TMI Blog2022 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority has, therefore, rightly admitted Application under Section 95(1) of the IBC. Whether the present application filed under Section 95(1) of the IBC is barred by law of limitation? - HELD THAT:- The final order was passed by Hon ble DRT on 20.09.2019 and the last payment of Rs. 5 crore was made by CD on 31.12.2019, whereas, the Application under Section 95(1) filed before Hon ble Adjudicating Authority on 03.11.2021. Considering the Hon ble Supreme Court Suo Moto Writ Petition IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER ] excluding period of limitation from 15.03.2020 to 28.02.2022 the present application was filed within 74 days from the last payment of 31.12.2019. Thus, it is clear that the Application u/s 95(1) was filed within Limitation Period and we therefore, there are no error in the Judgment of Adjudicating Authority on this point. Whether guarantee given as Managing Director/ Director of CD shall be treated as personal guarantee or otherwise? - HELD THAT:- Section 2 of IBC described the Applications of IBC Code. Section 2(e) of the IBC which case in force w.e.f. 01.12.2019 in so far as they relate to Personal Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Law Tribunal , Kochi Bench, Kerala, whereby, the `Adjudicating Authority admitted application under Section 95(1) of Insolvency Bankruptcy Code, 2016 (in short IBC) `CIRP proceedings filed by `State Bank of India- Respondent/Financial Creditor (in short `FC ) against `Corporate Debtor (in short `CD ) and `Personal Guarantors (in short `PG ) and initiated `Insolvency Resolution Process against `Appellant under Section 100 of IBC and appointed `Mr. Jossy Steephen Kattur as `Insolvency Resolution Professional (in short `IRP ). Since common issues and legal points are involved in both the `Appeals bearing `Appeal numbers Company Appeal (AT) (CH) (INS) No. 227 of 2022 Company Appeal (AT) (CH) (INS) No. 262 of 2022, both are being taken up together and common order is being passed accordingly. Brief Facts: 2. Mrs. Merin Jose- Appellant/PG [MD of ITMA Hotels India Pvt. Ltd. (in short ITMA)] in Company Appeal (AT) (CH) (Insolvency) No. 227 of 2022 and Mr. Jose M.M.- Appellant/PG Director (in ITMA) in Company Appeal (AT) (CH) (Insolvency) No. 262 of 2022 have been involved in hospitality industry since year 2010. A consortium of banks consisting of erstwhile Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveying the approval of compromise settlement). 3(5). In addition to the above, another amount of Rs.4.63 Crore also should be deposited by the defendants with SME Branch of the applicant bank at Ernakulam towards the deficit of Rs.100% cash margin on the first defendant by erstwhile State Bank of Travancore. The last date for deposit of this amount is 25.09.2019. Final Order further stated that in case payments are not effected within stipulated time, the compromise settlement would stand automatically withdrawn / cancelled and the entire amount as claimed in the OA along with the interest and cost shall become payable forthwith and would becomes recoverable from the defendants and mortgaged properties. 6. Admittedly, after the `CD made an upfront settlement payment of Rs. 12 crore and Rs. 5 crore was paid on 31.12.2019, `CD failed to make balance payments as per terms in compromise settlement. Aggrieved by this default, `FC filed an Application bearing No. CP (IB)/30/KOB/2020 before the `National Company Law Tribunal , Kochi Bench, to initiate `Corporate Insolvency Resolution Process , against the `CD and `PG under Section 7 of the IBC. 7. Aggrieved by `Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by limitation, since, account of the `CD was made `NPA in the year 2015, whereas, notice to guarantors was given on 17.11.2015 and application under Section 95(1) of the IBC was made on 26.10.2021 almost after 6 years from the date when the accounts of `CD were declared `NPA . 14. Learned Counsel for the Appellant further argued that Section 238 A of the IBC clearly stipulate that the provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be. 15. Learned Counsel for the Appellant cited cases of Hon ble Supreme Court in the matter of Babulal VardharjiGurjar vs. Veer Gurjar Aluminium Industries Pvt. Ltd. Ors. Reported in (2020) 15 SCC 1 and B.K. Educational Services Pvt. Ltd. vs. Paras Gupta Associates: AIR 2018 SC 5601. 16. Learned Counsel for the Appellant also raised issues regarding debt and dues itself claimed by `FC stating that these are uncertain, disputed and imaginary claims. 17. Finally, Learned Counsel for the Appellant referred to the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the OA along with interest and costs as claimed therein shall become payable forthwith and would become recoverable from the defendants and the mortgaged properties. Learned Counsel stated that `FC has produced the statement of account with certificate issued under Bankers Books Evidence Act, 1891 to prove the debt which were never disputed by the `Appellant and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. 22. Learned Counsel for the Respondent assailed the point of limitation prayed by the Appellant and mentioned that subsequent to declaration of account of `CD as `NPA , `OA was filed before the DRT, Ernakulam on 27.06.2016 and based on the compromise settlement approved by `FC on the request of `CD , DRT, Ernakulam passed a decree on 20.09.2019 and Rs. 5 crore was deposited by `CD on 31.12.2019. The `FC filed an `Application under Section 95(1) of IBC on 03.11.2021 within two years from the date of final order of DRT, Ernakulam and from the last payment. Learned Counsel further argued that taking Hon ble Supreme Court Suo Moto Writ Petition No. 2020 excluding period of limitation from 15.03.2020 to 28.02.2022, the present `Application was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Adjudicating Authority for enforcing claims of FC against CD as well as personal guarantor. (v) Whether, the provision of interest by Adjudicating Authority was incorrect and contrary to DRT final order. 29. Issues:- (i) Whether, debt was dues and default took place? 29(a). To understand whether in the present appeal any debt existed at all, which was due and not paid resulting into default. We need to see the exact definitions of relevant sections in the IBC. The `Debt has been defined in Section 3 (11) of IBC which is as under:- 3(11). debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; Since, the term `Claim is mentioned in above definition of debt, we need to refer to definition of `Claim , under Section 3(6) of IBC, which is as under:- 3(6). claim means- (a) A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) Right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 29(b) As seen from above, financial debt is an inclusive and non-exhaustive definition given under Section 5(8) of the IBC to mean a debt alongwith interest, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. 29(c) We have noted from the Written Submissions of Respondent that FC has produced the statement of account with certificate issued under Bankers Books Evidence Act, 1891 to prove the debt which were never disputed by the Appellant and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. While discussions the facts of the case above, it has already been noted that various term loan and working capital facilities were given by SBT SBBJ which later merged into SBI (FC). This fact was never disputed by Appellant. We also note that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.03.2019 Compromise settlement approved by FC. 11. 20.09.2019 Hon ble DRT Ernakulam passed based on compromise settlement between CD FC. 12. 27.03.2019 CD remitted Rs. 12 Crore in terms of compromise settlement. 13. 27.12.2019 Further extension was given whereby, CD was required to pay Rs. 10 Crore before 10.01.2020, Rs. 20 Crore before 31.01.2020, Rs. 15 Crore before 28.02.2020 and balance Rs. 15 crore on or before 31.03.2020. 14. 31.12.2019 CD remitted Rs. 05 Crore in terms of compromise settlement which was after stipulated date. 15. 19.04.2021 FC intimated CD that compromise settlement has failed. 16. 03.11.2021 Application under Section 95(1) filed before Hon ble Adjudicating Authority 17. 24.02.2022 Impugned Order issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctions as a Civil Court/Executing Court. Proceedings under the SARFAESI Act would, therefore, be deemed to be civil proceedings in a Court. Moreover, proceedings under the SARFAESI Act under Section 13(4) are appealable to the DRT under Section 18 of the SARFAESI Act. Mr. Dave s argument that proceedings under the SARFAESI Act would not qualify for exclusion under Section 14 of the Limitation Act, because those proceedings were not conducted in a Civil Court, cannot be sustained. 100. Another civil proceeding whether in a Court of first instance or of appeal or revision, against the party, for the same relief, would have to be construed to include any civil Proceeding in a forum, whether of first instance, or appellate, or revisional, against the same party for similar relief, more so, having regard to the language and tenor of Section 238A of the Limitation Act which applies the provisions of the Limitation Act as far as may be , to proceedings in the NCLT/NCLAT. 101. In our considered view, keeping in mind the scope and ambit of proceedings under the IBC before the NCLT/NCLAT, the expression Court in Section 14(2) would be deemed to be any forum for a civil proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 issued by Central Government along with seeking other relief under IBC concerning the validity of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) (in short PGCD) Rules, 2019 issued on 15.11.2019. In Para 3 of the said Judgment it was mentioned which is as herein under: 3. At some stage or the other, these petitioners (compendiously termed as the writ petitioners ) had furnished personal guarantees to banks and financial institutions which led to release of advances to various companies which they (the petitioners) were associated with as directors, promoters or in some instances, as chairman or managing directors . (emphasis supplied) 31(c). Hon ble Supreme Court had rejected and challenge by PGCD to Central Government notification dated 15.11.2019 by which PGCD were brought within same regime of IBC as govern the CD themselves. 31(d). Part II Chapter-I and II of the IBC contains Section 4 to 54 provided for Insolvency Resolution and Liquidation for Corporate Person. Section 2 of IBC described the Applications of IBC Code. Section 2(e) of the IBC which case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder of the Recovery Certificate would be a financial creditor and would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the Recovery Certificate . Section 22Aof the Recovery of Debts Bankruptcy Act 1993 deals with the relevancy of a Recovery Certificate Any recovery certificate issued by the Presiding Officer under sub-section (22) shall be deemed to be decree or order of the Court for the purposes of initiation of winding up proceedings against a company registered under the Companies Act, 2013 (18 of 2013) or Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009) or insolvency proceedings against any individual or partnership firm under any law for the time being in force, as the case may be. Thus, the legislature and the Apex Court has clearly stated that, Recovery Certificate is a sine qua non for initiation of IBC. 32(b). Learned Counsel for the Respondent opposed the averment of the `Appellant regarding not following clause 3(6) of final order of the DRT, Ernakulam dated 31.12.2019. Learned Counsel further mentioned that according to clause 3(7) of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions cannot be taken into account for the purposes of limitation. Thus, it is very clear that there was no requirement to approach the Hon ble DRT for getting Recovery Certificate before approaching the Adjudicating Authority. We, therefore, do not find any merit in the contention of the Appellant on this issue. 33. Issue (v) Whether, the provision of interest by Adjudicating Authority was incorrect and contrary to DRT final order. 33(a). Learned Counsel for the `Appellant submitted that there was no specific inclusion of penal interest in final order of the DRT, Ernakulam. Hence, penal interest amounting to Rs. 129,38,65,395.94/- was incorrect. 33(b). Learned Counsel for the Respondent however stated that based on the compromise settlement final order was passed by Hon ble DRT on 20.09.2019. As per the final order, provision was made for recovery of full principle amount along with cost with interest in clause 3(6) of Settlement If the deposits/Payments are not effected by the defendants within the time stipulated above, the compromise settlement would stand automatically withdrawn/cancelled and the entire amount as claimed in the OA along with interest and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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