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TMI Blog2019 (12) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of interest as well as principal amount as agreed. Hence, the accounts were declared as NPA on 05.11.2014. On 19.11.2014, notice of recall was issued to require the Corporate Debtor and its guarantors to repay the entire loan. Notice under section 13(2) of SARFAESI Act, 2002 was issued. 3. The learned counsel appearing on behalf of the Financial Creditor narrated these facts and contented that the property had been mortgaged also, hence, limitation period as per the provision of Limitation Act, 1963 was 12 years and, therefore, the debt was not barred by limitation. It was also pleaded that action under section SARFAESI Act had also been taken within time. Therefore, for this reason also the debt was not barred by limitation. The learned counsel further drew our attention to pages 39 to 65 of the Paper Book containing financial statements of Corporate Debtor for the financial year ended on 31st March, 2017 and he specifically drew attention to page 43 of the Paper Book, wherein fact of secured loans from Banks had been mentioned in Note No.3. In addition to these, details of securities were also given. Based upon this and description of security documents executed between the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited Vs Parag Gupta and Associates 2018 SCC Online SC 1921 in para 48 condonation of delay application as per the provisions of section 5 of the Limitation Act, 1963 was a must to over come the expiry of limitation period and which had not been done in the present case hence, the petition was liable to be dismissed on the ground of limitation. It was also pleaded that declaring of NPA was an internal administrative requirement for the purpose of making provisions and non recognition of income, hence, the same could not be said to be a valid proposition for counting limitation. It was also pleaded that the name of the Bank did not appear in the balance-sheet and balance-sheet could not be considered as an acknowledgement of fact and, therefore, the presentation in the balance-sheet could not extend the limitation on its own. Accordingly, the learned counsel submitted that the petition was liable to be dismissed. The learned counsel for the Corporate Debtor also placed reliance on the decision of the Hon'ble Supreme Court in the. case of Gaurav Hargovindbhai Dave Vs Asset Reconstruction Company ( India) Ltd. Passed in Civil Appeal No. 4952/2019 vide order dated September 18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation date, hence, the amount would have become due and payable only when such period would have expired. In the present case, commercial operation never started. Thereafter, he reiterated earlier submissions that no break up of loan was given at page 43 in the balance-sheet and, therefore, such balance-sheet could not amount to acknowledgement of debt. He again stated that signatures were not put at the requisite place of the application form and power of attorney was of 2007,hence, on technical grounds, the application was not maintainable. In this regard, he placed reliance on the decision of Hon'ble NCLAT in the case of Palogix Infrastructure Pvt. Ltd. Vs ICICI Bank as reported in (2017) SCC Online NCLAT266 and drew our attention to para 13 to 18 and 36 thereof. 7. In the Rejoinder, it was contended by the financial creditor that there was no suppression of facts and there was default in respect of debt which was due and payable, therefore, the application was to be admitted. It was also pleaded that all the claims made by the Corporate Debtor as regard to excessive interest or non-following of guidelines issued by the RBI or entitlement of the Corporate Debtor to rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person has been stated as authorised representative of the bank for filing application in the NCLT under section 7 of IBC, 2016 in respect of said corporate debtor. Thus, when both these documents are read together, it is established that such person is an authorised representative of the Financial Creditor. Even otherwise mere nomenclature of a document would not make a document of the nature of authorization as of the nature of Power of Attorney. The corporate debtor has placed reliance on the decision of the Hon'ble NCLAT in the case of Palogix Infrastructure Private Limited Vs. ICICI Bank Limited Company Appeal (AT) (Insol.) Nos.30,37 and 54 of 2017 order dated 20.09.2017 for the proposition that Power of Attorney holder was not competent to file an application on behalf of the Financial Creditor. However, it is observed that in para 36 of the said order it has been held that mere use of word " Power of Attorney" while delegating such power will not take away the authority of such officer and for all purposes, it was to be treated as an authorization by the financial creditor. Thus, in fact, this order supports the case of the Financial Creditor. The Hon'ble NCLAT in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out suitable amendments thereto as may be required for the implementation of the project including the time lines specified with respect to COD. In part F of sanction letter under the head of event of default it has been mentioned that the lenders reserved the right to recall the facility, impose any other terms and conditions and appoint one additional director upon the happening of any of the following event of default, if necessary. This clause also covers a situation where the borrower commits any breach or default in the performance of observance of the material covenants of the facility agreement. Part H relating to documentation also provides that the borrower was to comply with customary covenants such as financial covenants, representation and warranties of the borrower, conditions precedent to the loan and conditions precedent to each disbursement, events of default and consequences of the events of default. It has also been provided that terms and conditions stipulated by other bankers to the extent considered necessary by the Financial Creditor may also be applied. This takes us to study of common loan agreement. ln Clause 7.1 of Article VII containing specific ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of provisions of section 18 of the Limitation Act, 1963. This aspect and other related issues as regard to the nature and scope of provisions of section 18 of the Limitation Act, 1963 have come up for consideration in a few cases before us. The relevant findings of this Bench in the case of Kotak Mahindra Bank Limited Vs. M/S Sri Balaji Metals and Minerals Pvt. Ltd. passed in (CP(IB) No. 1476/KB/2018 in CA(IB) No. 1005/ KB/ 2019) dated 03.12.2019 are reproduced as under:- "10. We have considered the submission made by both the sides and material on record. The bone of contention is whether debt is barred by limitation or not. In this regard, it is noted that in the financial statements for the year ended 31st March, 2016, the amount of secured loan has been shown. The fact of default has also been mentioned. The said balance-sheet also contain figures of such loan in financial year ended on 31st March, 2015. It has been also noted that in financial year 2011-12 and 2012-13 cheuqes given by the Corporate Debtor as EMI have been presented by the Bank which have got dishonoured. Such cheques were neither recalled nor any instructions had been issued as regard to cancellation/ non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noteworthy that thereafter there have been no supplies or payment by the respective parties. As far as Corporate Debtor is concerned the main plea is that the debt is barred by limitation. For this purpose, the e-mail dated 19th April, 2016 has been claimed as not a proper acknowledgement of debt under Section 18 ofLimitation Act, 1963. It has been claimed so far the reason that the said e-mail was addressed to Baba Gora Transport and not to the Financial Creditor. On perusal of the records, it is noted that the said e-mail is, in fact, has been addressed to mail ID i.e. [email protected] which is not of the Financial Creditor but statement of account of Financial Creditor has been attached. To express our view about the validity of such e-mail is an acknowledgement of that we consider it necessary to reproduce Section 18 of the Limitation Act, 1963 as under: Section 18(1): Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement 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 thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts have been mentioned, hence, can it be said to be an acknowledgement of debt. This question again leads us to explanation (a) above wherein it has been stated that an acknowledgement may be sufficient though it omits to specify exact nature of property or right. " 19.In the case of Trinetra Electronics Limited vs. McNally Bharat Engineering co. Limited in cp (IB) No.1506/KB/2018 Order dated 16/10/2019, this Tribunal has held as under:- "5. We have considered submissions made by both sides and have also perused the materials on record. The question for our consideration anses is that (i) whether debt is barred by limitation or not; (ii) whether the letters dated 29/ 1/2018 and 30/ 7/2018 constitute acknowledgement as per provision of Sec. 18 of the Limitation Act, 1963. It is not in dispute that these letters have been written by the corporate debtor regarding confirmation of outstanding balance of ICD as on 31/ 12/2017 and 30/6/2018 as per the books of account of Financial Creditor. The confirmation ofoutstanding balance is to be given to the statutory auditors of the corporate debtor. This exercise cannot be considered in a light manner because reliance on the accuracy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the parties whereby acknowledgement of debt can be inferred as no specific format has been prescribed. 6. Having stated so, a question may arise that such communications are in respect of the debt outstanding in the books of account of corporate debtor as on 31/ 12/2017 and 30/6/2018 and have been sent on 29/ 1/2018 and 30/7/2018 respectively which are beyond three years period from 30/9/2014, hence, whether requirement of Sec. 18(1) of Limitation Act, 1963 is complied with. To look into this aspect, we have to see whether presentation in the balance sheet by itself constitutes an acknowledgment of debt or not. Now, there have been catena of decisions of NCLT and NCLAT that presentation of debt in the balance sheet constitutes acknowledgment of debt. Since the corporate debtor, in the present case has asked for conformation of balance from the financial creditor as on 31st December 2017 and 30th June 2016 in respect of loan taken in 2014 which itself implies that such loan is continuously outstanding in the balance sheet of corporate debtor from earlier financial years ending on 31 st March 2015, 31st March 2016 and 31st March 2017. Thus, this fact by it self goes against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. It has been settled judicially that Sec.238A is applicable since the implication of Insolvency & Bankruptcy Code 2016. It is evident that Sec.238A the word "as for as may be" have been used which means that the provision of Limitation Act, 1963 would apply to the extent possible and any provision of Limitation Act, 1963 being inconsistent to the provisions of Insolvency & Bankruptcy Code. 2016 will not be applicable. Further, the technicalities of Limitation Act, 1963 would not be applicable as Insolvency & Bankruptcy Code, 2016 is an economic legislation and functions on the principles of summary procedure. As discussed earlier that explanation (a) of Sec. 18 of Limitation Act. 1963 provides much flexibility and takes into consideration various factors/situations for explaining as to what would constitute acknowledgement and in view of Sec.238 and 238A of the Insolvency. & Bankruptcy Code. 2016. such provision has to be read further in conjunction with the wider meaning given to the term "claim" in Sec.3(6) of the Insolvency & Bankruptcy Code. 2016 which includes right to payment even on equitable ground. (Emphasis supplied). 10. In view of above discussion, we hold that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 which also depict the figures of the same as on 31st March, 2015 is continuation of such outstanding loan from the earlier financial years as in such a case no other conclusion can be arrived i.e. the outstanding loan continues from earlier years except the figure of the same which may vary due to interest, if any, charged subsequently or due to repayment of loan, if any. 12. We further find no merit in the claim of the Corporate Debtor that no outstanding debt had been shown in CIBIL report or balance had been written off by the Financial Creditor in its books of account, hence, no debt was due and payable for the reason that such action is required as per the guidelines of the RBI as well as the Bank itself and such unilateral action can not result into waiver of loan or in any way lead to a conclusion that debt is extinguished by financial creditor and no claim is to be made by the financial creditor in accordance with law. This view is further fortified by the fact that financial creditor in spite of writing it off have perused various legal options to realise the same and even petition under section 434 of Companies Act, 2013 had been filed. Further, the default of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bts, which are unsecured,which is directly related to the object sought to be achieved by the Code. In any case, workmen's dues, which are also unsecured debts, have traditionally been placed above most other debts. Thus, it can be seen that unsecured debts are of various kinds, and so long as there is some legitimate interest sought to be protected, having relation to the object sought to be achieved by the statute in question, Article 19 does not get infracted. For these reasons, the challenge to Section 53 of the Code must also fail. Epilogue 85. The Insolvency Code is a legislation which deals with economic matters and, in the large sense, deals with the economy of the country as a whole. Earlier experiments, as we have seen, in terns of legislations having failed, 'trial' having led to repeated 'errors' ultimately led to tin enactment of the Code. The experiment contained in the Code, judged by the generality of its provisions and not by so-called creditors and inequities that have been pointed out by the petitioners, passes constitutional muster. To stay experimentation in things economic is a grave responsibility, and denial of the right to experiment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under section 5(21) means a claim in respect ofprovision ofgoods or services". 15. Apart from the above decision, we consider it pertinent to reproduce findings of the Tribunal in the case of Punjab National Bank Vs. M/S Jas Infrastructure and Power Ltd. in CP (IB) No. 1290/KB/2018 order dated 01.10.2019 as under:- " 7. The first objection raised by the Corporate Debtor in regard to competency of person, who has signed and filed application under section 7 ofIBC, 2016. We have perused the contents of the relevant documents, which are wide enough in scope and also authorise the signatory of the petition to initiate Corporate Insolvency Resolution Process against the Corporate Debtor.ln this regard particular reference ofpara d(iv) read with para d(ii) can be taken. We are further of the view that the decision of the Hon'ble NCLAT in the case of Ramesh Chander Gupta(Supra) also supports the claim ofthe Financial Creditor. We are further of the view that in sum and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion period, but a suit for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding up proceeding. 10. In the present case, it is not in dispute that in the balance-sheet for the financial year ended on 31.03.2016, the Corporate Debtor has categorically admitted the amount outstanding, amount of instalment payable and default in payment of interest. Copy of the relevant pages have been placed on pages 930 and 931 ofPaper Book. It is also not in dispute that Corporate Debtor submitted a proposal for revival on 16.02.2015 in which the amount of loan has been admitted. The limitation, if counted from that date, ends on February 15, 2018. As per provisions of Section 18 of the Limitation Act, 1963 if the acknowledgement of debt happens before the expiry of said period, the limitation gets extended. As held in catena of decisions that presentation of debt in the balance-sheet amounts to acknowledgement of debt. Thus, taking into consideration ofprovisions of Section 18 of Limitation Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, it is not in dispute that there is a default in respect of payment of financial debts. Thus, for this reason also, there is no merit in this contention of the corporate debtor. 17. It is further considered necessary to mention that presentation of a debt as liability in the balance sheet is a statement made by the corporate debtor to the world at large that this amount is payable by the corporate debtor. Even for commercial purposes such as credit ratings/ renewals, obtaining of financial assistance or fixation of drawing limits or additional loan facilities etc. such liability is taken into consideration for computing net-worth, current ratio, capital gearing debt equity ratio etc.,hence, such presentation is of paramount importance from all perspectives.Thus, the* same cannot be ignored for the purposes of proceedings under section 7 or 9 of IBC,2016. We are further of the view that after taking into consideration above aspects, such presentation also amount to promise under section 25 (3) of Indian Contract Act, 1872. 18. The application filed by the Financial Creditor under section 7 of IBC,2016 is complete in all respects. The Financial Creditor has also proposed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have effect from the date of admission till the completion of the corporate insolvency resolution process. viii. Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. ix. Necessary public announcement as per Section 15 of the IBC, 2016 may be made. x. Shri Santanu T.Ray , having registration No. IBBI/ PA-002/ IP-N00360/2017-18/11127 email id santanutray @ aaainsolvency. com is appointed as Interim Resolution Professional for ascertaining the particulars of creditors and convening a Committee of Creditors for evolving a resolution plan. xi. The Financial Creditor to pay a sum of Rs. ( Rs. Five Lakhs) to IRP as advance fee as per Regulation 33(2) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation 2016 which shall be adjusted from final bill. In case further funds are required during Corporate Insolvency Resolution Process and if not provid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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