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TMI Blog2021 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... on on each acknowledgment and Application filed on March, 2020 cannot be said to be barred by time - It is true that each Balance Sheet has to be examined on a case to case basis to establish whether acknowledgment of liability in fact has been made. It is noted that all the Balance Sheets referred above clearly establish acknowledgment of liability by the Corporate Debtor. Thus, Section 18 is clearly attracted giving fresh period of limitation even in the event, we accept the submission of the Respondent that default was committed on 01.09.2012. The Adjudicating Authority committed error in rejecting the Application filed by the Appellant under Section 7 - Appeal allowed. - Company Appeal (AT) (Insolvency) No. 183 of 2021 - - - Dated:- 2-12-2021 - [Justice Ashok Bhushan] Chairperson , [Justice Jarat Kumar Jain] Member (Judicial) And [Dr. Ashok Kumar Mishra] Member (Technical) For the Appellant : Mr. Robin Jaisinghani, Mr. Vikas Mehta, Mr. Rajat Sehgal, Advocates For the Respondent : Mr. Dhaval Deshpande and Ms. Nidhi Shah, Advocates JUDGMENT Ashok Bhushan, J. 1. This Appeal has been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther with the terms of Memorandum of Understanding including the schedule of payments etc. The Respondent sent a letter dated 08.07.2015 denying signing and executing the MoU. It was also alleged that the Appellant had failed to raise the required funds as promised. The Appellant came to know that the Respondent intends to sell the property in question for which offers were invited. The Appellant filed Commercial Suit No. 782 of 2017 in the Bombay High Court for recovery of ₹ 41.75 Crores. The Commercial Suit was filed on 28.07.2017. The Respondent (Corporate Debtor) filed reply to the notice of motion and Affidavit filed by the Appellant. In the reply, in paragraph 7, it was acknowledged that the Plaintiff had paid ₹ 40.75 Crores and has further agreed to pay ₹ 300 Crores towards the aforesaid property. Allegation was made against the Plaintiff that they have without an authority put the advertisement in newspaper and tried to sell the land to the third party which cost financial loss to the Respondent. It was claimed that the Plaintiff (Appellant before us) are liable to pay compensation and damages to the Defendant Company. Bombay High Court in the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Learned Counsel for the Respondent. 4. Learned Counsel for the Appellant submits that the Respondent having acknowledged receipt of ₹ 25 Crores under the MoU dated 10.10.2011 clearly proves that it was financial assistance given by the Appellant. The Adjudicating Authority has erred in holding that there was no financial debt. Further, the Adjudicating Authority committed error in holding that the Application of the Appellant under Section 7 was barred by time. It is submitted that in the Balance Sheets of the Respondent which have been filed before the Adjudicating Authority i.e. Balance Sheet of 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19, the Respondent has acknowledged the liability of ₹ 40.75 Crores which acknowledgment amounts to an acknowledgment of debt as contemplated by Section 18 of the Limitation Act, 1963. The Application under Section 7 has been filed within the limitation and the Adjudicating Authority erred in holding the Application as barred by time. It is now well settled that acknowledgment of debt under Balance Sheets which are required to be mandatorily prepared under the Companies Act, 2013 is sufficient acknowledgment within the meaning o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s due from any person and includes a financial debt and operational debt 9. Section 5(8) defines financial debt which is to the following effect:- 5. Definitions.- . (8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; [Explanation. -For the purposes of this sub-clause,- (i) any amount ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 M/s. Arrow Engineering Ltd. Bldg. No.7, J Block Platform Level, Belapur Commercial Complex CBD Navi Mumbai- 400614 Dear Sir, Subject: Financial and Marketing assistance in Vile Parle Project We are seized and possessed of the piece of land at Vile Parle, more fully described in Annexure to the letter. We had entered into a MOU dated December 26, 2009 with Seth Developers Pvt. Ltd. and Suraksha Reality Ltd., for development of the said property. Two minority shareholders filed a suit in the Bombay City Civil Court, Mumbai (Din Doshi Branch) and moved an interim application. The Hon ble Court passed ad interim injunction restraining the Company from giving effect to the resolution dated January 18, 2010 thereby restraining the Company from going ahead with the said MOU. In view of the said injunction and in view of the fact that getting the stay vacated will take a long time, we have decided to develop the said property on our own. In order to do that we need financial assistance and also marketing expertise which you have agreed to us and pursuant thereto, you had advanced a sum of ₹ 15 crores (Rupees Fifteen Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U, we have already received a sum of ₹ 25 Crores (Rupees Twenty Five Crores Only) towards Financial and Marketing Assistance. As mutually agreed by us, please advance a further sum of ₹ 2 crores (Rupees Two crores only) and oblige. Thanking you, Yours faithfully, For GOLDEN TOBACCO LIMITED Sd/- AUTORIZED SIGNATORY 13. When we look into the letters written by the Corporate Debtor to the Appellant and the terms and conditions of MoU dated 10.10.2011, it is clear that the Appellant was to give financial assistance and marketing service and advices. One of the clauses of letter dated 10.10.2011 was that in case where the Corporate Debtor terminate/ differ marketing arrangement then the Corporate Debtor shall pay back the amount advanced by the Appellant with interest. At this juncture, it is also relevant to notice the financial document i.e. Balance Sheet maintained by the Corporate Debtor where the receipt of amount of ₹ 40.75 Crores has been admitted. In the Balance Sheet for the year 2014-15 as on 31.03.2015, in the column long term liabilities , there is mention of ₹ 40.75 Crores as advance received towards project developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the Plaintiffs caused huge financial loss to the Defendant Company. The plaintiffs are liable to pay compensation and damages for the same to the defendant company. 16. The Bombay High Court in Commercial Suit No. 782 of 2017 on Notice of Motion No. 68 of 2018 has passed an order on 14.10.2019 where the High Court noticed the stand of the Defendant. It is useful to look into paragraph 9 of the judgment of the High Court which is to the following effect:- 9. On behalf of the defendant, it is submitted by learned counsel that only an amount of ₹ 40,75,00,000/- has been received; however, while admitting the liability, it is contended that the defendant is not liable to repay at this stage in view of the counter claim lodged by the defendant as against the plaintiff. As on date, he submits that no money is payable to the plaintiff. On a specific query as to the state of the attachment levied, it is submitted that the Income Tax Authority has lifted the attachment and in that behalf, he relies upon a copy of the letter dated 3rd January, 2018 issued by the Tax Recovery Officer, whereby the attachment was withdrawn with immediate effect. The defendant has communi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt which debt has been duly and clearly acknowledged by the Corporate Debtor in his Balance Sheets as noted above. 20. The Adjudicating Authority after referring the Letter of Intent dated 03.06.2011 observed that MoU having not been formally executed is incomplete and does not fulfill the conditions of Section 10 of the Contract Act. The Adjudicating Authority has not adverted to the letter dated 10.10.2011 which was sent by the Respondent and confirmed by the Appellant which letter was treated as MoU by the Respondent themselves in the letter dated 01.02.2012. MoU dated 10.10.2011 having contained the agreement of both the parties, the said letter ought to have been looked into to find out the real nature of transaction between the parties. The Balance Sheet of the Respondent, as noted above, also clearly mentions the aforesaid acknowledgement of amount of ₹ 40.75 Crores as advance which debt is clearly acknowledged and as noticed above in Notes-25(7)(a) in the Balance Sheet of 2014-15, it was mentioned by the Corporate Debtor that in event BIFR directs after-sale of the property, the amount of ₹ 40.75 Crores shall also be refunded with interest to the Appellant. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advance of ₹ 40.75 Crores was not denied but in paragraph 7, as extracted above, the Corporate Debtor has instead of accepting his liability to repay the amount to the Appellant has stated that he is entitled to damages from the Appellant. The said reply can be very well treated as stand of the Respondent not to make any payment. The reply having been filed after 12.07.2017, on which date Commercial Suit was filed, the Application filed by the Appellant under Section 7 is well within three years from the said denial of claim of the Appellant by the Respondent. In his submissions, the Respondent has come up with the case that the default shall be treated to have occurred on 01.09.2012. Even assuming for argument s sake that default has taken place on 01.09.2012, we may notice the following submissions of the Corporate Debtor as contained in paragraph 5 (vi) of the written submissions: vi. It is therefore submitted that if at all there was a default on part of the Corporate Debtor the said default would have been committed only on 1st September, 2012 as opposed to the claim of the Appellant. A petition under the provisions of the Insolvency and Bankruptcy Code, 2016 in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgement rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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