India Sme Asset Reconstruction Co vs Medirad Tech India Ltd

[Arising out of Order dated 25.10.2018 passed by National Company Law Tribunal, New Delhi Bench in (IB)-1243(ND)2018]

IN THE MATTER OF: Before NCLT Before NCLAT

India SME Asset Financial Creditor Appellant Reconstruction Co. Limited 1004, 10th Floor, Naman Centre, Plot No.-C-31, G-Block, Bandra Kurla Complex, Bandra (East), Mumbai Maharashtra-400051

Versus

Medirad Tech India Corporate Debtor Respondent Limited D-155, Sarita Vihar, New Delhi - 110076

For Appellant: Shri Sumesh Dhawan, Ms. Vatsala Kak and Ms. Geetika Sharma, Advocates Ms. Seema Jungid, CS

For Respondent: Dr. U.K. Chaudhary, Senior Advocate with Shri Anurag Bhatt, Shri Sanjay Katiyal, Shri Lokesh Pathak and Shri Dhruv Gupta, Advocates 2

JUDGEMENT

A.I.S. Cheema, J. :

1. The Appellant/Financial Creditor (India SME Asset Reconstruction

Co. Limited) is assignee of a debt availed by Respondent - Corporate

Debtor (Medirad Tech India Limited) from IDBI Bank Ltd. and Axis Bank

Ltd. vide assignment deed dated 12th December, 2012 (Page - 231 of

documents filed - Diary No.8538) and assignment deed dated 30th March,

2011 (Page - 193 of documents filed - Diary No.8538), respectively.

2. The Appellant filed Application under Section 7 of the Insolvency

and Bankruptcy Code, 2016 (IBC - in short) before the Adjudicating

Authority (National Company Law Tribunal, New Delhi Bench)

No.(IB)-1243(ND)2018 claiming that there was outstanding debt of

Rs.39,20,76,489/- due from the Corporate Debtor and the same was in

default. For the purpose, the Appellant filed the Application in Form - 1

and annexed documents (Annexures 1 to 42).

3. On 25th October, 2018, the Adjudicating Authority passed Impugned

Order observing that the case arose out of loan transaction which was

given in 2001 and 2005 and refusal to honour agreement for the purpose

of its return, was in 2007. The Adjudicating Authority observed that there

was nothing on record to extend limitation and the Financial Creditor had

been given enough time to satisfy the Bench. Adjudicating Authority by

short Order proceeded to dismiss the Application.

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4. Aggrieved by the Impugned Order, the present Appeal has been filed.

The Appellant is relying on the various documents Appellant had filed

along with the Application under Section 7 as well as additional

documents which have been produced (with Diary No.8538) and claims

that the amount in default could not be said to be debt not legally

enforceable. It is the case of the Appellant that even the balance sheet for

the Financial Year - 2015 - 2016 of the Respondent - Corporate Debtor

(Page 147 - Diary No.8538) showed that the Company was still showing

that the secured loans of the Axis Bank and IDBI Bank were there. The

Appellant also referred to OA 18/2009 filed by Axis Bank against the

Respondent before DRT, Cuttack (Page 409 - Diary No.8538) and the

written statement filed by the Respondent acknowledging the debt. The

Appellant points out that the debt owed to IDBI Bank was supported by

mortgage of immovable properties by the Corporate Debtor and Corporate

Debtor had filed Writ Petition No.13910/2012 against IDBI Bank before

the High Court of Orissa, Cuttack (Page 447 - Diary No.8538). It is argued

that both the banks had initiated litigations on the basis of law as was

applicable at the concerned time and with the coming into force of IBC,

relief as now available was resorted to and thus, it cannot be said that the

debt was time barred. Appellant also claims that there was creation of

charge by the Respondent in favour of Axis Bank on 10.8.2004 and in

favour of IDBI Bank on 06.08.2003 and on 23rd April, 2001 and later on,

there was modification of charge in favour of the Appellant on 30th March,

2011 and 12th December, 2012. Corporate Debtor had in 2014, moved

Company Appeal (AT) (Ins) No.785 of 2018 4

Regional Director, Northern Region, MCA against IDBI Bank and the

Appellant sought setting aside of the two From No.8. Respondent had also

filed complaint before Registrar of Companies seeking rectification of

charge recorded. Appellant referred to the documents filed to show

creation of the equitable mortgage by deposit of title deeds. Appellant

claims that even the website of Ministry of Corporate Affairs shows

existence of the charge in favour of the Appellant.

5. Against this, the Respondent - Corporate Debtor has submitted that

the loan of IDBI became NPA on 30th June, 2007 and recalled the IDBI

loan vide Notice dated 13.07.2012 and that date must be treated as date

of default and thus, the Application under Section 7 must be said to be

time barred. As regards Axis Bank, it is argued that the account became

NPA on 5th January, 2007 and the bank recalled loan on 25 th November,

2007 and thus, the claim with regard to loan from Axis Bank also must be

said to be barred by limitation. Relying on the Judgement in the matter of

"B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates"

- (AIR 2018 SC 5601) passed by Hon'ble The Supreme Court of India, it

is argued that debt which had already became time barred cannot be relied

on to pursue proceeding under the IBC. The Respondent denies that the

reflection of the debt of Axis Bank and IDBI Bank in the balance sheet of

Corporate Debtor would tantamount to acknowledgement under Section

18 of the Limitation Act, 1963 (Limitation Act - in short) as according to

the Respondent, the name of the two banks does not mean the name of

Company Appeal (AT) (Ins) No.785 of 2018 5

the Appellant - India SME Asset Reconstruction Co. Limited is reflected.

Apart from this, it is claimed that in the Balance Sheet relied on by the

Counsel for the Appellant, the Company has mentioned in the same

Balance Sheet (at Pages 154 and 155 - Diary No.8538) regarding the

pending litigations. According to the Respondent, Article - 62 of the

Limitation Act would not be helpful as it relates to Suit.

6. Keeping in view Judgement relied on and arguments, we have gone

through the record, especially, Form - 1 and its Annexures as were

submitted before the Adjudicating Authority. The Appellant disclosed

particulars regarding the Corporate loan and working capital credit

facilities given by IDBI and Axis Banks. Referring to IDBI Bank, the

Applicant pointed out that on 23.04.2001, IDBI gave term loan of Rs.100

Lakhs as per the Loan Agreement and the Corporate Debtor executed Deed

of Hypothecation dated 23.04.2001; deed of guarantee by Dr. A.K. Rath

and Smt. L.K. Panigrahi as well as two undertakings were given by the

Corporate Debtor. There is reference to the mortgage of immovable

property by the Corporate Debtor on 20.01.2003 (Annexure A-5 - Page

106). The Application shows that on 06.08.2003 - Corporate Debtor asked

for additional loan of Rs.100 Lakhs and term loan was sanctioned.

Agreement in this regard was executed along with further documents on

12.11.2003 and there was further mortgage of property by the Corporate

Debtor. It is stated that IDBI recalled entire loan outstanding on

13.07.2012. It appears Notice dated 28.03.2008 under Section 13(2) of the

Company Appeal (AT) (Ins) No.785 of 2018 6 Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 (SARFAESI - in short) was issued. The

Application No.02/2010 was filed before the District Magistrate of Khurda,

Bhubneswar. Against such action initiated by the Appellant - Financial

Creditor, the Corporate Debtor went and filed Writ Petition 13910/2012

(Page 447 - Diary No.8538) in High Court which is still pending.

7. With regard to Axis Bank, the Application filed before Adjudicating

Authority shows that on 27th February, 2004, Corporate Debtor sought

and was sanctioned working capital of Rs.50 Lakhs and granted term loan

of Rs.500 Lakhs. Axis Bank issued sanction letter and term loan was

approved of Rs.500 Lakhs on 17th May, 2004 and Promissory Note and

other six documents were executed by the Corporate Debtor on

10.08.2004. Later on, Corporate Debtor applied for further loan of Rs.200

Lakhs on 18th April, 2005 and necessary documents in this regard were

executed on 2nd July, 2005. On 13th March, 2006, sanction letter to

restructure the term loan was executed with regard to both the loans and

the Corporate Debtor executed necessary documents on 31st October,

2006 including acknowledgement dated 31st October, 2006. The

Application shows Notice being issued to Corporate Debtor by Axis Bank

to pay outstanding dues on 25th November, 2007. Axis Bank applied to

DRT, Cuttack vide OA 18/2009 (Page 409 - Diary No.8538) dated

30.10.2009 which is stated to be still pending.

Company Appeal (AT) (Ins) No.785 of 2018 7

8. The Application in format is supported by Annexure 1 to 42. The

necessary particulars were given by the appellant in the format. The record

shows that Corporate Debtor executed documents on 31st October, 2006

along with acknowledgement and when there was default, Axis Bank

approached DRT filing OA 18/2009. Respondent does not show as to how

when DRT was moved, the claim of Axis Bank could be said to be time

barred. As regards the claim by IDBI, admittedly there were documents of

mortgage in existence. There is mortgage dated 12th November, 2003 and

it appears that IDBI took action under SARFAESI in 2010. There is no

substance in the argument of the learned Counsel for the Respondent that

Article 62 of the Limitation Act cannot be referred to because the said

Article refers to Suit. Under IBC, relevant factor for the purpose of

limitation is to consider if the debt is enforceable in law or not. Under

Article 62 of the Limitation Act to enforce payment of money secured by a

mortgage or otherwise charged upon immovable property, the limitation is

12 years from the time when the money sued for becomes due. At the

relevant time IDBI Bank had the option to file Suit or resort to proceedings

as per SARFAESI Act. IDBI resorted to proceeding under the SARFAESI

and the Respondent filed Writ Petition which is said to be pending. The

actions resorted to by the Axis Bank and IDBI Bank to get relief under the

laws available at the concerned time (and which actions are still pending)

show that it cannot be said that the claims moved at that time were barred

Company Appeal (AT) (Ins) No.785 of 2018 8

by limitation. With the coming into force of the Insolvency and Bankruptcy

Code, 2016, new relief became available and the Appellant resorted to

Application under IBC in spite of the other litigation pending. In this view

of the matter, we are unable to agree with the claim of the Respondent that

the debt was stale or time barred. The banks were pursuing the litigations

on the basis of legal provisions as were available earlier. It cannot be said

that the debt was time barred. This is apart from the fact that admittedly

Respondent has been showing the debt in its balance sheet even right up

to 2015 and 2016. Only because the Respondent has added note in the

balance sheet that litigations regarding the debt are pending, does not

mean that existence of debt outstanding is denied.

9. We are thus unable to agree with the Adjudicating Authority. With

the Application, there were already sufficient documents showing

existence of debt and particulars were given of the litigations pending and

thus, the Adjudicating Authority should not have dismissed the

Application holding that the debt was time barred.

10. For reasons mentioned, we allow the Appeal. The Impugned Order is

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

Authority (National Company Law Tribunal, New Delhi Bench). The

Application under Section 7 No.(IB)-1243(ND)2018 is restored. The

Adjudicating Authority is directed to admit the Application (after Notice to

Company Appeal (AT) (Ins) No.785 of 2018 9

the Corporate Debtor, in case the Corporate Debtor is desirous of paying

the dues before admission Order).

No orders as to costs.

[Justice S.J. Mukhopadhaya] Chairperson

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

[Kanthi Narahari] Member (Technical) 4th September, 2019 /rs/sk

Company Appeal (AT) (Ins) No.785 of 2018