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TMI Blog2024 (1) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... NB Housing Finance Ltd.-Financial Creditor seeking initiation of Corporate Insolvency Resolution Process ("CIRP" in short) against M/s Nakoda Fruit Products Pvt. Ltd.-Corporate Debtor. Aggrieved by the impugned order, the present appeal has been filed by the suspended director of the Corporate Debtor. 2. The factual matrix of the case which is necessary to be noted for deciding the matter are as below: - * The Corporate Debtor had availed loan from the Financial Creditor and mortgaged its immovable property for this purpose. The loan had been sanctioned for an amount of Rs.10.52 crore on 29.09.2018 which was for a tenure of 144 months with floating interest and repayable in EMI amounts of Rs.13,03,220/-. * The loan account of the Corporate Debtor was classified as Non- Performing Asset (NPA) on 14.12.2019 by the Financial Creditor as according to them the Corporate Debtor had allegedly failed to regularize the loan account. * A loan recall cum arbitration notice dated 26.12.2019 was issued by the Financial Creditor against the Corporate Debtor. * The Financial Creditor issued a notice under Section 13(2) of the SARFAESI Act, 2002 on 15.01.2020 and later on took possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10A. In support of their contention, reference was made to the judgment of the Hon'ble Supreme Court in the matter of Ramesh Kymal v. Siemens Gamesha Renewable Power Pvt. Ltd. in (2021) SCC 224. 6. Advancing their arguments further, it has been submitted by the Learned Counsel for the Appellant that the Corporate Debtor had been earnestly trying to keep its loan account healthy and untainted. This is evident from the fact that even during the Covid period, the Corporate Debtor had deposited Rs. 12 lakhs which is also recorded in the ledger statement of the Corporate Debtor. The Corporate Debtor had also sent letters to the Financial Creditor for one-time restructuring and OTS proposals which also proves their bona-fide. Relying on the judgment of the Hon'ble Supreme Court in the matter of M/s Vidarbha Industries Power Ltd. v. Axis Bank (2022) 8 SCC 352, it was pointed out that since the insurance claim arising out of the fire outbreak incident is pending adjudication before the District Consumer Disputes Redressal Commission, the Adjudicating Authority before admitting the Section 7 petition should have looked into the difficulties of the Corporate Debtor and allowed it a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. in CA (AT) (CH) (Ins.) No. 05 of 2021 wherein it has been held that the date of default shifts to the date when the OTS offer is made. 10. On the contention raised by the Appellant that the EMIs due from the Corporate Debtor having been cleared till 19.03.2020, default in the discharge of debt obligations, if any, arose only on or after 25.03.2020, which period being covered under Section 10A of the IBC, no Section 7 application was maintainable, the Learned Counsel for the Respondent No.1 submitted that, in the first place, this pleading needs to be rejected since it was never raised before the Adjudicating Authority. In any case, it was contended that this standpoint of the Appellant is misplaced since the first default arose in May 2019, which date corresponds to a period prior to 25.03.2020 and hence the bar of Section 10A would not apply. 11. Further, it has also been stated that the plea taken by the Appellant that they need to be given a chance for revival is misconceived. It was also added that the contention of the Appellant that their debt can be paid out of the proceeds of the insurance claim deserves scant regard since the purported insurance claims had already b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and permission having been granted to file written submissions even after the matter was reserved for orders and this opportunity had also been availed by the Corporate Debtor, we are of the considered opinion that their contention of having been denied opportunity to be heard before the Adjudicating Authority lacks foundational basis. 15. At this juncture, it may be useful to notice the findings returned by the Adjudicating Authority which is to the effect: "4. We have heard the arguments of Learned Counsel for Financial Creditor and the Corporate Debtor. 4.1. The bench observes that, the Financial Creditor in Part IV of the application has specified date of default as 14.12.2019, which is date of NPA. Since the account was classified as NPA on 14.12.2019, the date of default would be 90 days prior i.e. 13.09.2019. The SARFAESI notice u/s 13(2) was sent to the Corporate Debtor on 15.01.2020. The Corporate Debtor through its correspondences dated 24.08.2020 and 11.11.2022 to the Financial Creditor submitted the OTS proposal and these OTS proposals constitute acknowledgement u/s 18 of the Limitation Act. The present petition is filed on 24.01.2023 is well within the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part liquidation of the EMI against the FDR was done on 27.12.2019. It has also been pointed out that liquidation of the second part of the FDR was done on 19.03.2020. This re-appropriation was also confirmed by the Financial Creditor on 26.12.2019 and 18.03.2020. No default was therefore committed by the Corporate Debtor in the EMI repayment. It has also been contended that the loan account of the Corporate Debtor under these circumstances could not have been legitimately classified as NPA. 17. On the plea taken by the Appellant that there was no default since the EMI amounts had been liquidated by appropriation from FDR, it has been contended by the Financial Creditor that FDRs were pledged as security towards the loan and hence regularization of the loan account from such security interest was an untenable proposition. It was also added that the FDRs being in the nature of Debt Service Reserve Account (DSRA), the funds in DSRA are to be used on discretion of the Financial Creditor and not the Corporate Debtor. Moreover, whether security interest could be enforced from the DSRA was the prerogative of the Financial Creditor and the Corporate Debtor was not entitled to dictate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Affidavit. Further, in the OTS proposal of 11.11.2022, the Corporate Debtor has again acknowledged the existence of a loan account amounting Rs.10.40 crore since 2018. In this letter, as placed at page 11 of Additional Affidavit, we notice that the Corporate Debtor after acknowledging that their account had become irregular and converted into NPA, they have stated that they wanted to settle the said loan account by paying Rs.4 crore towards full and final OTS. This proposal of 11.11.2022 was rejected by the Financial Creditor on 13.07.2023 for being a meagre sum and this has been acknowledged the Corporate Debtor in their communication dated 27.07.2023 when they again submitted a revised OTS proposal of Rs.4.10 crore. This communication has been placed at page 12 of the Additional Affidavit. The Financial Creditor again rejected the modified OTS proposal on 04.08.2023 as is seen from page 16 of the Additional Affidavit. 21. Basis these OTS proposals, it has been contended by the Financial Creditor that such OTS offers made on more than one occasion clearly constitute acknowledgment of debt and default. The only defence which has been raised by the Corporate Debtor is that the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution process under Section 7 IBC ensures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 IBC. Further, the acknowledgment must be of a liability in respect of which the financial creditor can initiate action under Section 7 IBC." 24. Clearly the OTS proposals, which undisputedly fall within the three- year period from the date of default, clearly provided for a fresh period of limitation of three years. We, therefore, find that the Adjudicating Authority did not commit any error in holding that the OTS proposals dated 24.08.2020 and 11.11.2022 constitute acknowledgement under Section 18 of the Limitation Act, 1963 and hence the Section 7 application filed on 24.01.2023 was correctly held to be within the limitation period. 25. Now we come to the contention raised by the Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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