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TMI Blog2020 (10) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 and 31.03.2016, and therefore, a fresh period of limitation began to run from that date - the date of signatures of the directors be construed as the date of effective acknowledgement of the state of indebtedness of the company. On the matter of Settlement Offers made - HELD THAT:- In view of the fact that the Corporate Debtor in its financial statements for the F.Y. 2014-15 and F.Y. 2015-16 filed with the Ministry of Corporate Affairs acknowledges the liability towards the Financial Creditor; and also in its letter dated 23.02.2017 submitted a proposal for one time settlement of dues of the Financial Creditor, IDBI Bank Limited and Bank of India, which was also revised on 15.09.2018 - the petition filed by the Financial Creditor is within limitation. This Petition reveals that there is a debt as defined in section 3(11) of IBC; there is a default within the meaning of section 3(12) of IBC. Therefore, the Petition made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petition. 4. The Financial Creditor has granted various credit facilities to the Corporate Debtor aggregating to an amount of ₹ 37,67,28,000/-(Rupees thirty-seven crore sixty-seven lakh and twenty-eight thousand only) (at page 7 of the Petition). Details of claim as per Exhibit 'V' at pp.479.481 are as follows: Sr. No Nature of Credit Facility Principal Outstanding as on 31.05.2019 (Rs.) Normal Interest from 01.10.2014 to 31.05.2019 p.a. (Rs.) Other Debits less Other Credit (Rs.) Penal Interest @ 2% simple (Rs.) Total Claim amount (Rs.) (1) (2) (3) (4) (5) (2+3+4+5) 1. Cash Credit (A/c No. 0564008701738041) 35,01,06,230.47 68,26,31,758.38 32,09,10,740.11 9,25,60,238.43 1,44,62,08,967.39 2. Term Loan (Car Loan) (A/c No. 056400NG00053639) 20,96,656.00 18,76,404.40 - 3,19,387.98 42,92,448.38 3. Term Loan (Car Loan) (A/c No. 056400NG00053648) 22,47,802.00 16,41,305.28 (3,95,170.00) 2,79,371.11 37,73,308.39 Grand Total 35,44,50,688.00 68,61,49,468.06 32,05,15,030.11 9,31,58,997.52 1,45,42,74,724.16 5. The Financial Creditor submitted the particulars of Financial Debt at pp.8-9 of the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor executed Letter of Hypothecation for both Term Loans on 31.07.2012. Further the Directors of the Corporate Debtor namely Mr. Dinesh Jaiswal and Mrs. Sunita Jaiswal also executed Agreement of Guarantee 31.07.2012 for the Term Loans (Car Loan). All of these are placed as Exhibit R (Colly) and Exhibit S (Colly) at pp.419-439 of the petition. v) Further the Corporate Debtor, being in need of additional credit limits, approached Bank of India who sanctioned fresh credit facilities amounting to ₹ 25 crore and Term Loan of ₹ 5 crore. In pursuance of sanctioning the aforesaid additional credit limits by Bank of India, a First Supplement Joint Deed of Hypothecation, a First Supplement Working Capital Consortium Agreement, a First Supplement Inter Se Agreement, a First Supplement Deed of Guarantee, a Memorandum of Deposit of the Title Deeds, a letter of Authority to Lead Bank and an undertaking dated 23.11.2012 were executed adding Bank of India as a party, copies of the same are placed as Exhibit K-Q at pp.229-418 of the petition. vi) Initially the Corporate Debtor was regularly making payment towards the credit facilities. However, around June 2013, it started ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application." d) Further the Corporate Debtor also submits that the default cannot be regarded as continuing wrong so as to invite the application of section 23 of the Limitation Act. 7. The Financial Creditor filed a rejoinder to the affidavit in reply on 25.09.2019 stating the following: a) Credit facilities and term loans were sanctioned to the Corporate Debtor by the Financial Creditor between 27.11.2011 and 23.11.2012 through consortium arrangements with IDBI Bank Limited and Bank of India and through arrangements between the two parties on various dates. The Corporate Debtor defaulted in paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation has relied on the judgment of the Hon'ble Supreme Court in case of Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company (India) Limited & Anr (2019) 10 SCC 572 which reads as follows: "6) Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being "an application" which is filed under Section 7, would fall only within the residuary Article 137. As rightly pointed out by learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21.07.2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr. Banerjee's reliance on para 7 of B.K. Educational Services Private Limited (supra), suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. It is well settled that there is no equity about limitation -judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature." 12. This princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s rights as a result of which limitation would have begun ticking." 17. However, this exposition of law in regard to section 23 of the Limitation Act, 1963, has no applicability in so far as the case of the Corporate Debtor is concerned, inter alia for the reason that there is acknowledgement of liability, as discussed in the subsequent paragraphs. On the matter of Balance confirmation and acknowledgement of liability in the Balance Sheet 18. The Financial Creditor further submitted that the Hon'ble High Court of Andhra Pradesh in the matter of Vijaya Kumar Machinery & Electrical Stores Vs. Alaparthi Lakshmikanthamma MANU/AP/0150/1968 : has clearly laid down in para 50 as follows: "50. The Punjab High Court also took a similar view in Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla. In paragraph 37 it was laid down as follows: "Debts due to creditors not mentioned by name but included in the item relating to 'loans (unsecured)' or as due to 'sundry creditors' mentioned in the balance-sheet amount to an acknowledgment within the provisions of Section 19 of the Indian Limitation Act, so as to extend the period of limitation with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion therefore is that Ext.A1 balance sheet and the profit and loss account operates as an acknowledgment on 26.3.1997 of the liability on 31.3.1995." 21. The Corporate Debtor per contra, relied on a judgment of Hon'ble Calcutta High Court in case of Darjeeling Commercial Co. Ltd. vs. Pandam Tea Co. Ltd MANU/WB/0117/1981 which reads as follows: "16. Reference may also be made to a latest decision of the English court In Gee & Co. (Woolwich Ltd.), re [1974] 1 All ER 1149; 2 WLR 515(Ch.D), where the acknowledgment of the liability, of a company in its balance-sheet came up for consideration and after reviewing the relevant decisions including some of the decisions cited by Mr. S. B. Mukherjee on behalf of the company and summarising the relevant facts of the case which, in my view, are very similar to the present one, Brightman J. observed at page 1160 (p. 527 of 2 WLR) as follows: "I shall accordingly decide this case on the footing that a balance sheet, if duly signed by the directors, is capable of being an effective acknowledgment of the state of indebtedness as at the date of the balance-sheet; and that, in an appropriate case, the cause of action will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledgement or the undertaking has no legal effect must likewise be rejected. This letter is reminiscent of a letter that fell for consideration in Spencer's case as pointed out by Mr. Harish Salve, "as a rule the debtor who writes such letters has no intention to bind himself further than is bound already, no intention of paying so long as he can avoid payment, and nothing before his mind but a desire, somehow or other, to gain time and avert pressure." It was argued in a subsequent case that an acknowledgment made "without prejudice" in the case of negotiations cannot be used as evidence of anything expressly or impliedly admitted. The House of Lords observed as follows: "But when a statement is used as acknowledgement for the purpose of s. 29(5), it is not being used as evidence of anything. The statement is not an evidence of an acknowledgement. It is the acknowledgement." Therefore, the without prejudice rule could have no application." 24. In response to this, the Corporate Debtor has submitted the judgment of Shibcharan Das vs. Firm Gulabchand Chhotey Lal AIR 1936 All 157 which states as follows: "4. The defendant also called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the Hon'ble Allahabad High Court in Shibcharan Das (supra) must be held to be inapplicable in view of the judgment of the Hon'ble Supreme Court in ITC Limited. Further the order of the Hon'ble NCLAT discussed in previous paras directly relates to this matter and can be a continuous cause of action as well. 27. In the light of the above discussion and the fact that the Corporate Debtor in its financial statements for the F.Y. 2014-15 and F.Y. 2015-16 filed with the Ministry of Corporate Affairs acknowledges the liability towards the Financial Creditor; and also in its letter dated 23.02.2017 submitted a proposal for one time settlement of dues of the Financial Creditor, IDBI Bank Limited and Bank of India, which was also revised on 15.09.2018. 28. Therefore, we hold that the petition filed by the Financial Creditor is within limitation. 29. This Petition reveals that there is a debt as defined in section 3(11) of IBC; there is a default within the meaning of section 3(12) of IBC. Therefore, the Petition made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be. (e) Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (f) Mr. Mukesh Verma, Registration No. IBBI/IPA-001/ IPP01665/ 2019-20/12522, residing at A 504, Manish Garden Cooperative Housing Society, Manish Nagar, J.P. Road, Andheri West, Mumbai-400058, is appointed as Interim Resolution Professional to carry out the functions as mentioned under IBC. The fee payable to IRP or, as the case may be, the RP shall be compliant with such Regulations, Circulars and Directions as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP/ RP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the IBC. (g) During the CIRP Period, the management of the Corporate Debtor shall vest with the IRP or, as the case may be, the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents ..... X X X X Extracts X X X X X X X X Extracts X X X X
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