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TMI Blog2020 (12) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... gned Order in CP (IB) No. 324/NCLT/AHM/2019 and initiated Corporate Insolvency Resolution Process (CIRP in short). Thus this Appeal has been filed by the Appellants who are Directors of the suspended Board of Directors. 2. It is argued and the Appellants claim in the Appeal that Corporate Debtor had planned to roll out in Surat dedicated dark fibre broadband, Internet, Lease Lines etc. For such purpose, the Corporate Debtor approached the Bank for Loan. The Bank sanctioned Term Loan amounting to Rs. 20 crores 24 lakhs, through three Loan Accounts. The Accounts of the Corporate Debtor were classified as Non-Performing Assets (NPA) on 30th September, 2014, by the Bank. The Bank issued Recall Notice dated 01st October, 2014 demanding the outstanding dues reflected in the Statement of Accounts. The Bank filed DRT Proceeding bearing O.A. No. 656 of 2015 under Section 19 of Recovery of Debts Due to Banks and Financial Act, 1993 (RDDB Act) to recover Rs. 19,78,94,660.32 Paise. The Corporate Debtor disputed the calculations of the principal, quantum of interest and penal interest etc. and wanted the entries to be corrected by the Bank in Statement of Account. As this was not done Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Learned Counsel referred to Judgment in the matter of Jagdish Prasad Sarda Vs. Allahabad Bank (Company Appeal (AT) (Ins.) No. 183 of 2020) dated 28th August, 2020 passed by this Appellate Tribunal to submit that the other Bench has held that the payments made after declaration of NPA would not give benefit of Section 19 of the Limitation Act if the NPA had not been regularized by the Bank and the date of default continued to be mentioned as date of NPA. 5. The Learned Counsel further submitted that the Bank has in its reply (Diary No. 22385) referred in Paragraph 7 with regard to the instalments and that the Bank had taken benefit of "cut back offer". It is argued that such arrangement of taking cut back would not give benefit of Section 19 of the Limitation Act. 6. It is argued by the Learned Counsel for the Appellant that the authorization or Power of Attorney of the person signing Application under Section 7 was defective as it was given by the Bank before IBC came into force and nothing was shown that Power was given to take action under Provisions of IBC. 7. In response the Learned Counsel for the Bank relied on the reasonings recorded by the Adjudicating Authority and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of Respondents despite repeated call". The Order typed and signed by Adjudicating Authority records that the arguments for Learned Counsel for Petitioner are heard and order is reserved. The Impugned Order also in Paragraph 8 shows that the Adjudicating Authority recorded that on the perusal of the record it was observed that despite repeated calls, none appeared on behalf of Respondents and, therefore Final Hearing of the Application is made in the absence of the representative of the Respondent. The Bank, in Reply (Diary No. 22385) - Para 10 has stated that NCLT provided ample opportunities to both sides, but Corporate Debtor avoided its appearance through Counsel making lame and intentional excuses and ultimately preferred not to appear on 11.03.2020, the last date of hearing. We would rather rely on the Adjudicating Authority for the Order which is passed in the proceeding Annexure A8 on 11th March, 2020 and its observations in Paragraph 8 of the Impugned Order rather than accept the allegations now being made by the Appellants merely on the basis that the signature and entry regarding the appearance for Respondent No. 2 was cut out. In Appeal, the original of the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter be interested or concerned and also, if the said Attorney shall think fit, compromise, etc. It is all comprehensive paragraph which has conferred powers to this Chief Manager. We do not find any substance in the argument that as such General Power of Attorney was executed before coming into force of Insolvency and Bankruptcy Code hence, the said Chief Manager did not have authority. In our view, it is General Power of Attorney and not confined to any particular Act or Acts. We do not find any defect on this account with the Application under Section 7 of IBC. Although the Learned Counsel for Appellants did not turn up to make submissions at the final stage, still the Adjudicating Authority does appear to have considered the objections raised by the Appellants and in Paragraph 12 of the Impugned Order looked into this issue and did not find any substance in the objections raised that the Power of Attorney was not competent to file the Application. Limitation 12. Now the issue regarding the Limitation needs to be looked into. Appellants have filed copy of the Form. We have seen the Form submitted. Annexure A6 (Page 93) Part IV of the Format is as follows: "Part - IV &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants as copy has blanks where Annexure Numbers and Page Numbers were to be filled. It is probably copy as they received. It is however no bodies case that Annexure Numbers and Page Numbers are not filled in Original before Adjudicating Authority). The Adjudicating Authority in Paragraph 5 of the Impugned Order has recorded that the Applicant (i.e. the Bank) has submitted copies of the following documents in support of their claim. The same reads as under: "5. The Applicant has submitted copy of the following documents in support of their claim:- Sl. No. Particulars Page Nos. 1 Application by financial creditor for initiation of corporate insolvency against respondent company under Section 7 of IBC and general affidavit 1-9 2 Power of attorney of authorised signatory of the applicant 10-14 3 Form No. 2 - written communication by proposed interim resolution professional 15-17 4 Applicant's sanction advice dated 11.05.2009 18-19 5 Applicant's renewal of limit and sanction of fresh term loan dated 06.03.2010 20-25 6 Applicant's sanction advice dated 12.10.2011 26-29 7 Applicant's sanction letter dated 06.03.2013 for Rs. 20,26,50,000/- 30-41 8 Corporate debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditor that it has to recover Rs. 24,62,98,391/- which includes the principal amount of Loans sanctioned under different schemes, accrued interest and penal interest as per the calculation in tabular Form annexed to the Application at Page 3. It appears from the Application under Section 7 of IBC that the Corporate Debtor had been extended facility of Loan for working capital, letters of credit as well as Term-Loan. 16. The Learned Counsel for the Appellant referred to the Chart which is part of "Part IV of the Form" to say that for all these nature of loans, the dates of default were shown by the Bank as 30th September, 2014 which is the date of NPA and thus it is argued that as per Article 137 of the Limitation Act all these amounts were time-barred. The Learned Counsel also referred to Recall Notice dated 01ST October, 2014 (Annexure A3) which is referred in Paragraph 6 of Part V of the Form. According to the Learned Counsel the date of default has to be calculated from date of NPA and that the date of NPA does not shift. 17. The Learned Counsel for Respondent No. 2/Bank referred to the reasonings recorded by the Adjudicating Authority in Paragraph 11 of the Impugned Order wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 316.53 lacs till date due to the applicant against principle outstanding as under. (Rs. Lacs) Year Amount Remark 2014-15 25.48 CC-Int. And TL instalment 2015-16 12.39 TL instalment 2016-17 80.26 TL instalment 2017-18 110.12 TL instalment 2018-19 72.11 TL instalment 2019-20 16.17 TL instalment Total 316.53 (b) The Respondent was regularly serving interest and TL repayment up to June 2014. Even after declared NPA, as a gesture of continuing relationship with UBI, The Respondent continued to repay TL instalment, servicing of interest on Term Loan. The Respondents have deposited huge amount of Rs. 776.67 Lacs during the period from 2013-14 to till date. Year wise repayment & deposit of EMI against loan with UBI. (Rs. Lacs) Year Int. on CC TL-II TL-III TL-VII TL-VIII Total 2013.14 66.33 52.95 44.00 98.57 60.99 322.84 2014.15 32.38 21.80 16.60 52.68 39.33 162.78 2015-16 00.00 00.00 00.00 12.39 00.00 12.39 2016.17 00.00 80.25 00.00 00.00 00.00 80.25 2017-18 00.00 110.11 00.00 00.00 00.00 110.11 2018.19 00.00 08.89 00.00 63.22 00.00 72.11 2019.20 00.00 00.00 0.00 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " is an arrangement whereby the Corporate Debtor agreed that from the payments the Corporate Debtor receives from its customers, the Bank could directly deduct particular percentage towards its dues. Learned Counsel for Appellant argued that in this arrangement Bank directly deducts 10 % from Receipts against its dues and this may not be taken as deposit by Corporate Debtor. 22. The Learned Counsel for the Appellant has relied on Judgment in the matter of Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company (Civil Appeal No. 4952/2019) (2019 SCC OnLine 1239) to argue that the residuary Article 137 of the Limitation Act shall be applicable to Application under Section 7 of the Code and the time begins to run from the date of default i.e. date of NPA. It is argued that the date of NPA does not shift. Relying on the Judgment in the matter of Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company it is stated that the Hon'ble Supreme Court referred to its Judgment in the matter of B.K. Educational Services Pvt. Ltd. (2018) SCC Online SC 1921 to observe that the Report of Insolvency Law Committee itself stated that the intention of Code could not have been to give new lease o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime- barred. This requires being read with the definition of "debt" and "claim" in the Code. Further, debts in winding-up proceedings cannot be time-barred, and there appears to be no rationale to exclude the extension of this principle of law to the Code. 28.2. Further, non-application of the law on limitation creates the following problems; first, it re-opens the right of financial and operational creditors holding time-barred debts under the Limitation Act to file for CIRP, the trigger for which is default on a debt above INR one lakh. The purpose of the law of limitation is 'to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party's own inaction, negligence or laches'. Though the Code is not a debt recovery law, the trigger being "default in payment of debt" renders the exclusion of the law of limitation counter-intuitive. Second, it re-opens the right of claimants (pursuant to issuance of a public notice) to file time-barred claims with IRP/RP, which may potentially be a part of the resolution plan. Such a resolution plan restructuring time-barred debts and claims may not be in complian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed period is sought showing sufficient cause for not filing the Application within prescribed period. 23.4 In subsequent Judgments in the matter of "Gaurav Hargovindbhai Dave" & "Babulal Vardharji Gurjar", it is argued this factum was reiterated that for Section 7 application time begins to run from date of default, i.e. date of NPA and Period of Limitation is three years as prescribed in Article 137 of the Limitation Act. 23.5. Limitation Act, 1963 Part I deals with the short title, extent and commencement of the Limitation Act, 1963 and contains the Definitions. Part II deals with Limitation of Suits, Appeals and Applications and contains Sections 3 to 11. Part III deals with "Computation of Period of Limitation" and contains Sections 12 to 24. Part IV relates to "Acquisition of Ownership by Possession" and Part V is Miscellaneous. We are concerned with "Limitation of Applications". 23.6 "The Schedule" prescribes "Periods of Limitation" and is divided into various Divisions. First Division deals with Suits, Second Division deals with Appeals and Third Division deals with "Applications". There is no difficulty that the Applications under Section 7 and 9 of IBC fall under Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) the word "signed" means signed either personally or by an agent duly authorised in this behalf; and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. 19. Effect of payment on account of debt or of interest on legacy.-Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly Authorised in this behalf, a fresh period of limitation shall be computed from the time when payment was made: Provided that, save in the case of payment of interest made before the 1st day of January,1928, an acknowledgment of the payment appears in the hand- writing of, or in a writing signed by, the person making the payment. Explanation.- For the purposes of this section,- (a) where mortgaged land is in the possession of the mort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve claimed that the Appellants offered cut back approximately 10 % on the receipts and deposited Rs. 154.67 lakhs with the Bank during the period 12th June, 2017 till date. We are not impressed with the arguments of the Learned Counsel for the Appellant that in the arrangement of cut back the Bank was itself deducting 10 % on the receipts and so it can not be said to be payment of instalments by the Corporate Debtor. It is only an arrangement to make the payment by Corporate Debtor. When it is with the approval of the Corporate Debtor it is a payment on account of the debt, made by the Corporate Debtor. The Corporate Debtor claimed before the Adjudicating Authority that it had deposited Rs. 154.67 lakhs in the period 12th June, 2017 till date. Even if one was to take a different view of the cut back arrangement, the same Reply mentioned that the Corporate Debtor deposited huge amount of Rs. 776.67 lakhs during the period from 2013-14 till date and has given a table from 2013-14 till 2019-20. Even if we reduce Rs. 154.67 lakhs, there are other payments also, admittedly made. 26. The Learned Counsel for the Appellant referring to Judgment in the matter of Jagdish Prasad Sharda refer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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