Amogh Sabharwal vs Tata Capital Financial Services ...

(Arising out of Order dated 21.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi in C.A. No. 1233/2019 in C.P. (IB) 397(PB)/2018)

IN THE MATTER OF:

Amogh Sabharwal Suspended Director of Sammi Electronics India Private Limited, S/o Indrajit Sabharwal, R/o C-105 Chander Nagar, Ghaziabad, Uttar Pradesh - 201011. ...Appellant

Versus

1. Tata Capital Financial Services Limited Having its registered office at: 11th Floor, Tower-A, Peninsula Business Park, Canpatrao Kadam Marg, Lower Parel, Mumbai, Maharashtra - 400013. Email: shrinivas.kadiyal@tatacapital.com

2. Kapil Dev Taneja, IRP of Sammi Electronics India Private Limited R/o 56-C/BB, Janakpuri, New Delhi - 110058. kapildtaneja@gmail.com ...Respondents

Present:

For Appellant: Mr. Pallav Saxena, Mr. Sorabh Dahiya and Mr. Nauseen Samar, Advocates.

For Respondents: Ms. Pooja Mahajan and Ms. Mehak Nayak, Advocates.

Cont'd.../ -2-

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by the Suspended Director of the Corporate Debtor has

been filed against the order dated 24.05.2022 passed by the Adjudicating

Authority (National Company Law Tribunal), New Delhi, Bench IV by which

order Section 7 application filed by the Respondent No.1 - the Financial

Creditor has been admitted. Brief facts of the case necessary to be noticed

for deciding the appeal are:

(i) Vide Loan Agreement dated 31.08.2012, the Financial Creditor -

'Tata Capital Financial Services Limited' granted financial facility

to the tune of Rs.20 Crores to 'Simmtronics Semiconductors

Limited', the Principal Borrower. The Corporate Debtor stood as

the Corporate Guarantor to the borrowing by furnishing corporate

guarantee and also created mortgage towards its immovable

property to secure the loan.

(ii) Under the Loan Agreement, default was committed in repayment

of loan. Corporate Debtor caused delay in making the payment

incurring liability to pay interest as agreed. The Principal

Borrower committed default in payment of interest amount and

the instalment amount on its due date.

(iii) The Financial Creditor sent notice dated 19.05.2016, 06.06.2016

and 12.09.2016 to the Principal Borrower as well as the Corporate

Company Appeal (AT) (Insolvency) No. 868 of 2022 -3-

Guarantor (Corporate Debtor herein) for payment of the

outstanding amount to the Financial Creditor.

(iv) On 01.08.2016, winding up proceeding was initiated against the

Principal Borrower on petition filed by one DHL Logistics Pvt. Ltd.

(v) The Financial Creditor initiated Arbitration Proceedings against

the Principal Borrower on 12.04.2017.

(vi) In September, 2017, the Financial Creditor filed Civil Suit C.S.

(OS) No. 439 of 2017 against the Corporate Debtor before the

Delhi High Court seeking grant of decree for Rs.2,31,31,720/-

which Suit is still pending before the Delhi High Court.

(vii) Arbitral Award dated 11.10.2018 passed against the Principal

Borrower.

(viii) An application under Section 7 of the I&B Code has been filed by

the Financial Creditor on 31.12.2019 claiming default amount of

Rs.2,30,87,069/-. In the application notices were issued by the

Adjudicating Authority to the Corporate Debtor but no reply was

filed nor did anyone appear on behalf of the Corporate Debtor.

The Adjudicating Authority proceeded ex-parte. The Adjudicating

Authority by the impugned order dated 24.05.2022 admitted

Section 7 Application, appointed the Interim Resolution

Professional (IRP) and declared moratorium. Aggrieved by the

order dated 24.05.2022, this Appeal has been filed.

2. Learned counsel for Appellant challenging the order impugned

submits that application under Section 7 filed by the Financial Creditor on

Company Appeal (AT) (Insolvency) No. 868 of 2022 -4-

31.12.2019 was clearly barred by time. No date of declaration of account

of Corporate Debtor as NPA has been given in the application under Section

7. According to the Application under Section 7, default of payment of

instalment on due date begin from September, 2012. Section 7 application

was filed even after three years from the issue of notice to the Corporate

Debtor on 19.05.2016, 06.06.2016 and 12.09.2016. The Adjudicating

Authority without adverting to the question as to whether the application

filed by the Financial Creditor was within time, proceeded to admit the

application. Even if proceedings were ex-parte to the Corporate Debtor, the

Adjudicating Authority ought to have considered as to whether application

is within time. It is further submitted that from the details given in Part IV

of the Section 7 application it is clear that there is no outstanding due

towards the principal amount and application under Section 7 was filed for

recovery of the interest. Application under Section 7 which was filed only

for recovery of interest was liable to be dismissed. Period of limitation is

only three years from the date of the classification of the credit facility as

NPA and I&B Code cannot be utilized for recovery of time barred debts. The

Financial Creditor has not come with clean hands nor disclosed the date of

classification of account as NPA.

3. Learned counsel for the Respondent refuting the submissions of

learned counsel for the Appellant submits that date of NPA classification

was not relevant for computation of limitation. The three years period

which under Article 137 is to be computed is from the date when default

was committed. NPA declaration is made on classification by Financial

Company Appeal (AT) (Insolvency) No. 868 of 2022 -5-

Institution of a particular account. In the present case, since the Principal

Amount got paid as per RBI Guidelines, there was no requirement of

Financial Creditor to make any NPA declaration. Corporate Debtor has

failed to pay outstanding amount on demand by Financial Creditor, hence,

default was committed. Application filed under Section 7 is well within

three years period. The period during which the Financial Creditor was

pursuing remedies before other legal forums is liable to be excluded for the

purpose of computation of limitation. On 11.11.2016, Corporate Debtor

had proposed a One Time Settlement to Financial Creditor proposing a

payment of Rs.80 Lakhs which is a clear acknowledgement of liability by

the Corporate Debtor giving benefit of Section 18 of the Limitation Act.

Learned counsel has relied on the principles under Section 5 and Section

14 of the Limitation Act. It is submitted that claim of additional interest is

a financial debt within the meaning Section 5(8) of the I&B Code. The

Corporate Debtor did not appear before the Adjudicating Authority nor

raised any objection to the application.

4. We have considered the submissions of learned counsel for the

parties and perused the record.

5. Section 3 of the Limitation Act provides for bar of limitation. Section

3 Sub-section (1) provides:

"3. Bar of limitation.--(1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed,

Company Appeal (AT) (Insolvency) No. 868 of 2022 -6-

although limitation has not been set up as a defence."

6. Section 3 of the Limitation Act puts an embargo on every suit, appeal

and application if have been found to be barred by limitation. Section 3 is

imperative and cast a duty on the Adjudicating Authority to look into

limitation even if limitation is not set up as a defence, which is a well settled

principle of law. The present is a case where the Corporate Debtor did not

appear or raised any objection to the application, however, the Adjudicating

Authority was required to look into at least the averments in the Section 7

application to find out as to whether application under Section 7 is filed

within period of limitation or not. Limitation for filing application under

Section 7 is three years as provided in Article 137 of the Limitation Act.

Part IV of the Application contains particulars of financial debt. In the

'Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,

2016', an application under Section 7 has to be filed in Form-I. Part IV of

the application Item No.2 provides amount claimed to be in default and the

date on which the default occurred (The computation of amount and days

of default in tabular form was attached). When we look into application

which has been filed in Part IV, Item 2 details of dates when payment has

been received and dates when payment became due has been mentioned.

A perusal of the tabular chart in Part IV of the Application indicates that

according to the Financial Creditor default started w.e.f. 20.09.2012 which

default has been continuing as per chart till August, 2013. After tabulating

the details of default in a chart in Part IV of the application beginning from

Company Appeal (AT) (Insolvency) No. 868 of 2022 -7-

20.09.2012 till 20.08.2013 following has been stated in the Part IV of the

application:

"From a perusal of the above details, it is seen that the borrower company committed defaults by not making the payments on their due dates and there was delay in making payments (i.e., payments were not made on their due dates, but after delay)

The Financial Creditor also sent notices dated 19.05.2016, 06.06.2016 and 12.09.2016 to the borrower (Simmtronics Semiconductor Ltd. - now under liquidation) as well the Corporate Guarantor-cum-Mortgagor (i.e., Corporate Debtor herein) for the payment of the outstanding amounts to the Financial Creditor. However, neither response was received nor payments were made. Copy of the demand notices dated 19.05.2016, 06.06.2016 and 12.09.2016 sent to the Corporate Debtor herein as well as to the borrower company (since under liquidation) for payment of outstanding dues are annexed collectively as Annexure XII (colly).

The Corporate Debtor, being the continuing corporate guarantor and the mortgagor in respect of the loan, is co-extensively liable with the borrower company for the payment of the outstanding amounts to the Financial Creditor."

7. Under Part V certain further details have been given by the Financial

Creditor including details of Company Petition No. 690/2015 and Civil Suit

Company Appeal (AT) (Insolvency) No. 868 of 2022 -8-

being CS (OS) 439/2017 filed against the Corporate Debtor, Arbitral Award

dated 11.10.2018 against the Principal Borrower. Demand Notice dated

19.05.2016, 06.06.2016 and 12.09.2016 sent to the Principal Borrower

and the Corporate Debtor has also been mentioned in Part V. When we

look into Part IV, tabular form of default according to the application,

default is continuing from 20.09.2012. In the reply which has been filed

by the Financial Creditor reference of letter dated 11.11.2016 submitted by

the Corporate Debtor to the Financial Creditor making an offer of Rs.80

Lakhs towards full and final settlement is made on basis of which

extension of limitation under Section 18 is claimed. From 11.11.2016 also,

if there will be extension of limitation for 3 years, it will come to an end on

10.11.2019. The application under Section 7 has admittedly been filed on

31.12.2019 beyond three years from the demand notice dated 19.05.2016,

06.06.2016 and 12.09.2016 as claimed in the application. As per notices

issued by the Financial Creditor to the Corporate Debtor dated 19.05.2016

default of amount of Rs.2,22,94,220/- was claimed which was required to

be cleared within four days. It is useful to extract one of the notices dated

19.05.2016 which is to the following effect:

"To,

1. M/s Simmtronics Semiconductors Limited, C-41 Okhla Industrial Area Phase-I New Delhi Dl 110020

Kind Attn: Mr. Indrajit Sabharwal

Company Appeal (AT) (Insolvency) No. 868 of 2022 -9-

Dear Sir,

Sub: To clear the outstanding dues in Term Loan account Nos.3240439, 3249715, 3257103 and 3375444;

This is to be bring to your notice that as on 17th May, 2016 an amount of Rs.2,22,94,220/- (Rupees Two Crores Twenty Two Lakhs Ninety Four Thousand Two Hundred and twenty only) is due and payable by you to us in captioned Loan accounts.

We request you to clear the aforementioned outstanding amount within four days by way of cheque / RTGS or account payee Demand draft for the above stated amount immediately. The details of account for repayment are as follows:

Bank Name HDFC Bank Ltd.

Branch Maneckji Wadia Building, Ground floor, Nanik Motwani Marg, Fort, Mumbai-400 023

Beneficiary Tata Capital Financial Services Name Ltd.

Account no. 00600310012676 RTGS/NEFT - HDFC0000060 IFSC code

Account type Current Account

Kindly note that in the event of any default in making payment as sought above, we will be

Company Appeal (AT) (Insolvency) No. 868 of 2022 -10-

constrained to make disclosures about the status of your account to the relevant authorities including RBI, CIBIL and also other lenders in terms of the facility agreement and / or would be constrained to initiate appropriate legal action.

We hereby, also call upon you, M/s Sammi Electronics India Private Limited in the capacity of the Corporate Guarantor & Mortgagor to make the payment for the above mentioned outstanding amount at the earliest, failing which we would be constrained to initiate appropriate legal recourse against you and your directors as well.

Yours faithfully

For Tata Capital Financial Services Ltd.

Authorized Signatory

CC:

1) M/s Saami Electronics India Private Limited 803 A, Devika Tower, 6, Nehru Place, New Delhi, South Delhi-110019

Also at

Industrial Property No.1D/3, Ecotech II, Udyog Vihar Greater Noida, Gautam Budh Nagar, Nr.

Chetana Fashion, UP, 201306.

2) Mr. Inderjit Sabharwal House no. 104 & 105, Chander Nagar, Ghaziabad, UP 201011

Company Appeal (AT) (Insolvency) No. 868 of 2022 -11-

Also at

C-642, New Friends Colony, New Delhi - 110065

3) Mr. Amogh Sabharwal Director Simmtronics Semiconductors Limited C-642 New Friends Colony, New Delhi -

110065

4) Ms. Bhavna Sabharwal Director Simmtronics Semiconductors Limited C-642 New Friends Colony, New Delhi -

110065"

8. From the above notice dated 19.05.2016, 06.06.2016 and

12.09.2016 the application is not within three years. There being no details

or explanation in application filed under Section 7, Part IV or Part V to

indicate that how the application is filed within time, it was incumbent

upon the Adjudicating Authority to examine the question whether the

application under Section 7 is within limitation or not. The mere fact that

Corporate Debtor did not appear or filed any objection, was not relevant for

consideration of question of limitation by the Adjudicating Authority. The

submission which has now been advanced before us in this Appeal by

learned counsel for Respondent is that Applicant is entitled for benefit of

Section 5 and Section 14 of the Limitation Act for coming to the conclusion

that application is not barred by time. For claiming benefit under Section

5 and 14 of the Limitation Act facts and sequence of the events have to be

placed before the Court to consider the question as to whether the

Applicant was entitled for benefit under Section 5 or Section 14 or not. The

Company Appeal (AT) (Insolvency) No. 868 of 2022 -12-

extension of benefit of Section 14 or Section 5 is dependent on scrutiny of

the relevant facts and sequence of events which will required to be

examined before returning the finding. In view of the foregoing discussion,

we are satisfied that the Adjudicating Authority was obliged to consider the

question of limitation of the application under Section 7 filed by the

Financial Creditor and without adverting to the said issue application

ought not have been admitted. We are of the view that in view of the

foregoing discussions the order impugned cannot be sustained and the

Adjudicating Authority is required to consider the application afresh.

9. Insofar as submission of learned counsel for the Appellant that

application under Section 7 having been filed for recovery of additional

interest ought not have been entertained. In view of the fact that matter is

being sent back to the Adjudicating Authority for considering the question

of limitation, we are of the view that the above submission of the Appellant

may also be considered by the Adjudicating Authority. Looking to the facts

of the present case, we are also of the view that one opportunity be also

provided to the Appellant/Corporate Debtor to file a reply to Section 7

application. We give two weeks' time from today to the Corporate Debtor

to file a reply to Section 7 application before the Adjudicating Authority,

failing which the Adjudicating Authority may proceed to decide the

application on the basis of materials available on the record. We make it

clear that we have not expressed any opinion on the above issue and

Adjudicating Authority is to consider the respective submissions and take

a decision in accordance with law.

Company Appeal (AT) (Insolvency) No. 868 of 2022 -13-

10. In result, the Appeal is allowed. The order dated 24.05.2022 is set

aside. The Company Petition - C.P. (IB) 397(PB)/2018 is revived before the

Adjudicating Authority to be considered afresh in accordance with law. No

costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

23rd November, 2022

Archana

Company Appeal (AT) (Insolvency) No. 868 of 2022