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TMI Blog2022 (4) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... CATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [ 2018 (10) TMI 777 - SUPREME COURT ], wherein it is held that the limitation act is applicable to applications filed under Section 7 and 9 of the IBC from the inception of the Code. Article 137 of the Limitation Act gets attracted. It was held that the right to sue therefore accrues when a default occurs and if the default has occurred over three years prior to the filing of the date of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases wherein Section 5 of Limitation Act may be applied to condone the delay in filing such application. Subject to the finding on the contentions of the Counsel for the Financial Creditor, by virtue of the above judgment, this application stands to have been filed after three years, when reckoned from the dates mentioned in the MoUs, as observed in the above paragraphs. Coming to the Judgment of the GUJARAT HIGH COURT in Hindustan Apparel Industries [ 2000 (5) TMI 1095 - GUJARAT HIGH COURT ], the Patna High Court has already held that a post-dated cheque would amount to acknowledgement of liability irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Application are as follows: i. The Financial Creditor is one of the group entities managed by one Dr. Boppana Satyanarayana Rao, his family members and associates (herein after referred to as BSR Group). In the year 2015, the BSR group and some individual family members provided financial assistance by way of an investment to the Corporate Debtor, its group Companies and individuals of Lingamaneni family members (herein after referred to as Lingamaneni Group). In lieu of the said financial assistance, both the groups entered into a Memorandum of Understanding (MoU) dated 25.10.2015 for a total debt extended by the BSR Group to Lingamaneni Group. As per the said MoU, BSR Group has advanced an amount of ₹ 219 Crores for acquisition of various companies, since, the BSR group wants to withdraw, as there was no activity of acquisition by Lingamaneni Group, Lingamaneni Group accepted to pay back the total amount of ₹ 219 Crores along with compensation of ₹ 32 Crores on or before 31.01.2016. ii. It was further agreed that a collateral security for the amount should be paid by Lingamaneni Group. They agreed to register the freehold properties and upon fulfilmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Creditor, such non-repaid money will not become a debt much less a Corporate Debt for the purpose of initiating CIRP. Without admitting the liability of the Corporate Debtor it is submitted that the creditor made a self-conflicting statement in the Petition. It is stated that there was a Memorandum of Understanding (MOU) dated 25.10.2015 between BSR Group and Lingamaneni Group for a total debt extended by the BSR Group to the other group and in terms of that MoU, the BSR Group advanced an amount of ₹ 219 Crores to Lingamaneni Group for acquisition of various companies and Lingamaneni Group agreed to repay ₹ 219 Crores with compensation of ₹ 32 Crores on or before 31.01.2016. The Corporate Debtor does not know whether there are two such groups having corporate entity known as BSR Group and Lingamaneni Group. So far as the Corporate Debtor is concerned, it is a Company having individual corporate identity and it did not enter into any MoU either on 25.10.2015 or any time later and never undertook to repay any amount as stated. The binding nature, enforceability and truth of MOU dated 25.10.2015 is denied. A reading of the MOU dated 25.10.2015 reveals that nobody ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that; i. The contents of the MOU dated 15.07.2013 executed by and between Financial Creditor and Authorized signatory of the Corporate Debtor Company are commensurate with the contents and objects of the Trust Deed. The MOU dated 25.10.2015 enumerates the terms and conditions of the investment with all details. In the reply dated 08.01.2021 the Corporate Debtor itself admitted that it had taken money from the Financial Creditor. ii. As regards the limitation, the petition is well within the limitation. Section 18 of the Limitation Act, 1963 was held to be applicable to the proceedings under IBC by the Supreme Court. The Corporate Debtor is one of the Group entities owned by Lingamaneni Family, who has been well acquainted with the family of Dr. B.S. Rao who was the founder of Financial Creditor. Having long standing personal relationship between both the families they did many business transactions over the past 20 years which resulted in personal lending and lending between the Trusts and Companies. The Corporate Debtor in their reply affidavit at para No. 12 admitted the signing and issuance of cheques but at the same time stated that the authorised representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed within the period of limitation and whether the MoUs between the Financial Creditor and Corporate Debtor are executed under proper authorization. ii. Whether there is any debt which is due to be paid to the Financial Creditor and whether any default in terms of Section 3(12) has been committed by the Corporate Debtor. iii. To what result. I. Whether the application is filed within the period of limitation and whether the Memorandums of Understanding between the Financial Creditor and Corporate Debtor are executed under proper authorization. And II. Whether there is any debt which is due to be paid to the Financial Creditor and whether any default in terms of Section 3(12) has been committed by the Corporate Debtor. Both the points are considered together since the discussion on the points overlaps. The claim is based on two Memorandums of Understanding (MoUs) entered into between the parties. The first Memorandum of Understanding (MoU) is dated 25.10.2015 to which the parties are Sri Boppana Satyanarayana Rao resident of Poranki, Vijayawada (hereinafter referred to as Investor ) and Sri Ramesh Lingamaneni resident of Gayathri Nagar, Vijayawada (here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Investor against the Company would be only to proceed against the properties given as security and not to file any suit or application for recovery of the said amounts. In the first place the Counsel for the Corporate Debtor raises an objection regarding the authority of Sri Ramesh Lingamneni to bind the Corporate Debtor with the said Memorandum of Understanding. The contention is based on the fact that there is no authorization given to said Ramesh to enter into any MoU and that the MoU would only reflect that the said Ramesh Lingamaneni has signed on the MoU in his individual capacity and there is nothing in the MoU from which it can be inferred that he signed on behalf of the Corporate Debtor. It is also contended that the mentioning of the name Company would not suffice to bind the Corporate Debtor. The Counsel relies on a judgment of the Hon'ble Supreme Court (2010) 5 SCC 306 between Indowind Energy Limited Vs. Wescare (India) Limited and Another, wherein it was held that each Company is a separate and distinct legal entity and the mere fact that the two Companies have common shareholders or common Board of Directors, will not make the two Companies a single e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 specifies that the parties shall execute a shareholders agreement to give effect to the said MoU within 7 days upon incorporation/identifying a Company to be the JVC. A detailed timeline and next steps are attached to the MoU as Annexure-3. The terms of understanding under the MoU would show that party-B has failed to pay the agreed amount of ₹ 295 Crores by 30.11.2015 and has agreed to compensate Party-A by offering stake in 400 Acers Smart City Project in the manner specified therein. Party-B undertook to identify and arrange joint venture with the strategic partner before the end of August, 2016 and upon such strategic partnership, the Party-A shall be entitled for a consideration of ₹ 3 Crores per acre for the additional equity to be allotted to him as per Clause 1(d) therein. Clause 4 specifies that if Party-B fails to have strategic partnership and pay Party-A a total amount of ₹ 300 Crores, Party-B has to sell the land either by developing into plots or on as is where basis and pay Party-A an amount of ₹ 300 Crores within a period of 6 months from the date of the said MoU. Party-B will identify the portions of land that will be planned for plotti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filled it cannot be said that there is any default committed by Party-B. The present Application which is filed after three years from the date of the MoU or from the date on which the six months falls, which is also beyond three years, is based on a cheque dated 19.11.2020 which is issued by the authorized signatories of LEPL Ventures Private Limited. The date of MoU being 23.06.2016, six months from then would be ending by 23.12.2016. If three years is construed from 23.12.2016, the three years period would be completed by 23.12.2019. Hence, clearly the limitation for filing a suit, based on the MoUs, stands expired by the date of this application. The contention is that by virtue of the cheque dated 19.11.2020, the debt stands acknowledged and hence, a fresh limitation starts from 19.11.2020. In support of the said contention, the Counsel for the Financial Creditor relies on certain judgments. A judgment of the Hon'ble Supreme Court reported in between Hindustan Apparel Industries Vs. Fair Deal Corporation, New Delhi, in which the Supreme Court considered the judgment of Patna High Court in Rajpatiprasad's Case Vs. Kaushlya Kuer reported in AIR 1981 Pat 187, wherein t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the stage when the cheque is presented for payment. What is important to be noticed from the judgments discussed by the Supreme Court as observed by the Supreme Court is, in the first place a cheque is undoubtedly an acknowledgement of right or debt or liability and when the same is not issued as a post-dated cheque, date of issuance of the cheque would assume importance, whether subsequently it is honoured or dishonoured. It is thus at the stage of issuance of the cheque that there surfaces an intention on the part of the debtor to acknowledge the liability/right/debt owing to the person in whose favour the cheque is issued. If the cheque is honoured it would amount to part payment in writing and the same would fall under Section 19 of the Act (Section 20 of the Previous Act). It was held that a cheque would prima facie amount to an admission of debt unless a contrary intention has been expressed by the person issuing the cheque. Such an admission of payment of debt is to be determined with reference to the point of time at which the purported admission was made i.e., when the cheque was issued. What flows from the above judgment is that, by simple dishonour of cheque the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the statement on which the plea of acknowledgment is founded must relate to a present subsisting liability and indicate the existence of jural relationship between the parties. It is also observed that the debtor and creditor should have an intention to admit such jural relationship, which need not be in express terms but can be inferred by implication from the nature of the admission and surrounding circumstances. It was held that a statement written in the form a cheque will obviously amount to acknowledgement in writing. The said proposition is observed as being settled in Chintaman's Case. Hence the contention of the Counsel for the Corporate Debtor that unless the acknowledgement is in writing as specified under Section 18(1) it is not a valid acknowledgement as per Section 25(3) of Indian Contract Act, gets nullified since, issuance of cheque is held to be an acknowledgement in writing. Section 25(3) of Indian Contract Act, is as under: Section 25: Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law. -- An agreement made without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whether the investment made by the Financial Creditor is liable to be refunded, as to what was the purport of the terms of the investment as envisaged in MoUs etc., the NCLT has to conduct a rowing enquiry to pierce the corporate veil of the Corporate Debtor which is not permissible at this stage, the counsel for the Financial Creditor relies on a judgment of the Supreme Court in 1996 4 SCC 622 between Delhi Development Authority vs. Skipeer Construction Company (P) Limited and Another, wherein it is held that the concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. There is no doubt that this Tribunal has jurisdiction to lift the corporate veil, to understand the genuineness of the transaction. But for the purpose of understanding the genuineness of the transaction, if evidence need to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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