this order be sent to the Insolvency and Bankruptcy Board of India for taking appropriate action against Shri Parveen Bansal in respect of the false statement made in form No.2 (Annexure A-4 of the petition).
Section 16(2) of the Code inter alia states that where the application for CIRP is made by a financial creditor, the RP, as proposed in the application under Section 7, shall be appointed as the IRP. However, in view of the false statement made in form No.2, we do not consider Shri Parveen Bansal as fit for being appointed as IRP in the present case. We are therefore, adopting the procedure laid down in Section 16(3) of the Code in cases where no proposal for IRP is made in application for CIRP filed by an operational creditor.
Section 16(3)(a) of the Code says that where the application for corporate insolvency resolution process is made by an operational creditor and--
"a)no proposal for an interim resolution professional is made, the Adjudicating Authority shall make a reference to the Board for the recommendation of an insolvency professional who may act as an interim resolution professional;
b)xxxxx
Sub-section (4) of Section 16 says that the Board shall, within ten days of the receipt of a reference from the Adjudicating Authority under sub-section (3), recommend the name of an insolvency professional to the Adjudicating Authority against whom no disciplinary proceedings are pending."
In this regard a letter bearing File No.25/02/2020-NCLT dated 07.01.2020 has been received from the National Company Law Tribunal, New Delhi forwarding therewith a copy of letter No. IBBI/IP/EMP/2019/01 dated 31.12.2019 along with the guidelines and the panel of resolution professionals approved for NCLT, Chandigarh Bench for appointment as IRP or Liquidator. The panel is valid for six months from 01.01.2020 to 30.06.2020. We Select Mr. Gaurav Gupta appearing at Serial No.11 of the panel to be appointed as Interim Resolution Professional.
The Law Research Associate of this Tribunal has checked the credentials of Mr. Gaurav Gupta and there is nothing adverse against him.
The following directions are issued in respect of the appointment of the Interim Resolution Professional:-
Appoint Mr. Gaurav Gupta, registered insolvency professional bearing Registration No. IBBI/IPA-001/IP-P00556/2017-18/10986;email ID: [email protected] as Interim Resolution Professional.
ii) The term of appointment of Mr. Gaurav Gupta shall be in accordance with the provisions of Section 16(5) of the Code;
iii) In terms of Section 17 of the Code, from the date of this appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the Interim Resolution Professional and the officers and the managers of the Corporate Debtor shall report to the Interim Resolution Professional, who shall be enjoined to exercise all the powers as are vested with Interim Resolution Professional and strictly perform all the duties as are enjoined on the Interim Resolution Professional under Section 18 and other relevant provisions of the Code, including taking control and custody of the assets over which the Corporate Debtor has ownership rights recorded in the balance sheet of the Corporate Debtor etc. as provided in Section 18 (1)(B) of the Code. The Interim Resolution Professional is directed to prepare a complete list of inventory of assets of the Corporate Debtor;
iv) The Interim Resolution Professional shall strictly act in accordance with the Code, all the rules framed thereunder by the Board or the Central Government and in accordance with the Code of Conduct governing his profession and as an Insolvency Professional with high standards of ethics and moral;
The Interim Resolution Professional shall cause a public announcement within three days as contemplated under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 of the initiation of the Corporate Insolvency Resolution Process in terms of Section 1.3 (1) (b) of the Code read with Section 15 calling for the submission of claims against Corporate Debtor;
vi) It is hereby directed that the Corporate Debtor, its Directors, personnel and the persons associated with the management shall extend all cooperation to the Interim Resolution Professional in managing the affairs of the Corporate Debtor as a going concern and extend all cooperation in accessing books and records as well as assets of the Corporate Debtor;
vii) The Interim Resolution Professional shall after collation of all the claims received against the corporate debtor and the determination of the financial position of the corporate debtor constitute a Committee of Creditors and shall file a report, certifying constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the committee within seven days of filing the report of constitution of the committee; and
viii) The Interim Resolution Professional is directed to send regular progress report to this Tribunal every fortnight.
A copy of this order be communicated to both the parties. The learned counsel for the petitioner shall deliver copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send copy of this order to the Interim Resolution Professional at his email address forthwith.
A copy of this order be also sent to the Insolvency and Bankruptcy Board of India, New Delhi.
Accordingly, CA No.1161/2019 filed under Section 60(5) of the Code for dismissal of the petition No.375/Chd/Pb/2019 is dismissed and disposed of.