Kotak Mahindra Bank Limited vs Kew Precision Parts Private Limited

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Comp. App. (AT) (Ins) No. 1405 of 2023 IN THE MATTER OF: Kotak Mahindra Bank Ltd. ...Appellant Versus

Kew Precision Parts Pvt. Ltd. ...Respondent Present:

For Appellant : Mr. Ravi Gupta, Dhruv Gupta, Muskaan Mehra, Adv. For Respondents : Mr. Mohit Chaudhary, Prakhar Mithal, Raghav Dikshit, Gaurav Raj, Arjun Katyal, Adv.

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain: (Oral)

17.07.2025 : This appeal is directed against the order dated 29.08.2023

by which an application filed by the Appellant (Kotak Mahindra Bank Ltd.)

under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'Act')

r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016 (in short 'Rules') for the resolution of an amount of

Rs. 62,47,43,978/- as on 18.11.2019 has been dismissed.

2. Brief facts of this case are that the Appellant (Financial Creditor)

sanctioned various financial facilities to the Corporate Debtor (CD) up to a

sum of Rs. 22.46 Cr. on 21.11.2012, 07.02.2014, 05.03.2014 and the master

facility agreement was entered into between the parties on 05.03.2014.

3. The CD started defaulting in making payment and instalments became

due from June, 2015, therefore, the CD was classified as NPA.

4. The Appellant also raised demand by loan recall notice dated

07.10.2015 in respect of a sum of Rs. 18,19,40,434/-.

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5. The CD issued 10 cheques of Rs. 19,34,00,000/- towards the payment

of the said amount but all the cheques were dishonoured and the proceedings

were allegedly initiated under Section 138 of the NI Act which are still

pending.

6. The Appellant also issued notice under Section 13(2) of the SARFAESI

Act for an amount of Rs. 34,79,70,950/- on 13.12.2017. It is alleged that the

CD acknowledged its default and proposed an OTS for a sum of Rs. 13 Cr. on

12.12.2018. The CD alleged to have again proposed an OTS for sum of Rs.

20.76 Cr. on 19.12.2018 and promised to pay the said amount within 15 days

on the acceptance by the FC. It is further alleged that the CD offered an OTS

on 20.12.2018 for sum of Rs. 24.55 Cr. and promised to pay it before

31.12.2018. In this regard, the letter dated 20.12.2018 written by the CD and

the OTS accepted by the Appellant on 20.12.2018 are reproduced as under:-

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7. It is alleged by the Appellant that since the payment of OTS was also

not made before 31.12.2018 as stipulated, therefore, application under

Section 7 was filed on 02.01.2019 before the Tribunal. In part IV of Form 1

i.e the application, the following averments were made:-

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8. The application under Section 7, filed at the instance of the Appellant,

was admitted by the Tribunal vide its order dated 06.09.2019. Para 7 of the

said order is reproduced as under:-

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"7. As per the averments of the petition no payment has been made by the Corporate Debtor after the default occurred in June, 2015 and as on date 27.11.2018, an amount of Rs.

46,63,35,337.31/- is due and outstanding. The present petition being filed in January 2019 is within limitation, being within three years from the date of the cause of action. Further even though an attempt was made on the part of the corporate debtor to project certain inconsistencies in relation to claim amounts, however it is seen that the amount in default in excess of Rs. 1,00,000/- being the minimum threshold limit fixed under IBC, 2016. Considering the circumstances this Tribunal is inclined to admit this petition and initiate CIRP of the Respondent. Accordingly, this petition is Admitted."

9. The decision of the Tribunal dated 06.09.2019 was challenged by the

suspended director of the CD in appeal before this Tribunal bearing CA (AT)

(Ins) No. 1349 of 2019 which was allowed on the issue of limitation with the

following findings:-

"51. Admittedly, the 1 Respondent/Bank has filed OA 576/2016 before the 'Debt Recovery Tribunal', New Delhi in which the 'Corporate Debtor' had remained absent and a decree was passed on 21 May, 2019. In fact, an application for execution of decree is pending before the 'Debt Recovery Tribunal'. After passing of the decree by the 'Debt Recovery Tribunal' in OA 576/2016 the 'Corporate Debtor' projected a counter claim of Rs. 111.75 crores on 27.06.2019 claiming damages, loss of profit (including loss of opportunity) on the basis of non-restructuring of its dues.

52. In view of the fact that the default made by the 'Corporate Debtor' took place in June, 2015 and that the application u/s 7 of the 'I&B' Code was filed by the 1 Respondent of the Bank before the Adjudicating Authority on 30.01.19 and that the account of the 'Corporate Debtor' was declared as NPA on 30.09.15, it is held by this Tribunal that the application filed by the Bank before the Adjudicating Authority is barred by Limitation."

10. The Appellant challenged the order of this Tribunal by filing an appeal

before the Hon'ble Supreme court bearing CA No. 2176 of 2020 which was

decided on 05.08.2022, setting aside the order of the Tribunal and remanding

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the case back to the Tribunal on the issue that there was an OTS dated

20.12.2018 which has to be taken into consideration in terms of Section 25(3)

of the Contract Act, 1872 (Act).

11. After the remand, the Tribunal has held that "therefore, we conclude

that the OTS proposals made after expiry of limitation period may be

construed as promise to pay under Section 25(3) of the Act. The question III,

is therefore answered in the affirmative"

12. With these findings, the application filed under Section 7 by the

Appellant was considered to have been filed within the period of limitation.

However still the Tribunal dismissed the application filed under Section 7 by

recording a finding in para 18 and 19 of the impugned order which are

reproduced as under:-

"18. It is pertinent to note here again that a 'promise to pay', under Section 25(3) of the Contract Act, 1872, gives rise to a fresh contract, independent of the original debt, which may or may not have been acknowledged. In the instant case both parties are ad idem on the fact that the OTS proposal dated 20.12.2018 was accepted by the Applicant herein. Therefore, a fresh contract, independent of the original debt, was entered into by both the parties on acceptance of the OTS proposal by the Applicant Bank. Now, we need to examine, whether the instant application under Section 7 of the Code is based on this fresh contract between the parties or not?

19. When we examine the facts of the present application we find that, the original debt of the Applicant is already time barred, and the Applicant's claim can only survive on the basis of the fresh contract i.e. on the basis of the One Time Settlement Agreement entered between the Financial Creditor and the Corporate Debtor. However, we find that, the Debt mentioned in Part IV of the petition is the original debt which is time barred. The OTS dated 20.12.2018 which was agreed between the Financial Creditor and the Corporate Debtor is for an amount of Rs. 24.55 Crores only, which is agreed to be paid by the Corporate Debtor as per the OTS. However, the Financial Creditor claims that the debt due and payable as on 18.11.2019 is for an amount of Rs. 62,47,43,978/-, which is not in Comp. App. (AT) (Ins) No. 1405 of 2023 14

accordance with the OTS which was entered between the parties for an amount of Rs. 24.55 Crores only."

13. The sum and substance of the finding recorded by the Tribunal against

the Appellant is that the OTS dated 20.12.2018 was for an amount of Rs.

24.55 Cr. only whereas the Appellant in his application has claimed Rs.

62,47,43,978/- which is not in accordance with the OTS.

14. Aggrieved against the impugned order, the present appeal has been

preferred by the Bank/FC.

15. Counsel for the Appellant has submitted that the Tribunal has

committed a patent error in not referring to the contents of the OTS while

dismissing the application only on the ground that the amount mentioned in

part IV is less than the amount which has now been claimed.

16. It is also submitted that in the OTS proposal, the Respondent had

admitted the cash credit amount of Rs. 33,85,95,184.8 as on 31.10.2018 and

term loan of Rs. 12,77,41,207.06 as on 27.11.2018. The chart of the aforesaid

amount is reproduced as under:-

17. It is submitted that though by virtue of the OTS, there was a fresh

contract between the parties yet it was agreed upon by the Respondent to pay

the said amount on or before 31.12.2018. It is also submitted that it has been

provided in the OTS itself that 100% payment of OTS i.e. Rs. 24,55,00,000/-

is to be paid on or before 31.12.2018 and the events of default is also provided

in clause 6(i) which read as under:-

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"(i) KMBL reserves the right to revoke the present approval and in such an event of revocation, the decision of KMBL shall be final and binding on the Borrower and on the guarantors. In case of KMBL exercising the right of revocation, all the reliefs and concessions/sanctioned/granted shall be treated as withdrawn and all the terms and conditions of the original agreement(s)/loan and security documents shall come into force as if, no such reliefs and concessions were ever granted to the Borrower/Guarantors and KMBL shall be entitled to proceed with the Original Application filed before DRT, Delhi."

18. Thus, the contention of the Appellant is that it has been made clear to

the Respondent that if it commits a default in payment of OTS amount of Rs.

24,55,00,000/- which was agreed to by the Appellant/Bank even against the

amount of Rs. 33,85,95,184.8 as on 31.10.2018 and Rs. 12,77,41,207.06 as

on 27.11.2018, the Respondent shall be liable to pay the entire amount as is

clear from clause 6(i) that all the terms and conditions of the original

agreements/loan and security documents shall come into force.

19. On the other hand, Counsel for the Respondent has vehemently

opposed the appeal and submitted that there is no error in the impugned

order which may call for any interference by this Court.

20. It is submitted that there are two parts of the contract between the

parties. The original contract was entered into between the parties in the year

2012 but the Appellant was non-suited by this court on the ground that the

application filed on the basis of original date of default was time barred,

however, the Hon'ble Supreme Court had taken into consideration Section

25(3) of the Act and remanded the case back to consider the application filed

under Section 7 in the light of the aforesaid provisions of the Act. According

to him, the OTS is a separate agreement which came into being between the

parties on 20.12.2018. It is further submitted that the Appellant could not

have proceeded with the application filed under Section 7 with the original Comp. App. (AT) (Ins) No. 1405 of 2023 16

pleadings of Part IV. The Appellant was obliged to amend the pleadings of part

IV in consonance with the amount and date of default in terms of the OTS.

21. In rebuttal, Counsel for the Appellant has submitted that the Hon'ble

Supreme Court in para 71 of the order has observed that the Appellant may

file additional affidavit and there was no order in regard to the amendment of

the pleadings.

22. At this stage, counsel for the Respondent has submitted that he had

also filed an application bearing I.A No. 6309 of 2022 asking the Appellant

to amend the pleadings and for dismissal of the application filed under

Section 7. It is submitted that the said application remained pending and

ultimately the main petition filed under Section 7 has been decided.

23. We have heard Counsel for the parties and perused the record with

their able assistance.

24. The facts mentioned herein above are not in dispute that there was a

previous round of litigation between the parties till the Hon'ble Supreme

Court when the Hon'ble Supreme Court noticed Section 25(3) of the Act and

remanded the matter back to the Tribunal for considering the OTS between

the parties dated 20.12.2018 as per which the Respondent was to pay the

entire agreed amount before 31.12.2018 which had not been paid at all. In

the past also, when the Respondent was given a recall notice qua Rs.

18,19,40,434/- on 07.10.2015 by the bank, it had issued 10 cheques of Rs.

19,34,00,000/-, however, all cheques were dishonoured and criminal

proceedings had to be initiated by the Bank against the respondent which are

still pending. We are not commenting much upon the conduct of the

Respondent who had been playing hide and seek with the Appellant regarding

payment of its dues but ultimately the bank believed the Respondent when it

Comp. App. (AT) (Ins) No. 1405 of 2023 17

came with the proposal of the payment of OTS amount of Rs. 24.55 Cr. when

the Bank was proceedings against it under the provision of the SARFAESI

Act. The Bank showed its magnanimity and agreed to the OTS amount of Rs.

24.55 Cr. which was to be paid by the Respondent before 31.12.2018 but

again there was a default. Thus, there is a continuous default by the

Respondent in paying the dues of the Bank. However, this time when the OTS

documents were executed, the Bank was little careful and therefore it

provided clause 6(i) in the said documents in which it was categorically

mentioned that "(1) the Appellant reserves the right to revoke the present

approval and in such an event of revocation, the decision of the Appellant

shall be final and binding on the Borrower and on the guarantors. In case of

Appellant exercising the right of revocation, all the reliefs and

concessions/sanctioned/granted shall be treated as withdrawn and all the

terms and conditions of the original agreement(s)/loan and security

documents shall come into force"

25. This condition in the OTS scheme is sufficient to knock down the case

of the Respondent who has argued that a new contract came into being and

in the absence of pleadings in Part IV, application under Section 7 was not

maintainable. The CD cannot escape from its lability by taking such hyper

technical pleas. Suffice it to say that once the Hon'ble Supreme Court had

found that provisions of Section 25(3) empowers the Appellant to continue

with this application, filed under Section 7, when the amount of almost Rs.

40 Cr. was admitted at the time when the OTS was given. The Respondent

was duty bound to pay the amount which was agreed to at Rs. 24.55 before

31.12.2018. The Appellant bank consciously made a provision in the OTS

documents of reviving original loan agreement, therefore, there is no strength

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in the argument of the Respondent and the Tribunal has committed a patent

error in dismissing the application filed under Section 7.

26. In view of the aforesaid discussion, the present appeal succeeds and

the impugned order is set aside. However, without any order as to costs.

I.As, if any, are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical)

Sc/RR

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