TMI Blog2021 (5) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... lly all the financial debt u/s. 7 of IBC is complied with further, the claim of the financial creditor is recognised under the guarantee deed and therefore amounts to a debt and there has been default of non-payment of dues by the Principal borrower and thus the Petitioner has rightly invoked the guarantee deed. In J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. Anr. [ 2008 (1) TMI 963 - SUPREME COURT ] wherein the Hon ble Supreme Court held that Section 18 of Limitation Act, 1963 deals with acknowledgment of writing. Sub-section 1 provides that where before the expiration of period for a suit for application in respect of any rights, an acknowledgment of liability in respect of such right has been made in writing signed by party against whom that it is claimed, a fresh period of limitation shall be computed from the time when acknowledgment was so signed. The explanation to this section was to provide that an acknowledgment may be insufficient though it omits to specify the exact nature of right or averse that the time for payment has not yet come, or is accompanied by refusal to pay or is coupled with claim to set off, or is addressed to a person other than a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IAL) AND SH. V. NALLASENAPATHY, HON BLE MEMBER (TECHNICAL) For the Petitioner : Adv. Siddharth Barua, Adv. Ruturaj Bankar For the Respondent : Adv. Vinay Shukla, CS Prashant Thakre ORDER Per: Suchitra Kanuparthi, Member (Judicial) 1. The Petitioner/ Financial Creditor viz. IDBI Bank Limited‟ (hereinafter as Petitioner ) has filed this present Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter as Rules ) in the capacity of Financial Creditor by invoking the provisions of Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter as Code ) against Wizcraft International Entertainment Private Limited‟ (hereinafter as Corporate Debtor‟). 2. In the requisite Form, the total principal amount of debt disbursed under the Facility Agreements was ₹ 56.70 Crores. The total amount in default due to Financial Creditor by the Borrower with respect to the Financial Facility is ₹ 60,39,87,991.41/- as on June 01, 2019. Brief facts of the Petition: 3. The Petitioner had granted financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f outstanding dues under the Facility Agreement in view of the defaults committed by the Borrower under the Facility Agreement is annexed here to and marked as Annexure-11. 2) Notice dated December 8, 2014 sent by IDBI Bank Limited to the Corporate Debtor invoking the Guarantees furnished by the Corporate Debtor to IDBI Bank demanding that the Corporate Debtor pay forthwith the Guaranteed Sums is Annexed hereto and marked as Annexure-12. 3) Notice dated November 29, 2014 under section 13(2) of the SARFAESI Act, 2002 by the Financial Creditor to the Managing Director of Borrower and mortgager and the Corporate Debtor being the promoter and guarantors of the Borrower calling upon them to pay a sum of ₹ 39,43,32,818.08 as on November 14, 2014 and with further interest with effect from November 15, 2014 until realization of payment failing which IDBI shall be entitled to enforce its security interest and takeover the possession and/or management of secured assets is annexed as Annexure-13. Thereafter, the symbolic possession of the assets was taken over by IDBI on July 2, 2018 and the publication of the possession notice was made on July 7, 2018. 4) Letter dated August 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor to the Managing Director of Borrower and Mortgager and Corporate Debtor being the promoters of the Borrower calling upon them to pay a sum of ₹ 39,43,32,818.08 as on November 14, 2014 and with further interest with effect from November 15, 2014 until realization of payment failing which IDBI shall be entitled to enforce its security interest and takeover the possession and/or management of secured assets. Thereafter, the symbolic possession of the secured assets was taken over by the IDBI on July 2, 2018 and the publication of the possession notice was made on July 7, 2018. viii. Letter dated December 08, 2014, by the Financial Creditor invoking the Guarantees furnished by the Corporate Debtor calling upon and demanding that the Corporate Debtor pay forthwith an amount of ₹ 39,43,32,818.08 (Rupees Thirty-Nine Crore Forty-Three Lakh Thirty-Two Thousand Eight Hundred Eighteen and Paise Eight only). ix. Letter dated September 27, 2017 by the Corporate Debtor to the Financial Creditor requesting the Financial Creditor not to initiate any action under the Insolvency and Bankruptcy Code, 2016 and provide the Corporate Debtor and opportunity to present a plan that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Axis Bank, Punjab National Bank, New India Cooperative Limited as on 31.03.2019. 13. The Corporate Debtor denied all the allegations and submissions made in the Petition and claimed the Petition to be untenable in the law. 14. The Corporate Debtor further submitted that this Hon ble Tribunal has no jurisdiction to entertain proceedings as the liabilities of the Corporate Guarantor does not constitute to be a financial debt within the meaning of Section 7of IBC as such application is bad in law and deserves to be dismissed. The Corporate Debtor explained about the sanction of financial to the Great Indian Nautanki Company Private Limited/ Borrower and stated that the Corporate Guarantee dated 26.06.2009, 25.02.2010 and 14.01.2014 surpass the authorisation limit of INR 12.34 Crores and as such the Petition has violated terms of sanction letter and are therefore illegal and not enforceable. The Corporate guarantee for cash credit facility is INR 2 Crores only under sanction letter to the Borrower. The Corporate Guarantee for term loan 2 for INR 12 Crores aggregating to ₹ 1.4 Crores only under sanction 2. Thereafter the corporate guarantee for Term Loan 2 for INR 8.64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and is an operational solvent company and has 246 employees as on 30.11.2019. 21. The present Petition is not maintainable and barred by limitation. 22. The Corporate Debtor have enclosed the No Objection Certificate granted to the Borrower to carry out bidding process and has enclosed the bid document dated 02.07.2019 and requested proposal RFP which is also annexed to the reply. Rejoinder filed by the Petitioner: 23. The Petitioner filed rejoinder and categorically entailed the details of default by the Principal borrower and the Corporate Debtor in the Petitioner. The Corporate Debtor is trying to evade the legal liability of its obligations under deed of guarantee duly executed by Corporate Debtor guaranteed the payment of facilities availed by the Principal borrower i.e. Great Indian Nautanki Pvt Ltd. The Corporate Debtor had undertaken to guarantee all amounts payable by the principal debtor to the financial creditors in terms of deed of guarantee dated February 25, 2010, January 14, 2013. When the principal debtor/ borrower failed to repay the loan creditor bank invoked the corporate guarantee on December 8, 2014. 24. The liability of the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not sufficient even to discharge the payment of liability of the principal borrower under the loan agreement hence the default of principal borrower continues to exist and its subsisting despite the principal borrower paying certain amounts to the Financial Creditor. The principal borrower has failed to discharge the liabilities and hence the Petitioner has invoked the deed of guarantee. Written submissions filed by the Petitioner: 28. The Corporate Debtor is a promotor company of Great India Nautanki Company Private Limited and has guaranteed the loan and the payment obligations availed by the Principal Borrower from the financial creditor under a deed of guarantee dated 26.06.2009, 25.02.2010 and 14.01.2014. The principal Borrower defaulted in making payment of dues and as such the account has been classified as NPA. The Petitioner issued recall notice on 14.11.2014 and invoked the Corporate Guarantee on 18.12.2014. 29. The Corporate Debtor has not disputed the liability under the deed of guarantee nor has disputed principal Borrower s payment obligation and defaults under the loan agreements and other such financial documents. However, the main defence of Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. 32. The Petitioner relied upon plethora of correspondence between Petitioner and Corporate Debtor which can be constituted as acknowledgment in terms of Section 18 of Limitation Act, 1963. The Petitioner further relied upon the letter of Petitioner dated 25.08.2017wherein the Corporate Guarantor/ Corporate Debtor was called upon to pay the dues failing which the Petitioner would be constraint to take steps under IBC. The Corporate Debtor in his reply on 27.09.2017 categorically stated that Petitioner to not to take any action under IBC and provide them time to represent a plan to the Bank. Therefore, the Petitioner contented that fresh period of limitation has to be computed from 27.09.2017 and as such the Petition is not barred by limitation. 33. Further, the nature of guarantee is continuing in nature as such it will remain in full force and effect till such time the Borrower repays the full loan together with the interest, etc. Written submissions/Additional Written Submissions of Corporate Debtor and written submission to IA 613 of 2020 34. The Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor when a debt has become due and payable; and (g) that if default had occurred over three years prior to the date of filing of the application, the application would be time-barred save and except in those cases where, on facts, the delay in filing may be condoned; and (h) an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, is not for enforcement of mortgage liability and Article 62 of the Limitation Act, 1963, does not apply to this application. 37. The Counsel for the Corporate Debtor relied upon judgment of Jignesh Shah and BK Education Services Private Limited. The relevant para of judgment is reproduced below: 32. We have noticed all the relevant and material observations and enunciations in the case of Jignesh Shah hereinbefore. Prima facie, it appears that illustrative reference to Section 18 of the Limitation Act, in paragraph 21 of the decision in Jignesh Shah, had only been in relation to the suit or other proceedings, wherever it could apply and where the period of limitation could get extended because of acknowledgment of liability. Noticeably, in contradistinction to the proceeding of a suit, this Court observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the respondent No. 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, the respondent No. 2 never came out with any pleading other than stating the date of default as 08.07.2011 in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgement. In this view of the matter, reliance on the decision in Mahaveer Cold Storage Pvt. Ltd. does not advance the cause of the respondent No. 2. 38. The Corporate Debtor claimed that the Petition is hopelessly barred by limitation as date of defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o specify the exact nature of right or avert that the time of payment has not yet come or is accompanied by refusal to pay or is coupled with a claim of set off to a person to whoever that person entitled to the right. 42. The Petitioner relied upon judgment of Piyush Periwal Vs. Stressed Assets Stabilization Fund (SASF) of Hon ble NCLAT wherein it was held that the guarantor will be bound by the acknowledgment of principle Borrower and observed that the liability of the guarantor being co- extensive to the liability of principle Borrower and acknowledgment of liability by the principle Borrower in terms of letter dated 20.12.2016 form in Annexure R7 to rely Affidavit (Pg. 64) is binding on the Corporate Guarantor and cannot wriggle out to discharge obligation towards SASR. IA 613 of 2020: 43. The Petitioner had filed IA 613 of 2020 seeking the leave of the Tribunal to permit the applicant to file additional documents, i.e., letter dated November 19, 2016. 44. The applicant/ Petitioner in the IA ought to rely on a letter of November 19, 2016 which tantamount to an acknowledgment u/s. 18 of Limitation Act, 1963. Hence, the Petitioner claims the period of limitation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in the light of relevance of KODS project of state of Haryana tourism, appointed a committee to consider the request of GIAD and Corporate Debtor requested the petitioner not to initiate any action under IBC and provide them time to present a plan acceptable to the Petitioner. 50. In view of the said letter of Corporate Debtor there is an extension of period of limitation from 27.09.2017 an amount to acknowledgment of debt u/s 18 of Limitation Act, 1963. Section 18 of the Limitation Act, 1963 is as follows: 18. Effect of acknowledgment in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No 236 of 2020) pronounced on 14.09.2020. The Hon ble NCLAT reconfirmed the applicability of Section 18 and held that a fresh limitation period arouses and Corporate Debtor has acknowledgment its debt by issuing revival/ debt confirmation letters before the expiry of limitation period. 55. In J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. Anr. reported in 2008 SCC 444 wherein the Hon ble Supreme Court held that Section 18 of Limitation Act, 1963 deals with acknowledgment of writing. Sub-section 1 provides that where before the expiration of period for a suit for application in respect of any rights, an acknowledgment of liability in respect of such right has been made in writing signed by party against whom that it is claimed, a fresh period of limitation shall be computed from the time when acknowledgment was so signed. The explanation to this section was to provide that an acknowledgment may be insufficient though it omits to specify the exact nature of right or averse that the time for payment has not yet come, or is accompanied by refusal to pay or is coupled with claim to set off, or is addressed to a person other than a person entitled to a right. Interpreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad mentioned that the principal borrower Great Indian Nautanki Company Private Limited had failed to pay its dues to IDBI as a result of which IDBI has invoked the above-mentioned guarantee and called upon Wizcraft International Entertainment Private Limited to pay IDBI dues of ₹ 49.39 crores. The Corporate Debtor further requested petitioner bank not to initiate any action against insolvency code and provide them necessary time to provide plan in view of the ongoing subsidies being sanctioned by the Government of Haryana. The Corporate Debtor has sought time which amounts to admission and acknowledgment of liability and also recorded the default of non-payment of money by the Principal Borrower, thus the letter dated 27.09.2017 amounts of acknowledgment of liability in writing and period of limitation is extended from 27.09.2017 to 26.09.2020 under Article 137 of Limitation Act. 57. The Counsel for the Petitioner also relied upon the judgment of Piyush Periwal Vs. Stressed Assets Stabilization Fund (SASF) wherein the Hon ble NCLAT at para 10 held that 10. The liability of the Guarantor being coextensive to the liability of the Principal Borrower and the acknowledgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able claim in the year 1995, when the present petition was instituted. 59. The aforesaid judgment correctly hold that the suit for recovery based upon cause of action it is within limitation cannot be in any manner in fact separate an independent remedy of winding up proceedings. In law, when time begins to run, it can only be extended in the manner provided the limitation act. For eg. An acknowledgment of liability u/s. 18 of Limitation Act, 1963 would extend limitation period but a suit for recovery which is independent proceedings distinct from the remedy of windings up, in no manner, in fact the limitation within which winding up proceedings is to be filed, by somehow keeping the debt alive for the purpose of winding up. 60. Therefore, the Hon ble Supreme Court has held that limitation can only be extended in the manner provided u/s. 18 of Limitation Act, 1963. 61. Hon ble Supreme Court in Jignesh Shah and BK Education Services Private Limited reported in 2018 SCC OnLine SC 1921 has also held that Article 137 of Limitation Act, 1963 shall be applicable to the application filed u/s. 7 and 9 of IBC. 62. This Bench is of the considered opinion that the letter of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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