TMI Blog2020 (4) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7 of the Insolvency and Bankruptcy Code, 2016 by the petitioner/financial creditor against the corporate debtor - In the present case the account was declared as NPA on 30-4-2013, whereas the present petition under section 7 of the I B Code was filed on 12-9-2018, which was filed beyond three years. As such the present application is liable to be rejected. Petition dismissed. - CP (IB) No. 645/7/HDB/2018 - - - Dated:- 27-2-2020 - Ratakonda Murali, Judicial Member And Narender Kumar Bhola, Technical Member For the Appellant : Saini Keshav Rao, K. Anil Kumar and Ms. Grishma Acharya, Advs. For the Respondent : T. Surya Satish, Adv. ORDER RATAKONDA MURALI, JUDICIAL MEMBER 1. Heard on: 27-8-2019, 18-9-2019, 19-9-2019, 25-9-2019, 18-10-2019. The petition is filed by State Bank of India under section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of Insolvency 8B Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, seeking admission of the petition and initiation of Corporate Insolvency Resolution Process against the respondent/corporate debtor, namely, Messrs Vibha Agro Tech Limited, granting moratorium and appointmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Term Loan $ - - 99.72 99.72 100.00 99.72 Corporate Loan - - - 50.00 100.00 50.00 TOTAL FB - - 469.72 199.72 38.43 519.72 LCs - - - - - - BGs - -- - - - Total NFB - - - - - -- Total FB + NFB - - 469.72 199.72 38.43 519.72 2.3 In pursuance of sanction of working capital and term loan facility, Corporate Guarantor executed various documents. The details of which are given i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor offered its cotton Seed Production in Gujarat through organizers with specified contract terms conditions to ensure stringent quality, quantity, time of delivery and payment norms. 3.6 It is averred in para 8 of the Counter some unforeseen circumstances led to delayed payments to seed organisers, which are primarily natural calamities like deficient monsoon, drought in some states, etc. 3.7 In para 9 of the Counter the respondent/corporate debtor delved deep into the financial aspects due to which it had sustained financial crunch. They are primarily as under: (i) The Corporate Debtor never defaulted in paying monthly interests and term loan instalments from 1995 to 2012. (ii) The Corporate Debtor called JLM in August, 2012 to explain the drought situation and requested for enhancement of Working Capital Limits and sanction of ad hoc limits of ₹ 50 crore to tide over crisis. But the Banks did not sanction the ad hoc limit of ₹ 50 crores. (iii) The Financial Creditor kept the Corporate Debtor under an illusion that the Working Capital limits would be enhanced from ₹ 585 cr. to ₹ 800 cr. but had only made an exposure of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the market. (ix) Banks withdrew from CDR without giving any solution and resorted to legal action. 3.8 In para 10 of the Counter the respondent/corporate debtor articulated how the wrong decisions and breach of promises by the banks including the petitioner/financial creditor impacted the respondent/corporate debtor: (i) Loss of seeds inventory resulted significant losses to the Corporate Debtor which eroded complete net worth of the Corporate Debtor; employment loss of 2200 regular employees and 3000 temporary jobs. (ii) ₹ 85 crore dues for the seed producing farmers in Gujarat, Telangana, AP, Karnataka and Maharashtra got affected impacting 65,000 farmer families of their livelihood. (iii) Notwithstanding several requests made by the Corporate Debtor not to liquidate assets, the banks including the Financial Creditor were bent upon liquidating the assets of Corporate Debtor to recover their dues which is not even 10% of their dues, leaving farmers' dues, workmen dues and statutory dues. 3.9 In Para 11 of the Counter it is averred that the bank has issued show-cause notices on 20-8-2016 and 26-3-2018, as to why promoters cannot be identified as defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also a deliberate, intentional, mala fide action to throw out the promoters from the management of the Corporate Debtor. The application filed by the Financial Creditor not only hampers future prospects of the Corporate Debtor but also curtails the request that are made by the Corporate Debtor through its promoters to the Central government and to the Government of Gujarat. 3.14 In para 19 of the Counter the respondent/corporate debtor submitted that the instant application has been filed with absolute mala fide intention to cover up their omissions, commissions, illegal actions, coercive actions which were thrust upon the Corporate Debtor and its promoters 3.15 By the above submissions the respondent/corporate debtor prayed that the application be rejected. 4. Additional counter dated 17-6-2019 filed by the respondent. 4.1 In para 2 of the Additional Counter the respondent/corporate debtor has relied on and reproduced sections 3, 7, 8 and 10 of the Insolvency and Bankruptcy Code, 2016, to point out that the Code intends to cover only those cases where the default has occurred only after enactment of the Code. The Code came into effect on 28-5-2016. 4.2 In para 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 In paras 11 and 12 of the Additional Counter it is submitted that the Applicant Bank has stated that it has produced authorization or letter of authority at Annexure-I dated 31-8-2018 to the Application mentioning the name of Mr. B. Sudhakar. It is submitted that there ought to be some independent document or source of power which authorizes the signatory. In the absence of any such independent document giving such powers to Mr. B. Sudhakar, the certificate produced at Annexure-1 to the Application has no value and the present Insolvency Application filed on behalf of the Applicant Bank is totally without any authority whatsoever and the same is not maintainable. 4.8 In para 15 of the Additional Counter it is submitted that verification to the Insolvency Application is made not in individual/personal capacity of the deponent but it is signed For or on behalf of the Applicant Bank, a body corporate. Such verification is not verification in the eye of law. The Insolvency Application is filed without there being any valid affidavit in support thereof. 4.9 In paras 19 and 20 of the Additional Counter it is submitted that the petitioner/financial creditor has submitted variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 8 of its Additional Counter is not tenable. The petitioner/financial creditor relied on para 6 of the decision of the Hon'ble Supreme Court in the case of Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. India Ltd. [2019] 109 taxmann.com 395/156 SCL 397, which reads as under: So far as Mr. Banerjee's reliance on para No. 7 of B.K. Educational Services Pvt. Ltd. (supra) suffice it to say that the report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. It is submitted that the Hon'ble Apex Court in the above case was dealing with the aspect of time-barred debt. Whereas, in the present case, the debt of the respondent/corporate debtor is not time-barred. Hence the said decision is not applicable to the present case. 5.3 In para 7(C) of the written submissions the petitioner/financial creditor submitted that the contention of the respondent/corporate debtor raised in para 9 of the Additional Counter is not tenable. The petitioner/financial creditor submitted that a perusal of Column No. 2, Part-IV of Form-1 filed by the petitioner/financial c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess (CIRP) against the corporate debtor. 8. The learned counsel contended that the corporate debtor has taken strange defence as if the applicant cannot file the present application under section 7 of the I B Code against the corporate debtor for the default occurred prior to commencement of the I B Code. The learned counsel contended that the corporate debtor had taken a strange plea that the provisions of the I B Code are prospective in nature and that for a default which occurred prior to commencement of the I B Code for which no application can be filed under section 7 of the I B Code. The learned counsel contended that the defence taken by the corporate debtor is totally incorrect. The Tribunal is to see whether the applicant has established the debt and default to trigger CIRP against the corporate debtor. In the present case the learned counsel contended there is no dispute regarding the debt due by the corporate debtor to the financial creditor. It is not the case of the corporate debtor that there is no default. Therefore, the application is in order and as such it is liable to be admitted. 9. The learned counsel further contended that the corporate debtor had take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates as per the Bankers' Book of Evidence Act, 1891 (as amended) and these certificates would establish that the financial creditor has complied with the provisions of the Bankers' Book of Evidence Act and there is proper certification in respect of documents filed. 11. The learned counsel contended that the financial creditor is able to establish existence of debt and default and therefore, the petition is liable to be admitted. 12. On the other hand the learned counsel for the corporate debtor would contend that the present application is not maintainable as the default had occurred prior to commencement of the I B Code. The learned counsel contended that section 7 of the I B Code provides that application under section 7 is to be admitted when default has occurred. The learned counsel contended that the I B Code came into force in December 2016 and as such the default should have occurred after commencement of the I B Code. The learned counsel contended that even otherwise as per Form-1 the default took place on 30-4-2013, whereas the financial creditor has filed the application on 12-9-2018, which is more than five years after the default. The learned counsel cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in the petition for the period from 2011 to 2013. 15. The question is whether the petition filed by the financial creditor is within the period of limitation under Article 137 of the Limitation Act. The Hon'ble Apex Court has held in the rendered in the case of B.K. Educational Services (P.) Ltd. v. Parag Gupta Associates [2018] 98 taxmann.com 213/150 SCL 293, that Article 137 of the Limitation Act applies to the applications filed under sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016. The Hon'ble Apex Court has further held in the said decision that '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, . 16. The Hon'ble Apex Court has further held in the decision rendered in the matter of Gaurav Hargovindbhai Dave (supra) that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. The Hon'ble Apex Court has held that the application filed under section 7 of the Insolvency and Bankruptcy Code, 2016 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the Demand Notice. 18. The next contention of the learned counsel for the petitioner/financial creditor is that there was acknowledgment of debt in the form of OTS Proposal. The learned counsel for the petitioner has relied on the documents filed by the corporate debtor, particularly, the document relating to the OTS Proposal. It is the contention of the learned counsel for the petitioner/financial creditor that the submission of OTS Proposal by the corporate debtor amounts to an acknowledgement of debt. The learned counsel for the petitioner/financial creditor has relied on the Note submitted to the Joint Lenders' Meeting (JLM) held on 19-6-2015. This document is shown at pages 615-657 of Third Volume of the Paper Booklet of Counter filed by the corporate debtor. The contention of the learned counsel is that there was a proposal for OTS with Banks for payment in six quarters and searching for strategic investor for funding of OTS. The contention of the learned counsel is that this OTS Proposal amounts to acknowledgement. Nothing is available on record whether this proposal was accepted by the JLM of which the applicant is also a Member. What is clear from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are still pending and the petitioner/financial creditor moved the present application under section 7 of the Insolvency and Bankruptcy Code, 2016 simultaneously. Therefore, there is no question of any exclusion of time under section 14 of the Limitation Act for initiation of proceedings under section 7 of the Insolvency and Bankruptcy Code, 2016 by the petitioner/financial creditor against the corporate debtor. 21. In the matter of C. Shivakumar Reddy v. Dena Bank [2020] 114 taxmann.com 219, the Hon'ble NCLAT, New Delhi in its judgment has held in para 11 as follows: 11. Admittedly, the 'Corporate Debtor' the defaulted in making payments on 20th September 2013 and the Dena Bank declared the account as NPA on 31st December 2013. Therefore, we hold that the application filed under section 7 of the I B Code by the Bank is barred by limitation. The account was declared as NPA on 31-12-2013 in the case before the Hon'ble NCLAT, New Delhi. The Hon'ble Appellate Tribunal held that the application under section 7 of the Insolvency and Bankruptcy Code, 2016 filed by the Bank is barred by limitation. It was also observed by the Hon'ble Appellate Tribunal re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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