TMI Blog2019 (8) TMI 1656X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Valid acknowledgment of debt by the corporate debtor in its financial statement for the year ending March 31, 2017 - HELD THAT:- As per the civil suit pending for consideration, the corporate debtor challenged the procedure followed by the financial creditor in declaring the account as NPA. This case not on the basis of declaration of account as NPA but on the basis of occurrence of default. It has come out in evidence that no amount was repaid. Admittedly, the loan was availed by the corporate debtor. That being so the recital in the note that declaration of account as NPA is under challenge before the High Court and hence there is no direct admission 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 - Being satisfied that there is default, that the application is complete as per section 7(5)(a) of the I and B Code, the application warrants admission as prayed for on the side of financial creditor. Application admitted - moratorium declared. - C. P. (IB) No. 1111 /KB/ 2018 - - - Dated:- 19-8-2019 - K. R. JINAN Judicial Member and HARISH CHANDER SURI Technical Member Jay Saha , Senior Counsel with Debasish Chakrabarti and Trisha Saha for the financial creditor. Jishnu Chowdhury , Noella Banerjee , Dipak Dey and Dipanjan Dey for the corporate debtor. ORDER This is an application filed by State Bank of India/financial creditor for initiating corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the corporate debtor in favour of SBI before the Registrar of Companies, West Bengal and submitted a form 8 (annexure 1J) with the Registrar of Companies, West Bengal. On March 5, 2009 at the request of corporate debtor, the financial creditor sanctioned and/or allowed and/or renewed and/or enhanced the aggregate credit limit of ₹ 650 lakhs to ₹ 740 lakhs into both way interchangeability between CC and LC limit to an extent of ₹ 100 lakhs within overall limit of ₹ 740 lakhs against hypothecation over stocks of raw material/stores, stocks in process, finished goods, books 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 in terms of letter of arrangement (annexure 1K). (b) On March 7, 2009 for consideration of granting ₹ 740 lakhs to secure repayment of debit balance outstanding from time to time, the corporate debtor delivered an agreement of loan-cum-hypothecation (annexure 1M) in favour of SBI. On March 7, 2009 a further charge was created by the corporate debtor in favour of SBI before the Registrar of Companies, West Bengal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f disbursement to date of payment with monthly rests or at a discretionary rate interest fixed by SBI. The corporate debtor enjoyed and utilised the said credit facilities but in spite of repeated requests, the corporate debtor did not adhere to the terms and conditions of the said credit facilities. The account was therefore classified as NPA on or about August 6, 2012. On January 10, 2013 bank issued demand notice (annexure 1Y). Disbursement details and statement of accounts containing computation of amount of default and statement of accounts with certificates of financial creditor under the Bankers' Books Evidence Act, 1891 (annexure 1Z). (e) Total outstanding of ₹ 173,85,76,484.56 inclusive of interest calculated up to July 31, 2018 and further interest at 13.85 per cent. from August 1, 2018 till realisation. On January 27, 2013 despite receiving demand notice dated January 10, 2013 the corporate debtor failed to pay an aggregate sum of ₹ 75,74,16,762. Copies of form 8 being certificate of registration of charge issue by the Registrar of Companies-annexure 2A. SBI has filed an application being O. A. No. 392 of 2014 under section 19 of the RDB Act, 1993 befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt but instead sent a demand notice dated January 10, 2013 and the corporate debtor replied to the said notice on January 28, 2013 requesting the financial creditor to withdraw the notice as the restructuring proposal was under consideration. Thereafter, discussions for restructuring of the accounts were once again carried out between the financial creditor and corporate debtor, but the financial creditor did not consider the restructuring proposal of the corporate debtor. (c) It is further stated by the corporate debtor that the financial creditor had blocked ₹ 2,00,000 in the corporate debtor's current account for the purpose of TEV study, though the agency had failed to conduct a detailed TEV study which was later admitted by the financial creditor. The corporate debtor further states that the viability study was conducted after more than a year from the date the account of the corporate debtor became NPA. The corporate debtor further submits that the account of the corporate debtor ceased to be NPA when the financial creditor transferred 5 per cent. of all monies coming to the corporate debtor's account for being adjusted against outstanding dues. The corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and acknowledged in paragraphs 7-11 of affidavit in reply that it has, from time to time, availed diverse credit facilities from the bank. Allegation that the corporate debtor is entitled to concessional rate of interest is without any basis or support. The contention that request was made by the corporate debtor to restructure their account which makes it apparent that the corporate debtor has admittedly defaulted in repayment. The TEV deals with feasibility of reviving the corporate debtor, it does not justify the default. The notice issued under section 13(2) of the SARFAESI Act, 2002 cannot be challenged in these proceedings. Declaring the account as NPA cannot be challenged after 6 years that too in these proceedings. The contention that the corporate debtor is entitled to refund of excessive interest amounting to ₹ 10 crores is absurd and unsubstantiated. In terms of his Lordship HMJ I. P. Mukherjee's order dated July 21, 2014 the financial creditor and/or its higher authority has considered and rejected the representation on July 10, 2014 the corporate debtor has wrongly and illegally contended that its representation had not been disposed of. To avoid unnecessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the purview of the IBC or that it is a MSME. It is denied that the proceed ings have been initiated against the direction of the Calcutta High Court. (ii) The corporate debtor then filed a supplementary affidavit con tending that the application filed is not within the period of limitation and hence not maintainable. To the said supplementary affidavit the financial creditor has filed a rejoinder denying the allegations in the supplementary affidavit. 5. Heard learned senior counsel Shri Joy Saha for and on behalf of State Bank of India/financial creditor and learned counsel Shri Jishnu Chowdhury for and on behalf of the corporate debtor. Perused the records, argument notes and citations referred to on both sides. 6. Upon hearing the arguments and on considering the contentions raised on both sides the points that arises for consideration are : (i) Whether the application was filed within the period of limitation ? (ii) Whether the interim order in C. S. No. 191 of 2014, passed by the hon'ble Calcutta High Court, in any manner whatsoever prevents or bars the financial creditor from instituting the present petition ? Point No. (i) : The financial cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en up for hearing, learned counsel for the corporate debtor stressed his argument mainly on the question of limitation. According to him, this application was filed not within the period of limitation and that since an interim order in a civil suit is in force as against the financial creditor, filing of this application is in violation of the order of High Court and therefore, on the said two grounds this application is liable to be held not maintainable. In the above said background let us consider point No. (i). 9. The Limitation Act, 1963, is made applicable to the Code by way of amendment of section 238A of the Code. Learned senior counsel for the financial creditor submits that the application was filed within the period of limitation. The four folded submission on the side of the financial creditor are the following : Firstly he submits that the period of limitations runs from the last date of execution of letter of arrangement by the corporate debtor, is on August 30, 2011. Since the financial creditor had filed O. A. No. 392 of 2014 under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) on March 25, 2014 within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at filing of this application under section 7 of the Code is otherwise barred by laws of limitation. He would further submit that both the proceedings were initiated on the strength of very same cause of action and that being so in new proceedings, there is no saving of period of limitation. According to him, the cause of action in both the proceedings is on the strength of default, i. e., is on August 6, 2012 on the date of declaration of the account of corporate debtor as NPA and therefore, filing of this application on the strength of the very same cause of action in which the OA filed before the Debts Recovery Tribunal is clearly barred under section 14 of the Limitation Act, 1963. He cited AIR 2017 Cal 289 (Dr. Dipankar Chakraborty v. Allahabad Bank) for stressing on the said argument. He brought our attention specifically to paragraphs 12 and 18 of the said judgment. It is good to read paragraphs 12 and 18, which read as follows (page 293) : 12. In the facts of the present case, the petitioner has not con tended that, the claim made by the secured creditor before the Debts Recovery Tribunal under section 19 of the Act of 1993 is barred by the laws of limitation. In any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 19 of the RDB Act, 1993 before the Debts Recovery Tribunal. 11. In the above cited decision, the bank initiated parallel debt recovery proceedings both under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and under the SARFAESI Act of 2002. The borrower/ petitioner in the writ petition contends that when the bank invoked proceeding under the SARFAESI Act of 2002, the same was barred by limitation. The hon'ble High Court found that the bank invoked section 13(2) of the Act of 2002 on April 13, 2011, i. e., more than 9 years after the Act came onto effect, not within the period of limitation and thereby quashed the proceedings under the SARFAESI Act of 2002 referring to section 36 of the Limitation Act. 12. In the case in hand truly the financial creditor/bank initiated parallel proceedings. It filed OA before the Debts Recovery Tribunal under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 on March 25, 2014 and filed this application under section 7 of the I and B Code on August 10, 2018. It is significant to note here that the invoking proceedings under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. He relied upon article 137 of the Limitation Act, 1963. According to him as per article 137, the right to apply accrued when the I and B Code came in force and since the I and B Code came in force on December 1, 2016 filing of this application is within 3 years of accruing its right and therefore, the application filed is well within period of limitation. 15. Learned counsel for the corporate debtor on the other hand relying upon paragraph 27 of the B. K. Educational Services P. Ltd. v. Parag Gupta and Associates [2019] 212 Comp Cas 1 (SC), submits that right to sue accrued not on December 1, 2016 as submitted but accrued on the date of default, i. e., on August 30, 2011 as alleged by the financial creditor and therefore filing of this application beyond three years would be barred under article 137 of the Limitation Act. It is good to read article 137. It read as : Description of application Period of limitation Time from which period begins to run 137. Any other application for which no period of limitation is provided elsewhere in this division Three years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclosures-secretarial audit report. The balance-sheet under the head long-term borrowings the amount of debt payable is shown as ₹ 33,49,92,064. But the creditor to whom the said amount is due is not written under the said head . . . amount and therefore is not an acknowledgment. The note was read over by him to us to convince us that the amount shown in the note being written as the disputed amount it won't fall under section 18 of the Limitation Act. The said note is extracted below : Disclosure in auditors report relating to default in repayment of financial dues.-In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to any financial institutions, banks and debenture holders except the secured term loan from State Bank of India of ₹ 33,49,92,064 which has been declared by the bank as a non-performing assets. The same has been disputed by the company in the High Court. 20. Referring to the civil suit pending before the High Court, he further would submit that the declaration of NPA is under challenge and therefore that is not an acknowledgment of dues. We are not at all convince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, and therefore article 61(b) is not applicable, but article 63(a) appears to be applicable. By applying the very same principle applied by the hon'ble NCLAT in the said case, we can rightly hold that the applicant being a mortgagee its claim is not barred by limitation as the period of limitation is 30 years. 22. The above said discussions lead to a legitimate conclusion that the filing of this application is within the period of limitation and the claim of the financial creditor is not barred by limitation. This point is answered in favour of the financial creditor. 23. Point No. (ii) : It is contended on the side of the corporate debtor that initiating the proceedings by filing this application is in violation of the order of the hon'ble High Court, at Calcutta in C. S. No. 191 of 2014, dated July 21, 2014 and therefore, financial creditor is disentitled to take any steps against the corporate debtor, and therefore this application is not maintainable. To stress his said submission, he relied upon the below extracted para in the said order : Only for the period from now till the appeal is disposed of by the higher authority, the bank will not take any furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat you were fully aware of the same. 27. The above said reply to the corporate debtor by the bank revels that the corporate debtor itself did not act as per the directions of the order and delayed in submitting the appeal and the higher authority had declined the appeal and given fresh opportunities for fresh hearing by issuing several letters on October 3, 2018, December 5, 2018 and on December 10, 2018 and copies of all the letters were produced for our reference along with the rejoinder. Those letters were seen received by the corporate debtor and corporate debtor did not appear before the authority for rehearing. This circumstance indicates that any steps after the disposal of the appeal in no way violate the direction issued in the said order. 28. Learned senior counsel referred to the relief sought for in the civil suit submits that it was filed by the corporate debtor challenging the date of declaration of the account as NPA alleging non-adherence in following the guidelines issued by the RBI and further steps in continuing the already initiated proceedings were stayed and therefore the proceedings in the instant case will not fall under the scope of the direction. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Moratorium is declared for the purposes referred to in section 14 of the Insolvency and Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15. (iii) Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits the following : (a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority ; (b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein ; (c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) ; (d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (iv) The su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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