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TMI Blog2021 (11) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor in schedule A at Page 701 of Appeal Paper Books, Column I, the Financial Creditor Bank, the date of Non-Performing Assets (NPA) shown as 27.11.2018. Further the OA filed before the DRT-II at Chennai by the Consortium of Banks in the list of Non-Performing Assets (NPA) in respect of R1 it is shown as 27.11.2018. Therefore, it is evident that the date of default is 27.11.2018, though it did not mention in Part IV of Form-1 - it is evident that the date of default is 27.11.2018. Further in Column 8 of Part V in Form-1, the applicant is entitled to attach documents along with Form to prove the existence of Financial Debt, the amount and date of default. Therefore, it is presumed that the applicant, Financial Creditor complied with the procedure as prescribed in Form-1. In the present Appeal, though the first date of NPA is with respect to Axis Bank i.e. 10.02.2017. However, the RBI circulars/Directives provides filing of independent application by the Financial Creditor i.e. the SBI before the Adjudicating Authority (NCLT) under Section 7 of the IBC. Accordingly, the Applicant the 1st Respondent herein filed application under Section 7 of the IBC for initiating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Satish Parasaran, Sr. Advocate For Mr. Vipin Warrier, Advocate For the Respondent No.2 : Mr. S. Sathiyanarayanan, Advocate JUDGMENT (VIRTUAL MODE) Per : Kanthi Narahari Member (T) 1) The present Appeal is filed aggrieved by the Order dated 27th April 2021 passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench-II, Chennai) in IBA/45/2020, whereby the Adjudicating Authority admitted the application and initiated the Corporate Insolvency Resolution Process (CIRP). Appellant s Submissions :- 2) The Learned Counsel for the Appellant submitted that the Appeal is preferred by a shareholder of the Corporate Debtor holding 50.210% of shares and also a Suspended Director of the Corporate Debtor . He submitted that the Respondent herein i.e. the State Bank of India filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the Adjudicating Authority for initiation of CIRP against the Corporate Debtor on the ground that the Corporate Debtor had defaulted in repaying an amount of ₹ 52,28,93,796/-. 3) It is submitted that the Impugned Order passed by the Learned Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2018 State Bank of India 27.11.2018 Karur Vysya Bank Ltd. 10.01.2019 7) The Learned Counsel for the Appellant submitted that the main grievance in the appeal is that the Respondent did not mention the date of default in the Form-1 Part IV besides various other deficiencies in the Form-1. Despite giving opportunity by the Hon ble Adjudicating Authority , the Respondent has not inclined to cure the defect in the Form. The Hon ble Adjudicating Authority , in its order dated 27.04.2021, observed and concluded that the application is defective, but still admitted the application and further observed that one of the Consortium of banks i.e. Axis Bank has claimed the date of default as on or before 12.11.2016. 8) It is submitted that the fact was intentionally suppressed by the Respondent while filing their application under Section 7 of the Insolvency and Bankruptcy Code, 2016 to revive the otherwise time barred debt. It is submitted that the Section 7(5)(a) of the Code specifically lays down that if there is a default and if the application is complete and there is no Disciplinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 2016 to show that the application under Section 7 of the IBC should be in Form-1 as prescribed in the said Rules. The present Appeal is filed challenging the order of the Adjudicating Authority on the facts and laws and among other grounds stated in para 9 of the grounds of appeal. 12) It is submitted that the Adjudicating Authority failed to appreciate in Para 37 of the Hon ble Supreme Court Judgment in Civil Appeal No.2734 of 2020 passed in Laxmi Pat Surana v. Union Bank of India and Anr. wherein the Hon ble Supreme Court held that the date of default is not the date of Non-Performing Assets (NPA). It is submitted that much prior to the date of Non-Performing Assets (NPA) the date of default occurred and for the purpose of determining law of limitation the actual default is to be taken into consideration for the purpose of counting the period of limitation not the Non-Performing Assets (NPA). The Application filed by the 1st Respondent herein is time barred. Further the Learned Counsel stated that the Hon ble Adjudicating Authority failed to consider the grounds raised by the Appellant in their Counter Affidavit filed before the NCLT. 13) Further it is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority observed as under: 8. It appears that the said date 30.11.2019 is not the date of default but it is the date in which the said sum is due to the Financial Creditor. Except this description, date of default is not mentioned and some correction is seen to have made which has not been authenticated. Therefore, we hold that date of default is omitted from the relevant Column. On a query, the learned counsel for the Financial Creditor has stated that the date of default is date of NPA i.e. 27.11.2018. The learned Counsel for the Corporate Debtor, however maintained that the date of default is 12.11.2016. While reserving the order, this Adjudicating Authority had given opportunity for filing their respective written submissions in order to substantiate their arguments. In the above application, the date of default in the relevant column has not been deliberately typed by the applicant. It is also brought to the notice of this Adjudicating Authority, which the counsel for the Applicant has not mentioned even in the written submission. However, the date of default has been mentioned in the pleadings of the application. It is important that date of default oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Assets (NPA) was taken into consideration as date of default . The first date of default was 12.11.2016 even before as such, the limitation for filing an application under Section 7 of Insolvency and Bankruptcy Code, 2016 has already expired in the month of November 2019, whereas the application under Section 7 was filed on 19.12.2019 i.e. after the expiry of limitation period i.e. three years. Therefore, the Section 7 application ought not to have been admitted by the Hon ble Adjudicating Authority. 18) The Learned Counsel for the Appellant prayed that this Bench to allow the appeal and dismiss the application filed under Section 7 by the 1st Respondent herein. RESPONDENT S SUBMISSIONS: 19) The Learned Counsel appearing for the 1st Respondent filed a detailed Reply to the Appeal and submitted that the Respondent filed the application before the Learned Adjudicating Authority under Section 7 for initiation of CIRP against the Corporate Debtor who committed default in repaying the amount of ₹ 52,28,93,796/-. 20) It is submitted that the Respondent No.1 Bank extended various credit facilities to the Corporate Debtor and on 16.02.2007, credit facilities we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming Assets (NPA) declared by another consortium lender i.e. Axis Bank. The provisions of Insolvency and Bankruptcy Code enables this Respondent to file a fresh application under Section 7 and this Respondent can only rely upon the date of Non-Performing Assets (NPA) as declared by it. 25) Further the Learned Counsel submitted that there is no deliberate intention not to disclose date of default, the date of default has been stated in the pleadings forming part of Form-1. The Hon ble Adjudicating Authority has satisfied itself with the application which is complete and thereby the Hon ble Adjudicating Authority also admitted after satisfying that the default has occurred and the application is complete. It is to be held that Form-1 provides for adding additional information for proving the date of default as required and as such the details enclosed/attached along with Form-1 which are liable to be construed as an intrinsic part of Form-1 application. 26) It is submitted that the date of default in respect of Axis Bank s debt is irrelevant as the application filed by this Respondent is in respect of debt under the Working Capital Consortium i.e. for a sum of ₹ 52.28 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Respondent was satisfied that sufficient cause is shown for not removing the defects and hence proceeded with admitting the application on merits. Further, the Hon ble Adjudicating Authority has satisfied itself that ingredients of Section 7(5)(a) is satisfied in toto. 29) The Learned Counsel for the Respondent further submitted that the Hon ble Adjudicating Authority has entered a finding with respect to default only after a detailed discussion and application of mind. The Hon ble Adjudicating Authority has not ignored the Judgment of the Hon ble Supreme Court in Laxmi Pat Surana v Union Bank of India. The position discussed in the above Judgment is the case of default in the context of filing of Section 7 application for default by Corporate Guarantor and not Principal Borrower. It is settled position that the limitation starts running from declaration of NPA in the case of borrower. 30) Further, the Learned Counsel for the Respondent submitted that there is no legal bar for filing a separate application under Section 7 by the 1st Respondent herein as the Respondent No.1 is a Body Corporate carrying on the business of Banking and as such is regulated by RBI, a Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity , therefore the application filed under Section 7 is defective and the same ought not to have admitted by the Adjudicating Authority . 36) We have gone through the Impugned Order passed by the Adjudicating Authority, the Adjudicating Authority at Para 8 observed as under: 8. It appears that the said date 30.11.2019 is not the date of default but it is the date in which the said sum is due to the Financial Creditor. Except this description, date of default is not mentioned and some correction is seen to have made which has not been authenticated. Therefore, we hold that date of default is omitted from the relevant column. On a query, the learned counsel for the Financial Creditor has stated that the date of default is date of NPA i.e. 27.11.2018. The Learned Counsel for the Corporate Debtor, however maintained that the date of default is 12.11.2016. While reserving the order, this Adjudicating Authority had given opportunity for filing their respective written submissions in order to substantiate their arguments. In the above application, the date of default in the relevant column has not been deliberately typed by the applicant. It is also brought to the notice of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Learned Counsel for the Appellant contended that the above Judgment in the matter of Sesh Nath Singh Anr. V Baidyabati Sheoraphuli Co-operative bank Ltd. Anr. is out of context and the Learned Adjudicating Authority ought not to have relied upon the said Judgment. However, we are inclined to discuss the instant appeal on its merit, leaving it open to deliberate upon the decisions of the Hon ble Supreme Court. It is contended by the Learned Counsel for the Appellant that there is no finding on the point of omission of date of default in Part 4 of Form-1. In this regard, the Adjudicating Authority in Para 8 of the order was of the view that date of default has been mentioned in the pleadings of the application and observed that the date of default ought to be mentioned in the prescribed column of Part IV of the application as per the NCLT Rules, 2016. 39) Insolvency and Bankruptcy Code and Rules thereof prescribes for filing of an application by the Financial Creditor either by itself or jointly to initiate the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code. However, the Financial Creditor need to file application in a prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 13(2) by the Financial Creditor dated 28.01.2019 to the Corporate Debtor in schedule A at Page 701 of Appeal Paper Books, Column I, the Financial Creditor Bank, the date of Non-Performing Assets (NPA) shown as 27.11.2018. Further the OA filed before the DRT-II at Chennai by the Consortium of Banks in the list of Non-Performing Assets (NPA) in respect of R1 it is shown as 27.11.2018. Therefore, it is evident that the date of default is 27.11.2018, though it did not mention in Part IV of Form-1. However, from the pleadings and documents, it is evident that the date of default is 27.11.2018. Further in Column 8 of Part V in Form-1, the applicant is entitled to attach documents along with Form to prove the existence of Financial Debt, the amount and date of default. Therefore, we presume that the applicant, Financial Creditor complied with the procedure as prescribed in Form-1. 41) The Learned Counsel for the Appellant submitted that the non-mentioning of the date of default is fatal in admitting the application under Section 7 of the Act, since it is a Directory as per the decision of the Hon ble Supreme Court in Surendra Trading Co. v Juggilalkamlapat Jute Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l would like to emphasize that the Financial Creditor has filed sufficient proof of documents as evidence showing the date of default committed by the Corporate Debtor and the Adjudicating Authority has taken into consideration the same and admitted the Application. Even as per Clause 8 of Part V in Form 1 the Form prescribes the list of other documents to be enclosed/attached along with the application in order to prove the existence of financial debt, the amount and date of default. As discussed above, the Financial Creditor enclosed documents showing the date of default and existence of debt by producing the documents which have not been disputed by the Corporate Debtor. Even the OA filed by the Consortium of Banks before the DRT expressly show the date of default shown by the Financial Creditor. Therefore, this Tribunal is of the view that the Financial Creditor has shown the date of NPA by providing the documents which is an evidence admissible in law. 43) In this regard, the Judgment of the Hon ble Supreme Court in Surendra Trading Co. v Juggilalkamlapat Jute Mills Co., 2017 85 taxmann.com 372 SC is relevant to show that the Provisions of Section 7 (5) are directory in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the following basics undoubtedly come to the fore: 1) that the Code is a beneficial legislation intended to put the corporate debtor back on its feet and is not a mere money recovery legislation; 2) that CIRP is not intended to be adversarial to the Corporate debtor but is aimed at protecting the interests of the corporate debtor; 3) that intention of the Code is not to give a new lease of life to debts which are time-barred; 4) that the period of limitation for an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Limitation Act and is, therefore, three years form the date when right to apply accrues; 5) that the trigger for initiation of CIRP by a financial creditor is default on the part of the corporate debtor, that is to say, that he right to apply under the Code accrues on the date when default occurs; 6) that default referred to in the Code is that of actual non-payment by the corporate debtor when a debt has become due and payable; and 7) that if default had occurred over three years prior to the date of filing of the application, the application would be time-barred save and except in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Financial Creditor i.e. the SBI before the Adjudicating Authority (NCLT) under Section 7 of the IBC. Accordingly, the Applicant the 1st Respondent herein filed application under Section 7 of the IBC for initiating the CIRP against the Corporate Debtor independently taking into the date of NPA/default and the amount of debt and default. There is no dispute with regard to the existence of debt and default committed by the Corporate Debtor. However, there is only an objection raised with respect to omission to mention the date of default in Part IV of Form 1 filed before the Adjudicating Authority. It is evident from the records that the date of NPA of the SBI is 27.11.2018 and the application filed by the Financial Creditor on 19.12.2019 even if the 90 days period prior to NPA is taken into consideration for the purpose of deciding default as per the Judgment of the Hon ble Supreme Court in Re Laxmi Pat Surana, the application is within the period of limitation. Further, this Tribunal hold that omission to mention date of default in Col.2 Part IV in Form 1 is not fatal to the application. As we are of the view that as per Col.8 of Part V in Form 1 regarding particulars of Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 18 of the Limitation Act, 1963 and in order to preclude any question being raised on limitation regarding our liability to your Bank and the Member Banks for the payment of the outstanding amounts in respect of the present as well as future indebtedness and liabilities under the said action credited amounts or other amounts together with interest, compound interest, additional interest, liquidated damages, cost, charges, expenses and other money in terms of the said Working Capital Consortium Agreement, our liability shall remain in full force that of related securities, agreements and obligations as mentioned therein. 51) In view of the above acknowledgement dated 16.08.2018 given by the Corporate Debtor the period of limitation also can be extended under Section 18 of the Limitation Act, 1963 and the Hon ble Supreme Court in Laxmi Pat Surana held that: a subsequent acknowledgement to extend the limitation, being a fresh date of default of date. Even taking into consideration, the limitation period of three years from 16.08.2018, the application filed on 19.12.2019 is well within the period of limitation. 52) Further the Learned Counsel for the Appellant relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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