Air Travel Enterprises India Ltd vs Union Bank Of India & Ors

National Company Law Appellate Tribunal Principal Bench, New Delhi COMPANY APPEAL (AT) (INSOLVENCY) No. 993 of 2020 (Arising out of Order dated 15th October, 2020 passed by National Company Law Tribunal, Kochi Bench, Kochi, in IBA/01/KOB/2020).

IN THE MATTER OF:

Air Travel Enterprises India Ltd., Founder Promoter and Shareholder of M/s. Green Gateway Leisure Ltd., (the Corporate Debtor) 1st Floor, New Corporation Building, Palayam, Thiruvananthapuram, Kerala - 695033. ...Appellant

Versus

1. Union Bank of India, Chalai Bazar Branch, Chalai, Thiruvananthapuram, ...Respondent No.1/ Kerala - 695036. Financial Creditor

2. Green Gateway Leisure Limited, Through its Interim Resolution Professional, 1st Floor, New Corporation Building, Palayam, Thiruvananthapuram, ...Respondent No.2/ Kerala - 695033. Corporate Debtor

3. Shri E.M. Najeeb Elias Muhammed, 6D, Kowdiar Manjor, Jawahar Nagar, Trivandrum - 695041. ...Respondent No. 3

4. Dr. Sahadulla M.I, 69, Rastannra, RPD Marg, Kuravakonam, Kowdiar, Trivandrum - 695033. ...Respondent No. 4

Appellant: Dr. KS Ravichandran, (PCS). Ms. S. Manjula Devi, Advocate.

Respondents: Mr. Alok Kumar, Advocate for R-1/Union Bank of India. Mr. Shinoj K. Narayanan and Mr. Client Li Johny, -2-

Advocate for R-4. Mr. Raju P. K., for R.P.

JUDGEMENT

[Per; Shreesha Merla, Member (T)]

1. Aggrieved by the Order of Admission of Section 7 Application in

IBA/01/2020 filed by the Respondent Bank/Union Bank of India, the

Appellant/Air Travel Enterprises India Ltd. (arrayed as a second Respondent

in the Original Application), preferred this Appeal under Section 61 of the

Insolvency and Bankruptcy Code (in short the 'IBC'). By the Impugned

Order dated 15.10.2020, the Adjudicating Authority has observed as

follows:-

"14. Accordingly, the following points are considered to arrive at a decision in this application.

(a) Whether the applicant granted financial assistance to the Corporate Debtor, the same was disbursed to the Corporate Debtor and there was a due from the Corporate Debtor to the Financial Creditor and that there was default in repayment of the said dues?

(b) Whether the nature of debt is a "Financial Debt" as defined under Section 5 (8) of the Code?

15. It appears from the records that the Corporate Debtor nowhere denied the debt amount nor filed any documents to show that the claim is false, but in reply by way of counter the Corporate Debtor simply prayed to dismiss the application without showing any commendable and acceptable reasons. The contentions raised in the reply will not come in the way of the admission of the application in view of the categorical ruling of the Hon‟ble Supreme Court in the case "Innoventive Industries Ltd. (Supra), that the moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under Sub-Section (7), the adjudicating

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authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. The applicant produced the statement of account for the loan account which shows that as on 30.11.2019 a sum of ₹ 32,39,45,078/- (Rupees Thirty-Two Crores Thirty- Nine Lakhs Forty-Five Thousand and Seventy-Eight Only), is due from the Corporate Debtor. It has also been established that admittedly there is a "Default" as defined under Section 3 (12) of the Code on the part of the Corporate Debtor and the nature of debt is a „financial debt‟ as defined under Section 5(8) of the Code.

16. The application on behalf of Financial Creditor is complete and there is default in the payment of the financial debt. Therefore, as per Section 7(5)(a) of the code, the present application filed U/S 7 of the I&B Code deserves to be admitted against the Corporate Debtor („M/s. Green Gateway Leisure Ltd‟).

17. The Financial Creditor has suggested the name Mr. Raju Palanikunnathil Kesavan, IBBI/IPA-

001/IP-P00801/2017-2018/11356, email id rajupkin@gmail.com for appointment as Interim Resolution Professional (IRP). He has filed a declaration in Form 2 affirming that he is a Registered Insolvency Professional and no disciplinary proceedings are pending against him."

Facts in brief:

2. The Appellant is a major Shareholder of the 'Corporate Debtor' which

has been in the business of Travel and Tourism Sector for more than four

decades; the Appellant originally obtained leasehold rights over 55.33 acres

of land from Bekal Resorts owned by the Government of Kerala, the

promoters of the Appellant formed the 'Corporate Debtor' as a Special

Purpose Vehicle ('SPV') for implementation and operation of the project

which is a Resort at Bekal; the 'Corporate Debtor' obtained financial

assistance in the year 2010 for ₹ 20 Crores from State Bank of India ('SBI'),

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₹ 25 Crores from Union Bank of India ('UBI') and ₹ 20 Crores from State

Bank of Travancore ('SBT'), during the implementation of the project several

changes were made in the project and there was escalation on the project

cost requiring an additional term loan to the tune of ₹ 24 Crores; an

Agreement for granting an additional term loan to the tune of ₹ 24 Crores by

the lenders was agreed upon, with a condition that the loan repayment

would commence from 2014 and close by 2020.

3. It is stated that while promoters of the 'Corporate Debtor' had infused

their part of the equity capital, lenders delayed the grant of additional term

loan; SBI sanctioned ₹ 8 Crores on 28.05.2014 after a lapse of 1½ years with

additional terms and conditions which were not acceptable to the Appellant;

SBT sanctioned another sum of ₹ 8 Crores on 09.02.2015 but UBI was not

ready to sanction the additional loan contrary to the Agreement dated

22.10.2013.

4. It is only on account of delay in sanctioning of the additional loan that

the project cost got enhanced. Union Bank of India communicated their

inability to grant the additional term loan after almost two years of the

Agreement of 22.10.2013, thereby leading to severe hardships and losses. It

is stated that an additional 61.40 Crores was incurred till May 2017 in

addition to the interest, the total amount invested as on date as per the

Appellant is ₹ 185 Crores out of which ₹ 89 Crores is the loan amount and

₹ 96 Crores is the promoter's contribution. On 01.07.2016, Union Bank of

India issued a sanction communication informing renewal of the term loan

of ₹ 25 Crores. On 07.11.2016, the Joint Lenders Forum ('JLF') Meeting was

convened and a Techno Economic Viability study was conducted by M/s.

Company Appeal (AT) (Insolvency) No. 993 of 2020 -5-

Dun & Bradstreet. Based on the report, the lead bank SBI sanctioned their

share of ₹ 15.70 Crores on 29.03.2017. On 27.09.2017, in the Sixth JLF

Meeting, the Banks informed the Appellant that they would not provide any

additional funds and declared their account as NPA. SBI issued a Demand

Notice on 29.12.2017 under Section 13(2) of the SARFAESI Act, 2002

demanding to pay a sum of ₹ 96,04,97,895/- within 60 days. The 'Corporate

Debtor' filed WP(C) No. 6464/2018 before the Hon'ble High Court of Kerala

seeking a direction against the lenders for providing additional funds. SBI

issued a letter dated 12.04.2018 stating that it is not a consortium leader

and the loan availed by the 'Corporate Debtor' from lenders are distinct and

separate. It is stated that the Demand Notice under 29.12.2017 issued by

SBI is therefore without any authority. On 15.04.2018 SBI issued the

possession Notice under Section 13(4) of the SARFAESI Act 2002.

5. The 'Corporate Debtor' filed SA No. 274/2018 before the Debts and

Recovery Tribunal (DRT) No. 1, Ernakulam and the same is pending

consideration. The lenders including the Union Bank of India filed OA No.

417/2018 before DRT No. 1, Ernakulam. It is stated that the 'Corporate

Debtor' was servicing the interest component till 2017 and paid ₹ 61.40

Crores towards interest and principal against a loan of ₹ 89 Crores. A One

Time Settlement ('OTS') proposal was sent to SBI, the lead Bank which

informed the Appellant to give a fresh proposal enhancing the offer to ₹ 65

Crores. On 22.08.2019, a JLF Meeting was conducted and the OTS proposal

given by the 'Corporate Debtor' was rejected on the ground that there was no

upfront payment made by the 'Corporate Debtor'. The 'Corporate Debtor'

came to know about the same only after verifying the Minutes of the JLF

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Meeting. The Union Bank of India also gave an OTS proposal dated

10.10.2019 to settle the dispute for the sum of ₹ 20 Crores and agreed vide a

letter dated 05.11.2019 for an amount of ₹ 17,05,00,000/-, which was

accepted by the 'Corporate Debtor' vide a letter dated 26.11.2019 and an

amount of ₹ 25 Lakhs was transferred to Union Bank of India as part of the

settlement amount. Thereafter Dhanlaxmi Bank filed a Section 7 Application

before NCLT Kochi, the Adjudicating Authority and the same was settled by

the 'Corporate Debtor' on payment of ₹ 3.195 Crores and Dhanlaxmi Bank

withdrew the Application and the same was disposed of on 06.01.2020.

6. Having agreed to the OTS, without giving sufficient time, Union Bank

of India filed this Application under Section 7 causing grave miscarriage of

justice, the project at this stage, if liquidated would result in huge economic

loss as it is at the threshold stage and the first phase is ready to be rolled

out.

7. Submissions on behalf of the Learned Counsel appearing for the

Appellant:

 It is submitted that the Section 7 Application is barred by Limitation

as the date of NPA is 30.09.2015, whereas the Application was filed on

27.12.2019. The period of 3 years specified under Article 137 of the

Limitation Act, 1963 expired long before the date of initiation of the

proceeding under Section 7, hence it is ex-facie time barred.

 The Learned Counsel relied on the ratio of the Hon'ble Supreme Court

in 'Babulal Vardharji Gurjar' Vs. 'Veer Gurjar Aluminium

Industries Pvt. Ltd. & Anr.' reported in SCC 6347 of 2019,

'Jagdish Prasad Sarada' Vs. 'Allahabad Bank' in Company

Company Appeal (AT) (Insolvency) No. 993 of 2020 -7-

Appeal (AT) (Insolvency) No. 183 of 2020, 'Asset Reconstruction

Company (India) Limited' Vs. 'Bishal Jaiswal & Anr.' reported in

2021 SCC OnLine SC 321, 'B.K. Educational Services Private

Limited' Vs. 'Parag Gupta and Associates' in Civil Appeal No.

23988 of 2017 in support of his contention that the Section 7

Application is to be filed within three years of the date of NPA as the

debt cannot be given a new lease of life when it is time barred.

 The Union Bank of India failed to communicate on time its inability to

sanction further amounts and has stated this only after two years of

the Agreement. This act of default on behalf of the Bank led to

enhancement of the project cost.

 The revival letter is dated 01.06.2017 and even if this letter is accepted

to be an acknowledgement of debt under Section 18 of the Limitation

Act, 1963, the date of commencement of communication would be

01.06.2017 which is undisputedly the last signed document. At no

point of time, there was a recall notice as the amount involved is a

'Term Loan' and is repayable in instalments and the 'Corporate Debtor'

has paid the interest on the loans and to demand the entire balance

amount at one go when it is a term loan, is unjustified.

 Action was initiated by the Respondent Bank under SARFAESI Act,

2002 for sale of properties and recovery of money and such a recovery

under the IBC Code is against the objectives of Code itself.

Company Appeal (AT) (Insolvency) No. 993 of 2020 -8-

 The default in question cannot be attributed to the 'Corporate Debtor'

as it is the Financial Creditors who caused enormous delay in granting

the sanctioned additional loan resulting in overrun of cost.

 There was constant support and continuous funding and infusion of

capital by the promoters of the 'Corporate Debtor' to meet additional

funds and serving of interest of the existing loans. The project under

implementation is not a proper cause for result of Insolvency by

commencing CIRP, as the project has reached the stage where phase-1

could be put into operation.

 The commencement of CIRP would cause grave economic loss to all

the stakeholders who had contributed the long term capital need of

the project of the 'Corporate Debtor'.

8. Submissions on behalf of Learned Counsel appearing for the

Respondent:

 Briefly put, the Learned Counsel submitted that the Application is well

within the period of limitation as the debt amount is a 'Term Loan'

sanctioned for the purpose of construction of a Deluxe Resort, the

repayment of which amount, was to begin from September, 2012 till

the final repayment by September 2018. The same was never adhered

to by the 'Corporate Debtor' and the Respondent Bank agreed to

restructure the loan facility with a condition that the repayment would

start from 2014 and would be completed by the year 2020. The loan

was restructured once again as the 'Corporate Debtor' failed to adhere

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to the payment and the repayment date was extended to September

2022.

 On 01.07.2016, at the request of the 'Corporate Debtor', the Bank

renewed the limits on certain terms but the same was not accepted by

the 'Corporate Debtor' and as per the RBI norms, the account was

classified as NPA on 30.09.2015. The date is not a default date but the

date from which the Banks are prohibited to charge interest.

 Each unpaid instalments constitute a default whether it is the first

instalment or the last as per the payment schedule in the Loan

Agreement. The 'Corporate Debtor' continued to service interest upto

June 2017 and therefore the Application is not barred by Limitation as

the Limitation period of three years as provided under Article 137 of

the Limitation Act has not expired as on the date of filing of the

Application.

 A One Time Settlement was agreed upon on 05.11.2019 based on

certain conditions and the 'Corporate Debtor' was required to pay

17.05 Crores, which payment was once again defaulted by the

'Corporate Debtor'. Hence, the conditional OTS is rendered

infructuous thereby reverting the obligations to be ignored by the Loan

Agreement to 12.01.2015 which required quarterly instalments to be

made till the Financial Year 2022-23. As the last payment was made

in June 2017, the ratio of 'Asset Reconstruction Company (India)

Limited' (Supra) is applicable to this case.

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Submissions on behalf of the Learned Counsel appearing for

Respondent No. 4:

9. The fourth Respondent filed his Written Submissions stating that the

claim of Union Bank of India against him as a personal guarantor is not

maintainable as personal guarantor were brought under the purview of the

Code only with effect from 01.12.2019; that there is a pending dispute

between Union Bank of India and two other Banks and for the recovery of

the amount covered by IBA/01/KOB/2020, the said Banks including Union

Bank of India filed OA 417/2018 before the Debt Recovery Tribunal, Kochi

and in that litigation, the fourth Respondent has filed IA 1409/2019 seeking

a direction to the Banks to produce the originals of the documents relied

upon, and the same is still pending.

Assessment:

10. At the outset, we address ourselves to the issue whether the

Application filed under Section 7 of the Code is barred by Limitation. A plea

of limitation is a mixed question of law and fact. It cannot be decided as an

abstract principle of law devoid from facts as in every case, the starting point

of limitation is entirely a question of fact. The following facts with respect to

terms of payment of Loan Agreement is not in dispute:-

a) the first Loan Agreement is dated 02.07.2010 for the term loan of ₹ 25

Crores with a repayment schedule of 70 monthly instalments of

₹ 35.71 Lakhs each.

b) another Agreement dated 21.09.2011 was entered into according to

which the last four instalments were to be paid by 2019-20.

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c) the repayment schedule was once again revised by an Agreement

dated 24.02.2014, according to which the last two quarterly

instalments were to be paid by the year end 2021.

d) the last Agreement entered into between the parties is dated

12.01.2015, whereby the last four instalments were to be paid by the

year end 2022-23.

11. A perusal of the Minutes of the JLF Meeting held on 27.09.2017

attended by the 'Corporate Debtor' evidences that the Bankers brought to

the notice of the 'Corporate Debtor' regarding the recorded Minutes in the

Consortium Meeting held on 27.07.2015 and on 04.09.2015, wherein the

promoters have assured the completion of the project by 30.09.2015. It is an

admitted fact that the project was not complete and there was a cost overrun

of ₹ 88.22/- Crores. It is seen from the Minutes of 27.09.2017, that the

'Corporate Debtor' was aware that the account had slipped to NPA in the

books of UBI and SBI as on 30.06.2017 and 24.07.2017 respectively.

12. Notice dated 29.12.2017 was issued to the 'Corporate Debtor' under

Section 13(2) of the SARFAESI Act, 2002 specifying the outstanding liability

due and owing to all the three Banks is the sum of ₹ 96,04,97,895/-, failing

which the Banks can exercise their rights under Section 13(4) of the

SARFAESI Act, 2002. The Admission by the 'Corporate Debtor' in their Reply

filed before the Adjudicating Authority establishes that the 'Corporate

Debtor' was servicing interest upto 2017 and has paid ₹ 61.40 Crores

towards interest and principal. It is not in dispute that a JLF Meeting was

conducted on 22.08.2019 and Annexure R-20 details the Minutes of the

same. It is the case of the Appellants that the OTS was rejected on the

Company Appeal (AT) (Insolvency) No. 993 of 2020 -12-

ground that there was no upfront payment made. It is the case of the

'Corporate Debtor' that the same was not communicated to them. Be that as

it may, vide letter dated 29.08.2019, SBI has agreed for One Time Settlement

and the same was settled for the sum of ₹ 38,14,49,303/-.

13. It is also not in dispute that the Respondent, Union Bank of India has

given an offer letter dated 10.10.2019 (Annexure R-24) and on 05.11.2019 a

settlement amount was negotiated to ₹ 17,05,00,000/-. It is also the case of

the Appellant that Dhanlaxmi Bank filed IBA/41/KOB/2019 before the

Adjudicating Authority and the 'Corporate Debtor' paid ₹ 3.195 Crores as

part payment of the settlement amount and as such Dhanlaxmi Bank filed a

withdrawal Application. It is submitted that the 'Corporate Debtor' is also

ready to settle this dispute if given some time.

14. It is submitted that the Minutes of the Meeting of the JLF held on

27.09.2017 cannot be construed as acknowledgment under Section 18 of the

Limitation Act. The Hon'ble Supreme Court in its recent Judgement in

'Asset Reconstruction Company (India) Limited' (Supra) has discussed

elaborately Section 18 of the Limitation Act in reference with the Code.

Section 18 of the Limitation Act reads thus:-

"18. Effect of acknowledgement in writing.--(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

(2) Where the writing containing the acknowledgement is undated, oral evidence may be

Company Appeal (AT) (Insolvency) No. 993 of 2020 -13-

given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.--For the purposes of this section,--

(a) an acknowledgement may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,

(b) the word "signed" means signed either personally or by an agent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right."

15. The Hon'ble Supreme Court in 'Asset Reconstruction Company

(India) Limited' (Supra) has observed as follows:-

"37. Ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the financial creditor to initiate action under Section 7 of the Code. However, Section 7 comes into play when the corporate debtor commits "default". Section 7, consciously uses the expression "default" - not the date of notifying the loan account of the corporate person as NPA. Further, the expression "default" has been defined in Section 3(12) to mean 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. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their

Company Appeal (AT) (Insolvency) No. 993 of 2020 -14-

liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgements, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgement in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code enures. 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 acknowledgement, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgement of the debt, from time to time, for institution of the proceedings under Section 7 of the Code. Further, the acknowledgement must be of a liability in respect of which the financial creditor can initiate action under Section 7 of the Code."

11. Given the aforesaid, it is not possible to accede to the arguments made by Shri Sinha that Section 18 of the Limitation Act cannot be made applicable by reason of the arguments put forth by him. As has been held in Ambika Prasad Mishra v. State of U.P., (1980) 3 SCC 719, every argumentative novelty does not undo a settled position of law. Krishna Iyer, J., speaking for a Bench of five learned Judges, stated thus:

"5. ... But, after listening to the Marathon erudition from eminent counsel, a 13-Judge Bench of this Court upheld the vires of Article 31-A in unequivocal terms. That decision binds, on the simple score of stare decisis and the constitutional ground of Article 141. Every new discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent. In this view, other submissions sparkling with creative ingenuity and presented with high pressure advocacy, cannot persuade us to reopen what was laid down for the guidance of the nation as a solemn proposition by the epic Fundamental Rights case [(1973) 4 SCC 225 : 1973 Supp SCR 1]. From Kameshwar Singh [AIR 1952 SC 252 : 1952 SCR 889 : 1952 SCJ 354] (1952) and Golak Nath [I.C. Golak Nath v. State

Company Appeal (AT) (Insolvency) No. 993 of 2020 -15-

of Punjab, AIR 1967 SC 1643 : (1967) 2 SCR 762 :

(1967) 2 SCJ 486] (1967) through Kesavananda [(1973) 4 SCC 225 : 1973 Supp SCR 1] (1973) and Kanan Devan [Kanan Devan Hills Produce Co. Ltd. v. State of Kerala, (1973) 1 SCR 356 : (1972) 2 SCC 218 : AIR 1972 SC 2301] (1972) to Gwalior Rayons [State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg). Co. Ltd. (1973) 2 SCC 713 : (1974) 1 SCR 671] (1976) and after Article 31-A has stood judicial scrutiny although, as stated earlier, we do not base the conclusion on Article 31-A. Even so, it is fundamental that the nation's Constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and administrative action on vital issues deterred by the brooding threat of forensic blow up. This, if permitted, may well be a kind of judicial destabilisation of State action too dangerous to be indulged in save where national crisis of great moment to the life, liberty and safety of this country and its millions are at stake, or the basic direction of the nation itself is in peril of a shake-up. It is surely wrong to prove Justice Roberts of the United States Supreme Court right when he said :

[Smith v. Allwright, 321 US 649 (1944), 669, 670]

"The reason for my concern is that the instant decision, overruling that announced about nine years ago, tends to bring adjudications of this tribunal into the same class as a restricted railroad ticket good for this day and train only.... It is regrettable that in an era marked by doubt and confusion, an era whose greatest need is steadfastness of thought and purpose, this Court which has been looked to as exhibiting consistency in adjudication, and a steadiness which would hold the balance even in the face of temporary ebbs and flows of opinion, should now itself become the breeder of fresh doubt and confusion in the public mind as to the stability of our institutions."

(emphasis supplied)

12. Section 18 of the Limitation Act ..............................................................................

13. In an illuminating discussion on the reach of Section 18 of the Limitation Act, including the reach of the Explanation to the said Section, this Court, in Khan Bahadur Shapoor Fredoom Mazda v. Durga

Company Appeal (AT) (Insolvency) No. 993 of 2020 -16-

Prasad, (1962) 1 SCR 140 ["Shapoor Fredoom Mazda"], after referring to Section 19 of the Limitation Act, 1908, which corresponds to Section 18 of the 1963 Act, held:

"It is thus clear that acknowledgement as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgement of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgement must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgement rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is really no substantial difference between the parties as to the true legal position in this matter."

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16. The Counsel for the Respondent Bank in the instant case is relying on

the last Promissory Note dated 01.07.2016 signed by the 'Corporate Debtor'

for an amount of ₹ 25 Crores, interest rate reset with monthly rest.

17. To reiterate the date of NPA as stated in Part-IV of the Application is

30.09.2015, the last Promissory Note as stated in Part-V of the Application is

dated 01.07.2016; the revised letter of approval of a One Time Settlement is

dated 27.11.2019. The other dates which are relevant to this case are the

dates of payment as specified in the One Time Settlement for

₹ 17,05,00,000/-. Admittedly, this was extended as a last opportunity till

three months from 27.11.2019 with a stipulation that 5% of the OTS

amount ₹ 86 Lakhs was to be deposited immediately, 20% of the amount

₹ 3.14 Crores was to be deposited within 30 days from 27.11.2019 and the

balance amount ₹ 12.78 Crores was to be deposited three months from

27.11.2019. The 'Corporate Debtor' has not adhered to these terms of

payment and the Section 7 Application was filed on 21.12.2019. The Hon'ble

Supreme Court in 'Asset Reconstruction Company (India) Limited'

(Supra) has observed that the „words used in the acknowledgement must,

however, indicate the existence of the jural relationship between the parties

such as that of Debtor and Creditor and it must appear that the statement is

made with the intention admit as jural relationship. Such intention can be

inferred by implication from the nature of the Admission, and need not

expressed in words‟. In the instant case, the term loan was serviced till June

2017. The Application was filed on 21.12.2019. Further, an OTS Agreement

was entered into by the parties and the promise to pay the amount within

the time frame can safely be construed as the existence of a jural

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relationship between the parties constituting an 'acknowledgement of debt'.

Hence, we hold that the Section 7 Application was not barred by Limitation

as the facts substantiate that the period of limitation of three years as

provided under Article 137 of the Limitation Act, 1963 is satisfied.

18. Now we address ourselves to the merits of the matter. The Hon'ble

Supreme Court in 'Innoventive Industries Ltd.' Vs. 'ICICI Bank & Ors.',

(2018) 1 SCC 407 observed as follows:-

"28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor -- it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-Section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicants to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied

Company Appeal (AT) (Insolvency) No. 993 of 2020 -19-

that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-Section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be."

(Emphasis Supplied)

19. The Hon'ble Supreme Court while observing that the moment the

Adjudicating Authority is satisfied that a default has occurred, the

Application must be admitted unless incomplete, has also given an

opportunity to the 'Corporate Debtor' to point out that the default has not

occurred in the sense that the 'debt', which may also include a disputed

claim, is not due. Though we find some substance in the contention of the

Learned Counsel appearing for the Appellant that the 'Corporate Debtor' had

a legitimate expectation that the additional loan would be sanctioned and

released within the specified time frame specially in the light of the report

done by M/s. Dun & Bradstreet and that it is only on account of delay of

more than 1-1/2 years in releasing the amounts that the project cost had

escalated; it is significant to mention that in para 24 of their Reply before

the Adjudicating Authority the 'Corporate Debtor' had offered to settle the

matter. We are of the considered view that in the interest of justice, some

time be given to the Appellant to settle the matter for the following reasons:-

 The amount of default involved in this case is of a 'Term Loan'

'restructured in 2015 and payable by 2022-23'. Meanwhile,

admittedly an OTS Agreement was entered between the Respondent

Bank and the 'Corporate Debtor' on 05.11.2019 and finally approved

Company Appeal (AT) (Insolvency) No. 993 of 2020 -20-

on 27.11.2019. At this juncture, it is relevant to reproduce the OTS

letter dated 05.11.2019:-

Company Appeal (AT) (Insolvency) No. 993 of 2020 -21-

(Emphasis Supplied)

 As can be seen from the above terms and conditions, the promise of

payment started ticking from 27.11.2019. The initial instalment to be

paid as on that date was ₹ 86 Lakhs < ₹ 1 Crore. The Order of

Admission is dated 15.10.2020. The second instalment was due after

30 days i.e. on 27.12.2019 and this Application was filed on

Company Appeal (AT) (Insolvency) No. 993 of 2020 -22-

27.12.2019. It is the case of the Respondent that the Appellant has

not paid the first two instalments of OTS and hence it is the 'Term

Loan' amount which has to be paid. However, at this juncture, we

note that there has been a conscious effort on behalf of the Appellant

to settle the dues of the Banks. The OTS Agreements are detailed as

hereunder:-

The State Bank of India settled the ₹ 38,14,49,303.00 matter on 30.09.2019 Dhanlaxmi Bank settled the ₹ 12,50,00,000.00 matter on 13.12.2019 Union Bank of India offer of ₹ 17,05,00,000.00 settlement as on 05.11.2019 Total ₹ 67,69,49,303.00

(Emphasis Supplied)

20. Be that as it may, for all the aforenoted reasons and having regard to

the Written Submissions that efforts would be made to settle the matter, in

the interest of justice and taking into consideration the fact that in this

pandemic, the travel dependent sector, which is the core business of the

'Corporate Debtor', has more than suffered the negative impact of the crisis,

this opportunity is being given to settle which could help mitigate the blow.

We are also conscious of the fact that the 'Corporate Debtor' has settled the

matter with Dhanlaxmi Bank, the Applicant of Section 7 Application in

IA/06/KOB/2020 & IBA/41/KOB/2019 which was disposed of as

withdrawn based on the settlement terms on 06.01.2020, during which

period of pendency, this Section 7 Application was filed on 27.12.2019

against the same 'Corporate Debtor'. We reiterate, that the scope and

objective of the Code is Insolvency & not recovery. The Admission of Section

Company Appeal (AT) (Insolvency) No. 993 of 2020 -23-

7 Application is set aside. Keeping in view the peculiar facts of the attendant

case, we dispose of this Appeal with a direction that if the 'Corporate Debtor'

fails to settle in 6 months time from the date of this Order, the Respondent

Bank is at liberty to take appropriate steps. Any observations made in this

Appeal shall not stand in the way of any further proceedings, if initiated.

Needless to add, the period spent in pursuing this Appeal shall be excluded

for the purpose of limitation.

21. The Registry is directed to upload the Judgement forthwith on the

website of this Tribunal.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

NEW DELHI 09th September, 2021

ha

Company Appeal (AT) (Insolvency) No. 993 of 2020