Just a moment...

Report
FeedbackReport
Bars
×

By creating an account you can:

Logo TaxTMI
>
Feedback/Report an Error
Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
TMI Blog
Home / RSS

2019 (8) TMI 1656

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ent of Rs. 173,85,76,484.56 (rupees one hundred seventy three crores eighty five lakhs seventy six thousand four hundred eighty four and paise fifty six only) which included interest calculated up to July 31, 2018 along with further interest at 13.85 per cent. per annum from August 1, 2018 till realisation. 2. The averments material for the consideration of this application in brief are the following : (a) On the strength of an application (annexure 1C), the financial creditor had sanctioned cash credit facility of Rs. 250 lakhs and export packing facility of Rs. 400 lakhs on October 15, 2007 against hypothecation over stocks of raw material/stores, stocks in process, finished goods, book debts and other current assets as primary security and mortgage of immovable properties as collateral security upon terms and conditions of the said sanction letter (annexure 1D). On November 17, 2007 to secure repayment of debit balance outstanding from time to time, the corporate debtor executed an agreement of loan-cum-hypothecation along with consent clause (annexure 1E) in favour of SBI. On January 10, 2009 at request of corporate debtor, the financial creditor sanctioned and/or allowed an....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....bts and other current assets as primary security and mortgage of immovable properties as col lateral security upon terms and conditions of the said sanction letter in terms of arrangement dated June 22, 2010 (annexure 1-O). On June 22, 2010 in consideration of granting Rs. 12.50 crores credit limit and to secure repayment of debit balance outstanding from time to time, the corporate debtor executed and delivered (i) agreement of loan for overall limit along with consent clause (annexure 1P), (ii) agreement of hypothecation of goods and assets (annexure 1Q), (iii) letter regarding grant of individual limits within overall limits (annexure 1R), and (iv) omnibus counter guarantee (annexure 1S) in favour of SBI. (c) On August 30, 2011 at request of the corporate debtor, the financial creditor sanctioned and/or allowed and/or restructured the aggregate credit limit with renewal with enhancement of credit limits to the tune of Rs. 68.43 crores against hypothecation against entire current assets of the company present and future, entire plant and machinery of the company as primary security and mortgage of immovable properties as collateral security upon terms and conditions of the said....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....asubramanium is proposed as IRP. Form 2 and written consent is also enclosed. Upon the above said contention the financial creditor prays for admission of the application under section 7 of the Code. 3. The corporate debtor entered appearance and filed reply affidavit contending in brief is the following : (a) The corporate debtor states that the financial creditor has sup pressed the following facts, that the corporate debtor had requested the financial creditor on several occasions to reduce the rate of interest as per RBI Guidelines and in spite of the RBI Guidelines for concessional rate of interest, the financial creditor continued to charge the corporate debtor higher rate of interest at 17.75 per cent. However, no interest concession or fund interest term loan (FITL) was granted by the financial creditor. The corporate debtor received a notice dated August 14, 2012 declaring that the account of the corporate debtor was classified as NPA from August 10, 2012. The corporate debtor submits that the NPA notice dated August 14, 2012 is contrary to the prudential norms on income recognition assets classification and provisioning. (b) The corporate debtor on August 3, 2012 req....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... is further stated that in reply dated October 15, 2013 to the said notice the corporate debtor once again requested the financial creditor to restructure the account of the corporate debtor. 4. That the corporate debtor had filed a suit being C. S. No. 191 of 2014 before the hon'ble High Court at Kolkata which is pending till date. An interim order passed against the financial creditor is also in force. An appeal filed by the financial creditor has been disposed of. The financial creditor attempted to issue a notice under section 13(4) of the SARFAESI Act, 2002 which was challenged before the Debts Recovery Tribunal. Thereafter, the corporate debtor filed an application under the Contempt of Courts Act, 1971 being C. C. No. 14 of 2018 before the hon'ble High Court at Kolkata, in view of the alleged flagrant violation of the interim order passed by the hon'ble High Court. The financial debtor has also filed O. A. No. 307 of 2014 against the corporate debtor. The corporate debtor further states that by stopping the account of the corporate debtor the financial creditor has caused the corporate debtor to shut down its business and the corporate debtor has suffered substa....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ppression of material facts or that the bank has not come to this court with clean hand. It is incorrect to say that the corporate debtor made considerable repayment to the bank between 2007 and 2011. It is also incorrect to say that the corporate debtor had agreed to charge interest at the rate of 14 per cent. perannum as alleged or at all. It is denied that master circular dated September 12, 2011 has any application to the corporate debtor. It is denied that any assurance was given by the financial creditor to corporate debtor to restructure the account of the corporate debtor as alleged or at all. Contents of letter of the corporate debtor dated January 28, 2013 are denied and disputed. It is denied that the senior officials of the bank visited the office of corporate debtor or assured the corporate debtor that account will be restructured. It is denied that the viability of restructuring was justification of non-payment of dues. The TEV study was done at the behest and instance of the corporate debtor. It is incorrect to say that the proceedings initiated under SARFAESI were contrary to RBI Guidelines. The contents of C. S. No. 191 of 2014 are false untrue and incorrect. The s....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....facilities by the corporate debtor and declaration of the above said account as non-performing asset (NPA) on August 6, 2012 is not in dispute. As per the averments in the reply affidavit, the corporate debtor made a request to restructure their accounts which make it apparent that the corporate debtor has admittedly defaulted in repayment. The above said are the admitted facts. The corporate debtor though filed an exhaustive reply affidavit disputing its liability, there is no challenge in regard to the execution of loan agreement, letter of arrangement, agreement of hypothecation of goods and assets, guarantee agreement as referred to in the application as annexure D to annexure X. The disputes raised in the reply can be summarized as shown below : (i) Contractual rate of interest claimed by the financial creditor is not correct. (ii) Entitled to concessional rate of interest. (iii) Notice issued under section 13(2) of the SARFAESI Act is illegal and improper. (iv) Declaring the account of corporate debtor as NPA is being challenged in this application and hence this application is not maintainable. (v) Initiation of proceeding under section 7 of the Code is in violat....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....NL/0213/2019. Secondly he contends that right to apply under section 7 of the Code accrued to the financial creditor since December 1, 2016 when the I and B Code came into force, filing of this application on August 10, 2018 is within 3 years and therefore, this application is within time limit. He relied upon B. K. Educational Services P. Ltd. v. Parag Gupta and Associates [2019] 212 Comp Cas 1 (SC) and Shankar Vardharajan v. Dewachand Ramsaran Corporation P. Ltd. (Company Appeal (AT) (Insolvency) No. 735 of 2018) MANU/NL/0311/2018 ; [2019] 212 Comp Cas 1 45 (NCLAT) for strengthening the said submissions. Thirdly he submits that in the balance-sheet for the year ending March 31, 2017 the corporate debtor admitted the debt and therefore, filing of this application is not barred by law. He relied upon section 18 of the Limitation Act. Fourthly, he also would submit that the financial creditor being a mortgagee, the period of limitation to file an application to foreclosure is 30 years as per article 63(3) of the Limitation Act, 1963 and therefore, filing of this application on August 10, 2018 is not barred by law. 10. In regards the submission of learned senior counsel that f....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....edings has arisen for consideration in the present case . . . 18. Section 14 of the Limitation Act, 1963 saves the period of limitation in the event of a new proceeding being filed when the court in which the former proceeding was being prosecuted suffers from defect of jurisdiction or defect of like nature. It does not contemplate two proceedings on the same cause of action at the same time. In the present case, the bank has not withdrawn the proceeding under section 14 under the RDB Act, 1993, for defect in jurisdiction of the Tribunal to decide the same or otherwise. Rather the bank is proceeding under section 19 of the RDB Act, 1993. It can proceed parallely by under the Act of 2002 provided that the proceedings under the Act of 2002 are within the period of limitation. Pendency of the proceedings before the Debts Recovery Tribunal, under the RDB Act, 1993, will not save the period of limitation for a proceeding under the Act of 2002, if the proceeding under the Act of 2002, is by itself barred by the laws of limitation. In other words, a bank cannot take the benefit of the pendency of the proceedings before the Debts Recovery Tribunal to claim that, a proceeding under the Ac....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....28, 2016. By the said enactment, the financial creditor like the financial creditor in the case in hand got an additional remedy and not a parallel remedy as attempted to establish on the side of the corporate debtor. Thus, the said citation has no application to the facts of the case. 13. In view of the abovesaid, we are of the view that the filing of the proceedings before the Debts Recovery Tribunal by the financial creditor under the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, continues the period of limitation, or in other words, stops the running of the period of limitation from March 25, 2014 when the OA was filed by the financial creditor before the Debts Recovery Tribunal, Kolkata. Pendency of a petition under the provisions of the RDDBFI Act, 1993, being not a bar for initiating the proceedings under the I and B Code, filing of this application is within the period of limitation. 14. In answering the second submission of learned senior counsel for the financial creditor, learned counsel for the corporate debtor submits that the financial creditor was remedy-less before the filing of this application, because right to sue was barred....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Ramsaran Corporation P. Ltd. MANU/NL/0311/2018 ; [2019] 212 Comp Cas 145, 148 (NCLAT) : "In the present case, the right to apply under section 9 of the I and B Code accrued to the respondent since December 1, 2016 when the I and B Code came into force. Therefore, we find that for triggering the application under section 9, the application is within the time limit." 17. On a reading of the above said judgments, we are of the view that right to apply under the provisions of the Code started from the date of commencement of the Code and not on the date of default as attempted to be established on the side of the corporate debtor. So the contention on the side of the corporate debtor that second submission of learned senior counsel for the financial creditor is fallacious and unacceptable, and is found devoid of any merit. 18. Coming to the third submission that there is valid acknowledgment of debt by the corporate debtor in its financial statement for the year ending March 31, 2017 learned counsel for the corporate debtor submits that balance-sheet does not contain any acknowledgment that the money as claimed by the financial creditor is due to the financial creditor. Referring ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ssion in writing in the balance-sheet, is found devoid of any merit. In view of the above said we are inclined to hold that the balance-sheet above refereed is an acknowledgment of debt found due to the financial creditor from the corporate debtor and therefore the said ground taken by the corporate debtor is found unsustainable under section 18 of the Limitation Act, 1963. 21. The next submission on the side of the financial creditor is that even if it is found that filing of this application is barred by article 137, or under section 21 of the Limitation Act, 1963, the period of limitation for filing this application being 30 years as per article 63(a) filing of this application is within the period of limitation. According to learned senior counsel for the financial creditor the application filed under section 7 of the Code can be equated to a suit filed by a mortgagee for foreclosure, and the period of limitation start from when the money secured by the mortgagee becomes due and therefore filing of this application within 30 years of the money secured by the financial creditor is due, is well within the period of limitation. In Babulal Vardhaji Gurjar v. Veer Gurjar Aluminium ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....le. 25. Learned senior counsel for the financial creditor objected to the said submission on two grounds. Firstly, he submits that the appeal submitted before the higher authority was disposed of and repeated offers in writing were given to it for rehearing if any and therefore, there is no violation of the order by initiating proceedings under the Code. Secondly, he would submit that prohibition order is against taking any further steps relating only to the proceedings pursuant to the NPA date which are of no relevance in the instant case which was filed under section 7 of the Code. 26. We do find some force in the arguments advanced on the side of the financial creditor. A copy of the letter dated October 3, 2018 addressed to the corporate debtor was brought to our notice by learned senior counsel. It was produced along with the rejoinder. This letter was not seen challenged on the side of the corporate debtor. An extract from the letter is self explanatory. It is extracted below : "Despite your representation not having been made to the 'next Higher Authority', when the Branch received the communication, much after the time permitted by hon'ble High Court vide it....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....3 and that initiating the proceedings under section 7 by the financial creditor as against the corporate debtor is not contrary to the order dated July 12, 2014 passed by the hon'ble High Court, at Calcutta. Therefore, this application filed under section 7 of the I and B Code is found perfectly maintainable. 30. The corporate debtor has miserably failed to substantiate that the dispute it raised in the reply is fit for not to initiate CIRP and also failed to substantiate any reason as to why the application filed under section 7 of the I and B Code, shall not be initiated against the corporate debtor. The application filed is otherwise complete. Though no record with the information utility seen produced in the instant case a copy of report from CIRF High Mark Credit Information Services P. Ltd., as annexure 2B, produced on the side of the financial creditor proves that the corporate debtor is a defaulter. As per the written communication submitted by the proposed resolution professional, no disciplinary proceeding is pending against him. Hence, he can be appointed as an IRP. Being satisfied that there is default, that the application is complete as per section 7(5)(a) of the....