K.R.V. Uday Charan Rao vs Bank Of India

K.R.V. Uday Charan Rao ...Appellant

Versus

Bank of India & Anr. ...Respondents

Present:

For Appellant : Mr. Abhinav Vasisht, Senior Advocate with Mr. Puneet Yadav, Mr. Sourabh Yadav and Mr. Tarun Arora, Advocates.

For Respondents: Mr. Ashish Rana and Mr. Harshit Garg, Advocates for R-1.

SUDHANSU JYOTI MUKHOPADHAYA, J.

'M/s. Bank of India'- ('Financial Creditor') filed an application under

Section 7 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for

short) for initiation of the 'Corporate Insolvency Resolution Process' against

'M/s. Sainath Estates Private Limited'- ('Corporate Debtor'). The

Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench,

Hyderabad, by impugned order dated 8th July, 2019 admitted the

application.

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2. Learned counsel appearing on behalf of the Appellant/ Shareholder

submitted that the application under Section 7 was barred by limitation.

3. It was submitted that the loan was availed by the 'Corporate Debtor'

on 20th August, 2010 from the 'Financial Creditor'. Subsequently, notice

issued under Section 13(2) of the SARFAESI Act, 2002, but no action was

taken against the 'Corporate Debtor'.

4. It was submitted that on invocation of provisions of the 'I&B Code',

the 'Corporate Debtor' had no option but to provide confirmation of debt on

5th March, 2018. It was submitted that the said Agreement executed by the

'Corporate Debtor' was in violation of Section 25 of the Indian Contract Act.

5. Reliance has been placed on the decision of the Hon'ble Supreme

Court in "Gaurav Hargovindbhai Dave v. Asset Reconstruction

Company (India) Ltd. & Anr. − Civil Appeal No. 4952 of 2019" to

suggest that the application is barred by limitation.

6. Learned counsel for the Respondents submitted that the application

under Section 7 is not barred by limitation for the following reasons:

(i) The 'Corporate Debtor' have acknowledged the debt vide letters

dated 17th March, 2015, 20th March, 2015 and 5th March, 2018.

(ii) The 'Corporate Debtor' has made offer of One-Time Settlement

through various letters dated 17th January, 2017, 8th February,

2017 and 23rd March, 2017 to the Hyderabad Asset Recovery

Branch with respect to the account maintained with Mid-

Company Appeal (AT) (Insolvency) No. 731 of 2019 3

Corporate Branch. The said letter reflects another

acknowledgment of debt by the 'Corporate Debtor'.

(iii) On 27th March, 2017, the Bank approved the compromise offer

on the terms and conditions mentioned therein. Acting on the

same 'Corporate Debtor' made payment of Rs.1,00,00,000/- and

further sought time to make balance payment vide letters dated

4th July, 2017 and 10th July, 2017. It is submitted that making

part payment to the Bank also amounts to acknowledgment of

liability by the 'Corporate Debtor'

(iv) The Respondent Bank has received following part payments

against the outstanding debts in the following

M/s. Sainath Estates Pvt. Ltd. Credit received S.No. Date OTS Part Payment Remarks Amount

1 31-Mar-17 5,00,000.00 2 30-Jun-17 95,00,000.00 3 31-Aug-17 1,07,74,714.00 Received from Syndicate Bank

4 29-Jan-18 50,00,000.00 5 23-Feb-18 50,00,000.00 6 18-Apr-18 25,00,000.00 7 21-Apr-18 1,75,00,000.00 Total 5,07,74,714.00

The above clearly establishes that the 'Corporate Debtor' has

acknowledged the existence of debt.

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(v) The 'Corporate Debtor' has acknowledged its debt in the

financial statements for the Financial Year 2016-2017 and

2017-2018 filed with the Registrar of Companies.

(vi) After issuance of notice dated 4th December, 2013, the Bank

has duly taken action under Section 13 (4) of the SARFAESI Act,

2002 through lead banker Syndicate Bank, who vide notice

dated 5th September, 2014 has taken symbolic possession of the

properties. It is pertinent to mention that the Borrower has filed

WP No. 46730/2016 before the High Court of Telangana and

I.A. No. 1/2016 (WPMP No. 57551/2016) wherein it has sought

stay against the said notices. The Hon'ble High Court has

passed a conditional order and as a consequence of which the

Borrower had deposited Rs. 3 Crore which was shared by all the

secured lenders. Therefore, this part payment again shows that

the acknowledgment of liability and extension of contract.

7. Counsel for the Respondents also placed reliance on Section 18 of the

Limitation Act to suggest that the Application is not barred by limitation as

the limitation starts from the date of acknowledgement, which reads as

follows:

"18. Effect of acknowledgment in writing.-- (1) Where,

before the expiration of the prescribed period for a suit of

application in respect of any property or right, an

Company Appeal (AT) (Insolvency) No. 731 of 2019 5

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 subject to the provisions of the Indian

Evidence Act, 1872 (1 of 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

Company Appeal (AT) (Insolvency) No. 731 of 2019 6

(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."

8. For counting the period of limitation in filing the application under

Section 7, we find that Part II of Third Division of Schedule of Limitation Act,

1963 i.e. Article 137 is applicable, which reads as follows:

Part II-OTHER APPLICATION Description of application Period of Limitation Time from which period begins to run

137. Any other application for which Three years When the right to no period of limitation is provided apply accrues elsewhere in this division.

9. From the aforesaid provisions, it is clear that the limitation will start

from the date of accrual of right. The accrual of right is also to be noticed

from the date of confirmation or acknowledgment of the debt and to be read

along with Section 18 of the Limitation Act, 1963.

10. It was in this background, as far back as on 17th March, 2015, the

'Corporate Debtor' acknowledged the debt for the purpose of accepting the

liability under Section 18 of the Limitation Act, 1963, as extracted below:

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Company Appeal (AT) (Insolvency) No. 731 of 2019 8

11. In view of the aforesaid facts and provisions of law, we hold that the

application under Section 7 is not barred by limitation and the Adjudicating

Authority has rightly admitted the application under Section 7.

Company Appeal (AT) (Insolvency) No. 731 of 2019 9

We find no merit in this appeal. It is accordingly dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

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

[ Kanthi Narahari ] Member (Technical)

NEW DELHI 13th November, 2019

/AR/

Company Appeal (AT) (Insolvency) No. 731 of 2019