TMI Blog2020 (10) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... as the date of effective acknowledgement of the state of indebtedness of the company. On the matter of Settlement Offers made - HELD THAT:- In view of the fact that the Corporate Debtor in its financial statements for the F.Y. 2014-15 and F.Y. 2015-16 filed with the Ministry of Corporate Affairs acknowledges the liability towards the Financial Creditor; and also in its letter dated 23.02.2017 submitted a proposal for one time settlement of dues of the Financial Creditor, IDBI Bank Limited and Bank of India, which was also revised on 15.09.2018 - the petition filed by the Financial Creditor is within limitation. This Petition reveals that there is a debt as defined in section 3(11) of IBC; there is a default within the meaning of section 3(12) of IBC. Therefore, the Petition made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. Petition admitted - moratorium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious credit facilities to the Corporate Debtor aggregating to an amount of ₹ 37,67,28,000/-(Rupees thirty-seven crore sixty-seven lakh and twenty-eight thousand only) (at page 7 of the Petition). Details of claim as per Exhibit 'V' at pp.479.481 are as follows: Sr. No Nature of Credit Facility Principal Outstanding as on 31.05.2019 ( Rs. ) Normal Interest from 01.10.2014 to 31.05.2019 p.a. ( Rs. ) Other Debits less Other Credit ( Rs. ) Penal Interest @ 2% simple ( Rs. ) Total Claim amount ( Rs. ) (1) (2) (3) (4) (5) (2+3+4+5) 1. Cash Credit (A/c No. 0564008701738041) 35,01,06,230.47 68,26,31,758.38 32,09,10,740.11 9,25,60,238.43 1,44,62,08,967.39 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petition. Further a Deed of Guarantee dated 17.02.2012 between Mr. Dinesh G. Jaiswal, director of Corporate Debtor, Ms. Sunita D. Jaiswal, wife of director of the Corporate Debtor, as Personal Guarantors, D.J. Exim (India) Private Limited as Corporate Guarantor in favour of Punjab National Bank as security for the Term Loan is placed at pp.154-167 of the Petition. iii) A Deed of Hypothecation dated 17.02.2012 between the Corporate Debtor and the Financial Creditor and a Joint Deed of Hypothecation between the Corporate Debtor and Financial Creditor and IDBI Bank Limited are placed as Exhibit J (Colly) at pp.168-228. iv) On 31.07.2012 the Financial Creditor sanctioned two more Term Loan (Car Loan) facilities of ₹ 24,69,000/- and ₹ 22,59,000/-. To secure the aforesaid Term Loan (Car Loan) facilities the Corporate Debtor executed Letter of Hypothecation for both Term Loans on 31.07.2012. Further the Directors of the Corporate Debtor namely Mr. Dinesh Jaiswal and Mrs. Sunita Jaiswal also executed Agreement of Guarantee 31.07.2012 for the Term Loans (Car Loan). All of these are placed as Exhibit R (Colly) and Exhibit S (Colly) at pp.419-439 of the petition. v) F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019, hence the petition is time barred. b) Further the Financial Creditor initiated a recovery action under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 by notice dated 25.10.2013. Pursuant to the initiation of action the Financial Creditor sold a few properties of the Corporate Debtor which were mortgaged as per 'para 1 and 2' at pp. 1-3 of the reply. c) The Corporate Debtor has relied on section 238-A of Insolvency and Bankruptcy Code, 2016 along with the judgment of the Hon'ble Supreme Court in B. K. Education Services Private Limited V. Parag Gupta and Associates MANU/SC/1160/2018 : (Exhibit A pp.6-59 of the reply) which clearly lays down the application of Limitation Act to petition filed under IBC,2016 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able property at Charni Road and two cars are still available with the Financial Creditor against their claims but the claim amount is much greater than the value of these remaining secured assets. Findings: 8. We have heard the arguments of both sides and perused the records. 9. The objection of the Ld. Counsel for the Corporate Debtor is on the ground of Limitation and defences raised can be classified as follows on the subject of limitation: (a) Continuing wrong; (b) Balance confirmation and acknowledgement of liability in the Balance Sheet; (c) Settlement offers made. 10. The date of default is taken to be 30.09.2013, the day on which the Corporate Debtor was declared as a Non-Performing Asset (NPA) by the Financial Creditor as per the guidelines of Reserve Bank of India. 11. The Corporate Debtor on the point of limitation has relied on the judgment of the Hon'ble Supreme Court in case of Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company (India) Limited Anr (2019) 10 SCC 572 which reads as follows: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was clarified that a default cannot be regarded as a continuing wrong in para 4 as follows: 4. .. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues then the act constitutes a continuing wrong. In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury. It is only in regard to acts which can be properly characterised as continuing wrongs that s. 23 can be invoked. Following this judgment, it is clear that when the Recovery Certificate dated 24.12.2001 was issued, this Certificate injured effectively and completely the appellant's rights as a result of which limitation would have begun ticking. 17. However, this exposition of law in regard to section 23 of the Limitation Act, 1963, has no applicability in so far as the case of the Corporate Debtor is concerned, inter alia for the reason that there is acknowledgement of liability, as discussed in the subsequent paragraphs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) as follows: 'It seems to me plain that an acknowledgment signed by the directors in relation to their own debt would be fully effective if sanctioned by every member of the company .......... The general meeting of the company at which the accounts were adopted and the state of the Eccles account confirmed was in fact a meeting attended by, or by the representative of, every member of the company ................ In these circumstances, it seems to me plain that all the corporators must be taken to have agreed to the directors' written acknowledgment of the debt.' Nobody has a case that Ext.A1 balance sheet and the profit and loss account was not placed in the annual general body meeting of the defendant and got approved by the board of directors as mandated by the Company Law. The irresistible conclusion therefore is that Ext.A1 balance sheet and the profit and loss account operates as an acknowledgment on 26.3.1997 of the liability on 31.3.1995. 21. The Corporate Debtor per contra, relied on a judgment of Hon'ble Calcutta High Court in case of Darjeeling Commercial Co. Ltd. vs. Pandam Tea Co. Ltd MANU/WB/0117/1981 which reads as follows: 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the judgment of the Hon'ble Supreme Court in the case of ITC Limited vs. Blue Coast Hotels Ltd. Ors. which reads as follows: Letter of Undertaking 'Without Prejudice' 35. Much was sought to be made of the words without prejudice in the letter containing the undertaking that if the debt was not paid, the creditor could take over the secured assets. The submission on behalf of the debtor that the letter of undertaking was given in course of negotiations and cannot be held to be an evidence of the acknowledgement of liability of the debtor, apart from being untenable in law, reiterates the attempt to evade liability and must be rejected. The submission that the letter was written without prejudice to the legal rights and remedies available under any law and therefore the acknowledgement or the undertaking has no legal effect must likewise be rejected. This letter is reminiscent of a letter that fell for consideration in Spencer's case as pointed out by Mr. Harish Salve, as a rule the debtor who writes such letters has no intention to bind himself further than is bound already, no intention of paying so long as he can avoid payment, and nothing befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is 12 years since the transfer becomes known to the plaintiff [Article 61(b)]. 30. In view of the aforesaid position of law, the property having mortgaged, we also hold that the claim is not barred by limitation as the period of limitation is 12 years with regard to mortgaged property and in terms of Section 5(7) read with Section 5(8) as the property is mortgaged, Respondent No. 2 also comes within the meaning of 'Financial Creditor'. 26. In view of the law laid down by the Hon'ble Supreme Court in ITC Limited (supra), we hold that the offer of one Time Settlement (OTS) made by the Corporate Debtor to the Financial Creditor constitutes an acknowledgement of liability within the meaning of section 18 of the Limitation Act, 1963. The Judgment of the Hon'ble Allahabad High Court in Shibcharan Das (supra) must be held to be inapplicable in view of the judgment of the Hon'ble Supreme Court in ITC Limited. Further the order of the Hon'ble NCLAT discussed in previous paras directly relates to this matter and can be a continuous cause of action as well. 27. In the light of the above discussion and the fact that the Corporate Debtor in its financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enforcement of Security Interest (SARFAESI) Act, 2002; (iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. (c) Notwithstanding the above, during the period of moratorium: (i) The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period; (ii) That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator; (d) The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Tribunal approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be. (e) Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (f) Mr. Mukesh Ve ..... 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