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TMI Blog2019 (11) TMI 1679X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Debtor. This application was considered under a question of Limitation as the application was placed before the Tribunal after 3 years on 10.04.2019. In the guarantee agreement, which boils down to whether the principal borrower has furnished any acknowledgement of debt or revival letter regarding his loan amount - the principal borrower has admitted his liability as well as default to the Financial Creditor in the Writ Petition filed by him in the Hon'ble High Court of Kerala. A Financial Creditor falls under section 5(7) can file an application for Initiating Corporate Insolvency Resolution Process against a Corporate Debtor before this Adjudicating Authority when the default has occurred. No doubt the debt claimed is a financial debt as defined under section 5(8) of I B Code - Financial Creditor also produced statement of accounts and computation statement to show that amount claimed in the application is due from the Corporate Debtor. The same can be considered as such other record or evidence of default under Section 7 (3) of I B Code as proof for the due amount. The existence of default is, therefore, stand proved by the Financial Creditor. The Financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Security Interest Act (SARFAESI), 2002 and also initiated Original suit before the Debt Recovery Tribunal, Ernakulam. An amount of ₹ 259.64 Crores is due as on 23.10.2019, under the credit facilities availed by the principal borrower for which the corporate debtor herein is a guarantor, and hence claimed that there is a 'debt due'. Submissions by the Corporate Debtor 6. The Corporate Debtor, through its preliminary objection opposes the admission of the application for insolvency resolution. It is submitted that the documents submitted by the Bank are ex-facie contrary to law and facts and also barred by limitation and not maintainable. The counsel further prayed to dismiss the application ''in-limine'' without admitting the application. 7. The learned counsel for corporate debtor submitted that the Bank had obtained signatures of the guarantors including the corporate debtor herein on various pre-printed documents as part of the documentation procedure. 8. The counsel submitted that the principal borrower could not meet its commitments under the Loan Agreement, thereby, the loans were classified as Non-Performing Assets by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Time from which period begins run 137 Any other application for which no period of limitation is provided elsewhere in this Division Three Years When the right to apply accrues 14. The second contention raised by the counsel for the corporate debtor is that the application is not complete as it does not include any record of default from the information utility. It is clearly stated in Section 7(3) (a) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; 15. Therefore, the counsel for the corporate debtor claimed that or such other record appearing in Section 7 (3) of I B Code cannot be read in isolation and it has to be read as such other record or evidence of default which is followed by as may be specified . The words 'such other' is common to 'record and evidence of default' which is followed by 'as may be specified'. Therefore, the record of default can be either of a) record of default from an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. There was no notice served on the Guarantor, before they have sold such securities. The notice referred by the counsel for the applicant bank is not a notice served on guarantor, but on the principal borrower. The Guarantee Agreement therefore become void and the counsel prayed to dismiss the above application. Rejoinder and its reply The Financial Creditor filed rejoinder denying the contentions raised in the objection by reiterating what has been stated in its application. 19. The learned counsel stated that the averment raised by the Corporate Debtor that the Bank had obtained signatures of the respondent on various pre-printed documents are part of the documentation procedure is mischievous. All documents were executed by the corporate debtor, as per the requirements of the credit facility. He further submitted that it is an admitted fact that the principal borrower could not meet the commitments under the loan agreement. Due to the default caused in repayment by the principal borrower, the credit facilities were classified as Non-Performing Assets on 31.12.2015 in accordance with the guidelines of the Reserve Bank of India. 20. The counsel for the financial c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit. It is equally necessary that it must be a clear and unambiguous acknowledgment specifically admitting liability in respect of the debt sued upon and it must be signed by the party or by his authorised agent. If an admission amounts to such an acknowledgment, then if it is made before the expiry of the period, it is helpful and the suit can be maintained for the recovery of the earlier debt, the time being extended by the acknowledgment. In such an event there is no question of there being a fresh cause of action or a fresh promise to pay a debt which can be sued upon. On the other hand, if the acknowledgment is made after the period of limitation has expired, then the acknowledgment is of no utility and cannot save limitation. Findings 23. This is an application filed under section 7 of I B Code. The Corporate Debtor questioned the maintainability of the application stating that: a. the application is incomplete and; b. barred by limitation. 24. What are the factors to be considered in a case of this nature is noted by sthe Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank Anr. (Civil Appeal Nos.8337 - 8338 of 2017) SC. It is go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be treated as duly authorized agent of Guarantor(s) for the purpose of Section 18 and 19 of Indian Limitation Act, 1963.' In the light of the above clause, in the guarantee agreement, which boils down to whether the principal borrower has furnished any acknowledgement of debt or revival letter regarding his loan amount. To support his argument that the application is not barred by limitation, the counsel for the Financial Creditor has drawn an attention to the Writ Petition filed by the principal borrower as 3rd petitioner with the Hon'ble High Court of Kerala in August 2018 questioning the Bank's right to recovery under SARFAESI proceedings and RDB Act. We have gone through the copy of the petition which was dismissed by the Hon'ble High Court of Kerala. The relevant portions of the Writ Petition are as under: a. . The 3rd petitioner, for its business, had borrowed funds from the 2nd respondent Bank. Various immovable properties of all the 1st and 2nd petitioners were mortgaged to secure the loans. The 1st and 2nd petitioners had also offered personal guarantee for the borrowings of the 3rd petitioner. Some properties of sister concerns of the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith that of the principal debtor. 28. In an application of this nature, this Adjudicating Authority is bound firstly to consider as to whether there is existence of default from the records and information utility or based on other evidence furnished by the Financial Creditor. If the Financial Creditor succeeds in proving default of which the claim put forward by the Financial Creditor and satisfy Section 7 (5)(a) of the I B Code, this Adjudicating Authority is bound to admit the application. The procedure adopted for the disposal of this application is summary in nature. This petition has been filed by the Financial Creditor on 10/04/2019. Financial Creditor has succeeded in proving existence of default. Annexure I (2) dated 21.03.2013, Annexure I (9) dated 03.07.2013 and Annexure I (40) dated 14.01.2016 filed with the application and Exhibit B2 with the counter strengthen the Financial Creditor's contention that Corporate Debtor admitted its default. The Financial Creditor also produced statement of accounts and computation statement to show that amount claimed in the application is due from the Corporate Debtor. The same can be considered as such other record or eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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