TMI Blog2023 (10) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... s proceeding was incorporated under the Companies Act, 1956. In the case of Kotak Mahindra [ 2022 (8) TMI 329 - SUPREME COURT ], credit facilities were extended to the borrower entities in the years 199394. It is obvious that the three corporate entities involved in that case were incorporated under the Companies Act that prevailed prior to coming into operation of 2013 Act. The position of law to guide the subject proceeding should be the same. In the event a financial creditor wants to pursue a recovery certificate as a deemed decree, he would get twelve years time. The argument of the appellant about maintainability of the application out of which this appeal arises on the ground of the application being barred under limitation, is not satisfying. The application with respect to the two recovery certificates issued in the year 2017 is maintainable. In the event the Appellate Tribunal is of opinion that the CIRP could not lie so far as the recovery certificate of 2015 is concerned, as the decree would be still alive, the claim based on the said recovery certificate could be segregated from the composite claim and the Committee of Creditors shall, in that event, treat the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.1653 of 2017. The third application was filed before the DRT, Bengaluru which was registered as OA No.1930 of 2014. Three recovery certificates were issued by the respective Tribunals covering the claims of the lending banks. Two recovery certificates by the Hyderabad Tribunal were issued on 08.09.2015 and 17.10.2017 for a sum of Rs.14,50,06,349.23/and Rs.1408,03,14,857.40/respectively. In the case registered as OA No.221 of 2014, the State Bank of Hyderabad was the applicant bank. In OA No. 154 of 2014, all these banks filed a composite application. In OA No.1930 of 2014, the proceeding brought by State Bank of Bikaner and Jaipur, recovery certificate was issued on 04.08.2017 for a sum of Rs.5,22,21,750/. In respect of the recovery certificate issued on 17.10.2017, the State Bank of India claimed to be entitled to Rs.368,22,13,348.59/. 3. The State Bank of India s application under Section 7 of the IBC was filed on 06.09.2019 before the NCLT, founded on all the three recovery certificates in which the first respondent had substantial stake. In its order passed on 12.01.2021, the adjudicating authority admitted the application and declared moratorium in terms of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant was that the banks had approached the forum under the IBC, on the basis of the aforesaid circular. The said circular was, however, quashed in the case of Dharani Sugars and Chemicals Ltd. (supra). On this ground, the appellant argued that the application was not maintainable. The Appellate Tribunal held, interalia: 56. In regard to the plea of the Appellant that the Adjudicating Authority in the impugned order even though at paragraph 12 had mentioned that the Corporate Debtor had raised two fold contention (1) that the petition is barred by limitation (2) the petition has been initiated as by the RBI Circular 12.02.2018 which was held ultra virus of section 35 AA of the Banking Regulation Act by the Hon ble Supreme Court, this Tribunal ongoing through the impugned order is of the considered view that the Adjudicating Authority had not adverted to the same and the said order in this regard has not spelt out reasons. Therefore, this Tribunal is of the earnest opinion that it is desirable that an Adjudicating Authority is to disclose its mind in future so that the compulsion of disclosure, guarantees consideration apart from the fact, that the duty to assign reasons introd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the present case, hence they are neither considered, nor discussed. 60. Be that as it may, in view of the detailed upshot, this Tribunal taking note of the respective contentions projected by the Learned Counsels appearing for the parties, considering the facts and circumstances of the present case in a proper perspective, comes to a resultant conclusion that the instant case there is a Financial Debt which is due and payable by the Corporate Debtor . Moreover, as against the Corporate Debtor/Totem Infrastructure Limited, orders were passed by the Debt Recovery Tribunal(s) and the three Recovery Certificates dated 17.10.2017, 04.08.2017 and 08.09.2015 clearly establish the factum of Financial Debt, due and payable, and that default being committed by the Corporate Debtor . To put precisely, the onus of proving the debt and default on the part of the First Respondent/Bank in the instant case, has been duly discharged. Looking at from any angle, the admission order of the section 7 application as against the Corporate Debtor by the Adjudicating Authority, ( National Company Law Tribunal , Hyderabad Bench in an application filed by the First Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority. The prohibition to institution of suit or continuation of pending suits or proceedings including execution of decree would not mean that a decreeholder is also prohibited from initiating CIRP, if he is otherwise entitled to in law. The effect would be that the applicant, who is a decreeholder, would himself be prohibited from executing the decree in his favour. xxx xxx xxx 71. We have already hereinabove, done the exercise of considering the relevant provisions of the IBC afresh and come to a conclusion that a liability in respect of a claim arising out of a recovery certificate would be a financial debt within the meaning of clause (8) of Section 5 IBC and a holder of the recovery certificate would be a financial creditor within the meaning of clause (7) of Section 5 IBC. We have also held that a person would be entitled to initiate CIRP within a period of three years from the date on which the recovery certificate is issued. We are of the considered view that the view taken by the twoJudge Bench of this Court in Dena Bank [Dena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section, (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to setoff, or is addressed to a person other than a person entitled to the property or right, (b) the word signed means signed either personally or by an agent duly authorised in this behalf, and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. Section 238A of the IBC stipulates: Limitation. The provisions of the Limitation Act, 1963 (36 of 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. 7. So far as the present proceeding is concerned, if we proceed on the basis that the date of initial default is the starting point of limitation, then lapse of three years from that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to waive off all the penal interests levied by your bank on the Loan outstanding amount from the date of account became irregular to till date of your notification to us It would be of great relief to us, if you can waive off all the penal interests and penalties and other charges levied on our account and inform us to enable us to plan for repayments. So in this regard we further request you to consider this as One Time Settlement (OTS) option extended to us. We also request you to allow us to repay the said amount in at least 4 to 6 Instalments spread over a period of one year. We are highly indebted to your bank in supporting us in all our tough times and believing us. We are always committed for repayment of your outstanding dues. Finally we request you not to issue any public notifications or such actions which will spoil our reputation as well as closes all options for us to raise funds or to make alternative arrangements to repay the loan outstanding amounts. Kindly organise Consortium meeting or joint Lenders Meeting at the earliest, preferably before 07th February 2020 to discuss and to come to an understanding. We hope that you will con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Article 137 to the Limitation Act was applied for computing the period of limitation. But these authorities do not lay down a proposition of law which is contrary to that laid down by the threeJudge Bench judgment of this Court in the case of Kotak Mahindra I (supra). This Court, in the case of Vashdeo R. Bhojwani vsAbhyudaya Cooperative Bank Limited and Another [(2019) 9 SCC 158], on considering the facts involved in that case, came to the finding that when the recovery certificate was issued, the said certificate injured effectively and completely the appellant's rights, as a result of which limitation would have begun ticking. The recovery certificate there was issued on 24.12.2001 and the financial creditor filed an application under Section 7 of the IBC before the NCLT on 21.07.2017. But in the said judgment also the date of recovery certificate was treated to be the date on which the time of limitation began to tick. 11. On behalf of the appellant, submissions have been made that the banks having approached the DRT, were barred under the doctrine of election from approaching the NCLT for recovery of same set of debts. This is a doctrine embodied in the law of evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued on 08.09.2015. We have already held that the letter dated 29.01.2020 cannot by itself revive the debt though it could create an independent cause of action. A question that arises now is as to whether the debts in connection with the recovery certificate issued in the year 2015 could form subject matter of an application under Section 7 of the IBC filed on 06.09.2019. In the case of Kotak Mahindra I (supra), it was held that CIRP could be brought within three years from the date of issue of recovery certificate. 13. What has been filed before the NCLT is a composite application based on three recovery certificates, two of which have been instituted within the three year period as postulated in Article 137 of the Limitation Act. The third recovery certificate was issued in the year 2015. Thus, there is more than three years gap between the date of issue thereof and the date of filing of the application before the NCLT. But a recovery certificate under the 1993 Act is also clothed with the character of a deemed decree. The provisions of Section 19 (22A) of the 1993 Act specifies : Section 19 Application to the Tribunal: .. (22A) Any recovery certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of Section 19 of the Debts Recovery Act, in view of subsection (22A) of Section 19 of the Debts Recovery Act it will be deemed to be a decree or order of the Court for the purposes of initiation of windingup proceedings of a company, etc. However, there is nothing in subsection (22A) of Section 19 of the Debts Recovery Act to imply that the legislature intended to restrict the use of the recovery certificate limited for the purpose of winding up proceedings. The contention of the respondents, if accepted, would be to provide something which is not there in subsection (22A) of Section 19 of the Debts Recovery Act. 80. In any case, when the legislature itself has provided that any recovery certificate issued under subsection (22) of Section 19 of the Debts Recovery Act will be deemed to be a decree or order of the court for initiation of windingup proceedings, which proceedings are much severe in nature, it will be difficult to accept that the legislature intended that such a recovery certificate could not be used for initiation of CIRP, which would enable the corporate debtor to continue as an ongoing concern and, at the same time, pay the dues of the creditors to the maxim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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