2024 TaxPub(CL) 14 (NCLAT- New Del)
INSOLVENCY AND BANKRUPTCY CODE, 2016
Section
7
Application for initiating CIRP under section 7 is not liable to be
time-barred where application is being filed within a period of 3 years from
the date of letter of acceptance for the agreement.
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Initiation of CIRP - Application admitted
by Adjudicating Authority - Contention of time barred application -
Allowability thereof
Application under section 7 had been filed and
admitted by the Adjudicating Authority. Appeal filed with a contention of
application barred by time. It was submitted that the consent terms should
extend the limitation for three years which was the reason recorded by the
Adjudicating Authority for holding that the application was within time, was
erroneous. Held: The Letter of Acceptance which was an agreement
between the parties gave a fresh period of limitation. Hence, the application
filed by the financial creditor was not barred by time and the debt and default
being proved, the Adjudicating Authority did not commit any error in admitting
section 7 application.
REFERRED : Bombay Dyeing &
Mfg. Co. Ltd. v. State of Bombay AIR 1958 SC 328], Kotak Mahindra Bank Ltd. v.
Kew Precision Parts (P) Ltd., (2022) 9 SCC 364
FAVOUR : Appeal dismissed
A.Y. :
IN THE NATIONAL COMPANY LAW
APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI
ASHOK BHUSHAN, CHAIRPERSON & BARUN MITRA, T. M.
Jubin Kishore Thakkar
v. Phoenix Arc (P) Ltd.
Company Appeal (AT) (Insolvency) No. 273 of 2023
22 December, 2023
Appellant by : Krishnendu Datta, Senior Advocate with Kumar Anurag Singh,
Zain A. Khan and Neha Aggarwal, Advocates.
Respondents by : Arvind Nayyar, Senior Advocate with Amit Mahaliyan and
Akshay Joshi, Advocates for Respondent No. 1. Aditya Gauri and Mr. Dhananjaya
Sud, Advocates for Respondent No. 2 (RP).
Ashok Bhushan, J.
This Appeal has been filed against order dated 24-2-2023 passed by the
Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-IV by
which order section 7 application filed by the Respondent No.1 Financial
Creditor has been admitted. The Appellant, Suspended Director of the Corporate
Debtor aggrieved by the admission has come up in this Appeal. Brief facts of
the case necessary to be noticed for deciding this Appeal are:
i. A
consortium of Bank extended various financial facility to the Corporate Debtor
in the year 2002.
ii. The
account of Corporate Debtor was declared NPA by Bank of India on 31-3-2015.
iii. On
16-9-2016, Bank of India issued Recall Notice to the Appellant recalling monies
payable by the Corporate Debtor under the various credit facilities.
iv. On
22-11-2018, Bank assigned the debt along with all underlying security interest
under the Deed of Assignment to the Respondent No.1.
v. Letter of
acceptance was issued on 24-4-2019 and an agreement was entered under which the
Corporate Debtor was to repay the amounts payable to the Financial Creditor.
vi. On
1-11-2021, section 7 application was filed by the Respondent No.1.
vii. On
26-9-2022, Consent Terms were entered between the Corporate Debtor and the
Financial Creditor in the proceedings before Debts Recovery Tribunal.
viii. By order
dated 24-2-2023, the Adjudicating Authority finding debt and default admitted
section 7 application. Aggrieved by which order this appeal has been filed.
2. We have heard Shri Krishnendu Datta, learned senior counsel
appearing for the Appellant and Shri Arvind Nayyar, learned senior counsel
appearing for Respondent No.1.
3. When the Appeal was taken on 3-3-2023, learned counsel for the
Appellant submitted that they have submitted proposal to Respondent No.1 for
repayment of dues. Noticing the aforesaid, interim order was passed on
3-3-2023. Following order was passed on 3-3-2023:
ORDER
3-3-2023 :
Learned Counsel for the Appellant submits that a proposal has been submitted to
Respondent on 01st March, 2023 for repayment of ARC Dues.
2. Learned
Counsel for the Respondent submits that proposal has been received which is
still under consideration.
3. Learned
Counsel for the Appellant prays that Appeal be taken after two weeks to enable
the Respondent to consider the proposal.
As prayed,
list this Appeal on 22nd March, 2023. In the meantime, in pursuance of the
order impugned, Committee of Creditors shall not be constituted.
4. Matter was again adjourned on 22-2-2023 noticing that proposal of the
Appellant is under consideration. Appellant took further opportunity on
19-4-2023 to make another endeavour to submit better offer. Subsequently, again
on 25-5-2023 it was noted that proposal is under consideration, however, no
settlement between the parties could take place. Learned counsel for the
Appellant addressed his submission on 22-11-2023.
5. Shri Krishnendu Datta, learned counsel for the Appellant submits that
application filed by the Financial Creditor was barred by time. Section 7
application itself mention 31-3-2015 as date of default and the acknowledgement
made on 30-1-2016 at best shall extend the limitation till 29-1-2019. It is
submitted that the application filed by the Appellant on 1-11-2021 was clearly
beyond three years. It is submitted that the Consent Terms dated 26-9-2022
shall extend the limitation for three years which was the reason recorded by
the Adjudicating Authority for holding that the application is within time, is
erroneous. The Consent Terms cast a duty upon the Financial Creditor to
withdraw the Company Petition which was not withdrawn.
6. Learned counsel appearing for the Financial Creditor refuting the
submissions of learned counsel for the Appellant contends that application was
well within time. Learned counsel for the Respondent No. 1 has referred to the
letter of acceptance dated 24-4-2019, where the Corporate Debtor has
acknowledged the debt and entered into fresh agreement, which was novation of
agreement and provide fresh cause of action. From24-4-2019, the application
under section 7 was well within time. The Consent Terms dated 22-9-2022 arrived
before Debts Recovery Tribunal, Mumbai was not honoured by the Corporate
Debtor. The Corporate Debtor having not honoured the Consent Terms, there was
no occasion to withdraw the Company Petition. The Adjudicating Authority has
rightly held that section 7 application was well within time. It is submitted
that debt and default having been proved the Adjudicating Authority has rightly
admitted section 7 application.
7. We have considered the submissions of learned counsel for the parties
and perused the record.
8. We may first notice the amount claimed and date of default as contained
in Part IV of the section 7 application. In Part IV Item No. No. 2 following
has been stated:
10
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Amount claimed
to be in default and the date on which the default occurred (attach the
workings for computation of amount and days of default in tabular form)
(annexed as anneuxre-2)
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Cash Credit
Facility
1.
Outstanding Amount as on October 31, 2021 Rs. 43,18,11,891 (Rupees Forty
Three Crores Eighteen Lakhs Eleven Thousand Eight Hundred Ninety One Only)
2. Date of
Default The account of the Corporate Debtor was declared as NPA on March 31,
2015.
Star
Sahayata Term Loan
1.
Outstanding Amount as on October 31, 2021 Rs. 99,74,73,641 (Rupees Ninety
Nine Crores Seventy Four Lakhs Seventy Three Thousand Six Hundred Forty One
Only)
2. Date of
Default March 31, 2015, as evidenced from the Statement of Account of the
Term Loan.
Inland Bill
Purchase Account
1.
Outstanding Amount as on October 31, 2021 Rs. 23,40,63,483 (Rupees Twenty
Three Crores Forty Lakhs Sixty Three Thousand Four Hundred Eighty Three Only)
2. Date of
Default September 30, 2015.
Date of
declaration of Corporate Debtors Account as NPA March 31, 2015
Date of
Default under the LOA March 31, 2019.
Apart from
the aforesaid dates of default, the Corporate Debtor has acknowledged its
liability in respect of the aforesaid financial facilities in various
documents including (without limiting) in the LOA dated April 24, 2019 and
the Corporate Debtors Balance Sheets from time to time.
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9. There is no doubt that date of default has been mentioned as 31-3-2015
on which date the account of Corporate Debtor was declared as NPA, however, the
Letter of Acceptance dated 24-4-2019 has also been pleaded in Part IV, as
noticed above. The Adjudicating Authority in the impugned order has noticed the
DRT Consent Terms dated 26-9-2022 and observed that fresh period of limitation
shall start, hence the objection on the ground of limitation have no merit.
Para 13 of the impugned order is as follows:
13. In view of
the Consent Terms and the Order of DRT Mumbai dated 26-9-2022, the fresh period of limitation will start
and hence, the present application is not barred by limitation. Nonetheless, a
sum of Rs. 23,40,63,483 is claimed to be outstanding under inland bill purchase
account facility and is stated to in default since 31-3-2019 as per Part-IV of
the Petition. Also, the Corporate Debtor has acknowledged its liability in
respect of all three Credit Facilities vide LOA dated 24-4-2019. In view of this
also the objection on ground of limitation does not have any merit.
10. In Para 13 of the Adjudicating Authority two documents have been
noticed; Consent Terms dated 26-9-2022 and Letter of Acceptance dated
24-4-2019. We are of the view that in so far as Consent Terms dated 26-9-2022
and fresh period of limitation thereafter, they have no relevance in the
present application which was filed in the year 2021. However, the later part
of the order where Letter of Acceptance dated 24-4-2019 has been noted is
relevant for the purpose of limitation. Letter of Acceptance dated 24-4-2019
issued by Respondent No. 1, Financial Creditor has been filed at page 493 of
the appeal. The Letter of Acceptance has been signed by the Financial Creditor
and the Directors of the Corporate Debtor including the Appellant before us.
The Letter of Acceptance is in the nature of agreement which is signed by all
parties and amounts to fresh agreement between the parties. This fresh
agreement acknowledges the debt of Rs. 106,97,76,398.83 along with interest.
The Letter of Acceptance further provides that the Obligors shall jointly
and/or severally to pay Rs. 43,89,46,000 along with interest towards the
settlement of assigned debt due. The Letter of Acceptance which is an agreement
between the parties shall give a fresh period of limitation after 24-4-2019, which
is within three years of 1-11-2021, date on which Section 7 application was
filed.
11. The Hon'ble Supreme Court in Kotak Mahindra Bank Ltd. v. Kew
Precision Parts (P) Ltd., (2022) 9 SCC 364 in Paras 30 and 31 has laid down
following :
30. In this
appeal, it is contended that the last offer of 20-12-2018 was followed by an
agreement. Whether there was such agreement or not would have to be considered
by the adjudicating authority. To invoke section 25(3), the following
conditions must be satisfied:
30.1. It must
refer to a debt, which the creditor, but for the period of limitation, might
have enforced.
30.2. There
must be a distinct promise to pay such debt, fully or in part.
30.3. The
promise must be in writing, and signed by the debtor or his duly appointed
agent.
31. Under
section 25(3), a debtor can enter into an agreement in writing, to pay the
whole or part of a debt, which the creditor might have enforced, but for the
limitation of a suit in law. A written promise to pay the barred debt is a
valid contract. Such a promise constitutes novation and can form the basis of a
suit independent of the original debt, for it is well settled that the debt is
not extinguished, the remedy gets barred by passage of time as held by this
Court in Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay [Bombay Dyeing
& Mfg. Co. Ltd. v. State of Bombay, AIR 1958 SC 328].
12. In view of the law laid down by the Hon'ble Supreme Court, there shall
be fresh period of limitation from 24-4-2019 and the application filed by the
Appellant within three years from the said date was well within time. The
Adjudicating Authority in Para 13 has also noticed the Letter of Acceptance
dated 24-4-2019 for holding that objection on ground of limitation does not
have any merit. We fully concur with the view of the Adjudicating Authority
that objection raised on the ground of limitation has no merit.
13. In the present case, there is no dispute to the debt and default there
being acknowledgments by the Corporate Debtor. We have also noticed that in
this Appeal several opportunities were taken by the Appellant to settle the
debt which could not fructify.
14. We, thus, are of the view that application filed by the Financial
Creditor was not barred by time and the debt and default being proved, the
Adjudicating Authority did not commit any error in admitting section 7
application. There is no merit in the Appeal. Appeal is dismissed.