Ashok Tiwari vs Tattva & Mittal Lifespaces Private ...

[Arising out of the Order dated 21st March, 2023 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court - IV), in I.A. No.962/2023 in C.P.(IB)/642(MB)/2022]

IN THE MATTER OF:

Ashok Tiwari Aged: 52 years, India Inhabitant, Occupation - Business Having address at: Vista - 1, 1501, Tower B, Wadhwa, The Address, LBS Marg, Mumbai - 400086. ...Appellant.

Versus

Tattva & Mittal Lifespaces Private Limited A private limited company incorporated under the provisions of the Companies Act, 1956. Having its registered office address at: 33, 3rd Floor, Todi Building, Mathurdas Mill Compound, Lower Parel (West), Mumbai - 400013. ...Respondent.

Present

For Appellant: Mr. Prasannan S. Namboodiri, Advocate. For Respondent: Mr. Ravi Raghunath, Advocate.

JUDGMENT

[Per: Ajai Das Mehrotra, Member (T)]

1. The present Appeal has been filed under Section 61 of the Insolvency

and Bankruptcy Code, 2016, (hereinafter called `IBC, 2016') on 12.05.2023,

by `Mr. Ashok Tiwari' (hereinafter called the `Appellant') against the Impugned

Order dated 21.03.2023 read with Order dated 17.01.2023 passed by the

National Company Law Tribunal, Mumbai Bench, Court - IV, (hereinafter

referred to as the `Adjudicating Authority'). The Application of the Appellant

herein, being C.P. (IB)/642(MB)/2022 was dismissed as not maintainable as -2-

the default occurred in the period excluded as per the provisions of Section

10A of the IBC, 2016, vide Order dated 17.01.2023 of the Adjudicating

Authority. The Appellant herein had applied for rectification of the said Order

vide filing dated 15.02.2023, which was partly allowed vide Order dated

21.03.2023.

2. The Learned Counsel for the Respondent have questioned the

maintainability of the present Appeal on the grounds of period of Limitation

under Section 61(2) of the IBC, 2016. The Respondents have submitted that

the Appellant had not filed Appeal against the substantive Order dated

17.01.2023, the period of filing of Appeal for this Order expired on 16.02.2023

and the condonable period of 15 days expired on 03.03.2023 and therefore,

the Appellant cannot challenge the findings rendered by the Learned

Adjudicating Authority in the Order dated 17.01.2023. It is submitted that

the present Appeal is filed only on 12.05.2023 and therefore the present

Appeal is only against the Order dated 21.03.2023 which partly allowed and

partly refusing to rectify the Order dated 17.01.2023.

3. The Appellant had submitted that the present Appeal is filed on

12.05.2023, which is within the period of 30 days form the date of Impugned

Order dated 21.03.2023, excluding the time taken for obtaining the certified

copy of the Impugned Order. As per the stamp of the Registry of the

Adjudicating Authority, the certified true copy was applied on 23.03.2023 and

was issued on 17.04.2023. The Appellant submitted that he did not file Appeal

against the dismissal Order dated 17.01.2023 as his application for

rectification of Order dated 17.01.2023 was filed on 15.02.2023, which is

within 30 days. The screen shot of the NCLT website showing date of filing as

15.02.2023 of the said rectification Application numbered as I.A. 962/2023 Comp. App. (AT) (Ins.) No. 729 of 2023 -3-

has been submitted as evidence. The Appellant has placed on record the

Judgement dated 05.02.2020 of three Member Bench of this Tribunal in the

case of `Mohinish Kumar & Anr.' Vs. `Mohit Chawla RP of Premsons

Super Steels Pvt. Ltd. and Ors.' reported as 2020 SCC OnLine NCLAT 918,

wherein this Tribunal had considered that rectification should have been

pursued before filing of the Appeal before the Tribunal. The copy of the Order

is reproduced below for ready reference:

"An error appears to have crept in the minutes of proceedings recorded on 23rd January, 2020 by inadvertently observing that the Liquidator will proceed in accordance with the decision of this Appellate Tribunal rendered in "Y. Shivram Prasad v. S. Dhanapal - Company Appeal (AT) (Insolvency) No. 224 of 2018 disposed of on 27th February, 2019". This is actually and factually, incorrect as no order of liquidation has been passed in the application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 by the Corporate Applicant. The error is rectified by recalling such observation.

After hearing learned counsel for the parties for a while, we find that the Appellant has filed an application for rectification of some errors stated to have crept in the Impugned Order passed by the learned Adjudicating Authority, National Company Law Tribunal, New Delhi, Court - III. But at the same time the instant appeal has been preferred against the Impugned Order. This is not a happy situation. The Appellant may either pursue the application for rectification before the learned Adjudicating Authority or withdraw the same to pursue the instant Appeal.

Faced with this situation, learned counsel for the Appellant seeks to withdraw the instant Appeal with liberty to re-agitate the matter in the event of his prayer not being entertained by learned Adjudicating

Comp. App. (AT) (Ins.) No. 729 of 2023 -4-

Authority. We accordingly, dismiss this Appeal with the aforesaid liberty.

Learned Adjudicating Authority, National Company Law Tribunal, be informed of this order. It would advised to do well by first taking up the Applicant application for rectification before considering the application for passing of order of Liquidation."

4. We have considered the submissions made by both sides and we find

that the Appellant herein had filed for rectification of Order dated 17.01.2023

on 15.02.2023 which is within 30 days of the said Order. The Order dated

17.01.2023 was partly rectified vide Order dated 21.03.2023 and, excluding

the period taken for obtaining the certified copy, the Appeal has been filed

within 30 days of the said Order. The Order dated 17.01.2023 has merged

with the Order dated 21.03.2023 due to partial rectification.

5. Regarding exclusion of period taken for obtaining certified copy of the

Order in computing the period, reference is invited to sub-Rule (2) of Rule 22

of the NCLAT Rules, 2016, regarding presentation of Appeal, which provides

that every Appeal shall be accompanied by a certified copy of the Impugned

Order. Reference is also invited to Section 12 in Part III of Limitation Act,

1963, which provides that time requested for obtaining a copy of the Order

appealed against shall be excluded in counting for Limitation. Reference is

invited to Order of the Hon'ble Supreme Court in the case of `Sanket Kumar

Agarwal & Anr.' Vs. `APG Logistics Private Limited' in Civil Appeal

No.748/2023, wherein the following observations are recorded in Para 28 of

the said Order:

"28. In the present case, the application for a certified copy was sent from Delhi to Chennai on 2 September 2022, which was received on 5 September 2022, within the period of limitation of 30 days specified in Section 61(2). This aspect lies in contrast to the facts Comp. App. (AT) (Ins.) No. 729 of 2023 -5-

as they obtained before this Court in the judgment in V Nagarajan (supra) where even the application for obtaining the certified copy was not filed. In the present case, the appellant exercised due diligence and applied for a certified copy upon pronouncement of the order in terms of Rule 22(2) of the NLCAT Rules 2016. The certified copy was provided to the appellant on 15 September 2022. Hence, the period of 10 days between 5 September 2022 and 15 September 2022 taken by the court to provide a certified copy of the order ought to be excluded when determining the period of limitation under Section 61(2) of the IBC."

(Emphasis Supplied)

6. Thus, considering the Order of the Hon'ble Supreme Court cited supra

and provisions of sub-Rule (2) of Rule 22 of NCLAT Rules, 2016 and Section

12 of the Limitation Act, 1963, the period spent in obtaining certified copy of

the Impugned Order is to be excluded while calculating the period of 30 days

prescribed for filing Appeal under Section 61 of the IBC, 2016. Further,

following the Order of this Tribunal cited supra, the Appellant cannot be

faulted with for seeking rectification of the Order dated 17.01.2023 before

filing the Appeal before this Tribunal. Considering the above facts, we hold

that Appeal under Section 61 of the IBC, 2016, filed before this Tribunal is

within time and the rectification Order dated 21.03.2023 merges with the

original Order dated 17.01.2023, and proceed ahead for determination of

issued in the present Appeal.

7. The facts of this case as submitted by the Appellant, briefly are that the

Appellant had disbursed the loan of Rs.1,50,00,000/- to M/s. Tattva

Properties LLP (hereinafter called the `Principal Borrower') for development of

a Project known as Bombay XI located at Mumbai vide Loan Agreement dated

12.10.2020, which was executed by and between the Appellant, the Principal

Borrower and the Respondent/Tattva Mittal Lifespaces Private Limited

(hereinafter referred to as the `Corporate Guarantor'). The Corporate Comp. App. (AT) (Ins.) No. 729 of 2023 -6-

Guarantor was signatory to the Loan Agreement and had given two cheques

as security. As per Clause V of the Loan Agreement, the Principal Borrower

was required to pay the loan amount between the period 15.02.2021 to

15.03.2021. On failure of the Principal Borrower to pay the loan amount as

per repayment Plan, the loan facility was to be extended as per Clause VI of

the Loan Agreement dated 12.10.2020, which states that in case of delay in

repayment, the interest charges applicable will be 24% per month and further

the Principal Borrower will provide security in the form of Residential Flat to

the Appellant in the said Project Bombay XI. For the period from April, 2021

to December, 2021 the Principal Borrower failed to repay the loan amount

and failed to provide the Residential Flat as security, leading to event of

acceleration in terms of Clause IX of the Loan Agreement. The Appellant

deposited cheques given by the Principal Borrower as well as the Respondent

which were dishonoured by Bank Memo dated 19.01.2022. The default of the

Corporate Guarantor arose only on the failure of the Principal Borrower and

only when the Principal Borrower failed to pay the amount with interest, the

Guarantee was invoked by depositing the security cheques issued by the

Corporate Guarantor with the Bank, and issuing Notice to the Respondent to

pay the amount in default of the Principal Borrower. Hence the date of deposit

of the cheque or date of receipt of Notice dated 31.01.2022 has to be

considered as the date of invocation of the guarantee and the date of

dishonour of the security cheques as the `date of default'.

8. The Learned Counsel for the Appellant further submitted that the date

of invocation of Guarantee and date of dishonour of the cheques is beyond

the period covered by provisions of Section 10A of the IBC, 2016.

Comp. App. (AT) (Ins.) No. 729 of 2023 -7-

9. Learned Counsel for the Respondent submitted that there is no error in

the Order of the Adjudicating Authority and the loan was to be originally

repaid during the period 15.02.2021 to 15.03.2021 which is the period

excluded by Section 10A of the IBC, 2016, for which Corporate Insolvency

Resolution Process (`CIRP') cannot be initiated. The Respondent also

submitted that the name of the Corporate Guarantor does not figure as a

party in the personal Loan Agreement dated 10.12.2020, that the Corporate

Guarantor is not a 'surety' in the Contract of Guarantee to the Corporate

Debtor as the personal Loan Agreement dated 12.10.2020 in Clause VI states

that the Respondent is a Guarantor towards (loan taken by the Directors). It

is submitted that Respondent is not a Guarantor to any loan taken by the

Corporate Debtor/Tattva Properties LLP and therefore Insolvency Petition is

not maintainable against the Respondent. The Respondent also submitted

that the alleged Guarantee was never invoked by the Appellant. Respondent

relied upon the Judgements in the case of `Ramesh Kymal' Vs. `Siemens

Gamesa Renewable Power (P) Ltd.', (2021) 3 SCC 224, and `Zhejiang

Industrial Group Co. Ltd.' Vs. `Al Badr Seafoods Private Limited', 2023

SCC OnLine NCLAT 573.

10. We have heard the Parties and perused the documents.

11. Through Personal Loan Agreement dated 12.10.2020, M/s. Tattva

Properties LLP, the Corporate Debtor had taken loan of Rs.1,50,00,000/- from

the Appellant, Financial Creditor. Though the name of the

Respondent/Corporate Guarantor is not included in the name of the parties

listed on page 1 of the Agreement, as per Clause VI of the Agreement, the

Corporate Guarantor M/s. Tattva Mittal Lifespaces Pvt. Ltd. has undertaken

to act as a Guarantor towards loan. On page 4 of the Agreement, the Borrower Comp. App. (AT) (Ins.) No. 729 of 2023 -8-

is shown as the Corporate Debtor M/s. Tattva Properties LLP and Guarantor

is shown as Tattva Mittal Lifespaces Pvt. Limited. Similarly, Schedule 1 & 2

on page 5 of the Agreement are signed by the Respondent Corporate

Guarantor. Thus, it is clear that the Respondent Tattva Mittal Lifespaces Pvt.

Ltd. has stood as a Guarantor to the loan taken by Tattva Properties LLP for

which they have also issued two security cheques of Rs. 75,00,000/- each. As

per certificate of the IDFC First Bank dated 19.01.2022, the cheques were not

encashed due to insufficient funds. Vide Notice dated 31.01.2022 issued to

both the Corporate Debtor and the Corporate Guarantor, the Appellant herein

had brought to their Notice that the cheques have been dishonoured and had

demanded the repayment from the Guarantor within 15 days from the receipt

of the said Notice as per Clause 13 (b) of the Notice. The dishonour of security

cheques and subsequent Demand Notice dated 31.01.2022 indicates that the

Guarantee was invoked in January, 2022, which is the period not covered by

provisions of Section 10A of the IBC, 2016.

12. The Judgements cited by the Respondent in para 9 quoted supra are

not relevant here as they are basically stating that the default committed

during the period covered by the provisions of Section 10A of the IBC, 2016

will save the Corporate Debtor from initiation of CIRP. The issue herein is

whether the date of default is the original date of default as per repayment

schedule given in Clause V of the Loan Agreement dated 12.10.2020, or the

date of default is in January, 2022 when the security cheques were deposited

and the Notice for repayment was issued to the Corporate Guarantor. In the

Order dated 28.04.2023 in the case of `Pooja Ramesh Singh' Vs. `State

Bank of India & Anr.' in Comp. App. (AT) (Ins.) No. 329/2023, this Tribunal

has held that date of default in the case of Corporate Guarantor shall be the Comp. App. (AT) (Ins.) No. 729 of 2023 -9-

date on which the Corporate Guarantee was invoked. In this case the Principal

Borrower's account was declared as NPA on 05.12.2019 and the Guarantee

was invoked by Notice dated 01.10.2020. It was held that the date of default

is 01.10.2020 in the case of Corporate Guarantor, which is within the period

declared as prohibited period under Section 10A of the IBC, 2016. This

Judgement was followed in Judgement dated 03.05.2023 in Comp. App. (AT)

(Ins.) No. 486/2023 in the case of `JC Flowers Asset Reconstruction

Private Limited' Vs. `Deserve Exim Private Limited'. Para 8 of the said

Judgement states as under:

"The question as to when the default on part of the Guarantor is to considered has been decided by this Tribunal in a recent judgment pronounced on 28.04.2023 in "Company Appeal (AT) (Ins.) No.329 of 2023, Pooja Ramesh Singh vs. State Bank of India", where it has been held that default on the part of the Corporate Guarantor shall be held to have been committed only when guarantee was invoked, when Deed of Guarantee itself mentions issue of demand notice by the Bank. The issues which have been raised in the present appeal are fully covered by the judgment in Pooja Ramesh Singh vs. State Bank of India."

13. In another Judgement of this Tribunal in the case of 'Vikram Kumar

Proprietor Vs. `Arcana (Mumbai) Private Limited' in Comp. App. (AT) (Ins.)

No.836 of 2023, it was held that the date of default in the case of the

Guarantor is the date on which the Guarantee was invoked.

14. By its action of depositing the security cheques and issue of Notice

dated 31.01.2022, the Financial Creditor, the Appellant herein, is deemed to

have invoked the Corporate Guarantee in the month of January, 2022, which

is to be considered as the date of default, and which lies beyond the period

prohibited under Section 10A of the IBC, 2016. In the light of the aforesaid

detailed discussion, and relying on the Judgements of this Tribunal quoted

Comp. App. (AT) (Ins.) No. 729 of 2023 -10-

supra, it is concluded that the date of default lies beyond the prohibited period

prescribed under Section 10A of the IBC, 2016. The Adjudicating Authority is

directed to hear and decide the Application of the Financial Creditor under

Section 7 by treating it as a case not covered by the provisions of Section 10A

of the IBC, 2016. Considering the loss of time, it is expected that the said

Application will be decided by the Adjudicating Authority expeditiously.

15. With these directions Comp. App. (AT) (Ins.) No. 729/2023 is allowed

and disposed of. No order as to costs.

[Justice Anant Bijay Singh] Member (Judicial)

[Ajai Das Mehrotra] Member (Technical)

Principal Bench, New Delhi 31st October, 2023

himanshu

Comp. App. (AT) (Ins.) No. 729 of 2023