Bank Of India vs Multi Arc Coating & Straps Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal(AT) (Insolvency) No. 891 of 2019 IN THE MATTER OF: Bank of India, Bharuch Branch, New Rasda Building, Bharuch ...Appellant Vs Multi Arc Coating and Straps Limited Registered Office: Survey No. 7/8/9, National Hitghway No. 8, Bharuch - 392 015. ....Respondent Present: For Appellant: Mr. Shivanshu Kumar and Mr. Vikky Dang, Advocates. For Respondent: Ms. Aastha Mehta, Advocate.

ORDER

06.02.2020 This Appeal has been filed by Bank of India (Financial

Creditor) who had filed Application under Section 7 of Insolvency and

Bankruptcy Code, 2016 (in short 'IBC') before the Adjudicating Authority

(National Company Law Tribunal, Ahmedabad Bench), Ahmedabad in C.P.(I.B.)

No. 349/7/NCLT/AHM/2018. The Application was filed claiming that there was

a financial debt outstanding, the total value of which is Rs. 22,01,85,312/-

which was not cleared by the Respondent- Multi Arc Coating and Straps Limited

(Corporate Debtor). There was debt outstanding and default was claimed. The

Appellant relied on various documents in support of his claim which can be seen

from the Impugned Order itself.

2. The learned Adjudicating Authority heard parties and observed in

paragraph -15 of the Judgment as under:

..

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 1 of 10

" In view of the above, while going through the

documents so filed by the petitioner, admittedly, corporate

debtor executed joint documents on 10.08.2007 and

23.11.2009 and corporate debtor again admitted and

acknowledged liability by letters of acknowledgement of

debt/balance confirmation letters dated 24.04.2012 in

favour of the petitioner. The said fact could be revealed from

petitioner's own documents i.e. original application No.

334/2015 filed before the DRT-II at Ahmedabad and placed

at page No. 73 (part of pleadings) to the application. Under

such circumstances, even if it is calculated from

24.04.2012, the three years' period gets over somewhere in

April, 2015, whereas, the instant application is filed on

11.07.2018 i.e. much beyond three years. There is/are no

acknowledgement before the expiry of three years placed by

the petitioner so as to extent the period of limitation beyond

three years."

...

On the above basis, the Application came to be rejected as barred by

limitation.

3. We have heard Advocate Mr. Shivanshu Kumar and Advocate Mr. Aastha

Mehta of the parties. Learned Counsel for the Appellant is pointing out that the

Adjudicating Authority Noticed the acknowledgement letter dated 24.04.2012

(page- 277 of Paper Book) and stated that if the limitation is calculated from that

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 2 of 10 date, three years' period would be over in April, 2015. Learned Counsel stated

that there was also another letter of acknowledgement issued by the Corporate

Debtor which is dated 12.03.2014 (page-419 of the Paper Book) wherein the

Corporate Debtor had clearly acknowledged the dues of the consortium Banks

and wrote with regard to the action taken under Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act,

2002 (in short 'SARFAESI') and suggested certain actions to banks regarding

sale of properties so as to recover money. Learned Counsel for the Appellant then

referred to another acknowledgement in the form of letter from the Corporate

Debtor, copy of which is at page- 420. This letter is dated 09.06.2016. Learned

Counsel states that this letter was also placed before the Adjudicating Authority

as can be seen from the list reproduced by the Adjudicating Authority in

paragraph-5 of the Impugned Order. It is stated that the Adjudicating Authority

did not consider these documents and did not refer to them and thus committed

an error in recording that the claim was time barred.

4. Letter dated 09.06.2016 from Corporate Debtor to Financial Creditor and

other Banks (page-420) has heading "Request for One Time Settlement of

outstanding dues as per OTS agreed upon for 12.30 crores". Letter reads as

under:

"Respected Sir,

With reference to the above referred subject, I would

like to bring to your kind notice that this property of the

undersigned, situated at Bharuch, being Plot No. 7,8 & 9

was mortgaged with the consortium of Banks consisting of

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 3 of 10 Bank of India and Punjab National Bank, wherein the Bank

of India was lead bank in the consortium of the Bank.

As per the one time settlement (OTS) agreed upon, the

consortium of Banks was agreeable to One Time Settlement

proposal for amount of Rs. 12.30 Cores. In response to this

the undersigned has already deposited Rs. 1 Crores in the

'no lien account' as well as the Bank has already recovered

the amount of Rs. 6,00,40,000/- by auction sale of Thane

Property and have recovered the further amount of Rs.

1,17,00,000/- from auction sale of Plant & Machinery of

Bharuch Property.

Further, I am in receipt of communication dated

7.6.2016 from a proposed buyer, who is interested in

purchasing the Plot Nos. 7 & 8 of village Vadadala, District-

Bharuch, which are mortgaged to Bank of India and Punjab

National Bank after clearing the differential outstanding

OTS amount, out of the total amount of Rs. 12.30 Cores. It

is further even stated in the said proposal that the said

proposed buyer will also take the responsibility of clearing

all the statutory dues that has been imposed on the lands

in question.

In the light of above, if the bank is agreeable to abide

by the onetime settlement (OTS) as agreed upon for a total

amount of Rs. 12.30 Crores, wherein substantial amount

has already been recovered by the Bank, then the proposed

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 4 of 10 buyer who is interested in purchasing the said land as

agreeable to pay the differential outstanding amount from

the Total Amount of Rs. 12.30 Crores as per OTS.

The aforesaid proposal is without prejudice to the

rights and contentions of the undersigned of the pending

court proceedings.

In view of above, I would request your goodselves to

take immediate steps on the aforesaid proposal and

intimate us with regard to the decision of both the Banks so

that the immediate steps can be taken by the proposed

buyer and the issue can be resolved at the earliest in the

interest of all the parties."

...

5. Learned Counsel states that this letter also constitutes an

acknowledgement in terms of Section 18 of the Limitation Act, 1963 as it shows

that the Corporate Debtor acknowledged debt and suggested steps are required

to be taken so that proposed buyer can take necessary steps and pay differential

outstanding as claimed by the Corporate Debtor. Learned Counsel further states

that Notice dated 10.04.2012 (page-275) issued under SARFAESI had informed

the Corporate Debtor that the Account had become NPA with effect from

30.06.2009. Learned Counsel states that if the acknowledgement dated

24.04.2012 (page-277), then letter of acknowledgement dated 12.03.2014 (page-

419) and then letter dated 09.06.2016 (page-420) are considered, the

acknowledgements are within three years of each other and thus the Section 7

Application filed on 11.07.2018 was within limitation period.

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 5 of 10

6. Learned Counsel for the Respondent submits that the Appellant had

sanctioned various facilities in 2006 and there is no dispute regarding the fact

that the Account had become NPA on 30.06.2009. She states that the Appellant

served Notice under Section 13(2) of SARFAESI only on 10.04.2012 and Debt

Recovery Tribunal was moved only in 2015. She accepts that Respondent had

sent letter dated 09.06.2016 (page-420) but it is her submission that the letter

cannot be construed as an acknowledgement. She states that the letter clearly

states that the same is made by the Corporate Debtor without prejudice to rights

and contentions of the Corporate Debtor in the Court proceedings pending. It is

stated that this letter could not be treated as an acknowledgement. Learned

Counsel for the Respondent is submitting that because of this, the Adjudicating

Authority ignored the letter dated 09.06.2016 and she supported the judgement

of the Adjudicating Authority.

7. Section 18 of the Limitation Act reads as under:

"18. Effect of acknowledgment in writing.--

(1) Where, before the expiration of the prescribed period for a suit

or application in respect of any property or right, an

acknowledgment 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 acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated,

oral evidence may be given of the time when it was signed; but

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 6 of 10 subject to the provisions of the Indian Evidence Act, 1872, oral

evidence of its contents shall not be received.

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

(a) an acknowledgment 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 a 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."

[Emphasis supplied]

8. In this context, learned Counsel for the Appellant has referred to the

judgement of the Hon'ble Supreme Court in the matter of "ITC Limited Vs. Blue

Coasts Hotel Ltd." [CIVIL APPEAL Nos. 2928-2930 OF 2018] -

MANU/SC/0263/2018. Paragraph 35 of the said judgment reads as under:

...

Letter of Undertaking "Without Prejudice"

"35. Much was sought to be made of the words

"without prejudice" in the letter containing the

undertaking that if the debt was not paid, the creditor

could take over the secured assets. The submission on

behalf of the debtor that the letter of undertaking was

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 7 of 10 given in the course of negotiations and cannot be held to

be an evidence of the acknowledgement of liability of the

debtor, apart from being untenable in law, reiterates the

attempt to evade liability and must be rejected. The

submission that the letter was written without prejudice

to the legal rights and remedies available under any law

and therefore the acknowledgement or the undertaking

has no legal effect must likewise be rejected. This letter

is reminiscent of a letter that fell for consideration in

Spencer's case as pointed out by Mr. Harish Salve, "as

a rule the debtor who writes such letters has no

intention to bind himself further than is bound already,

no intention of paying so long as he can avoid payment,

and nothing before his mind but a desire, somehow or

other, to gain time and avert pressure."

It was argued in a subsequent case that an

acknowledgment made "without prejudice" in the case of

negotiations cannot be used as evidence of anything

expressly or impliedly admitted. The House of Lords

observed as follows:

"But when a statement is used as

acknowledgement for the purpose of s. 29 (5), it

is not being used as evidence of anything. The

statement is not an evidence of an

acknowledgement. It is the acknowledgement."

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 8 of 10 Therefore, the without prejudice rule could have no

application. It said:

"Here, the respondent, Mr. Rashid was not

offering any concession. On the contrary, he

was seeking one in respect of an undisputed

debt. Neither an offer of payment nor actual

payment."

We, thus, find that the mere introduction of the

words "without prejudice" have no significance and the

debtor clearly acknowledged the debt even after action

was initiated under the Act and even after payment of a

smaller sum, the debtor has consistently refused to pay

up."

...

9. Learned Counsel has then referred to judgment of this Tribunal in the

matter of "Gouri Prasad Goenka Vs. Punjab National Bank and Ors." in

Company Appeal (AT)(Insolvency) No. 28 of 2019 dated 08.11.2019 and "K.R.V.

Uday Charan Rao Vs. Bank of India and Ors." in Company Appeal

(AT)(Insolvency) No. 731 of 2019 dated 13.11.2019 to submit that this Tribunal

has accepted in earlier Judgment that the OTS Proposal acts as an

acknowledgement.

10. We have gone through the matter and having heard learned Counsel for

both the sides it appears that keeping in view of provision of Section 18 of the

Limitation Act and reading the same with the contents of letter dated

Company Appeal (AT)(Insolvency) No. 891 of 2019 Page 9 of 10 09.06.2016, the same needs to be construed as an acknowledgement of the debt

outstanding and merely because in the document the Corporate Debtor mention

that the proposal was given was without prejudice to the rights and contentions

in pending Court proceedings, will not make any difference. In this view of the

matter, when NPA was declared on 30.6.2009, the documents pointed out by the

learned Counsel for the Appellant dated 24.04.2012 (page 277), 12.03.2014

(page-419) and 09.06.2016 (page-420) calculated from the date of NPA, give fresh

periods of limitation and filing of Section 7 Application on 11.7.18 was not

barred.

11. We hold that the Adjudicating Authority erred in dismissing the

Application under Section 7 of the IBC.

12. For the above reasons, the Appeal is allowed, the Impugned Order is

quashed and set aside. The matter is remitted back to the Adjudicating

Authority. The Adjudicating Authority will admit the Application under Section

7 of the IBC and pass further suitable orders required to be passed on admission

of Application under Section 7 of IBC.

The Appeal is disposed of accordingly. No costs. The parties to appear

before the Adjudicating Authority on 26.02.2020.

[Justice A.I.S. Cheema] Member (Judicial)

[Justice Anant Bijay Singh] Member (Judicial)

(Kanthi Narahari) Member(Technical) Akc/Md

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