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TMI Blog2020 (4) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petition, the Corporate-Debtor-Company, M/s. Ionic Castings Pvt. Ltd. was incorporated on 13-7-1998 with CIN: U27100GJ1998PTC034378. The authorised share capital of the company is Rs. 2,25,00,000/- (Rupees Two Crores Twenty-Five Lakhs only) divided into 22,50,000 Equity Shares of Rs. 10/- (Ten) each and the issued, subscribed and paid-up share capital is Rs. 2,20,00,000/- (Rupees Two Crore Twenty Lakh only). It is stated that, Mr. Kamlesh Natwarlal Gajjar and Mrs. Meena Kamlesh Gajjar (Annex.E, Page38) are the directors of the Corporate-Debtor-Company. The company is said to be engaged in the business of manufacturing, casting and finishing of machinery parts. The registered office is situated at: Block No. 275/B, Opp. Bharat Aluminium, Santej-Vadsar Road, Ta. Kalol, Gandhinagar, Gujarat- 382721. 4. As per the present IB. Petition, the Respondent/Corporate Debtor approached the Ambawadi Branch of the PNB, Ahmedabad for seeking financial assistance and to take over some loan facilities availed by it from the Bank of Baroda, Sola Road Branch, Ahmedabad for his business requirements. 5. Considering such request of Respondent/Corporate Debtor, the Petitioner/Financial Creditor dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, following loan/facilities were sanctioned to the defendant in the year 2010: A. Term Loan (Takeover from Bank of Baroda) Rs. 3,12,31,000/- B. Term Loan (Fresh) Rs. 75,00,000/- C. Cash-Credit Hypothecation (Including Takeover of Rs. 350=00 lakh) Rs. 5,40,00,000/- Total (Rupees Nine Crore Twenty Seven Lakh Thirty-One Thousand only) Rs. 9,27,31,000/- 13. It is also stated that the Respondent/Corporate-Debtor further approached to the Petitioner Bank in respect of its financial requirement for his business purposes and the Petitioner Bank duly sanctioned such loans/facilities on certain terms and conditions which the Respondent agreed to by signing/executing following documents: Sl. No. Description of Documents 1. Hypothecation of goods and book-debts to secure Cash-Credit-Facility dated 23-3-2010 for an amount of Rs. 5,40,00,000/- (Rupees Five Crore Forty Lakhs only). 2. Hypothecation of Assets to secure Term Loans dated 23-3-2010 for Rs. 3,87,31,000/- (Rupees Three Crore Eighty Seven Lakh Thirty-One Thousand only). 3. Agreement of Guarantee dated 23-3-2010 signed and delivered by (i) Meena Gajjar and (ii) Ionic Metallics for an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms and conditions of the agreement entered on date 28-9-2011. 19. It is further submitted that, a supplementary agreement for re-schedulement of Term Loan dated 28-9-2011 for an amount of Rs. 2,84,49,000=00 (Rupees Two Crore Eighty-Four Lakh Forty-Nine Thousand only) had been executed by the Respondent/Corporate-Debtor and he further agreed to pay interest at the rate of BR+4.50% per annum with monthly rests (the then 15.75%). The Respondent further agreed that in case of any default in payment of interest or instalments on the due date/or in case, the entire loan is recalled by the Bank and/or in case the account becomes irregular for any reason, the Borrowers/Respondent agree to pay increased interest at the rate of 2% p.a. with agreed rates over and above the agreed rates of interest. Thus, the Respondent executed the Term Loan Agreement dated 23-3-2010 and the said Term Loan was secured by Hypothecation of Plant and Machineries and mortgage of various properties. The Respondent agreed to repay the Term Loan as per the revised repayment schedule in 84 months after moratorium of 12 months. 20. The Respondent executed another Supplementary Agreement for Reschedulement of Term L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther stated that the Respondent signed and executed the funded Interest Term Loan/Working Capital Term Loan dated 28-9-2011 for the amount of Rs. 52,65,000=00 (Rupees Fifty-Two Lakhs Sixty-Five Thousand only). The Respondent agreed to pay interest at BR+5% p.a. with monthly rests (15.75%) and further agreed to pay 2% p.a. over and above agreed rates in case, the account becomes irregular/default occurs for any reason. The funded Interest Term Loan was to be repaid in 60 months after moratorium of 12 months. The Respondent/Corporate Debtor had agreed to in all the terms and conditions mentioned in agreement dated 28-9-2011. 24. It is submitted that the Respondent signed and executed the funded Interest Term Loan/working capital term loan dated 28-9-2011 for the amount of Rs. 45,35,000=00 (Rupees Forty-Five Lakhs Thirty-Five Thousand only) and further agreed to pay interest at the rate of BR+5% p.a. with monthly rests (the then 15.75%). He further agreed to pay 2% p.a. over and above agreed rates in case, the account becomes irregular/default occurs for any reason. The funded Interest Term Loan was to be repaid in 60 months after moratorium of 12 months. The Respondent/Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per terms and conditions agreed to. Consequently, the loan account of the Respondent has become a Non-Performing Asset ("NPA" for short) with effect from 30-6-2012 and the interest was not debited in the account since 31-5-2012. As per the income recognition and asset classification (IARC) norms issued by the Reserve Bank of India, the interest accrued in the loan accounts as per the contractual rate has not been charged/applied in the loan account. It is stated that the Petitioner Bank is entitled to charge and recover interest prevailing @16% with monthly rests in facilities. The Respondent/Corporate Debtor is required to repay the said outstanding dues as per the prevailing rate of interest and the interest from time to time changed by the Reserve Bank of India and the Petitioner Bank's Head Office. Since the interest was not debited to the loan account of the Respondent, hence, the same as the same was declared NPA with effect from 30-6-2012. 29. It is stated that thereafter, the Petitioner Bank initiated SARFAESI proceedings against the Respondent/Corporate Debtor by demanding an amount of Rs. 1,02,72,30,676=40. However, such amount was neither paid nor notice of the Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvency Resolution Process ("CIRP") would not be appropriate. 32. It is further contended by the Respondent Company that the Company is prepared to settle the debt of the Financial Creditor but it is not possible for it to make upfront payment. For the above stated reason, the Petitioner has prayed for rejection of the present IB. Petition. 33. We have gone through the contents of the Petition and pleadings of both parties. We examined the merits of the same for the purpose of triggering the CIRP in respect of Corporate Debtor Company. The main legal issue arises for our consideration is that as to whether present I.B. Petition is filed well within the prescribed limitation in the light of Hon'ble Supreme Court's decision, if there is no further acknowledgement of debts by the Corporate Debtor within three (03) years from the date of N.P.A, and whether such limitation would be over and continuing or it can give rise to fresh cause of action to file present IB. Petition under the IB. Code, 2016 as per the settled legal position by the Hon'ble Supreme Court in its landmark decision in the matter of B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates [2018] 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , only Article 137 of the Limitation Act would apply and not Article 62 of the Limitation Act, which prescribe Limitation for twelve (12) years to enforce payment of money secured by mortgage of immovable property. The Hon'ble Apex Court pleased to take such view in the matter of Gaurav Hargovindbhai Dave (supra) that, Article 62 of the Limitation Act is out of the way in the IB. Petition as such ground is only applied to suits and not to an application filed under section 7 of the IB. Code which is to be filed only within Article 137. Therefore, time begins to run from the date of default and not from the date of the LB. Code came in to affect, i.e. 01-10-2016. 37. The Hon'ble Supreme Court also pleased in the aforesaid judgment in Gaurav Hargovindbhai Dave's case (supra) to refer to the report of the Insolvency committee which states that the Code cannot give a new lease of life to debts which are already time-barred. The relevant decision of the Hon'ble Supreme Court in the matter of Gaurav Hargovindbhai Dave (supra) is reproduced herein below: "1. In the present case, the Respondent No. 2 was declared NPA on 21-7-2011. At that point of time, the State Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Educational Services Private Limited v. Parag Gupta and Associates, MANU/SC/1160/2018 in order to buttress his argument that it is Article 137 of the Limitation Act which will apply to the facts of this case. 5. Mr. Debal Banerjee, learned Senior Counsel, appearing on behalf of the Respondents, countered this by stressing, in particular, para 7 of the B.K. Educational Services Private Limited (supra) and reiterated the finding of the NCLT that it would be Article 62 of the Limitation Act that would be attracted to the facts of this case. He further argued that, being a commercial Code, a commercial interpretation has to be given so as to make the Code workable. 6. Having heard the learned Counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being "an application" which is filed under section 7, would fall only within the residuary Article 137. As rightly pointed out by learned Counsel appearing on behalf of the Appellant, time, therefore, begins to run on 21-7-2011, as a result of which the application filed Under Section 7 would clearly be time-barred. So far as Mr. Banerjee's rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the present case was continuing no limitation period would attach. It was further held that the Recovery Certificate of 2001 plainly shows that there is a default and that there is no statable defence. 3. Having heard learned Counsel for both parties, we are of the view that this is a case covered by our recent judgment in B.K. Educational Services Private Limited v. Parag Gupta and Associates, 2018 (14) Scale 482, Para 27 of which reads as follows: 27. It is thus clear that since the Limitation Act is applicable to applications filed Under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred Under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act maybe applied to condone the delay in filing such application. 4. In order to get out of the clutches of para 27, it is urged that Section 23 of the Limitation Act would apply as a result of which lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dated 11-10-2018 in B.K. Educational Services Private Limited v. Parag Gupta and Associates (MANU/SC/1160/2018) we had made it clear that the Insolvency and Bankruptcy Code's coming into force on 01-12-2016 is wholly irrelevant to the triggering of any limitation period for the purposes of the Code. However, we find that in the impugned judgment the following statement is made: "13. Admittedly, 'I & B Code' has come into force since 1st December, 2016, therefore, the right to apply accrued to 1st Respondent on 1st December, 2016. Therefore, we hold that the application Under Section 7 was not barred by limitation." 2. We had also made it clear beyond any doubt that for applications that will be filed Under section 7 of the Code, Article 137 of the Limitation Act will apply. However, we find in the impugned judgment that Article 62 (erroneously stated to be Article 61) was stated to be attracted to the facts of the present case, considering that there was a deed of mortgage which was executed between the parties in this case. We may point out that an application Under section 7 of the Code does not purport to be an application to enforce any mortgage liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan on 28-9-2011. (Page Nos. 102-106) 2. CIBIL Report dtd: 08-9-2017 confirms default 3. Date of default is 30-6-2012 4. The Financial Creditor initiated SARFAESI action on 05-7-2012 and took the symbolic possession of the properties in question on 22-11-2012. 5. The Financial Creditor also filed an Application O.A. No. 200 of 2012 on 26-11-2012 before DRT-I, Ahmedabad 6. Last payment was received in the account on 30-6-2012. 7. Corporate Debtor filed SA 86 of 2012 before the DRT and the same was allowed on 15-9-2014 against which an Appeal was preferred by the Bank in 2015 (No. 13 of 2015) before DRAT, which is yet to be disposed by the DRAT. 8. Corporate Debtor Company filed affidavit in reply on 21-11-2017 stating that the Corporate Debtor offered OTS Proposal to the Applicant Financial Creditor vide letter dated 29-9-2017 but the Bank has agreed to their OTS proposal subject to upfront payment of Rs. 1.25 crore. The Respondent Company could not arrange upfront payment of Rs. 1.25 crore as stipulated by the Financial Creditor, but to show the bonafide, the Corporate Debtor offered an immovable property being Land at Santej towards the upfront payment of the OTS proposal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TS offered is not complied by the Corporate Debtor. The legal battle is going on till the Financial Creditor filed this application on 15-9-2017. Hence, the period from 26-11-2012 i.e. filing of application with DRT is to be excluded for the purpose of limitation. In view of the above, this application is not barred by limitation. Moreover, the Corporate Debtor has offered OTS proposal filing affidavit on 21-11-2017 before this Adjudicating Authority, which is a clear acknowledgement of debts by the Corporate Debtor. Moreover, the Corporate Debtor is praying before this Adjudicating Authority on 21-11-2017 to pass suitable order (in view of the OTS offer to Financial Creditor) on the application filed under section 7 by this Financial Creditor on 15-9-2017. This is a clear acknowledgement of debts and the limitation is further extended to three years from 21-11-2017. As per MCA/RoC data, the charge filed by the Corporate Debtor through its Director, Shri K.N.Gajjar in favour of the Financial Creditor, who is representing the Corporate Debtor now, is not yet satisfied. It confirms the existence of debt and application is not barred by limitation. In view of the above, the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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