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TMI Blog2021 (9) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... n was not barred by Limitation as the facts substantiate that the period of limitation of three years as provided under Article 137 of the Limitation Act, 1963 is satisfied. In the interest of justice and taking into consideration the fact that in this pandemic, the travel dependent sector, which is the core business of the Corporate Debtor , has more than suffered the negative impact of the crisis, this opportunity is being given to settle which could help mitigate the blow - the Corporate Debtor has settled the matter with Dhanlaxmi Bank, the Applicant of Section 7 Application which was disposed of as withdrawn based on the settlement terms on 06.01.2020, during which period of pendency, this Section 7 Application was filed on 27.12.2019 against the same Corporate Debtor . The Admission of Section 7 Application is set aside - this Appeal is disposed off with a direction that if the Corporate Debtor fails to settle in 6 months time from the date of this Order, the Respondent Bank is at liberty to take appropriate steps. - COMPANY APPEAL (AT) (INSOLVENCY) No. 993 of 2020 - - - Dated:- 9-9-2021 - [Justice Anant Bijay Singh] Member (Judicial) And [Ms. Shreesha Merla] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Two Crores Thirty-Nine Lakhs Forty-Five Thousand and Seventy-Eight Only), is due from the Corporate Debtor. It has also been established that admittedly there is a Default as defined under Section 3 (12) of the Code on the part of the Corporate Debtor and the nature of debt is a financial debt‟ as defined under Section 5(8) of the Code. 16. The application on behalf of Financial Creditor is complete and there is default in the payment of the financial debt. Therefore, as per Section 7(5)(a) of the code, the present application filed U/S 7 of the I B Code deserves to be admitted against the Corporate Debtor ( M/s. Green Gateway Leisure Ltd‟). 17. The Financial Creditor has suggested the name Mr. Raju Palanikunnathil Kesavan, IBBI/IPA-001/IP-P00801/2017-2018/11356, email id [email protected] for appointment as Interim Resolution Professional (IRP). He has filed a declaration in Form 2 affirming that he is a Registered Insolvency Professional and no disciplinary proceedings are pending against him. Facts in brief: 2. The Appellant is a major Shareholder of the Corporate Debtor which has been in the business of Travel and Tourism Sector for more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Sixth JLF Meeting, the Banks informed the Appellant that they would not provide any additional funds and declared their account as NPA. SBI issued a Demand Notice on 29.12.2017 under Section 13(2) of the SARFAESI Act, 2002 demanding to pay a sum of ₹ 96,04,97,895/- within 60 days. The Corporate Debtor filed WP(C) No. 6464/2018 before the Hon ble High Court of Kerala seeking a direction against the lenders for providing additional funds. SBI issued a letter dated 12.04.2018 stating that it is not a consortium leader and the loan availed by the Corporate Debtor from lenders are distinct and separate. It is stated that the Demand Notice under 29.12.2017 issued by SBI is therefore without any authority. On 15.04.2018 SBI issued the possession Notice under Section 13(4) of the SARFAESI Act 2002. 5. The Corporate Debtor filed SA No. 274/2018 before the Debts and Recovery Tribunal (DRT) No. 1, Ernakulam and the same is pending consideration. The lenders including the Union Bank of India filed OA No. 417/2018 before DRT No. 1, Ernakulam. It is stated that the Corporate Debtor was servicing the interest component till 2017 and paid ₹ 61.40 Crores towards interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Appeal No. 23988 of 2017 in support of his contention that the Section 7 Application is to be filed within three years of the date of NPA as the debt cannot be given a new lease of life when it is time barred. The Union Bank of India failed to communicate on time its inability to sanction further amounts and has stated this only after two years of the Agreement. This act of default on behalf of the Bank led to enhancement of the project cost. The revival letter is dated 01.06.2017 and even if this letter is accepted to be an acknowledgement of debt under Section 18 of the Limitation Act, 1963, the date of commencement of communication would be 01.06.2017 which is undisputedly the last signed document. At no point of time, there was a recall notice as the amount involved is a Term Loan and is repayable in instalments and the Corporate Debtor has paid the interest on the loans and to demand the entire balance amount at one go when it is a term loan, is unjustified. Action was initiated by the Respondent Bank under SARFAESI Act, 2002 for sale of properties and recovery of money and such a recovery under the IBC Code is against the objectives of Code itself. The defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores, which payment was once again defaulted by the Corporate Debtor . Hence, the conditional OTS is rendered infructuous thereby reverting the obligations to be ignored by the Loan Agreement to 12.01.2015 which required quarterly instalments to be made till the Financial Year 2022-23. As the last payment was made in June 2017, the ratio of Asset Reconstruction Company (India) Limited (Supra) is applicable to this case. Submissions on behalf of the Learned Counsel appearing for Respondent No. 4: 9. The fourth Respondent filed his Written Submissions stating that the claim of Union Bank of India against him as a personal guarantor is not maintainable as personal guarantor were brought under the purview of the Code only with effect from 01.12.2019; that there is a pending dispute between Union Bank of India and two other Banks and for the recovery of the amount covered by IBA/01/KOB/2020, the said Banks including Union Bank of India filed OA 417/2018 before the Debt Recovery Tribunal, Kochi and in that litigation, the fourth Respondent has filed IA 1409/2019 seeking a direction to the Banks to produce the originals of the documents relied upon, and the same is still p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R-20 details the Minutes of the same. It is the case of the Appellants that the OTS was rejected on the ground that there was no upfront payment made. It is the case of the Corporate Debtor that the same was not communicated to them. Be that as it may, vide letter dated 29.08.2019, SBI has agreed for One Time Settlement and the same was settled for the sum of ₹ 38,14,49,303/-. 13. It is also not in dispute that the Respondent, Union Bank of India has given an offer letter dated 10.10.2019 (Annexure R-24) and on 05.11.2019 a settlement amount was negotiated to ₹ 17,05,00,000/-. It is also the case of the Appellant that Dhanlaxmi Bank filed IBA/41/KOB/2019 before the Adjudicating Authority and the Corporate Debtor paid ₹ 3.195 Crores as part payment of the settlement amount and as such Dhanlaxmi Bank filed a withdrawal Application. It is submitted that the Corporate Debtor is also ready to settle this dispute if given some time. 14. It is submitted that the Minutes of the Meeting of the JLF held on 27.09.2017 cannot be construed as acknowledgment under Section 18 of the Limitation Act. The Hon'ble Supreme Court in its recent Judgement in Asset Recon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor, as the case may be. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. 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) acknowledgements, 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 the moment acknowledgement in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgement, however, must be before the expiration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial destabilisation of State action too dangerous to be indulged in save where national crisis of great moment to the life, liberty and safety of this country and its millions are at stake, or the basic direction of the nation itself is in peril of a shake-up. It is surely wrong to prove Justice Roberts of the United States Supreme Court right when he said : [Smith v. Allwright, 321 US 649 (1944), 669, 670] The reason for my concern is that the instant decision, overruling that announced about nine years ago, tends to bring adjudications of this tribunal into the same class as a restricted railroad ticket good for this day and train only . It is regrettable that in an era marked by doubt and confusion, an era whose greatest need is steadfastness of thought and purpose, this Court which has been looked to as exhibiting consistency in adjudication, and a steadiness which would hold the balance even in the face of temporary ebbs and flows of opinion, should now itself become the breeder of fresh doubt and confusion in the public mind as to the stability of our institutions. (emphasis supplied) 12. Section 18 of the Limitation Act ... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Respondent Bank in the instant case is relying on the last Promissory Note dated 01.07.2016 signed by the Corporate Debtor for an amount of ₹ 25 Crores, interest rate reset with monthly rest. 17. To reiterate the date of NPA as stated in Part-IV of the Application is 30.09.2015, the last Promissory Note as stated in Part-V of the Application is dated 01.07.2016; the revised letter of approval of a One Time Settlement is dated 27.11.2019. The other dates which are relevant to this case are the dates of payment as specified in the One Time Settlement for ₹ 17,05,00,000/-. Admittedly, this was extended as a last opportunity till three months from 27.11.2019 with a stipulation that 5% of the OTS amount ₹ 86 Lakhs was to be deposited immediately, 20% of the amount ₹ 3.14 Crores was to be deposited within 30 days from 27.11.2019 and the balance amount ₹ 12.78 Crores was to be deposited three months from 27.11.2019. The Corporate Debtor has not adhered to these terms of payment and the Section 7 Application was filed on 21.12.2019. The Hon ble Supreme Court in Asset Reconstruction Company (India) Limited (Supra) has observed that the words use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-Section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. (Emphasis Supplied) 19. The Hon ble Supreme Court while observing that the moment the Adjudicating Authority is satisfied that a default has occurred, the Application must be admitted unless incomplete, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 67,69,49,303.00 (Emphasis Supplied) 20. Be that as it may, for all the aforenoted reasons and having regard to the Written Submissions that efforts would be made to settle the matter, in the interest of justice and taking into consideration the fact that in this pandemic, the travel dependent sector, which is the core business of the Corporate Debtor , has more than suffered the negative impact of the crisis, this opportunity is being given to settle which could help mitigate the blow. We are also conscious of the fact that the Corporate Debtor has settled the matter with Dhanlaxmi Bank, the Applicant of Section 7 Application in IA/06/KOB/2020 IBA/41/KOB/2019 which was disposed of as withdrawn based on the settlement terms on 06.01.2020, during which period of pendency, this Section 7 Application was filed on 27.12.2019 against the same Corporate Debtor . We reiterate, that the scope and objective of the Code is Insolvency not recovery. The Admission of Section 7 Application is set aside. Keeping in view the peculiar facts of the attendant case, we dispose of this Appeal with a direction that if the Corporate Debtor fails to settle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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