Vijaya Bank vs M/s. Castal Extrusion Private Limited

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

Vijaya Bank (now merged with Bank of Baroda), the Financial Creditor filed this application under Section 7 of Insolvency and Bankruptcy Code, 2016 against M/s Castal Extrusion Private Limited the Corporate Debtor (the corporate guarantor of the original borrower, M/s. Tantia Construction Limited) to start Corporate Insolvency Resolution Process (in short "CIRP") of the Corporate Debtor on the ground that the Corporate Debtor being guarantor of the original borrower committed default in paying Financial debt of Rs. 58,57,94,985/- (Rupees Fifty Eight Crore Fifty Seven Lakh Ninety Four Thousand Nine Hundred and Eighty Five Only).

There is no dispute to the fact that the Corporate Debtor is the corporate guarantor of the principal debtor, M/s. Tantia Construction Limited. The principle debtor committed default in paying loan. It has gone in process of CIRP. The Corporate Debtor being guarantor of M/s. Tantia Construction Limited is duty bound to pay the debt as and when called upon by the Bank. It is undisputed that till the date, Corporate Debtor did not pay any amount to the Bank towards repayment of the debt.

Upon service of notice of this application, the Corporate Debtor appeared and raised two contentions in its defense: -

We heard Ld. Counsel for the Bank and Ld. Counsel for the Corporate Debtor. We perused record.

It is not in dispute that on 08.11.2012, loan amount of the principle debtor classified as Non-Performing Asset (NPA). On 10.03.2014, the Bank sent the principle borrower as well as the Corporate Debtor notice under Section 13(2) of the SARFAESI Act 2002 and called upon them to pay the loan. Copy of that notice is on record at page no. 174. Perusal of it shows that the Bank has invoked the guarantee of the Corporate Debtor and called upon the Corporate Debtor to clear outstanding loan amount. It shows that by notice dated 10.03.2014, under Section 13(2) of the SARFAESI Act, the Bank revoked the guarantee given by the Corporate Debtor. Hence, the first defense of the Corporate Debtor falls flat.

It takes us to consider second defense that the claim is time barred. From above evidence it is clear that the right to apply against the Corporate Debtor had accrued to the Bank on 10.03.2014 i.e. the date on which the guarantee was invoked. As per Article 137 of Law of Limitation, 1963, it was necessary for the Bank to file this application within three year there from. This application is filed by the Bank on 14.03.2018. It is filed beyond period of three years.

Upon our query to Ld. Counsel for the Bank that as to how this proceeding is maintainable as it is filed beyond period of limitation? Ld. Counsel for the Bank submits that the Corporate Debtor had challenged notice under Section 13(2) by filing Writ Petition bearing no. 9003 of 2017. It has been disposed by the Hon'ble High Court vide order 04.04.2017 (page no. 198). He submits that in that Writ Petition, the Corporate Debtor has admitted and acknowledged the debt.

We have perused the Corporate Debtor's contention in Writ Petition. It has acknowledged and admitted the debt to the extent of Rs. 35 Crore. The Writ Petition was filed within three years from date of invocation of the guarantee. Hence, for purpose of computing the period of limitation for filing application, 04.04.2017 is relevant date because it was date of which Corporate Debtor had filed writ petition wherein the liability to pay debt to the extent of Rs. 35 Crore was admitted by the Corporate Debtor. This proceeding is filed on 14.03.2018. It is filed within period of limitation.

The Financial Creditor suggested name of one Mr. Niraj Agarwal having registration no. IBBI/IPA-001/IP-P00130/2017-18/10270 for appointment of Interim Resolution professional (in short "IRP"). It appears from record that no disciplinary proceeding is pending against the IRP. This application is defect free. Hence, we admit the Corporate Debtor in CIRP with following orders: -

The application filed by the Financial Creditor under section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, M/s Castal Extrusion Private Limited is hereby admitted.

ii) We declare a moratorium and public announcement in accordance with Sections 13 and 15 of the IBC, 2016.

iii) Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of Insolvency & Bankruptcy Code, 2016 shall be made immediately.

iv) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following:

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;

Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

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 (54 of 2002);

The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated, suspended, or interrupted during moratorium period.

vi) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any Financial sector regulator.

vii) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process.

viii) Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.

ix) Necessary public announcement as per Section 15 of the IBC, 2016 may be made.

Mr. Niraj Agarwal having registration no. IBBI/IPA-001/IP-P00130/2017-18/10270, email id. [email protected], having address for correspondence- M/s. H.K, Awrawal & Co., 125, Netaji Subash Road, 5th Floor, Room No. 52, Kolkata-700001 is appointed as Interim Resolution Professional for ascertaining the particulars of creditors and convening a Committee of Creditors for evolving a resolution plan.

xi) The Applicant/ Financial Creditor to pay sum of Rs. 1,00,000/- (Rupees One Lakh Only) in the ESCROW Account in SBI to be operated through the Registrar, NCLT, Kolkata bench, for the purpose of meeting the preliminary expenses for initiating the CIRP by the IRP, as per Regulation 33(2) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation 2016.

xii) The Resolution Professional shall conduct CIRP in time bound manner as per Regulation 40A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016.

xiii) Registry is hereby directed under section 9(5) of the I.B. Code, 2016 to communicate the order to the Financial Creditor, the Corporate Debtor and to the I.R.P. by Speed Post as well as through e-mail.

List the matter on 05.05.2020 for the filing of the progress report.

Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.