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TMI Blog2023 (8) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, passed by the 'Adjudicating Authority' ('National Company Law Tribunal', Hyderabad Bench, Hyderabad). 2. The 'Adjudicating Authority' ('National Company Law Tribunal', Hyderabad Bench, Hyderabad), while passing the 'impugned order', dated 06.05.2022, in CP (IB) No. 324 / 7 / HDB / 2020 (Filed by the '1st Respondent / Petitioner / Financial Creditor'), under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, at Paragraph Nos.6 to 8, had observed the following: 6. "It is the case of the Financial Creditor that it has provided various loan facilities to the Corporate Debtor from time to time and that as on date an amount of Rs.239,51,53,055.83/- is in default. The only contention of the Corporate Debtor is that the Application herein has not accounted for the amounts received by way of sale of various assets of the Corporate Debtor and therefore the Application lacks merit. In relation to the said contention, it is settled position of Law than an Applicant under Section 7 of IB Code, 2016 cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner / Financial Creditor, this Adjudicating Authority is inclined to admit the instant Application." and finally 'Admitted', the 'Application', by 'appointing' an 'Interim Resolution Professional', and declared 'Moratorium', etc. Appellant's Submissions: 3. The Learned Counsel for the Appellant, contends that the 'Adjudicating Authority' / 'Tribunal', had failed to 'appreciate' that the 'Claim' of the '1st Respondent / Petitioner / Financial Creditor', was hopelessly barred by 'Limitation'. 4. According to the Appellant, the 'period of three years', as per 'Article 137 of the Limitation Act, 1963', for filing the 'Claim', under Section 7 of the Code, lapsed on 10.06.2009, and that the Section 7 Application, was filed on 29.02.2020, being 'Barred by Time'. 5. The Learned Counsel for the Appellant, points out that the 'Default', in the present case, took place on 11.06.2006, and that, the '1st Respondent / Petitioner / Financial Creditor', had relied upon the 'One Time Settlement Offer', made w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditor', had not mentioned the 'Date of Default' in 'Form I', which clearly prove that the 'Financial Creditor', had not fulfilled the stipulations, required under the 'Code'. 11. The Learned Counsel for the Appellant, brings it to the notice of this 'Tribunal' that the 'Adjudicating Authority' / 'Tribunal', should have 'rejected', the 'application', filed under Section 7 of the 'Code', based on the ground that the Financial Creditor's Claim is 'Barred by Limitation', and also there is a 'Dispute', in regard to the 'Invocation of Bank Guarantees'. 12. Moreover, the 'Suit' in OS No. 7734 of 2014, is pending before the City Civil Court, Bengaluru, in regard to Chitradurga Project and Arbitration Suit No.5 of 2015, is pending on the File of the City Civil Court, Bengaluru (Filed by the National Highway Authority), as against the 'Arbitration Award', issued in favour of the 'Corporate Debtor'. 13. The Learned Counsel for the Appellant, takes a stand that the 'Award' in 'Arbitration, was initiated against the National Highways Authority of India, on 06.09.2014 and the said 'Award', is under 'challenge', in COM.A.S. No. 5 of 2015, before an 'Appropriate Forum', and the '1st Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y would be extraneous to the matters involved in the petition. Disputes with the Electricity Regulator or the Recipient of Electricity may not be of much relevance. The question is whether an award of the APTEL in favour of the Corporate Debtor, can completely be disregarded by the Adjudicating Authority (NCLT), when it is claimed that, in terms of the Award, a sum of Rs.1,730 crores, that is, an amount far exceeding the claim of the Financial Creditor, is realisable by the Corporate Debtor. The answer, in our view, is necessarily in the negative. 61. In our view, the Appellate Authority (NCLAT) erred in holding that the Adjudicating Authority (NCLT) was only required to see whether there had been a debt and the Corporate Debtor had defaulted in making repayment of the debt, and that these two aspects, if satisfied, would trigger the CIRP. The existence of a financial debt and default in payment thereof only gave the financial creditor the right to apply for initiation of CIRP. The Adjudicating Authority (NCLT) was required to apply its mind to relevant factors including the feasibility of initiation of CIRP, against an electricity generating company operated under statutory cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the 'Adjudicating Authority / Tribunal', in respect of Section 7 Application. 24. At this juncture, the Learned Counsel for the 1st Respondent / Bank, refers to an 'Admission of Liability', on the part of the 'Appellant' (vide Paragraph 7 of the Counter - Page 104 of the Appeal Paper Book (vide Diary No.455 dated 06.06.2022), which runs as under: 7. "It is submitted that despite of huge pressure from the market, the Director of the Corporate Debtor in the fond hope of reviving the Company in the Year 2008, has approached the Financial Creditor Bank to settle the Liability so as to revive the Company and in pursuance of the same sold all the joint family properties, by convincing the other family members and paid substantial amounts by the end of the year 2013." 25. The Learned Counsel for the 1st Respondent / Bank, cites the Judgment of the Hon'ble Supreme Court of India dated 31.08.2017, in Innoventive Industries Ltd. v. ICICI Bank (vide Civil Appeal Nos.8337-8338 of 2017), reported in India Kanoon, wherein, at Paragraph 28, it is observed as under: 28. "...... The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hargovindbhai Dave (supra) cited by Mr. Shivshankar, this Court had no occasion to consider any proposal for one time settlement. Be that as it may, the Balance Sheets and Financial Statements of the Corporate Debtor for 2016-2017, as observed above, constitute acknowledgement of liability which extended the limitation by three years, apart from the fact that a Certificate of Recovery was issued in favour of the Appellant Bank in May 2017." 29. The Learned Counsel for the 1st Respondent / Bank, adverts to the Judgment of the Hon'ble Supreme Court of India in Lakshmipat Surana v. Union Bank of India dated 26.03.2021 (vide Civil Appeal No. 2734 of 2020), reported in India Kanoon, wherein, at Paragraphs 37, 41 & 42, it is observed as under: 37. "..... Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld automatically extend the 'Period of Limitation', as well as 'Date of Default'. 31. The Learned Counsel for the 1st Respondent / Bank, cites the Judgment of this 'Tribunal' dated 24.03.2021, in Kishanlal Likhmichand Bothra v. Canara Bank (vide Comp. App (AT) (INS.) No. 704 of 2020, wherein, at Paragraph 13, it is observed as under: 13. ".... We have no difficulty to state that Section 18 of the Limitation Act is applicable to proceedings under IBC and that if there is acknowledgment of debt in the balance-sheets or the OTS Proposal, the period of limitation would get extended if the acknowledgment is made before the period of limitation expires....." 32. The Learned Counsel for the 1st Respondent / Bank, brings it to the notice of this 'Tribunal' that subsequent to the 'Order', passed by the 'Adjudicating Authority' / 'Tribunal', the Resolution Professional / 2nd Respondent, had conducted the 'Committee of Creditors' meeting, without any let or hindrance from any 'Third Parties', and further that, in as much as the said 'Order', was acted upon the 'Appellant', cannot continue the instant 'Appeal', before this 'Tribunal'. 33. The Learned Counsel for the 1st Respondent / Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble at some future date'. 41. An 'Application', under Section 7 of the 'Code', cannot be 'rejected', on the ground that it was made with a 'Malice' or 'Bad / Ill Motives', provided it is lawfully made. 42. No wonder, the pendency of proceedings, under the 'Other Statute', will not bar the 'initiation of Insolvency and Resolution Process Proceedings', under the 'Code'. 43. The 'aspect of Debt and Default', can be gone into only, if the 'Corporate Debtor', disputes the 'Debt' or takes the plea that there is no 'Default', though, there is a 'Debt', as per decision in R.P. Synthetics & Anr. v. Bee Ceelene Textile Mills Pvt. Ltd., 2018 148 SCL Page 584. 44. In 'Law', the 'Liability of a Guarantor', is co-extensive with that of the 'Principal Borrower'. To put it succinctly, under Section 128 of the Indian Contract Act, 1872, the 'Liability of a Guarantor', is co-extensive with the 'Liability of a Principal Debtor', as per decision in State Bank of India v. Indexport Registered & Ors., reported in A.I.R. (1992) SC 1740. Discretion: 45. The term 'Discretion', when 'applies', to a 'Court of Law', it means a 'Sound Discretion', ofcourse guided by 'Law'. However, it must not be a 'Fanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an 'Admission of the Debt'. 50. It transpires, that the 'Corporate Debtor', in its Counter, before the 'Adjudicating Authority' / 'Tribunal', had averred that the Section 7 'Application', filed by the '1st Respondent / Petitioner / Financial Creditor / Bank', is 'not maintainable', as per Section 238A of the I & B Code, 2016. 51. It is the version of the Corporate Bank that the 1st Respondent / Bank, had filed O.A. No.547 of 2019, before the 'Debt Recovery Tribunal - II', at Hyderabad, for 'Recovery of Alleged Dues', and a 'Written Statement', was filed by the 'Corporate Debtor', denying the 'Liability', however, the 1st Respondent / Bank, as 'Financial Creditor', filed Section 7 Application (CP (IB) No. 324 / 7 / HDB / 2020), before the 'Adjudicating Authority' / 'Tribunal'. 52. On behalf of the Corporate Debtor, before the 'Adjudicating Authority', it was averred in the Counter to the main Company Petition, filed by the 1st Respondent / Bank, that the Director of the Corporate Debtor, in terms of the 'Advice', by the Financial Creditor / Bank, had sold his individual 'Properties', and remitted Rs.800 Lakhs, on 30.10.2006 (through Cheque No.392311), and further, the 'Bank', h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the 'aspect of Reply Notice', dated 19.06.2019, issued on behalf of the 'Corporate Debtor' (for the 'Legal Notice', dated 10.06.2019), issued by the 1st Respondent / Bank / Financial Creditor, the Paragraph 2 of the said 'Reply', makes a reference to the 'Financial Turmoil', faced by the 'Corporate Debtor', in the recent past, resulting to 'Non payment of Loan Amount', and the discussion both had with 'O.T.S. Proposal', for 'Fourteen Cr.', which was under due consideration, etc. 58. To be noted, an 'admission', is the best peace of evidence, which can be used against the 'Maker', and this can be taken advantage of, by a 'Party', which places reliance, so as to 'bind', the said 'Maker'. 59. Suffice it, for this 'Tribunal', to point out an 'admission', is not a 'self serving statement', but it is a 'self harming' one. An 'Admission', is 'Confession' or 'Voluntary Acknowledgement', made by a 'Party' or 'Someone', identified with him, in 'legal interest', of the 'existence of certain facts', which are in issue or relevant to an issue, in the case, as per decision, in Ajodhya Prasad Bhargava v. Bhawani Shanker Bhargava, A.I.R. 1957, All at Page 1, Spl Pg: 11 (FB). 60. It cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this 'Tribunal', that the 1st Respondent / Bank / Financial Creditor, filed CP (IB) No. 324 / 7 / HDB / 2020, before the 'Adjudicating Authority' / 'Tribunal', in March 2020. 68. The settled position of 'Law' is that it is for the 'Resolution Professional', to determine the 'aspect of Claim', and it is for him to take a 'final call', in the subject matter in issue. 69. In the present case, as on date, for the 'Loan Facilities', provided by the 1st Respondent / Bank, to the Corporate Debtor, a Sum of Rs.239,51,53,055.83/-, being the 'Due Default Amount', committed by the 'Corporate Debtor'. If there is any 'Financial Debt and Default', in repayment of the same, by the 'Corporate Debtor', then, an 'Adjudicating Authority' / 'Tribunal', by exercising its 'Discretion', after 'subjectively satisfying', itself that a 'Default', was committed by the 'Corporate Debtor', then, the Section 7 Application, filed by the 'Financial Creditor', can be 'admitted', under the I & B Code, 2016. 70. It is brought to the fore that the 'last confirmation', was on 11.05.2017, made on behalf of the 'Corporate Debtor' / 'M/s. A.L. Sudershan Constructions Company Limited', towards the joint and several li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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