Jagdish Prasad Sarda vs Allahabad Bank

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) (Insolvency) No. 183 of 2020 (Arising out of Impugned Order Dated 27.08.2019 passed by Hon'ble National Company Law Tribunal, Hyderabad Bench, Hyderabad in CP(IB) No. 102/07/HDB/2019)

In the matter of: Jagdish Prasad Sarada (Suspended Managing Director of the Company) Office At: Plot No.655, Satamraj Village Gaganpahad, R.R.Dist. Telangana - 501 323 Address: Villa No.35, Pearl County Attarpur Hyderabd 48, Telangana, India ...Appellant

Vs. Allahabad Bank Himayathnagar Branch, 3-6-435 Ground Floor, Main Road, Himayathnagar Hyderabad - 500 029, Telangana ....Respondent

Present: For Appellant: Mr. S.Nandkumar, Mr. Piyush Singh and Mr.Akshay Srivastava, Advocates. For Respondent: Mr.Abhishek Sharma, Mr. Anisha Mahajan and Mr.Atul Sharma, Advocates.

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The Appellant - Jagdish Prasad Sarda, Suspended Managing Director of

the M/s. Sarda Agro Oils Limited has filed this Appeal under Section 61

read with Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short

Company Appeal (AT) (Insolvency) No. 183 of 2020 2

'I&B Code, 2016') & Rule 4 of the Insolvency and Bankruptcy (Application

to Adjudicating Authority) Rules, 2016 against the Impugned order dated

27.08.2019 passed by the Adjudicating Authority (National Company Law

Tribunal, Hyderabad Bench, Hyderabad) in CP(IB) No.102/07/HDB/2019.

The Adjudicating Authority has admitted the Petition and initiated

'Corporate Insolvency Resolution Process' (in short 'CIRP') and appointed

'Interim Resolution Professional' (in short 'IRP') Mr. Madhusudhan Rao

Gonugunta.

2. The Appellant prays for allowing the present Appeal and setting aside the

ex-parte order dated 27.08.2019 as state d above apart from stay of

Insolvency Proceeding against the Corporate Debtor etc.

3. The Appellant has attached Companies list of Debtors and receivable

alongwith action for its recovery. In addition to the 'Balance Sheet' as on

31.03.2015. A look at the 'Balance Sheet' reveals that the Company has

started making losses from the 'Financial Year' 2014-15. The Appellant

has also enclosed 'Memorandum of Writ Petition' filed in Hon'ble High

Court of Judicature at Hyderabad in W.P No.2214 of 2016, the same

appears to be pending before the Hon'ble High Court of Judicature at

Hyderabad and appearing at Annexure A-6 of the main Application.

They have also filed the order of Debt Recovery Tribunal, (for short 'DRT')

Hyderabad in S.A No.10/2017. The DRT, Hyderabad has allowed for

quashing the possession notice dated 27.01.2016 of the Bank but has

Company Appeal (AT) (Insolvency) No. 183 of 2020 3

allowed the Respondent Bank to take measure under Section 13(4)

SARFAESI Act, 2002.

4. The Adjudicating Authority has after repeated notice to the Appellant and

even when counsel appeared, he failed to file any counter before the

Adjudicating Authority. The Adjudicating Authority has posted the case on

various dates like 18.02.2019, 06.03.2019, 27.03.2019, 08.04.2019,

29.04.2019, 02.08.2019 & 05.08.2019 but the Appellant has failed to

appear before the Adjudicating Authority. The Counsel for the Appellant

appeared on 04.07.2019 but did not file any counter nor represented

before the Adjudicating Authority when the case was posted on 02.08.2019

and 05.08.2019.

5. The Adjudicating Authority has admitted the case based on some

payments made by the Appellant- Corporate Debtor M/s. Sarda Agro Oils

Limited, Hyderabad - into the current account of the Respondent Bank

and the last payment being on 19.02.2016 for an amount of

Rs.49,50000/- reflected in the 'Statement in the Account' of the Corporate

Debtor in the books of the Respondent Bank inspite of Non-Performing

Asset (for short 'NPA') on 30.09.2015.

6. On the issue of delay in filing the Appeal the Registrar, NCLAT, New Delhi

vide its order 28.01.2020 in Interlocutory Application No.415/2020 has

already condoned the delay and listed the matter before the Bench 'For

Admission'. Although, the Respondent Bank has raised this issue of delay

but the matter has already been disposed of vide its order 28.01.2020.

Company Appeal (AT) (Insolvency) No. 183 of 2020 4

7. The Respondent Bank in its submission has also made an observation that

when this Appellate Authority was hearing the matter on 07.02.2020, it

has already observed "only issue that deserves consideration in this matter

is whether the Application under Section 7 of the I&B Code, 2016 filed by

the Respondent Bank was within the period of limitation".

8. The Respondent Bank has also submitted that the Corporate

Debtor/Appellant was already sanctioned the cash credit facility of Rs.20

Crore, Term Loan of Rs.14 crore and Letter of Creditor of Rs.65 Crores by

way of a Common Sanction Letter dated 31.05.2012. It was also submitted

that the Appellant became irregular in repayment and consequently the

account was declared NPA on 30.09.2015. The Respondent Bank has

taken necessary measure by invoking provisions section 13(2) & (4)

SARFAESI Act, 2002. They have realized Rs.49,50,000/- on 19.02.2016

by way of cash and is reflected in the ledger of Corporate Debtor

maintained with the Respondent Bank. The Respondent Bank has gone

on further submission that by operation of Section 19 of the Limitation

Act, 1963 read with Article 137 of the Schedule to the said Act, a fresh

period of limitation of 3 years commenced from 19.02.2016 when a part of

the debt/interest was repaid. The Respondent Bank has also averred that

they have filed under Section 7 Application of I&B Code, 2016 on

31.12.2018 which is within 3 years from 19.02.2016. They have cited the

Hon'ble Apex Court Judgment of M/s. Gaurav Hargovindbhai Dave Vs

Asset Reconstruction Company (India) Ltd. & Anr., (2019) 10 SCC 572. Company Appeal (AT) (Insolvency) No. 183 of 2020 5

This decision has been followed by this Hon'ble Tribunal in the matter of

Ishrat Ali Vs. Cosmos Cooperative Bank Ltd & Anr. (Company Appeal (AT)

(Ins) No.1121 of 2019). Further, in the context of Section 19 of the Act, the

Hon'ble Supreme Court in the case of Kamla Devi and Ors. Vs. Pt. Mani

Lal Tiwari & Ors. (1976) 4 SCC 818 held that "4.... The function of Section

19 is to provide a later date to count the period of limitation afresh, and

that fresh period of limitation will be computed from the time when the

acknowledgement is signed....".

9. The Appellant has averred that even after the alleged payment of

19.02.2016 made by them the account of the Corporate Debtor remained

to be an NPA and was not regularized by the Respondent Bank and 'Debt'

of 'Default' continued to be mentioned as the date of NPA.

10. The Hon'ble Supreme Court has already observed in Civil Appeal No.

439, 436, 3137, 4979, 5819 & 7289 of 2018 in B.K.Educational Services

Pvt. Ltd Vs. Parag Gupta and Associates dated 11.10.2019 that the

limitation period for application under section 7 of the Code is 3 years as

provided by Article 137 of the Limitation Act, 1963 which commences from

the date of default and is extendable only by application of section 5 of

Limitation Act, 1963 if any case for condonation of delay is made out. The

view taken by the Hon'ble Apex Court in 'B.K.Educational Services

Company Appeal (AT) (Insolvency) No. 183 of 2020 6

Private Limited Vs. Parag Gupta and Associates' that the limitation

period for application under Section 7 of the I&B Code is three years as

provided by Article 137 of the Limitation Act, which commences from the

date of default and is extendable only by application of Section 5 of The

Limitation Act, 1963 if any case for condonation of delay is carved out, has

again been reiterated in the latest pronouncement of Hon'ble Apex Court

in 'Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries

Pvt. Ltd. & Anr. (Civil Appeal No.6347 of 2019) decided on 14th August,

2020. It is therefore manifestly clear that date of default will be the date of

declaration of account as NPA and such date of default would not shift.

11. We are of the firm view that the determining factor is the three years

period from date of default/NPA. This Appe llate Tribunal has also observed

in Rajendra Kumar Tekriwal Vs. Bank of Baroda in Company Appeal(AT)

(Ins) No.225 of 2020 dated 13.08.2020 that the period of three years from

the date of the Account of Corporate Debtor is classified as NPA then it

becomes impermissible to proceed with Section 7 Application as observed

in the para 11 of the Judgment.

12. All these leads to reiterate that the provisions of The Limitation Act, 1963 vide Section 238A of the I&B Code, 2016 will be applicable to all NPA cases provided they meet the criteria of Article 137 of the Schedule to The Limitation Act, 1963. The extension for the period of Limitation can only

Company Appeal (AT) (Insolvency) No. 183 of 2020 7

be done by way of application of Section 5 of The Limitation Act, 1963, if any case for the condonation of delay is made out.

13. In view of the above, this Appeal is allowed and we set aside the impugned order dated 27.08.2019 passed by the Adjudicating Authority (NCLT, Hyderabad Bench, Hyderabad). Consequently, orders passed by the Adjudicating Authority appointing IRP/RP, declaring moratorium, freezing of account etc. and all consequential action taken by IRP/RP including advertisement publication etc. all such orders and actions are declared illegal and set aside. The Adjudicating Authority will now close the CIRP procee dings and fix the fee of IRP/RP and the Corporate Debtor will pay the fees of IRP/RP and other costs incurred by him. Let the Registry to communicate the judgment of the Adjudicating Authority (NCLT, Hyderabad Bench, Hyderabad). Copy of the judgment be provided to the party concerned as per laid down Rules as well as copy of the judgment be uploaded in the website of this Appellate Tribunal . If any, interim orders were issued stands vacated. IA, if any, is disposed of. No order as to costs.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

New Delhi 28th August, 2020 RK

Company Appeal (AT) (Insolvency) No. 183 of 2020