UV Asset Reconstruction Company Ltd. vs Kalpataru Cold Storage Private Ltd.

Per Shri M. B. Gosavi, Member(J):

UV Asset Reconstruction Company Ltd.- the Financial Creditor filed this application under section 7 of the Insolvency & Bankruptcy Code, 2016 (in short, I&B Code) against Kalpataru Cold Storage Private Ltd. – Corporate Debtor to start Corporate Insolvency Resolution Process (in short, “CIRP”) of the Corporate Debtor as the Corporate Debtor committed default in paying the financial debt of Rs.21,61,12,013/-.

The following facts are not in dispute.

By loan sanction letter dated 28.03.2019, United Bank of India granted and disbursed loan of Rs.12.26 crores to the corporate debtor. Corporate Debtor executed demand promissory notes and other documents, having availed the loan. The loan was not repaid as agreed by the corporate debtor. Hence, on 31.03.2014, the loan account was declared to be NPA by the United Bank of India.

On 29.03.2014, bank assigned the debt to the financial creditor by way of Deed of Assignment. It was within the knowledge of the corporate debtor. The Financial Creditor claimed the recovery of assigned debt from the corporate debtor but the corporate debtor did not pay. Hence, proceeding for recovery of loan which was already initiated by United Bank of India bearing OA No.530/2015. It is pending for adjudication. Financial Creditor filed this application to start CIRP of the corporate debtor.

Financial Creditor suggested name of one Mr. Anup Kumar Singh, having registration no. IBBI/IPA-001/IP-P00153/2-17-2018/10322 and email Id. [email protected] for appointment as the IRP.

Corporate Debtor is served with the notice of this application. One Mr. Gurupada Sinha, one of the directors of the corporate debtor appeared. He filed affidavit-in-reply. He contended that the time-barred debt is sought to be recovered. Deed of assignment on the basis of which, this proceeding is filed, is not legal and valid document. Financial Creditor does not get right to initiate any proceeding on the basis of such invalid deed of assignment.

He further contended that corporate debtor has filed suit bearing Title Suit No.1609/2017 in City Civil Court, Kolkata challenging the legality and validity of the deed of assignment. It is pending. Since the Court of Competent Jurisdiction is yet to decide the legality of deed of assignment, this authority cannot take cognizance of this proceeding. The proceeding is not maintainable and may be dismissed.

We heard the Ld. Counsel for the Financial Creditor and the Corporate Debtor at length. Ld. Counsel for the corporate debtor brought to our notice deed of assignment but he argued that it is not properly stamped. It has not been duly registered. Deed is not legal and it is invalid. It cannot be said that by virtue of such deed, debt is legally assigned or transferred in favour of the applicant. The applicant is not a Financial Creditor within the meaning of section 5(7) of I.& B. Code.

He further contended that according to the applicant the debt became due upon declaring loan account to be NPA by the bank. That date is 31.03.2014. If it was so, this proceeding ought to have been filed within three years thereafter. It is filed beyond period of limitation.

Ld. Counsel for the Financial Creditor submitted that deed is legal and valid. It is properly stamped and registered. Its legality cannot be challenged. He relied on the order of the Hon'ble NCLAT in case of Lalan Kumar Singh-vs-Phoenix ABC Pvt. Ltd. and Ors. [(Company Appeal (AT) (Insolvency) No.485 of 2018).

He further submitted that pendency of suit in between the parties not a ground to reject this application. He further submitted that the loan account of the corporate debtor declared to be NPA in March, 2014 and immediately thereafter the bank has filed recovery proceeding against the corporate debtor in DRT, Kolkata. Thereby, period of limitation stopped running against the Financial Creditor. This proceeding is filed well within time. Corporate Debtor may be admitted in CIRP.

On the basis of materials on record and the submissions made at the Bar, the following points of controversy arises for our determination. We record our findings thereon as follows:

We deal with the first objection raised by the corporate debtor. It is submitted that the applicant cannot be financial creditor within the meaning of section 5(7) of IBC as the deed of assignment is legal and valid. Section 5(7) of IBC defines Financial Creditor that, "Financial Creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; The law requires that there must be legally assignment of debt. Herein, before us the deed of assignment is produced as Annexure P-3. We find that it is prepared on stamp paper of Rs.100/-. It has been registered duly before the Registrar of Assurance, Kolkata. Prima facie, we hold that it is legal and valid deed of assignment of debt. If, at all, it is on insufficient stamp paper, then law requires that deficiency of paying stamp can be recovered with penalty. The deed cannot be said to be illegal thereby. Moreover, the Hon'ble Appellate Tribunal in the order stated above held that in para 16 that, "The appellant has challenged the 'Deed of Assignment' executed between the 'HSBC & Phoenix', but while filing reply to the notice issued during the admission of application under section 7 of the I&B Code, such issue cannot be raised as it cannot be decided by the Adjudicating Authority on objection." In view of above, we hold that the applicant herein is the financial creditor within the meaning of section 5(7) of IBC. We answer first point in the affirmative.

The proceeding is also challenged on the ground that it is time-barred debt. It is not in dispute that the bank declared loan account of the corporate debtor to be NPA on 31.03.2014. The bank got right to sue the corporate debtor in March, 2014. As per Article 137 of Law of Limitation, bank could have filed recovery proceedings against the corporate debtor on or before 30.03.2017. However, on 29.03.2017, the bank assigned the debt to the financial creditor. Prior to that the bank had filed recovery proceeding against the corporate debtor in DRT, Kolkata. Ld. Counsel for the financial creditor submitted that time to file other proceeding against the corporate debtor stopped running thereby. However, it is difficult for us to accept this submission. Very recently, the Apex Court in case of Gaurav Hargovindbhai Dave-vs- Assets Reconstruction Company India Ltd. (Civil Appeal No.4952 of 2019) has held that –

In short, it was expected from the financial creditor and earlier to that by the bank to file proceeding against the corporate debtor within three years from the date on which the account of the corporate debtor became NPA. In this case, the account declared to be NPA on 31.03.2014, proceeding is filed on 31.10.2018.

However, there is one more dimension as far as case in hand is concerned. The financial creditor and even corporate debtor have produced on record the corporate debtor's balance-sheet for the year ending March, 2016 (page no.300 onwards in paper book). From the perusal of those financial papers of the corporate debtor, it is seen that corporate debtor noted that they have to pay the debt of United Bank of India. Their account is declared as NPA. In short, in the year 2016, the corporate debtor in its balance-sheet acknowledged the debt to be payable by them which is claimed herein by the financial creditor. This acknowledgement of debt in its balance-sheet by the corporate debtor in the year 2016 has brought the claim of financial creditor within period of limitation. It is filed well within period of limitation. We hold that the debt is not time-barred. We answer point no.2 in the negative.

Coming back to other facts that there is no dispute that the corporate debtor is liable to pay debt more than Rs.21 crores. It is also not in dispute that the corporate debtor has committed default in paying the debt. By virtue of corporate debtor's admission about the debt in its balance-sheet for the year 2016, this proceeding appears to have been filed within period of limitation. Financial Creditor suggested name of Resolution Professional for appointment as the IRP against whom no disciplinary proceeding appears to be pending. This application is defect-free. Hence, we admit the same and pass the following order: