TMI Blog2021 (1) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... PADMAKUMAR VERSUS STRESSED ASSETS STABILISATION FUND (SASF) ANR. [ 2020 (3) TMI 1244 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] IDBI had advanced financial assistance of ₹ 600 Lakhs by way of Term Loan Agreement dated 2nd March, 2000 to the Corporate Debtor and the loan was duly secured. The account of Corporate Debtor was classified as NPA on 29th May, 2002. IDBI Bank initiated recovery proceedings by filing OA No. 289 of 2003, later renumber as OA No.413 of 2007. It was decreed on 19th June, 2009 leading to issuance of Recovery Certification on 31st August, 2009 which was reflected in the Balance Sheet dated 31st March, 2012 - The Appellant, basing its plea on the aforestated facts, raised the contention that the application filed under Section 7 of I B Code in the year 2019 was barred by limitation. This Appellate Tribunal noticing the judgments delivered by Hon ble Apex Court in JIGNESH SHAH ANOTHER VERSUS UNION OF INDIA ANOTHER [ 2019 (9) TMI 1121 - SUPREME COURT] , GAURAV HARGOVINDBHAI DAVE VERSUS ASSET RECONSTRUCTION COMPANY (INDIA) LTD. AND ANR. [ 2019 (9) TMI 1019 - SUPREME COURT] , VASHDEO R BHOJWANI VERSUS ABHYUDAYA CO-OPERATIVE BANK LTD AND ANR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or matter being placed before a Larger Bench for reconsideration in the circumstances indicated in the aforesaid judgments after recording its opinion. It is not open to the Referral Bench to appreciate the judgment rendered by the earlier Bench as if sitting in appeal to hold that the view is erroneous. Escaping of attention of the earlier Bench as regards a binding judicial precedent or a patent error is of relevance but not evaluation of earlier judgment as if sitting in appeal - We are sad to note that the Referral Bench has overlooked all legal considerations. Such misadventures weaken the authority of law, dignity of institution as also shake people s faith in rule of law. We hope and trust that the Hon ble Members of the Referral Bench would exhibit more serious attitude towards adherence of the binding judicial precedents and not venture to cross the red line. As a sequel to the rejection of order of reference as being incompetent, let the Company Appeal (AT) (Insolvency) No. 385 of 2020 be listed for regular hearing before Court No. IV on 11th January, 2021. - Company Appeal (AT) (Insolvency) No. 385 of 2020 - - - Dated:- 22-12-2020 - [Justice Bansi Lal Bhat] Acting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olvency and Bankruptcy Code, 2016 (hereinafter referred to as I B Code ) for initiation of CIRP against the Corporate Debtor which raised various issues including limitation. The Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, on being satisfied that debt and default was established and the application had been filed within limitation period, admitted the application. Aggrieved thereof, Mr. Bishal Jaiswal, the Ex-Director of the Corporate Debtor filed appeal against the order of admission, primarily on the ground that the account of Corporate Debtor had been declared as NPA on 28th February, 2014 and since the application under Section 7 came to be filed in December, 2018, after a delay of around five years, same was barred by limitation. Financial Creditor, on the other hand, contended that the right to sue for the first time accrued to it upon classification of the account as NPA on 31st July, 2013 but thereafter, the Corporate Debtor had admitted, time and again, and unequivocally acknowledged its debt in the Balance Sheets for the years ending 31st March, 2015, 31st March, 2016 and 31st March, 2017. Hence, according to the Financial Creditor, the right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Company is prepared under the compulsion of law or in discharge of statutory duty, it cannot be held that the Balance Sheet of the Company cannot amount to an acknowledgement of liability. VI. The Balance Sheet is a material document attached with sanctity that must be submitted to ROC and is used for obtaining a business loan or investments. Relevant provisions in regard to Balance Sheet of the Company provided in Section 129, 130, 131, 134, 137, 143 and 397 of the Companies Act. Section 130 and 131 provides that a Company cannot reopen its Books of Account and Financial Statement without the Order made by the Court of Competent Jurisdiction or the Tribunal. Directors of the Company after making Judgments and estimates that are reasonable and prudent cannot resile without permission of Tribunal. VII. Section 397 of the Companies Act and Rules made thereunder by a Company with the Registrar shall be admissible in any proceedings thereunder. Without proof or production of original as evidence of any contents of the original or of any fact stated therein of which direct evidence is admissible. 5. Shri Ramji Srinivasan, Sr. Advocate representing Respondent No. 1 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in judgments rendered in Raghubir Singh s Case and Pradeep Chandra Parija s Case . Learned counsel for Respondent No. 1 also referred to Central Board of Dawoodi Bohra Community Anr. Vs. State of Maharashtra Anr. , reported in (2005) 2 SCC 673, wherein the Hon ble Apex Court after taking note of the earlier decisions, summed up the legal position in the following terms:- 12. Having carefully considered the submissions made by the learned senior counsel for the parties and having examined the law laid down by the Constitution Benches in the abovesaid decisions, we would like to sum up the legal position in the following terms :- (1) The law laid down by this Court in a decision delivered by a Bench of larger strength is binding on any subsequent Bench of lesser or co-equal strength. (2) A Bench of lesser quorum cannot doubt the correctness of the view of the law taken by a Bench of larger quorum. In case of doubt all that the Bench of lesser quorum can do is to invite the attention of the Chief Justice and request for the matter being placed for hearing before a Bench of larger quorum than the Bench whose decision has come up for consideration. It will be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, learned counsel for Respondent No. 1 submits that the reference is maintainable and deserves to be answered. 6. Shri Abhijeet Sinha, Learned counsel for Appellant opposing the reference submits that the most recent judgment in Central Board of Dawoodi Bohra Community Anr. Vs. State of Maharashtra Anr. , clearly lays down that a Bench of lesser strength cannot disagree with the decision of a Larger Bench. It is submitted that a decision delivered by a Bench of larger strength is binding on any subsequent Bench of lesser or co-equal strength. In case of doubt, the Bench of lesser quorum can invite the attention of the Chief Justice and request for the matter being placed before a Bench larger than the Bench whose decision has come up for consideration. It will be open only for a Bench of co-equal strength to express an opinion doubting the correctness of the view taken by the earlier Bench of co-equal strength. It is further submitted that a case may be referred to a Larger Bench only when the statute provides for a power to refer matters, a Bench of lesser strength is of opinion that the earlier judgment of Larger Bench is per incurium, there is difference of opinion be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it by applying the law laid down in V. Padmakumar . 7. Having noticed the Order of Reference and submissions of learned counsel for the parties, we shall now proceed to have a thorough conspectus of the circumstances attending upon constitution of the Larger Bench, the issues before it, the case law noticed and the decision rendered by the five Member Bench. 8. Application under Section 7 of I B Code filed by M/s Stressed Assets Stabilization Fund (SASF) Financial Creditor came to be admitted by the Adjudicating Authority (National Company Law Tribunal), Single Bench Chennai in terms of order dated 21st November, 2019 which was assailed in Company Appeal (AT) (Insolvency) No. 57 of 2020 primarily on the ground that demand notice was not served before passing of the admission order otherwise the Appellant would have shown that the application was barred by limitation as the account of Corporate Debtor had been declared as NPA in the year 2009 and decree came to be passed in the year 2013. Respondents appeared to contest the appeal and relied upon a three Member judgment of this Appellate Tribunal rendered on 22nd January, 2020 in M/s. Ugro Capital Limited Vs. M/s. Bangalor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod for filing an application under Section 7 of the I B Code . It is of vital significance to notice that the five Member Bench specifically dealt with the view taken in M/s Ugro Capital Ltd. (Supra) and observed as under:- 19. In M/s. Ugro Capital Limited v. M/s. Bangalore Dehydration and Drying Equipment Co. Pvt. Ltd. (BDDE)─ Company Appeal (AT) (Insolvency) No. 984 of 2019 , as other decisions have not been brought to the notice of the Hon ble Bench, it cannot be cited as a precedent. This finding recorded by the five Member Bench after noticing a plethora of judicial precedents of the Hon ble Apex Court leaves no room for doubt that the conflict of decisions in the two above referred judgments of this Appellate Tribunal in V. Hotel s Case and M/s Ugro Capital Ltd. s Case arose as the judicial precedents of Hon ble Apex Court noticed hereinabove were not brought to the notice of three Member Bench hearing the M/s Ugro Capital Ltd. s Case and in view of the same decision rendered therein could not be cited as a precedent. 10. The five Member Bench next dealt with the acknowledgement of claim in the audited Balance Sheet of Corporate Debtor to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statutes and as laid down by the Hon ble Apex Court. This Appellate Tribunal only interprets and applies the law as it is. Once a Larger Bench of this Appellate Tribunal came to be constituted in the wake of two conflicting judgments rendered by Benches of co-equal strength on the issue, one of the two Benches having failed to notice the judgment of the Hon ble Apex Court on the subject, the issue raised by the Referral Bench can no more be said to be res integra, in so far as the jurisdiction exercised by this Appellate Tribunal under I B Code is concerned. It was a matter of judicial discipline for the Referral Bench to follow the judgment of the five member Bench in V. Padmakumar s Case as a binding precedent and not question the correctness of the Judgment by adopting the cut and paste methodology in branding the five Member Bench Judgment in V. Padmakumar s Case as so very incorrect , divorced of the context in which the Hon ble Apex Court used this expression in Raghubir Singh s Case (supra) and Pradeep Chandra Parija s Case (supra). While expressing our shock on this aspect, we propose to first deal with the issue that is sought to be raised on the basis of gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Services Case (supra), wherein in para 42 it was observed that 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 may be applied to condone the delay in filing such application. The five Member Bench of this Appellate Tribunal also noticed the judgment rendered by this Appellate Tribunal in V. Hotels Case (supra) wherein after noticing judgment of Hon ble Apex Court in Vashdeo R. Bhojwani , this Appellate Tribunal made following observations in regard to applicability of Section 18 of the Limitation Act for extension of limitation:- 22. The aforesaid provision makes it clear that for the purpose of filing a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has to be made in writing duly signed by the party against whom such property or right is claimed. 23. In the present case, Asset Reconstruction Company (India) Ltd. - ( Financial Creditor ) has failed to bring on record any ack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvency and bankruptcy issues for which timelines were laid down. It is now well settled that the remedy available under the I B Code is a remedy distinct from remedy available in civil jurisdiction/ recovery mechanism and since the I B Code is not a complete Code, provisions of Limitation Act are attracted to proceedings under it before NCLT and NCLAT as far as applicable i.e. in regard to matters not specifically provided for in I B Code. The whole mechanism of triggering of Corporate Insolvency Resolution Process revolves round the concept of debt and default . Once debt and default are established, the Financial Creditor, the Operational Creditor or the Corporate Person can initiate the CIRP by filing application respectively under Section 7, 9 or 10 of I B Code in prescribed format before the Adjudicating Authority. It is well settled now that proceedings under I B Code are not in the nature of recovery proceedings and being an independent remedy same can be had recourse to by the aggrieved person seeking triggering of CIRP by establishing debt and default and complying with the procedural requirements laid down under the Code. With reference to the above referred judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 7 of the I B Code and the fact that filing of Balance Sheet/ Annual Report being mandatory under Section 92(4) of Companies Act, failing of which attracts penal action under Section 92(5) (6).In view of the judgment of Hon ble Apex Court in Sampuran Singh (supra), the Referral Bench should not have relied on a stray observation made by the Hon ble Apex Court in an earlier decision Mahavir Cold Storage Vs. CIT, (1991) Supp (1) SCC 402 in regard to extension of period of limitation on the basis of entries in the books of accounts amounting to acknowledgement of liability which related to recovery proceedings. It is therefore preposterous to hold that the judgment of five Member Bench is so incorrect that the same can in no circumstances be followed . The Referral Bench has failed to draw a distinction between the recovery proceedings and the insolvency resolution process . I B Code provides timelines for resolution of insolvency issues and proceedings thereunder cannot be equated with the recovery proceedings . The insolvency resolution mechanism is based on debt and default . Adjudication of civil disputes and complex issues is impermissible within the ambit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-equal strength. II. In Keshav Mills Co. Ltd. vs. CIT (1965) 2 SCR 908 , it was held that nature of infirmity or error would be one of the factors in making a reference. Whether patent aspects of the question remained unnoticed or was the attention of Court not drawn to any relevant and material statutory provision or was any previous decision of the Hon ble Apex Court not noticed would be the relevant factors. III. In Supreme Court Advocates on Record Association vs. Union of India, (2016) 5 SCC 1 , it was held that the Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling given after due deliberation and full hearing was erroneous, revisit earlier decision so that the law remains certain. IV. In Sub-Inspector Rooplal Anr. Vs. Lt. Governor Ors. reported in (2000)1 SCC 644, the Hon ble Apex Court observed as under:- 12. At the outset, we must express our serious dissatisfaction in regard to the manner in which a Coordinate Bench of the Tribunal has overruled, in effect, an earlier judgment of another Coordinate Bench of the same Tribunal. This is opposed to all principles of judicial discipline. If at all ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
