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TMI Blog2025 (3) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings and hence the Section 7 application attracts Section 65 of the IBC. On seeing the prayers contained in the present appeal, it is not found that Section 65 has been sought to be invoked. Furthermore, the degree of proof and evidence required to prove any transaction to be fraudulent in nature should be beyond reasonable doubt and of an unimpeachable nature which is not found established in the present case. There are no substance in this contention of the Appellant and the same is rejected. The account of the Corporate Debtor for this Term Loan was declared as NPA on 31.03.2016. Calculating three months prior to the date of NPA, the date of default works out to be not later than 31.12.2015. The Section 7 application was filed on 09.01.2021 which is clearly beyond three years from the date of default. What therefore needs to be seen is whether the Respondent No. 1 has effectively substantiated the argument canvassed by them that the debt and default having been acknowledged by the Corporate Debtor within the three years limitation period made room for extension of the period of limitation. There is sufficient evidence to prove the existence of debt and default. The balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed by Respondent No. 1 in Part-V. The Adjudicating Authority has also adverted attention to the decision of this Tribunal in the case of Manmohan Singh Jain Vs SBI [2021 (11) TMI 794 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI] wherein it had been held that omission to mention date of default is not fatal to a Section 9 application as long as sufficient documentary evidence is adduced to establish the date of default. In the present case, since the CoC has already been constituted, in the event the settlement proposal as proposed by the Appellant is accepted by the Respondent No. 1, it shall be open for the Respondent No. 1 to file a Section 12- A application read with Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 within two weeks from date of pronouncement of this order. In the event the settlement proposal is not accepted by Respondent No. 1 and the Section 12-A application is not filed within two weeks from date of pronouncement of this order, the RP shall proceed with the CIRP of the Corporate Debtor in accordance with law. Conclusion - i) The Section 7 application is not time-barred due to the acknowledgment of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l from the Corporate Debtor seeking enhancement of the Term Loan from Rs 15 Cr. to Rs 35.50 Cr. * TL-1 became NPA on 31.12.2008. * On 07.01.2009, Union Bank of India issued notice under Section 13(2) of SARFAESI Act and took symbolic possession of the mortgaged assets on 11.05.2009 and proceeded ahead with SARFAESI proceedings. * On 03.12.2013, an Assignment Agreement was signed by which the Union Bank of India assigned the TL-I along with the interest, underlying security and guarantee to Respondent No. 1-Phoenix ARC Pvt. Ltd. * A Memorandum of Compromise ("MoC" in short) was entered between the Corporate Debtor and Respondent No.1 on 03.12.2013 for a settlement amount of Rs 18.10 Cr. besides interest @ 30% p.a. and penal interest. * The Corporate Debtor wrote to Respondent No. 1 on 03.12.2013 for a fresh Term Loan of Rs 6.90 Cr. * On 07.02.2014, a Term Loan Agreement (hereinafter referred to as "TL- 2") for Term Loan of Rs 3.40 Cr. was entered between Corporate Debtor and Respondent No.1 with a rate of interest of 30% p.a. and penal interest of 36% p.a. The loan was sanctioned out of which Rs 1.59 Cr. was appropriated towards interest. As per Repayment Schedule in Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are time-barred and that when a debt is barred by time, the right to remedy is time-barred. In the present case, though the claim was not made within the prescribed limitation period, the Adjudicating Authority had erroneously come to the conclusion that the claim was within the limitation. It was also added that the same judgment had also laid down that any party seeking extension of period of limitation, requisite evidence has to be furnished and relevant facts are required to be pleaded. In the present case, the Respondent No.1 had alleged several dates of acknowledgment of the liability by the Corporate Debtor without placing the same on record. The Adjudicating Authority had wrongly relied on a letter dated 08.05.2017 in treating it as an acknowledgment of debt when no such letter was on record. The Adjudicating Authority had also wrongly relied upon the balance sheet of the Corporate Debtor for financial year 2019-2020 for the purpose of acknowledgment of debt as it was beyond three years from the alleged date of default which was 31.12.2015. Reliance was also placed on the judgment of Ramdas Dutta Vs IDBI Bank Ltd. in CA(AT)(Ins) No. 1285 of 2022 wherein it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the fact that they had already deposited the principal amount indicated in Part-IV with the NCLAT Registry. 5. Refuting the contentions of the Appellant, Shri Amit Singh Chadha, Ld. Sr. Advocate representing Respondent No.1 submitted that the Section 7 application was not time-barred and very much maintainable as it was filed on the basis of debt and default in terms of Schedule-III of the TL-2 dated 07.02.2014. In terms of the repayment schedule of TL-2, the loan of Rs 3.40 Cr. was to be paid in 12 quarterly instalments starting from 31.03.2015 and ending on 31.12.2017. The account of the Corporate Debtor for this TL-2 was declared as NPA on 31.03.2016. A Recall Notice had also been issued on 29.04.2017 which the Appellant has deliberately not placed on record. Instead, the Appellant has tried to mislead this Tribunal by placing on record only the Recall Notice issued in respect of recall of MoC dated 03.12.2013. The Ld. Counsel for Respondent No. l has also placed reliance on the judgment of this Tribunal in Koncentric Investment Ltd. & Anr. Vs Standard Chartered Bank, London & Anr in CA(AT)(Ins) No. 911 of 2021 which held that the only statutory requirement under Section 7 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never raised the issue of RBI guidelines for not permitting additional funding when submissions and pleadings were made before the Adjudicating Authority. 7. We have duly considered the arguments advanced by the Learned Counsel for both the parties and perused the records carefully. 8. The first issue for our consideration is whether the present Section 7 petition is time-barred or not and whether TL-1 and TL-2 could have separate dates of default. It is the case of the Appellant that the Respondent No. 1 did not disclose the status of loan account acquired from Union Bank of India in the Section 7 application. This loan account of the Corporate Debtor remained NPA from 31.12.2008. This was concealed from the Adjudicating Authority as it would have otherwise revealed that the limitation commenced on 31.12.2008. Further that Respondent No. 1 had issued a Possession Notice on 23.06.2017 basis the Demand Notice dated 07.01.2009 issued by Union Bank of India tantamount to the Respondent No. 1 admitting that the loan account of Corporate Debtor remained NPA from 31.12.2008. It is also asserted that as per RBI Master Circular dated 01.07.2013, the loan account is required to be declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Term Loans along with the unpaid interest amount were shown under the head Other- Current Liabilities of the Corporate Debtor. As per Section 18 of the Limitation Act, 1963, a fresh period of limitation shall be computed from the date of acknowledgment of debt provided the acknowledgment is made before the expiry of the Limitation Period. 14. In light of the settled principle of law, a fresh period of limitation will start from the date of acknowledgment. In the present case, the Corporate Debtor had acknowledged its liability in the letter dated 8.04.2017. Therefore, even if the argument of the Corporate Debtor regarding the date of default being a date not later than 31.05.2015 is considered, a fresh period of limitation will begin on 8.04.2017 as the Corporate Debtor has acknowledged the debt within a period of three years from such date of default being not later than 31.12.2015. Further, as per the guidelines issued by the Supreme Court to deal with the Covid Crisis, in cases where the limitation would have expired during the period between 15.03.2020- 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined hereunder) for the Purpose mentioned hereinbelow and subject to the terms and conditions set out in this Agreement and such other documents in relation thereto executed/to be executed by and between the Lender and the Obligors including for creation and perfection of New Loan Security (defined hereinafter) (collectively "Facility Documents" and more particularly defined hereunder). ...... ...... DEFINITIONS AND INTERPRETATION (xivii) "New Loan Amount" shall mean the maximum amount of Rs.3.40,00,000/- (Rupees Three Crores and Forty Lakhs only). (xiviii) "New Facility Documents" shall mean and include: (a) this Agreement; (b) the New Loan Security Documents; (c) any other document categorised by the Lender as a Facility Document. (l) "New Loan Dues" shall mean: (a) the principal of and interest payable in respect of the New Loan and all other obligations and liabilities of the Borrower, default/penal interest, indemnities, charges (including prepayment premium if any), fees, penalties, expenses, any other monies, incurred, arising out of or payable in connection with the New Loan; (b) any and all sums incurred/advanced by Lender in order to preserve the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applicable, have been duly registered with the Sub-Registrar of Assurances and/or appropriate Governmental Authorities." ( Emphasis supplied ) 13. It is also the contention of the Respondent No. 1 that it was the Corporate Debtor which approached Respondent No. 1 to provide this additional loan as is evident from their letter dated 03.12.2013 seeking a fresh Term Loan of Rs 6.90 Cr. which letter is as reproduced below: To, Date 03.12.2013 Chief Operating Officer Phoenix ARC Private Limited 7th Floor, Dani Corporate Park 158, C.S.T Road, Kalina, Santacruz (E), Mumbai -400098 Dear Sir, As per letter dated 3rd December, 2013 in view of the debt of Union Bank of India pertaining to Karni Developer & Construction Company Private Limited to your company being transferred to your organisation, we hereby propose settlement of existing Term Loan facilities at Rs. 18.10 cr. as per terms agreed under Memorandum of Compromise. Also, we request Phoenix ARC Pvt. Ltd. as reconstruction measure, to sanction Karni Developer & Construction Company Pvt. Ltd. a Fresh Term Loan of Rs 6.90 cr., the same would be utilised towards taking necessary approval from Authority and commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.05.2022 as placed at page 248 of Appeal Paper Book ('APB' in short), we notice that the Corporate Debtor has sent a Onetime Settlement (OTS) proposal to the Respondent No. 1 wherein again a clear distinction has been drawn by the Corporate Debtor between TL-1 and TL-2 of Rs 3.40 Cr. 15. From the above multiple materials/documents available on record, we are persuaded to believe that the Respondent No. 1 had filed the Section 7 application in respect of a new and additional loan under TL-2 of 07.02.2014 and not for the amount due and payable in respect of TL-1 and accordingly hold that the limitation period has to be computed from the NPA date of 31.03.2016. Given this backdrop, we do not find much substance in the contention of the Appellant that present is a case where the Adjudicating Authority should have investigated the nature of transaction and exercised caution in admitting the Section 7 application. We note that reliance has been placed by the Appellant on the judgment of this Tribunal in Pawan Kumar Vs Utsav Securities Pvt. Ltd. in CA(AT)(Ins.) No. 251 of 2020 in which it has been held that that where any person furnishes information under Section 7, which is false in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled on 09.01.2021 which is clearly beyond three years from the date of default. What therefore needs to be seen is whether the Respondent No. 1 has effectively substantiated the argument canvassed by them that the debt and default having been acknowledged by the Corporate Debtor within the three years limitation period made room for extension of the period of limitation. 19. The Appellant's contention is that the letter of 08.05.2017 which finds mention in the impugned order is not on record. We find no reasons to disagree with the Appellant on this score. However, we find other material on record which has been adverted to by the Respondent No. 1 which were also available before the Adjudicating Authority which clearly establish acknowledgement of liability. It is an undisputed fact that a Recall Notice had been issued on 29.04.2017 by the Respondent No. 1. This Recall Notice had been replied to by the Corporate Debtor on 05.05.2017 wherein the Corporate Debtor clearly admitted their debt and default and requested for postponement of the Recall Notice. The relevant excerpts of this letter placed at 184-186 of APB is as extracted below: Date: 05.05.2017 Eshwar Karra, Chief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporate Debtor on 11.12.2017 to the Respondent No. 1 admitting the debt and default in respect of TL-2 of Rs 3.40 Cr. In the said letter, the Appellant have themselves drawn a clear distinction between the TL-1 by way of assignment by Union Bank of India on 03.12.2013 and the TL-2 of 07.02.2014 for Rs. 3.40 Cr. as extracted below: Date11.12.2017 Mahesh Malunjkar Authorised Officer Phoenix ARC Pvt. Ltd. Ref :- Your Letter Subject :- For taking physical possession of property Dear Sir, You have sanctioned the term loan of Rs.18.10 Crores by way of assignment of term loan of Union Bank of India on 03rd December, 2013 and also sanctioned term loan of Rs. 3.40 Crores on 07th February, 2014 for payment against fees and charges of Jodhpur Development Authority for approval of Plan. We have intimated the position of our project time to time through various letters, through telephonic talk and meeting with your authorized officers. But we were unable to pay your dues as per repayment schedules or agreed terms due to project constraints as intimated by us. We have received your letter to take physical possession of said mortgaged property. Our mortgaged property is loc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient evidence to prove the existence of debt and default. The balance sheet of the Corporate Debtor for FY 2019-20 and the Independent Auditor's Report attached thereto clearly indicate both the Term Loans along with unpaid interest amount. We therefore find no error in the impugned order that in view of the acknowledgement of liability on the part of the Corporate Debtor, the period of limitation stood extended. Hence, though the Section 7 application was filed on 09.01.2021, it fell within the limitation period in view of the judgment of the Hon'ble Supreme Court in Suo-Motu Writ Petition (C) No. 3 of 2020 wherein it was held that in all case where limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, the limitation period of 90 days was to be counted from 01.03.2022. Hence the application under Section 7 was clearly filed within limitation. 23. We now come to the next limb of argument of the Appellant that the Respondent No. 1 being an ARC was not entitled to grant fresh loan to the Corporate Debtor which had slipped into NPA from 31.12.2008. It has been further contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deploying their funds for undertaking restructuring of acquired loan account with the sole purpose of realizing their dues. Chief General Manager In-Charge Apart from there being no bar, we also notice that it was the Corporate Debtor which had approached Respondent No. 1 to provide this additional loan for the purpose of effective restructuring of the Corporate Debtor. This is evident from the letter dated 03.12.2013 from the Corporate Debtor to the Respondent No. 1 seeking a fresh Term Loan of Rs 6.90 Cr. as reconstruction measure which letter is already reproduced above at paragraph 13 above. In any case this issue was not agitated before the Adjudicating Authority and has been raised as an afterthought before this Tribunal. 25. Another argument which has been canvassed by the Appellant is that the imposition of 30% interest p.a. and penal interest 36% p.a. is unlawful under the Usurious Loans Act, 1918. This contention was repelled by the Respondent No.1 by adverting attention to the Term Loan Agreement-2 wherein the Corporate Debtor acknowledged that all sums payable under the Facility Documents by way of default interest was reasonable and that it represented genuine pre- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority is expected to interfere with the terms of contract entered into between the concerned parties. All that is required to be seen is whether the debt and default is proven without adjudicating on whether the rate of interest was unreasonable or inflated. That being the case, raising this fresh plea at the appellate stage of excessive interest rate cannot be looked into. 27. This brings us to the objection raised by the Corporate Debtor that no date of default has been mentioned in the Section 7 application. This technical plea has been turned down by the Adjudicating Authority in the impugned order which is as reproduced below: 8. In the present Application, the Corporate Debtor has raised a technical objection that the date of default has not been mentioned in the Form-1 of the Application filed by the Financial Creditor, therefore the application filed under Section 7 is defective and is not maintainable. Upon perusal of Form-1 filed by the Financial Creditor, in Part IV against the amount claimed to be in default and the date on which default occurred, the Financial Creditor has stated that "Amount claimed to be in default is Rs. 5,05,89,698/- (Rupees Five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Corporate Debtor and Guarantors. Annexure-A11: Notice dated 14.08.2019 U/s 13(2) of the SARFAESI Act, 2002. From the list of documents placed in the Part-V, we notice that the Adjudicating Authority had substantial material on record placed before it for determination of date of default. We have no reasons to disagree with the Adjudicating Authority in recording its satisfaction basis the materials on record placed by Respondent No. 1 in Part-V. The Adjudicating Authority has also adverted attention to the decision of this Tribunal in the case of Manmohan Singh Jain Vs SBI in CA(AT)(CH)(Ins) No. 97 of 2021 wherein it had been held that omission to mention date of default is not fatal to a Section 9 application as long as sufficient documentary evidence is adduced to establish the date of default. 29. At this juncture, we may notice the relevant findings with regard to debt and default as recorded by the Adjudicating Authority in the impugned order which has come up in appeal. The relevant portions are as excerpted below : 15. As far as the other contentions of the Corporate Debtor are concerned, it will be relevant to refer to Section 7 of the Code. Section 7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity may reject an application and not otherwise." 31. On the question as to whether debt and default was adequately demonstrated before the Adjudicating Authority, basis the records made available before it, the Adjudicating Authority has rightly concluded that it was satisfied with the evidence and material produced before it by the Respondent No.1 to prove that a debt had arisen; that a default has occurred and the default is above the threshold limit. There was admittedly a debt qua the Financial Creditor and there was a default in discharge of the debt obligations by the Corporate Debtor. We find no cogent reasons to disagree with this part of the impugned order either. 32. The Ld. Sr. Counsel for the Appellant has also submitted that they have already deposited the claim set out in Part-IV of Section 7 application with the NCLAT Registry and are willing to submit a Settlement Proposal to the Respondent No. 1 to amicably resolve the dispute subject to imposition of a reasonable rate of interest. 33. In the present case, since the CoC has already been constituted, in the event the settlement proposal as proposed by the Appellant is accepted by the Respondent No. 1, it shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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