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TMI Blog2020 (11) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... 69 of 2019 under Rule 11, read with Rule 51 of National Company Law Tribunal Rules, 2016 (Rules - in short), to dismiss the Company Petition. The Adjudicating Authority has allowed I.A. 69 of 2019 and dismissed the Company Petition CP(IB)No.144/BB/2017 reserving liberty to the Appellant - Financial Creditor to file fresh Company Petition in accordance with law after High Court of Karnataka decides the issues pending before the High Court. Thus, the present Appeal. 2. The Appellant filed the Application on 23.11.2017 under Section 7 of IBC on assigning of the debt as per registered deed of assignment (Annexure A-11) dated 30.03.2016 by which deed South Indian Bank assigned its debt to the Appellant. We will refer to the South Indian Bank as "SIB" or, unless context is otherwise - as "Appellant" for sake of convenience. 3. The case of the Appellant, in short, is that the Corporate Debtor (CD - in short) earlier filed Statement of Objections (Annexure A-17) opposing Section 7 Application, on 11.06.2018. Later Corporate Debtor filed I.A. 69 of 2019 on 30th January, 2019 vide Annexure A-18 (Page - 321) and challenged maintainability of Section 7 Application. Initially, the said I.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telegraphic Language 1. 25.03.2009 Annexure - A3 Page - 60 SBI & South Indian Bank (SIB) entered into Term Loan Consortium Lending Agreement dated 25.03.2009 and sanctioned and granted financial facility to CD of Rs. 20 Crores and Rs. 15 Crores respectively. - Annexure A4 - Later Supplementary Agreement dated 29.01.2011 entered into. 2. 30.01.2014 As per Appeal there was Default - CD classified as NPA by Appellant/SIB. 3. 10.01.2014 SBI filed OS 88/14 in DRT Bengaluru under Section 19 of RDDB&FI Act, 2002 against CD for Rs. 19,96,71,133. (Appeal Para - 7.4) 4. 15.07.2014 Annexure - A5 Page - 121 SIB filed OA 932/14 in DRT under Section 19 of RDDB&FI Act, 1993 for Rs. 11,18,21,775.83 towards Term Loan in Consortium arrangement and Rs. 71,93,509.00 towards Overdraft facility outside Consortium as on 04.04.2014, as there was default in debt of SIB also. 5. 27.10.2014 Annexure A/6 Page 142 SBI as consortium leader issued Demand Notice to CD under Section 13(2) SARFAESI Act, 2002 for Rs. 33,69,18,099 as on 07.10.2014 (which included Rs. 11,89,08,577 as dues of SIB under Consortium). 6. 28.11.2014 Annexure A-7 Page - 148 CD made repayment of Rs. 3,47,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017. 18. 12.10.2017 Annexure A-15 Page - 300 - CD filed IA 1/17 in WP 52886- 52887 of 2015 - challenging Notices dated 09.03.2017 and 19.08.2017. Respondent No.1 is Authorised Officer of SBI and Respondent No.2 is SBI. Prayer made was to direct the Bank not to take further proceeding under SARFAESI Act and Security Interest Rules as per Notice dated 19.08.2017. - HC passed Order dated 12.10.2017 directing SBI not to precipitate further till Main Petition is decided. (Appeal Page 306/306A) 19. 23rd November, 2017 Annexure A-16 Page - 307 Appellant/SIB filed IBC Section 7 Application before Adjudicating Authority at Bengaluru - CP/IB/144/BB/2017. 19A. (W.e.f. 06.06.2018) (Section 238 A inserted in IBC - applying provisions of the Limitation Act, 1963, as far as may be made applicable to proceedings.) 20. 11.06.2018 Annexure A-17 Page - 313 CD filed Statement of Objections, to Annexure A- 16. 21. 30.01.2019 Annexure A-18 Page - 321 CD filed IA 69/2019 under Rule 11 read with Rule 51 of NCLT Rules, 2016 challenging maintainability of Section 7 Application, when DRT proceeding was pending and High Court had stayed the proceeding. Dismissal was sought. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Karnataka and Order dated 04.12.2015 was passed against SBI. That, even this Notice was withdrawn on 14th February, 2017 vide Annexure A-12. The Counsel submitted that Writ Petition 52886 - 52887 of 2015 filed by Corporate Debtor became infructuous when the said Notice dated 17.10.2015 was withdrawn by State Bank of India and the Writ Petition would no more survive. The learned Counsel submitted that subsequently on 9th March, 2017 by Annexure A-13 (Page 289), State Bank of India in individual capacity and not as a consortium leader demanded dues from Corporate Debtor and issued Possession Notice (Annexure A-14) dated 19th August, 2017 due to which the Corporate Debtor filed I.A. 1 of 2017 in WP 52886 - 52887 of 2015 challenging Notices dated 09.03.2017 and 19.08.2017 and High Court passed Order dated 12th October 2017, copy of which is at Page - 306. Argument is that SIB is not party to the said Writ Petition. It is argued that the Notice issued by SBI as Consortium Leader was already withdrawn and subsequent individual action of State Bank of India and Order passed in view of that action under SARFAESI cannot be reason for Adjudicating Authority to dismiss the Applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petition and Adjudicating Authority wrongly expected SIB to get permission from High Court. Thus the learned Counsel submitted that the Adjudicating Authority erred in dismissing the Application of the Appellant. 10. Against this, the Corporate Debtor has raised objections (Diary No.18701) and it is argued that the Corporate Debtor had borrowed loan to the tune of Rs. 35 Crores, under consortium banking arrangement wherein - from State Bank of India Rs. 20 Crores and from South Indian Bank Rs. 15 Crores was the amount. The Agreement was dated 25th March, 2009 and supplementary Consortium Agreement was executed on 29th January, 2011. On 30th December, 2010, SBI sanctioned further loan of Rs. 5 Crores. The Corporate Debtor has partially repaid State Bank of India and SIB. The Corporate Debtor claims that the Notice under Section 13(2) of the SARFAESI Act was issued by SBI on 27.10.2014 vide Annexure A-6. In the said Notice, the debt was declared NPA as on 30th January, 2014. On 24th November, 2014, the Appellant - SIB filed OA 932 of 2014 (Annexure A-5) before DRT. On 10th January, 2014, SBI filed OA 88 of 2014. Both the OAs were based on Notice dated 27th October, 2014. It is stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India was restrained from proceeding further. Para - 18 of the Statement of Objections filed reads as under:- "18. The Notice dated 09.03.2017 was challenged by the Respondent in I.A. No. 01/2017 in W.P.No.52886/2015. By order dated 12.10.2017, the Hon'ble High Court was pleased to restrain SBI from initiating further proceedings until the main petition is considered in full (pg.306 of Annexure A-15)." [Emphasis supplied] 12. On such basis, the Corporate Debtor claims that there is stay Order dated 4th December, 2015 which enjoins SBI and SIB from taking any further proceeding and the said Order dated 12th October, 2017 is another stay Order. Thus, the Corporate Debtor claims that the Impugned Order is required to be maintained. It is further the defence and it is argued that the Application under Section 7 is time barred considering the Judgement of Hon'ble Supreme Court in the matter of "B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates" (MANU/SC/1160/2018) (AIR 2018 SC 5601) and Judgement in the matter of "Gaurav Hargovindbhai Dave Vs Asset Reconstruction Company (India) Ltd & Anr" - Civil Appeal No.4952 of 2019 which laid down that Application under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main case. Moreover, it is settled provision of law that Original jurisdiction of Hon'ble High Courts as conferred on them Under Articles 226 and 227 of Constitution of India is intact. Admission of the case under the Code pre-suppose imposition of Moratorium apart from appointing IRP etc. The Adjudicating Authority is not empowered to pass any order over jurisdiction of Hon'ble High Court or to clarify over interim orders passed by it. The above facts and circumstances clearly indicate rather suggest that the broad issue of Loans given to Applicant and subsequent defaults are issues to be decided by the Hon'ble High Court of Karnataka in the pending cases. And we are not convinced with the reasons cited by the Petitioner/Financial Creditor that the main Company petition is still maintainable. 13. On careful perusal of the judgement of Rita Machines (India) Ltd. vs. DRAT and others, relied upon by the learned Senior Counsel for the Respondent/Financial Creditor, we found that the facts and circumstances and issue raised are totally different from the facts and issue involved in the instant case. In this case, broad issues are the validity of Assignment in question and the allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Interim Prayer was to restrain the Authorized Officer of the Bank from taking further steps pursuant to the SARFAESI Notice dated 17.10.2015. The Hon'ble High Court of Karnataka passed following Order on 4th December, 2015:- "Since the petitioner alleges action on the part of the respondents which are an over-reach of their authority and the law, it would be appropriate for this petition to be entertained notwithstanding the embargo imposed by the Supreme Court and the statute that the proceedings shall not lie before this Court. Accordingly, the respondents are restrained from taking any further proceedings other than what has been impugned before the Debts Recovery Tribunal. Emergent notice regarding rule." 16. The copy of Writ Petition is at Annexure A-9 in which there are only two Respondents - 1) Authorized Officer of State Bank of India and 2) State Bank of India. The Appellant or SIB are not Respondents in this Writ Petition. Rather in Para - 7 of the Writ Petition, Corporate Debtor claimed that it was mandatory for the consortium to jointly give Notice of Default. The prayer clauses seek to quash the Notice dated 17th October, 2015. The earlier Notice dated 27th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Respondents in Writ Petition. Present the Corporate Debtor is aware that both the Orders were against SBI as portions reproduced from its Statement of Objections (Diary No.18701) and highlighted supra show. We find it difficult to accept that there was restraint Order against SIB. 19. Apart from above, the action initiated by the Appellant - SIB by filing Application under Section 7 was not merely relevant to - 1) term loan facility which was under the Consortium but also, 2) overdraft facility which was separate arrangement between the Corporate Debtor and SIB. In the Application, Form 1 (Annexure A- 16 - Page 307), the Appellant in Para - IV calculated amount of debt granted as Rs. 16,35,00,000/- as per sanction dated 26th February, 2009 and the amount claimed to be in default is stated to be Rs. 15,43,83,042.73. The date of default is mentioned as 30th January, 2014. In support of claim of such outstanding debt, Part - V of Form refers to the particulars of financial debt and contents of documents and records in support and that in those documents, there is reference to the Consortium Agreement dated 25th March, 2009 and also Supplementary Agreement dated 29th January, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the Adjudicating Authority erred in directing the South Indian Bank to go and get directions from the High Court or to await decision of issues by the High Court when South Indian Bank was not even party in the said Writ Petition. The Adjudicating Authority accepts that there is no bar in IBC for Bank to initiate CIRP proceedings even individually when it is part of Consortium. Still the Adjudicating Authority wrongly insisted that South Indian Bank should go before the High Court when Corporate Debtor itself did not make South Indian Bank a party in the Writ Petition. 21. Apart from above, it is clear that the Application under Section 7 of IBC filed is not confined to debt as arising in the arrangement due to Consortium Lending which was a term loan, but was also towards independent overdraft facility and amounts due in that context. As such, even if one was to stretch the Order of High Court dated 04.12.2015 to say that it affects SIB, still the South Indian Bank was competent to maintain Section 7 Application on the basis of overdraft facility which was provided outside the Consortium. Thus, it appears to us that the Order passed by the Adjudicating Authority is not at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arji Gurjar" which read as under:- "33. Apart from the above and even if it be assumed that the principles relating to acknowledgement as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said provision and principles come in operation in the present case nor they enure to the benefit of Respondent No. 2 for the fundamental reason that in the application made before NCLT, the respondent No. 2 specifically stated the date of default as '8.7.2011 being the date of NPA'. It remains indisputable that neither any other date of default has been stated in the application nor any suggestion about any acknowledgement has been made. As noticed, even in Part-V of the application, the Respondent No. 2 was required to state the particulars of financial debt with documents and evidence on record. In the variety of descriptions which could have been given by the Applicant in the said Part- V of the application and even in residuary Point No. 8 therein, nothing was at all stated at any place about the so called acknowledgment or any other date of default. 33.1. Therefore, on the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above Judgement dated 14th August, 2020 has been passed. The above Judgement of "Babulal Vardharji Gurjar" shows that the Hon'ble Supreme Court in para - 6.3 looked into not only the contents recorded as Point No.2 of Part - IV of the Application but also looked into the requirement as in Point No.5 of Part - V where the Applicant was required to attach the latest and complete copy of the financial contract reflecting all amendments and waivers to date. Hon'ble Supreme Court also referred to point No.8 of Part - V which required to give List of other documents "in order to prove the existence of financial debt, the amount and date of default". The Hon'ble Supreme Court reproduced portions from the format which was filed in that matter and thereafter, Hon'ble Supreme Court analysed the relevant provisions of the Code of the Limitation Act and relevant basics of IBC and looked into the various Judgements passed by the Hon'ble Supreme Court and examined the operation of law of limitation over IBC proceedings. After noticing relevant and material observations and enunciations in the case of "Jignesh Shah vs. Union of India" 2019 SCC Online SC 1254, and other Judgements observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the Adjudicating Authority is satisfied that - (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may be, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application: Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority." Section 3 of the Limitation Act when it is read with Sub-Section 5 of Section 7 of IBC, it must be said that it was duty of the Adjudicating Authority to look into the format submitted and to consider whether prima facie the Form 1 read with Documents disclosed material to show debt due which is payable in law or in fact and if such debt is in default. For this Format's Part IV (2) read with Part V (8) would be relevant to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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