TMI Blog2018 (7) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... by the applicant is also seriously in dispute in the case in hand. The principal amount due is only ₹ 22,74,897.65. The amount of interest claimed comes to ₹ 4,28,01,055.43 (Four Crore twenty-eight lakh one thousand fifty-five and paise forty-three only) as per the calculation of the operational creditor and he calculated the interest at the prevailing rate charged by the State Bank of India which includes compound interest and penal interest. Admittedly, there is no contractual liability to pay interest by the corporate debtor. If it is allowed it amounts to allowing interest more than 18 multiple of the principal amount which according to us is substantially unfair. No hesitation in coming to a conclusion that the dispute raised by the Corporate Debtor/Respondent is bona fide and it requires further investigation. Moreover, it appears to us that the claim for interest which is exceeding more than 18 times of the principal amount cannot be claimed by the applicant as a legitimate claim as against a corporate debtor in a proceedings of this nature, especially, from a Central Government undertaking who is willing to settle the applicant’s claims without interest. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd @ 3 times of the bank rate notified by the Reserve Bank of India, which is in accordance with the Micro, Small and Medium Enterprises Development Act, 2006 for the period from 02.10.2006 to 31.08.2017. 4. The operational creditor issued demand notice under section 8 of the I B Code to which there was no response from the corporate debtor within 10 days from the date of delivery of the demand notice. However, the operational creditor was in receipt of reply after ten days raising untenable contentions. The operational creditor issued demand notice along with invoices. Since the corporate debtor failed in repayment of the amount outstanding as demanded by the operational creditor and committed defaults, the operational creditor filed this application. The operational creditor produced Annexure II (D) for proving authorization given to the representative of the operational creditor to move an application of this nature. The corporate debtor proposed the name of Mr. Vinod Tarachand Agarwal, e-mail: ca.vinod@gmail.com with ICAI Registration NO.IBBI/IPA/001/IP-P00641/2017-2018/11090 as Interim Resolution Professional and produced Form 2 and written communication along with the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecame more sick and was registered with Board of Industrial and Financial Reconstruction (BIFR) in the year 2002. Thereafter, the respondent was compelled to stop its production in the year 2006 and as per a Cabinet decision on 28th December 2016, closure of respondent company was approved by the Union Cabinet and the employees were allowed to avail VRS/VSS package and all employees of the respondent company were released on 31.01.2017 based on acceptance of their VRS. The Union Cabinet, upon taking a decision for closure of the respondent, provided funds support towards closure and by way of one time settlement the respondent settled and discharged the principal due amount to the financial creditor amounting to the tune of ₹ 305.63 crores and got waiver of interest due to the tune of ₹ 347.84 crores. 9. In view of allocation of funds towards final decision of various sundry creditors, a publication was issued in the newspaper calling for submission of claim by way of one time full and final settlement making clear in the advertisement that final closure of the dues to the sundry creditors shall not be construed as admission of liability by the respondent for whatsoe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Act, 2006. According to the applicant, despite issuance of demand notice dated 21.09.2017, the respondent did not repay the unpaid amounts and, therefore, the application is liable to be admitted for initiating Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor. 14. Admittedly, an amount of ₹ 22,74,897.65 (Rupees Twenty-Two Lakh Seventy-Four Thousand Eight Hundred Ninety-Seven and Sixty Five Paise only) is the outstanding amount due to the operational creditor from the corporate debtor and according to the operational creditor it is the principal amount due excluding the interest which is liable to be paid by the respondent. 15. The Ld. Counsel for the corporate debtor submits that the application is liable to be dismissed as claim is barred by limitation. According to him, admission of principal amount subsequent to the prescribed period of limitation not at all save the period of limitation. Secondly, he submits that claim of interest is in dispute and that respondent showed its reediness to discharge its debt limiting to the principal amount and expressed his willingness even to pay the principal amount while this case was taken up fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble High Court observed in the Paragraph No.14 as follows: It is thus clear that there are a catena of decisions and plethora of authority for holding that though a debt might have become time-barred on the date a debtor entered into a fresh obligation with the creditor to Day the liability, the said obligation, if it satisfies the conditions laid down in Section 25(3) of the Indian Contract Act, will amount to a fresh contract in the eye of law and can certainly be made the basis of an action for recovering the amount promised and acknowledged therein by the debtor. While Section 18 of the Limitation Act (Section 19 of the Old Act) deals with an acknowledgement made by a debtor within the period of limitation, the contractual obligation which a debtor enters into under the terms of Section 25(3) has no reference whatsoever to the acknowledged debt being within time or not. 14.5. So far as this case is concerned, Ex.P.5 satisfies the requirement under Section 25(3) of the Contract Act and therefore the defendant is liable to pay the admitted liability under Ex.P.5. 18. The proposition laid down in the above referred judgment is squarely applicable in the case in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government or any local authority. 22. It is also good to read the meaning of financial debt as defined under section 5(8) of l B Code. It read as follows:- (8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; (g) any derivative transaction entered into in connection with protection against or benefit from fluctuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act. (4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference. 25. A readi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any contractual right but on the strength of provisions of SSI Act and MSMED Act. It has come out in evidence that respondent a Central Government undertaking was closed in the year 2016 and was declared as a sick unit from the year of 2002 and registered with BIFR in the year 2002 due to non generation of fund internally. In view of the notice admittedly received by the applicant dated 19.05.2017 calling the applicant to submits its claim that a public notification was issued by the respondent calling for submission of claim by all sundry creditors dated 18.11.2017, that the respondent never refused the repayment of the principal amount found due to the applicant, that the applicant approached the Tribunal without submission of its claim in response to the notice as well as publication of notification, it appears to us that approaching the Adjudicating Authority for initiating CIRP as against a Government undertaking who did not commit wilful default and who disputed its liability to pay interest claiming excessive compound interest not on the basis of commercial rate but on the basis of statutory right cannot be entertained in the interest of justice. In view of the above said d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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