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TMI Blog2023 (9) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... ith caveats. Whether the notes to the account or the Director s Report/Statement as relied by Learned Counsel for the Respondent are sufficient to hold that there is no acknowledgement in the balance sheet of the debt? - HELD THAT:- The acknowledgement of debt in the balance sheets from 1998-99 is continuous. Notes to the account and the Director s Report/Statement at best can be treated to be account of litigation emanating from such date - it is noticed that in the notes to the account and the Director s Statement/Report, it has been categorically mentioned that Company failed to repay the loan. In the Financial Year 2020-21, there is reiteration of credit facility availed by the Company from the IDBI - When the Company Petition was dismissed with the observation as observed, there is a failure to see that how the Respondent can contend that claim of the Appellant is limited to only Rs. 250 Lakhs. After perusing the relevant balance sheets and director s report, it is satisfied that balance sheets contain an acknowledgement of debt and the mere fact that details of litigation emanating from the loan and subsequent events are mentioned in the notes to the account and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs. After availing the above credit facilities from IDBI, the Respondent Company failed and neglected to make the payment. A legal notice dated 10th June, 1998 was given by the IDBI. IDBI filed Original Application being O.A. No. 445/1998 before the Debt Recovery Tribunal, Delhi (DRT in short) for recovery of amount of Rs. 6,19,93,815/- together with pendente lite and future interest. During pendency of the O.A. before the DRT, the Corporate Debtor approached the IDBI offering a One-Time Settlement for a sum of Rs. 225 Lakhs. IDBI asked the Corporate Debtor to increase the amount to Rs. 250 Lakhs out of which Rs. 225 Lakhs was to be paid by a particular date in June, 2006. The amount being not paid by the Corporate Debtor, the OTS was not implemented. IDBI assigned the debt to Kotak Mahindra Bank Limited on 31st March, 2006. After assignment, Kotak Mahindra Bank Limited was substituted in O.A. No. 445 of 1998 filed by the IDBI as an Applicant. On 16.04.2008, Kotak Mahindra Bank Limited assigned the debt in favour of the Appellant-Company Jumbo Chemicals and Allied Industries Pvt. Ltd. by registered deed on assignment. The Corporate Debtor filed a writ petition in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2019, limitation of 3 years expired before entering into settlement agreement and there was no acknowledgement after 14.01.2011 hence the case of the Appellant that the date of default is 26th July, 2021 cannot be accepted and Section 7 Application was dismissed as barred by time. The Order was passed by the Adjudicating Authority without issuing notice to the Corporate Debtor. 3. This Appeal was heard by this Tribunal on 10th August, 2021 on which date notices were issued to the Corporate Debtor and following order was passed: 10.08.2022: Appellant has filed application I.A. No. 2689/2022 for condonation of delay. 14 days delay in filing the Appeal is condoned. I.A. No. 2689/2022 stands disposed of. counsel for the Appellant submits that the Adjudicating Authority committed error in rejecting the application filed by the Appellant as barred by time whereas there was acknowledgment in the balance sheets which was sufficient to grant benefit of Section 18 of the Limitation Act. Submission needs scrutiny. Issue notice. Requisites alongwith process fee be filed within three days. Reply be filed by the Respondent within three weeks. Rejoinder be filed within tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept the contention of the Applicant that cause of action arose only when the deed of settlement was cancelled on 25.07.2021 because that deed of settlement was made much after the period of expiry of the limitation. 20. Apart from that, we also notice that the loan was recalled by the IDBI on 26.08.1998, whereas the deed of assignment was executed on 31.03.2006, much after the period of limitation, therefore, we are unable to accept the contention of the Applicant that cause of action arose on 26.07.2021. Hence, we are of the considered view the present application is barred by limitation. 8. We thus need to answer whether limitation for filing Section 7 Application had already come to an end when Section 7 Application was filed by the Appellant on 01.10.2021. 9. Mr. Ramji Srinivasan, Learned Sr. Counsel for the Appellant submits that there being continuous acknowledgement by the Corporate Debtor in its balance sheets since the financial year 1998-99 till the financial year 2020-21 within meaning of Section 18 of the Limitation Act, 1963, the Application was not barred by time. It is submitted that the Adjudicating Authority committed error in coming to the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which have come up for consideration in this Appeal is question of limitation of Section 7 Application, we have permitted the parties to bring relevant balance sheets on record and permitted them to refer to the relevant balance sheets in respect of their respective contentions. 12. The law is well settled that for finding out acknowledgement within the meaning of Section 18 of the Limitation Act, balance sheets can be looked into. Hon ble Supreme Court in Asset Reconstruction Company India Limited Vs. Vishal Jaiswal Anr., (2021) 6 SCC 366 has examined the question in reference to Section 18 of the Limitation Act and held that it depends on the facts of each case as to whether an entry made in a balance sheet made in accordance with law, qua any particular creditor is unequivocal or has been entered into with caveats. In paragraph 35 of the Judgment, following has been laid down: 35. A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Financial Year 2008-09 which also mentions Rupee Term Loan of Rs. 3,29,00,000/- and Foreign Currency Loan of Rs. 1,18,17,747/- which entries have been continuing from previous year. In the Financial Statement of 2008-09, NOTES TO THE ACCOUNT have been relied on by Learned Counsel for the Respondent. We may refer to paragraph 11 which gives the details of loan and the litigation regarding it. Paragraph 11 is as follows: 11. a) That the company is not repaying term loan amount taken from the financial institution and the matter is pending with Debt Recovery Tribunal as well Delhi High Court. b) The company is in dispute with IDBI over the amount of secured loan due to them in the Balance Sheet amounting to Rs. 447 Lacs (Principal Amount), has been reflected as payable. The IDBI was approached for one time settlement (OTS) vide application dated 10.03.2006. The bank did not communicate the decision to the Company and hence, the company approached IDBI under RTI Act, 2005 on 11.09.2006. In reply to the Company s RTI Application, IDBI has furnished the minutes of their Northern Zone Committee dated 27.03.2006 in which OTS proposal of Rs. 250 lacs was sanctioned, but no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company and hence, the company approached IDBI under RTI Act, 2005 on 11.09.2006. In reply to the Company s RTI Application, IDBI has furnished the minutes of their Northern Zone Committee dated 27.03.2006 in which OTS proposal of Rs. 250 lacs was sanctioned, but no letter of intent as stipulated in the minutes was issued in favour of the company. In the mean time, IDBI assigned the loan account to Kotak Mahindra Bank Ltd. (KMBL) without any information to the company. Thereafter Kotak Mahindra Bank filed an application before the Debt Recovery Tribunal Delhi for substitutions of their name on place of IDBI. The Hon ble DRT passed an order on 12.12.2006 substituting the name of KMBL in place of IDBI. The company filed an appeal in DRAT and the DRT order was stayed on 05.02.2007 against the order of DRAT, KMBL filed a writ petition no. 3535 of 2007 in the High Court of Delhi. The Hon ble High Court passed an order on 23.05.2007 on the above WP No. 3535 of 2007 and issued directions that DRT to examine afresh the defense of the company on merits including its contention that KMBL were bound by the purported decision of IDBI to accept the OTS proposal of the Company and KMBL had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the minutes of IDBI dated 27.03.2006 i.e. Rs. 250 lacs only. The company has deposited Rs. 250 lacs in favour of Registrar General of Delhi High Court as per order by the Company Court, Delhi High Court. After hearing the honable court dismissed the company petition filed by Jumbo Chemicals and asked the Registry to refund a sum of Rs. 250 Lacs along with interest, which has been received by the company during the relevant previous year. Jumbo Chemicals has filed an appeal before Delhi High Court (Appeal) which is pending. There is also show cause notices from Custom Department, regarding deposit of custom duty, the company is taking appropriate legal actions on that. 18. We may also notice the balance sheets of the Corporate Debtor for the year 2020-21 which was financial year prior to filing of Section 7 Application. In the Director s Report/Statement with respect to financial year 2020-21, following was stated: RISKS, CHALLENGES AND CONCERNS The Company had availed the credit facilities (Rupees Term Loan Foreign Currency Loan) from IDBI during the year 1996-1997, together with working capital margin. IDBI, though disburse the Term Loan but failed to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent some of which has been extracted above are sufficient to hold that there is no acknowledgement in the balance sheet of the debt. 20. The acknowledgement of debt in the balance sheets from 1998-99 is continuous. Notes to the account and the Director s Report/Statement at best can be treated to be account of litigation emanating from such date. We have noticed that in the notes to the account and the Director s Statement/Report, it has been categorically mentioned that Company failed to repay the loan. In the Financial Year 2020-21, there is reiteration of credit facility availed by the Company from the IDBI. The assignment in favour of Appellant has also been noticed in the notes to the account and director s statement. The notes to the account and director s report has repeatedly referred to that liability is limited to Rs. 250 Lakhs which is on the strength of Order passed in the Company Petition filed by the Appellant where Company Court directed the Respondent to deposit amount of Rs. 250 Lakhs in the Court which amount was deposited. We need to notice the Judgment of Learned Single Judge dated 22.05.2015 by which Company Petition filed by the Appellant was ultimatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the debt. From the entire series of record of such financial balance sheets from 2007-2008 to 2017-18 it can be presumed that the Corporate Debtor intended from time to time to acknowledge the debt in the Balance Sheet, however we cannot ignore the fact that in 2014-15, 2015-16 and 2016- 17, the Corporate Debtor has disputed claims. On overall basis out of 13 Balance Sheets from 2006-07 to 2018-19, apparently in the three Balance Sheets, disputes were recorded as noted above and based on this, in balanced manner and keeping commercial/judicial fairness, such denial of acknowledgment cannot be taken as stout dispute regarding debt which would tantamount to absolute and continued denial of acknowledgments of debt by the Corporate Debtor. Keeping in view the ratio decidendi of Bishal Jaiswal (Supra), therefore, in light of this detailed analysis, this Appellate Tribunal has to consider that there were acknowledgements of due in the Balance Sheets and the acknowledgement letter of the Corporate Debtor which would extend the limitation period, in terms of Section 18 of Limitation Act, 1963. 25. That this Tribunal ultimately accepted the acknowledgment in the balance sheets to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record in volume II of the Appeal, page 194. Learned Single Judge held that the Company Petition is not the case where High Court should exercise its discretion to wind up the company. In paragraph 17, following observations were made: 17. The respondent has submitted that it could not commence its business on account of failure on the part of the IDBI to adhere to its obligations. The respondent is also pursuing a counter claim against IDBI and it was contended that the company would be able to revive itself, once the said controversy is decided. It is also to be borne in mind that winding up of a company has serious consequences and the Courts have always leaned towards ensuring that the ailing companies are given a fair and reasonable opportunity to revive. In the present case, the company is pursuing its counter claim against IDBI and the question whether the company would be able to revive or not can only be considered after that controversy has concluded. Concededly, the jurisdiction to wind up a company under section 433(e) and 433(f) of the Act is discretionary. In my view, this is not a case where this court should exercise its discretion to wind up of the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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