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TMI Blog2022 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor' (in short `CD') and `Personal Guarantors' (in short `PG') and initiated `Insolvency & Resolution Process' against `Appellant' under Section 100 of IBC and appointed `Mr. Jossy Steephen Kattur' as `Insolvency Resolution Professional' (in short `IRP'). Since common issues and legal points are involved in both the `Appeals' bearing `Appeal' numbers Company Appeal (AT) (CH) (INS) No. 227 of 2022 & Company Appeal (AT) (CH) (INS) No. 262 of 2022, both are being taken up together and common order is being passed accordingly. Brief Facts: 2. Mrs. Merin Jose- Appellant/PG [MD of ITMA Hotels India Pvt. Ltd. (in short ITMA)] in Company Appeal (AT) (CH) (Insolvency) No. 227 of 2022 and Mr. Jose M.M.- Appellant/PG Director (in ITMA) in Company Appeal (AT) (CH) (Insolvency) No. 262 of 2022 have been involved in hospitality industry since year 2010. A consortium of banks consisting of erstwhile State Bank of Travancore (SBT) along with State Bank of Bikaner & Jaipur (SBBJ) sanctioned term loan facilities of Rs. 74 Crores to CD (ITMA) for construction of a Star Hotel under name "Jomer Symphony". The facility was further renewed in the year 2013 for Rs. 95.7 Crore along with working ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of Travancore. The last date for deposit of this amount is 25.09.2019." Final Order further stated that in case payments are not effected within stipulated time, the compromise settlement would stand automatically withdrawn / cancelled and the entire amount as claimed in the OA along with the interest and cost shall become payable forthwith and would becomes recoverable from the defendants and mortgaged properties. 6. Admittedly, after the `CD' made an upfront settlement payment of Rs. 12 crore and Rs. 5 crore was paid on 31.12.2019, `CD' failed to make balance payments as per terms in compromise settlement. Aggrieved by this default, `FC' filed an Application bearing No. CP (IB)/30/KOB/2020 before the `National Company Law Tribunal', Kochi Bench, to initiate `Corporate Insolvency Resolution Process', against the `CD' and `PG' under Section 7 of the IBC. 7. Aggrieved by `Impugned Order' dated 24.02.2022, the present two appeals as discussed above, have been filed before this `Appellate Tribunal'. Appellant's Submissions: 8. Learned Counsel for the Appellant brought out the facts of the case during the course of arguments and mentioned that due to COVID-19 Pandemic, `CD' coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that Section 238 A of the IBC clearly stipulate that "the provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be." 15. Learned Counsel for the Appellant cited cases of Hon'ble Supreme Court in the matter of Babulal VardharjiGurjar vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Ors. Reported in (2020) 15 SCC 1 and B.K. Educational Services Pvt. Ltd. vs. Paras Gupta & Associates: AIR 2018 SC 5601. 16. Learned Counsel for the Appellant also raised issues regarding debt and dues itself claimed by `FC' stating that these are uncertain, disputed and imaginary claims. 17. Finally, Learned Counsel for the Appellant referred to the Hon'ble Supreme Court of India Judgement in Swiss Ribbons vs. Union of India, 2019 (4) SCC 17, according to which, IBC is a beneficiary legislation to put `CD' back on its feet and not merely `recovery legislation for creditors'. 18. Learned Counsel for the Appellant concluded with prayer that `impugned order' dated 24.02.2022, may be suspende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he `Appellant' and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. 22. Learned Counsel for the Respondent assailed the point of limitation prayed by the Appellant and mentioned that subsequent to declaration of account of `CD' as `NPA', `OA' was filed before the DRT, Ernakulam on 27.06.2016 and based on the compromise settlement approved by `FC' on the request of `CD', DRT, Ernakulam passed a decree on 20.09.2019 and Rs. 5 crore was deposited by `CD' on 31.12.2019. The `FC' filed an `Application' under Section 95(1) of IBC on 03.11.2021 within two years from the date of final order of DRT, Ernakulam and from the last payment. Learned Counsel further argued that taking Hon'ble Supreme Court Suo Moto Writ Petition No. 2020 excluding period of limitation from 15.03.2020 to 28.02.2022, the present `Application' was filed within 74 days from the last payment of 31.12.2019 and is well within Limitation period. 23. To buttress his point, Learned Counsel referred to Hon'ble Supreme Court of India Judgment in the matter of CA No. 1650 of 2020 Dena Bank (now Bank of Baroda) vs. C. Shivakumar Reddy & Anr. and Sesh Nath Singh and Anr. Vs. BaidyabatiSheoraphuli Co-operative Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sulting into default. We need to see the exact definitions of relevant sections in the IBC. The `Debt' has been defined in Section 3 (11) of IBC which is as under:- "3(11). "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;" Since, the term `Claim' is mentioned in above definition of debt, we need to refer to definition of `Claim', under Section 3(6) of IBC, which is as under:- "3(6). "claim" means- (a) A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) Right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;" Similarly, `Default' is also defined under Section 3(12) of IBC, which is as under: - "3(12). "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. 29(c) We have noted from the Written Submissions of Respondent that FC has produced the statement of account with certificate issued under Bankers Books Evidence Act, 1891 to prove the debt which were never disputed by the Appellant and total outstanding as of 31.07.2021 was Rs. 1,97,54,49,848,81/-. While discussions the facts of the case above, it has already been noted that various term loan and working capital facilities were given by SBT & SBBJ which later merged into SBI (FC). This fact was never disputed by Appellant. We also note that subsequent to FC's claim under SARFAESI Act and later before Hon'ble DRT, CD proposed compromise settlement which also clearly stipulated about existence and acceptance of debt in terms of both principal as well as interest. Therefore, there was clear financial debt which was due and not paid and Adjudicating Authority has, therefore, rightly admitted Application under Section 95(1) of the IBC. 30. Issue No. (ii)Whether the present application filed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt Suo Moto Writ Petition No. 2020 excluding period of limitation from 15.03.2020 to 28.02.2022 the present application was filed within 74 days from the last payment of 31.12.2019. 30(d). We would like to refer to Judgments of the Hon'ble Supreme Court of India in the matter of Dena Bank (now Bank of Baroda) vs. C. Shivakumar Reddy & Anr. Reported in (2021) 10 SCC 330. The relevant paragraphs of the Judgement is mentioned here as under:- "142. To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. 143. Moreover, a judgment and/or decree for money in favour of the Financial Creditor, passed by the DRT, or any other Tribunal or Court, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- "7. Learned Counsel for the Appellant has placed reliance on a Judgment of Hon'ble Supreme Court reported in 2020 (15) SCC 1 in the matter of 'Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr.' and submitted that Hon'ble Apex Court has held that the date of default has to be ascertained on the basis of pleadings in Section 7 Application of the IBC. In the present case, Part-IV of the Section 7 Application of the IBC, 'Date of Default' is dated 25th August, 2017 there is no dispute regarding that but along with the Application the relevant documents including ledger account of the payment were also brought on record where the last payment made by the Corporate Debtor has been mentioned on 31.07.2018 and the same has been noticed by the Adjudicating Authority. In view of the last payment made on 31.07.2018 as noted above, the Application was well within time and the Financial Creditor entitled for taking benefit of 3 years period of limitation from the date of last payment. The Judgment relied on by the Learned Counsel for the Appellant does not come to any aid to the Appellant in the present case." From above events, as well as case laws o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Power to make rules), Section 240 (Power to make regulations) and Section 249 (Part V) in so far as they relate to PGCD. 31(e). With these amendments through the amended Section 2(e) pertaining to PGCD, it was made possible to subject PGCD to Insolvency Proceedings before same Adjudication Authority (NCLT)/ Appellate Authority (NCLAT) who decides matter related to CD. Thus, if the CD's debt remains unpaid, the personal guarantor would not stand discharged but would himself be forced to face bankruptcy proceedings before the Adjudicating Authority. After going through the various provisions of IBC as well as detailed judgement in the matter of 'Lalit Kumar Jain (Supra)' there is no doubt that personal guarantee given by Mrs. Merin Jose and Mr. Jose M.M are enforceable and Adjudicating Authority has correctly taken decisions accordingly. We therefore, do not find any error as regard this issue. 32. Issue(iv) Whether, on failure of settlement agreement, the FC need to go to DRT or can directly approach Hon'ble Adjudicating Authority for enforcing claims of FC against CD as well as personal guarantor. 32(a). Learned Counsel for the Appellant submitted that after settlement between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits/payments are not effected by the defendants within the time stipulated above, the compromise settlement would stand automatically withdrawn/cancelled and the entire amount as claimed in the OA along with interest and costs as claimed therein shall become payable forthwith and would become recoverable from the defendants and the mortgaged properties. 3 (7). In the event of cancellation of the compromise settlement as stated in clause 6 above and the amount of Rs. 4.63 Crores is not deposited as per clause 5 above, Rs. 4.63 Crores from out of the amount paid by the defendants under the compromise would be set apart for meeting the liability under the subsisting Bank guarantees issued on behalf of the first defendant. The balance if any available would adjusted towards the claim made in the OA. The applicant would be entitled to apply for and obtain a Recovery Certificate for the amount claimed in the OA less such amount if any adjusted, together with interest and costs as prayed for." (emphasis supplied) Thus, the DRT, Ernakulam order as mentioned in clause 3(7) give the right to the FC to apply for and obtain Recovery Certificate and not the mandatory obligation to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,81/-. From the 'compromise settlement' as mentioned by the DRT, Ernakulam in the final order, it has been made clear that in case of failure of 'compromise settlement' entire amount as claimed in `OA' along with interest and cost shall become payable. We took note from Form C filed by FC before `Learned Adjudicating Authority' about details of Rs. 1,97,54,49,848.81 furnished as herein under in a tabular form:- Due Amount as on 31.07.2021 Principal 67,85,31,257.87 Interest 129,38,65,395.94 Other Charges/ Legal Expenses 30,53,195.00 Total 197,54,49,848.81 In any commercial loan, time value is very important. The definition of `financial debt' as provided in Section 5(8) of IBC mentioned herein above. It makes clear that `Financial Debt' along with interest against consideration for the time value of money is required. The DRT, Ernakulam has already provided in their final order about interest component in clause 3(6). Further in Para 1 of the final order of DRT, Ernakulam, future interest @ 13.95% is also provided for. The relevant Para 1 is provided as herein under:- "1. This original application is filed on 27.06.2016 under Section 19(1) of the Recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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