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TMI Blog2020 (8) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... t/ Applicant/ 'Financial Creditor'. 2. The Adjudicating Authority (National Company Law Tribunal), Bengaluru bench while passing the impugned order on 16th July, 2019 at paragraph 9 to 11 had observed the following: - "9. ....., the Karnataka Bank Ltd. (hereinafter referred to as the "Assignor Bank") has granted Loan amounting to a sum of Rs. 25,00,00,000/- along with interest at the prime Lending rate compounded monthly, along with further interest at the rate of 2% p.a. in case of non-payment of the Loan amount by the due date. Accordingly, the 'Corporate Debtor' has to repay the loan in instalments commencing from November, 2012 until May, 2014 along with interest and other charges thereon. However, the Corporate Debtor failed to pay outstanding instalments resulting to classify the account of Corporate Debtor as a Non- Performing Asset ("NPA") on 16.08.2013, in accordance with the RBI directives and guidelines. The Bank has also issued a Demand Notice to the Corporate Debtor U/s 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI ACT"), calling upon them to repay the amount due, as on 15.02.2014, amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded), by certifying that the statement of account obtained from the Assignor Bank by virtue of the Assignment Agreement executed and all such data/ entries are stored in the Safe Custody in the ordinary course of Business of Phoenix." and resultantly admitted the 'Application' filed by the 1st Respondent/ 'Financial Creditor' by appointing 'Mr. Guruprasad Makam as an Interim Resolution Professional' to carry out the functions as per I&B code etc. 3. Assailing the validity, correctness and legality of the impugned order dated 16th July, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), the Learned Counsel for the Appellant submits that the impugned order is a perverse one and in fact the Adjudicating Authority had overlooked the hardships faced by the Appellant which were beyond control. 4. The Learned Counsel for the Appellant comes out with a plea that Karnataka Bank had acted in an unprofessional fashion and in a manner that exhibit total disregard for the 'Regulations and circulars' issued by the Reserve Bank of India. 5. The Learned Counsel for the Appellant forcefully takes a plea that the Adjudicating Authority had overlooked the fact that the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Application under Sec 7 of the Code was filed on 06.09.2018, which is more than two years and nine months later and as such, the said Application is barred by limitation. In fact, the learned Counsel for the Appellant contends that Article 137 of the Limitation Act, 1963 clearly applies to the facts of the present case. 9. The Learned Counsel for the Appellant submits that there are two parts of the Loan - (1) the Loan granted by the Karnataka Bank is beyond the period of limitation; and (2) New Loan was granted by the Asset Reconstruction Company and that the Appellant is ready to pay the remaining sum of Rs. 2,70,00,000/- in a short notice. 10. According to the Learned Counsel for the Appellant, the 'Corporate Debtor' M/s Sovereign Developers and Infrastructure Ltd. ('SDIL') commenced the construction of phase I of the project 'Sovereign Unnathi' in May 2010 and it obtained the phase II and phase III of the project in March 2011 and due to increase in cost of construction, the project cost went up to more than Rs. 330 crores and by that time, the 'Corporate Debtor' had already spent an amount of Rs. 240 crores on the project, whereas only Rs. 190 crores was collected from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the project was due to external factors beyond the control of Builders and closed the resolution process. 15. Countering the submission of the Learned Counsel for the Appellant, the Learned Counsel for the 1st Respondent/ 'Financial Creditor' submits that the 1st Respondent is an 'Asset Reconstruction Company' registered under Section 3 of the SARFAESI Act, 2002. Further, it is the plea of the 1st Respondent that the 'Corporate Debtor'/ SDIL requested the Karnataka Bank Limited/ Assignor Bank for grant of certain facilities/ loan for the purpose of Company Appeal (AT) (Insolvency) No. 848 of 2019 construction of 'Residential Apartments' and that the Karnataka Bank/ Assignor Bank granted a Term Loan of Rs. 25 crores. In terms of the 'Loan Agreement', the aforesaid Term Loan was to be repaid by the 'Corporate Debtor' in instalments commencing from November 2012 till May 2014 together with future interest and other charges thereon. The 'Corporate Debtor'/ SDIL had failed to repay the said credit facilities as per terms and conditions adumbrated in the Loan Agreement executed among other things by the 'Corporate Debtor'. 16. The Learned Counsel for the 1st Respondent points out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Loan Agreements executed by the 'Corporate Debtor', the additional credit facility/ fresh loan, together with contractual interest was to be repaid by the 'Corporate Debtor' in installments beginning from 09.06.2016 and going up to 30.11.2016. In fact, the said credit facility, according to the 1st Respondent was also secured among other things by 'Guarantees and Mortgage'. Furthermore, the 'Corporate Debtor' after executing the New Loan Agreement for credit facility of Rs. 5 crores and rescheduling of other credit Company Appeal (AT) (Insolvency) No. 848 of 2019 facilities had made various part-payments towards the interest and principal amount due and payable by it to the 1st Respondent. In this regard, the Learned Counsel points out that some of the part payments were made on 17.10.2016, 11.11.2016, 29.11.2016, 29.12.2016, 31.12.2016, 10.01.2017, 23.01.2017, 25.01.2017, 28.02.2017 and 31.05.2017 respectively. 21. It is the specific case of the 1st Respondent that post 31.05.2017 the 'Corporate Debtor' had defaulted and stopped making payments to the 1st Respondent/ Company and on 24.08.2017 the 1st Respondent issued a Recall Notice to the 'Corporate Debtor', whereby and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Loan). The amount claimed to be in default as on 02.09.2018 was due from November 2012. It comes to the fore that before the Adjudicating Authority, the 'Corporate Debtor' had filed detailed reply, inter alia, stating that Section 7 Application filed by the 'Financial Creditor' was a result of inaction on its part in not taking corrective measures and issuing NOCs and improper handling of Escrow account and further the Applicant / 'Financial Creditor' was unable to show that the default had occurred within the meaning of Section 7 of the IBC and the same being caused at the hands of the 'Corporate Debtor' etc. 25. Also that the 'Corporate Debtor' before the Adjudicating Authority in its reply averred that it made payment of Rs. 12 crores before execution of the Assignment to the Karnataka Bank in service of payment and the amounts which was due to the tune of Rs. 25 crores, though it was different matter that out of Rs. 25 crores, Rs. 2.5 crores were never released and Rs. 2.5 crores was simply moved across the ledger in an attempt to windowdress accounts and the said sum of Rs. 2.5 crores were never realized to the 'Corporate Debtor', which was reflected in the account. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest and other charges and because of the 'Corporate Debtor's' failure to pay the outstanding installments, its account came to be classified as Non-Performing Asset on 16.08.2013. Even for the Demand Notice issued by the Bank in terms of Section 13(2) of the SARFAESI Act, 2002 the 'Corporate Debtor' had failed to Company Appeal (AT) (Insolvency) No. 848 of 2019 repay the amount of Rs. 19.32,25,988.22/- together with interest etc. within 60 days from the date of receipt of the notice. Indeed, the Assignor Bank had Assigned the Debt to the 1st Respondent/ ARC Pvt. Ltd. along with all the underlying securities by means of Assignment Agreement dated 29.03.2016. 28. Not resting with the same, the 'Corporate Debtor' obtained an additional fund of Rs. 5 crores by means of New Loan Agreement dated 09.06.2016 and personal guarantees were also provided and that the 'Corporate Debtor' had failed to pay the outstanding sum even after repeated demands made to it in respect of the sum of Rs. 35,33,34,286/-, not only in respect of the Assigned Debt, but also in respect of the New Loan as on 16.08.2017, which came to Rs. 42,80,92,640/- along with interest as on 02.09.2018. As seen from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f in the instant case is that after execution of the New Loan Agreement in respect of the credit facility of Rs. 5 crores and re-scheduling of the other credit facilities, without any doubt, the 'Corporate Debtor' had made several part payments towards principal and interest sum due and payable by the 'Corporate Debtor' to the 1st Respondent and some of the periodical payments were made on 17.10.2016, 11.11.2016, 29.11.2016, 29.12.2016, 31.12.2016, 10.01.2017, 23.01.2017, 25.01.2017, 28.02.2017, 31.05.2017. The grievance of the 1st Respondent/ 'Financial Creditor' is that the 'Corporate Debtor' defaulted and stopped making payments to it and it transpires that the 1st Respondent filed O.A. No.1083 of 2018 before the Debts Recovery Tribunal, Bengaluru for recovery of the amount of Rs. 35,33,34,286/- being the outstanding sum as on 16.08.2017 and later on 05.09.2018 the 1st Respondent filed Section 7 Application before the Adjudicating Authority for commencement of CIRP. 32. It cannot be gainsaid that as per Section 18 of the Limitation Act, 1963, an 'acknowledgement' is not limited in respect of the debt only, but in relation to 'any property or right', which is the subject matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the close of the year in which last item admitted or proved as entered in the account established. It is also to be pointed out that an acknowledgment by a borrower shall bind the guarantors as well, as per decision Om Prakash v Uco Bank AIR 2005 MP p. 234 (DB). 35. It must be borne in mind that when a plaintiff has concurrent remedies availed one remedy and remained unsuccessful, then, he cannot seek the Company Appeal (AT) (Insolvency) No. 848 of 2019 benefit under Sec 14 of the Limitation Act, when instituting an alternate remedy as per decision Hasan Chand Sons v. Gaj Singh ILR 1961 11 Raj 365. It is to be remembered that pendency of DRT proceedings is not a bar for commencement of 'Insolvency Resolution Process'. Further, time spent in insolvency proceedings is not to be excluded for filing an execution case based on money decree, secured against an insolvent, as per decision Yashant v. Walchand AIR 1951 SC p. 116 As Art. 113 of the Limitation Act relates to 'suits', Art. 137 of the Limitation Act pertains to 'Applications'. In this connection, it is to be pointed out that in B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates (Civil Appeal No.23988/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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