Mohan Nathuram Sakpal vs State Bank Of India & Anr

Through its authorised representative incorporated Under the provisions of Maharashtra Co-Operative Societies Act, 1960 Under Reg. No. BOM/HSG/2651 of 86-87 Having its office at Sundar Nagar, Kole Kalyan, ...Appellant Santacruz (East), Mumbai - 400 098

Versus

STATE BANK OF INDIA

A body corporate constituted under the State Bank of India Act, 1955, having Its address at Corporate Centre at State Bank Bhavan, Madam Cama Road, Nariman Point, Mumbai - 400 021; and a branch Amongst others at Stressed Assets Resolution Group Commercial (III), having its address at 112-115, Floor-1, Plot - 212, West Wing, Tulsiani Chambers, Free Press Journal Marg, ...Respondent No. 1 Nariman Point, Mumbai - 400 021

HARSHAD SHAMKANT DESHPANDE

Interim Resolution Professional of AA Estates Private Limited IBBI/IPA-001/IP-P00166/2017-18/10335 Having his address at 403, Kumar Millennium,

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 2

Shivatirtha Nagar Kaman, Hospital, Opp. Krishna Hospital, Paud Road, Kothrud, Pune, Maharashtra - 411 038 ...Respondent No. 2

Present:

For Appellant : Ms. Mrinal Elker Mazumdar, Mr. Saurabh Singh & Ms. Aarushi Gupta, Advocates. For Respondents : Mr. Ankur Mittal & Ms. Yashika Sharma, for R-1. Mr. Anuj Tiwari, for R-2/RP.

With

Company Appeal (AT) (Insolvency) No. 1527 of 2022

IN THE MATTER OF: MOHAN NATHURAM SAKPAL

Having his address at A Wing, 903, 9th Floor, Dynamic Enclave, Plot No. 29, Sector 36, ...Appellant Kamothe, Panvel, Raigarh, Maharashtra

Versus

STATE BANK OF INDIA

A body corporate constituted under the State Bank of India Act, 1955, having Its address at Corporate Centre at State Bank Bhavan, Madam Cama Road, Nariman Point, Mumbai - 400 021; and a branch Amongst others at Stressed Assets Resolution Group Commercial (III), having its address at 112-115, Floor-1, Plot - 212, West Wing, Tulsiani Chambers, Free Press Journal Marg, ...Respondent No. 1 Nariman Point, Mumbai - 400 021

HARSHAD SHAMKANT DESHPANDE

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 3

Interim Resolution Professional of AA Estates Private Limited IBBI/IPA-001/IP-P00166/2017-18/10335 Having his address at 403, Kumar Millennium, Shivatirtha Nagar Kaman, Hospital, Opp. Krishna Hospital, Paud Road, Kothrud, Pune, Maharashtra - 411 038 ...Respondent No. 2 Present:

For Appellant : Mr. Krishnendu Dutta, Sr. Advocate along with Mr. Abhijeet Sinha, Mr. Puneet Singh Bindra, Ms. Zaina Khan, Mr. Simranjeet, Mr. Akash Chatterjee, Mr. Kumar Anurag Singh, Mr. Rishabh Gupta & Ms. Neha Agarwal, Advocates. For Respondents : Mr. Ankur Mittal & Ms. Yashika Sharma, for R-1. Mr. Anuj Tiwari, for R-2/RP.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This order shall dispose of two appeals i.e. CA (AT) (Ins) No. 1527 of

2022 titled as Mohan Nathuram Sakpal Vs. State Bank of India & Anr. (In

short 'first appeal') and CA (AT) (Ins) No. 1526 of 2022 titled as Sundar Nagar

Co-operative Housing Societies Union Limited Vs. State Bank of India & Anr.

(In short '2nd appeal') as both the appeals have been filed against the same

impugned order dated 06.12.2022 by which an application filed under Section

7 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') r/w Rule 4

of the Insolvency and Bankruptcy (Application to Adjudicating Authority)

Rules, 2016 (in short 'Rules') by State Bank of India (Financial Creditor)

against A A Estates Private Limited (Corporate Debtor) for the resolution of an

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 4

unresolved financial debt of Rs. 1,35,26,12,129/- inclusive of interest and

penal interest has been admitted.

2. The first appeal has been filed by a shareholder/director of the

Corporate Debtor whereas 2nd appeal has been filed by a federal society

comprising of nine societies incorporated under the provisions of

Maharashtra Co-operative Societies Act, 1960.

3. The brief facts of this case are that the Corporate Debtor is a company,

which is incorporated under the Companies Act, 1956 on 17.07.1996 engaged

in the business of real estate construction and development and is working

on multiple residential and commercial real estate projects.

4. The Corporate Debtor vide an application dated 30.09.2011 approached

the Financial Creditor for sanction of credit facilities. The Commercial Branch,

Vile Parle East, Mumbai of the Financial Creditor granted cash credit facilities

of Rs. 70,00,00,000/- vide sanction letter dated 18.02.2012. The Corporate

Debtor agreed to pay interest @4.50 bps over base rate with monthly interest

in respect of the cash credit facility, including levy of penal interest, on

account of non-compliance of sanction conditions.

5. The cash credit facility was secured by the Corporate Debtor by creating

a pari passu charge of the flats of the project 'RNA Address', entered into

escrow agreement and loan cum hypothecation agreement both dated

18.02.2012. The said cash credit facilities were further secured by way of

mortgage of land, owned by RNA Corp. Pvt. Ltd., vide deed of mortgage dated

18.02.2012 and personal guarantee was provided by Anil Kumar Agarwal,

Saranga A Agarwal, Anubhav A. Agarwal and Gokul A Agarwal vide guarantee

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 5

agreement dated 18.02.2012 and Corporate Guarantee was provided by RNA

Corp. Pvt. Ltd. vide guarantee agreement dated 18.02.2012.

6. The Corporate Debtor failed to maintain its account and defaulted on

31.03.2014. The Financial Creditor requested the Corporate Debtor to

regularise its account. The Corporate Debtor addressed a revival letter dated

18.03.2014 and acknowledged the outstanding debt. The Financial Creditor

vide letter of arrangement dated 18.03.2014 informed the Corporate Debtor

that it had sanctioned shifting the Date of Commencement of Commercial

Operation (DCCO) by 12 months from June 2013 to June 2014 and shifting

of repayment schedule of the then outstanding amount of Rs. 59.33 Crores

for a period of one year from September, 2014 to 2015. A Rectification deed

dated 21.03.2014 was executed for mortgage of development rights of saleable

area of the project alongwith saleable area of the building to be constructed

on the land bearing CTS No. 4853, 4853/1 to 85, 87, 88, Village Kolekalyan,

Sundernagar, Kalina, Santacruz (East), Mumbai having total saleable area of

6,28,080.07 sq. ft. However, since the DCCO did not occur on 30.06.2014 i.e.

twelve months from the original DCCO, the account of the Corporate Debtor

was classified as NPA on 30.06.2014, in terms of the guidelines issued by the

Reserve Bank of India. The Financial Creditor issued a legal demand notice

dated 02.03.2015 to the Corporate Debtor and the personal guarantors under

Section 13(2) of the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (SARFAESI Act) recalling the total

outstanding liability due and owed to the Financial Creditor but the Corporate

Debtor did not remedy the default, therefore, the Financial Creditor served

possession notice dated 01.07.2015 intimating the Corporate Debtor that it

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 6

has taken over physical possession of the land on 27.06.2015 and has

initiated the sale process of the said land for recovery of the debt, but the

Financial Creditor did not receive any bids.

7. The Financial Creditor vide legal demand notice dated 05.04.2016,

served upon the Corporate Debtor, recalled the entire outstanding dues

alongwith interest payable and also filed an original application on

01.07.2016 against the Corporate Debtor and the Guarantors before the

Debts Recovery Tribunal-III at Mumbai under Section 19 of the Recovery of

Debts due to Banks and Financial Institutions Act, 1993 to claim an amount

of Rs. 75,22,70,867.51 plus interest.

8. While application of the Financial Creditor was pending before the DRT,

the Corporate Debtor vide its compromise proposal dated 31.01.2018,

admitted the liability of outstanding principal amount of Rs. 59.33 Crores and

proposed a settlement at Rs. 40 Crore to be paid in full by 31.03.2018. The

Corporate Debtor also enclosed a cheque of Rs. 2 Crore which was deposited

by the Financial Creditor in a separate no lien account but the compromise

proposal was not accepted. The last payment made by the Corporate Debtor

in its loan account was Rs. 50,00,000/- on 01.06.2015. The Financial

Creditor has thus filed the application under Section 7 of the Code in which

the date of default has been categorically mentioned in part IV of the

application filed under Section 7 of the Code as 01.06.2015.

9. On the other hand, the Corporate Debtor pleaded in the reply that

another Financial Creditor had already filed a Company Petition under

Section 7 of the Code separately against the Corporate Guarantor i.e. RNA

Corp Pvt. Ltd. which had been admitted by the Adjudicating Authority vide

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 7

order dated 26.11.2019 in which the Financial Creditor had filed a claim of

Rs. 137,55,54,367/-.

10. The case set up by the Respondent (Corporate Debtor) was that the

Financial Creditor, for the same set of debt, cannot file his claim in two

separate CIRP, one against the borrower and another against the Corporate

Guarantor and relied upon a decision of the NCLAT in the matter of Dr.

Vishnu Agarwal Vs. Piramal Enterprises Limited, 2019 SCC Online NCLAT

81.

11. It also raised an objection regarding the maintainability of the

application filed under Section 7 of the Code on the ground of limitation

alleging that though the Financial Creditor had mentioned that the default

occurred on 31.03.2014 but the date of default mentioned in part IV of the

application filed under Section 7 of the Code is 01.06.2015.

12. In rejoinder, the Financial Creditor alleged that the facts of Dr. Vishnu

Aggarwal (Supra) are different from the facts of the present case. In Dr. Vishnu

Aggarwal (Supra) the CIRP was initiated against two Corporate Guarantors as

compared to one and moreover, the said decision in the case of Dr. Vishnu

Aggarwal (Supra) is under challenge before the Hon'ble Supreme Court in Civil

Appeal No. 878 of 2019 in which status quo has been ordered to be

maintained.

13. As regards, the different dates of default are concerned, it is submitted

by the Financial Creditor that the loan account of the Corporate Debtor was

restructured in the month of March 2014 upon the requests of the Corporate

Debtor and the terms were modified to shift the DCCO by 12 months from

June 2013 to June 2014 which is evidenced by the revival letter, letter of

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 8

arrangement and rectification deed. Thereafter, part payment of Rs. 50 lakhs

was received from the Corporate Debtor on 01.06.2015 which was the last

payment, therefore, the date of default has rightly been considered by the

Financial Creditor as 01.06.2015 in regard to the remaining amount due from

the Corporate Debtor. It is further alleged that after restructuring, there was

further default and the Financial Creditor was bound to further declare the

account as NPA on 27.02.2015 which was intimated to the Corporate Debtor

vide demand notice dated 02.03.2015, however, since the Corporate Debtor

failed to adhere to the revised DCCO, the account was classified as NPA w.e.f.

June 30, 2014 as per the guideline of the RBI in master circular - prudential

norms on income recognition, asset classification and provisioning pertaining

to advances dated 01.07.2014 as such the date of default is 30.06.2014.

14. The Learned Tribunal, in so far as, contention of the Corporate Debtor,

raised with the support of a decision of the NCLAT in the case of Dr. Vishnu

Aggarwal (Supra), observed that the NCLAT in the case of State Bank of India

Vs. Athena Energy Venture Pvt. Ltd. CA (AT) (Ins) No. 633 of 2020 has held

that not only the CIRP can be initiated against both the borrower and the

guarantor but also held that the claim can be filed for the same debt in the

CIRP of both the borrower and the guarantor.

15. As regards, the issue of limitation is concerned, it has been held that

the date of default is 01.06.2015 and the compromise letter acknowledging

the existence of debt towards the Financial Creditor was written by the

Corporate Debtor on 31.01.2018, therefore, the application filed under

Section 7 of the Code on 15.01.2021 is within the period of limitation.

Admitted, Harshad Shamkant Deshpande was appointed as Interim

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 9

Resolution Professional (IRP), moratorium was imposed and aggrieved against

the order of admission, the present appeal has been filed. The first appeal is

by the shareholder and ex-director whereas in the 2nd appeal, the appellant is

a federal society comprising of nine societies incorporated under the

provisions of Maharashtra Co-operative Societies Act, 1960. The project

includes a plot of land where the Appellant was earlier situated and thereafter,

each of the societies, which constitute the Appellant, entered into a

development agreement with the Corporate Debtor for the development of the

plot of land. The project pertains to plots of land of the Appellant comprising

of nine societies alongwith two other Co-operative housing societies and one

Shri Sai Seva Kamgar Chawl Rahivashi Sangh. All these entities together

comprises of 315 members. For the development of the plots of land, each of

the societies as well as the chawl had entered into a development agreement

with the Corporate Debtor whereunder the Corporate Debtor was appointed

as the developer. The project is in two phases. Phase 1 comprises of wings A

to E of rehabilitation buildings as well as Wings A to E of sale buildings. It is

alleged that in so far as Phase 1 is concerned, the Corporate Debtor has

constructed Wings B to E of rehabilitation buildings and has handed over

possession to 255 members out of the total 315 members. Even for the sale

buildings, Wings A, B, C, D & E are undergoing construction and 184 flats

have been sold to third parties. It is alleged that the Corporate Debtor has

rehabilitated 75% of the members of the society and presently 60 members

remain to be rehabilitated.

16. In both the appeals, Counsel for the Appellant has argued that the order

of admission deserves to be set aside on the ground that the application filed

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 10

under Section 7 was barred by limitation. In this regard, it was submitted that

the date of default mentioned in part IV of the application under Section 7 of

the Code is 01.06.2015 whereas the application itself has been filed on

15.01.2021. It was submitted that the period of limitation for the purpose of

filing of an application under Section 7 of the Code is three years from the

date of default which had expired on 01.06.2018.

17. In this regard, Counsel for the Respondent has submitted that in

between the period 01.06.2015 to 01.06.2018, the Corporate Debtor

acknowledged its debt by submitting a compromise letter dated 31.01.2018

in which the Corporate Debtor has clearly acknowledged the principal amount

of Rs. 59.33 Crores. In the said compromise letter not only the liability of

amount of Rs. 59.33 Crore approximately was confirmed as on 31.01.2018

but also a proposal was made in writing for the settlement of the account. In

this regard, the question thus arises as to whether by virtue of the

compromise letter dated 31.01.2018, the limitation would again start to run

for three years up to 31.01.2021 and the application filed under Section 7 of

the Code by the Financial Creditor on 15.01.2021 was within the period of

limitation?

18. In this regard, Counsel for the Respondent has relied upon a decision

of the Hon'ble Supreme Court in the case of Dena Bank Vs. C. Shivakumar

Reddy (2021) 6 SCC 330 in which it was held that "Section 18 of the Limitation

Act cannot also be construed with pedantic rigidity in relation to proceedings

under the IBC. This court sees no reason why an offer of one-time settlement

of a live claim, made within the period of limitation, should not also be

construed as an acknowledgement to attract Section 18 of the Limitation Act".

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 11

19. In the present case, the claim w.e.f. 01.06.2015 till 01.06.2018 was live

because the Financial Creditor could have filed a petition under Section 7 of

the Code during this period and the occurrence of one time

settlement/compromise, initiated at the instance of the Corporate Debtor

during this period vide its letter dated 31.01.2018 had revived the period of

limitation from 31.01.2018 to 31.01.2021 in terms of Section 18 of the

Limitation Act and the application under Section 7 of the Code having been

filed on 15.01.2021 is thus within the period of limitation.

20. Thus, in view thereof, there is no force in the contention of the Appellant

for setting aside the order under challenge on the ground that the application

filed under Section 7 of the Code was already barred by limitation and could

not have been entertained.

21. Counsel for the Appellant has then argued that another Financial

Creditor filed a petition under Section 7 of the Code against the Corporate

Guarantor i.e. RNA Crop Pvt. Ltd. which was admitted on 26.11.2019 much

earlier then the order has been passed in the present case on 06.12.2022 in

which the present Financial Creditor has filed the claim. He has relied upon

a decision in the case of Dr. Vishnu Aggarwal (Supra) in which it has been

held that the Financial Creditor cannot initiate two separate CIRP for the same

set of debt.

22. In this regard, Counsel for the Financial Creditor has submitted that in

the case of Dr. Vishnu Aggarwal (Supra) CIRP was initiated against the two

corporate guarantors as compared to one and the decision of this Tribunal in

the case of Dr. Vishnu Aggarwal (Supra) has already been challenged before

the Hon'ble Supreme Court in which status quo has been ordered to be

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 12

maintained whereas in another case of this Tribunal in State Bank of India

Vs. Athena Energy Ventures Private Limited, it was held that the CIRP can be

initiated against both the borrower and the guarantors.

23. We have heard Counsel for the parties in this regard. In so far as the

decision in the case of Dr. Vishnu Aggarwal (Supra), relied upon by the

Appellant is concerned, in that case the application under Section 7 was filed

against two Corporate Guarantors whereas in the case of Athena Energy

Ventures Pvt. Ltd. (Supra) it was against the borrower and the guarantor. Moreover, the decision in the case of Dr. Vishnu Aggarwal (Supra) is already

sub-judice before the Hon'ble Supreme Court in which status quo has been

ordered to be maintained and in the case of Athena Energy Ventures Pvt. Ltd.

(Supra) this Tribunal has held as under:-

"16....We are also of the view that simultaneously remedy is central to a contract of guarantee and where Principal Borrower and surety are undergoing CIRP, the Creditor should be able to file claims in CIRP of both of them. The IBC does not prevent this. We are unable to agree with the arguments of Learned Counsel for Respondent that when for same debt claim is made in CIRP against Borrower, in the CIRP against Guarantor the amount must be said to be not due or not payable in law. Under the Contract of Guarantee, it is only when the Creditor would receive amount, the question of no more due or adjustment would arise....

19. It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor. The law as laid down by the Hon'ble High Courts for the respective jurisdictions, and law as laid down by the Hon'ble Supreme Court for the whole country is binding. In the matter of Piramal, the Bench of this Appellate Tribunal "interpreted" the law. Ordinarily, we would respect and adopt the interpretation but for the reasons discussed above, we are unable to interpret the law in the manner it was interpreted in the matter of Piramal. For such reasons, we are unable to uphold the Judgement as passed by the Adjudicating Authority."

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 13

24. Therefore, we do not find any error in the approach of the Ld. Tribunal

while rejecting the argument of the Appellant in this regard as well.

25. In the end, Counsel for the Appellant has submitted that in the case of

Vidarbha Industries Power Limited v. Axis Bank Limited 2022 SCC Online SC

1339 it has been held that the Legislature has intended Section 9(5)(a) of the

IBC to be mandatory and Section 7(5)(a) of the IBC to be discretionary,

therefore, the Adjudicating Authority should have considered the grounds

made by the Corporate Debtor against the admission of the application filed

under Section 7 of the Code.

26. In this regard, Counsel for the Respondent has drawn our attention to

the order passed by the Hon'ble Supreme Court in the case of Vidarbha

Industries Power Limited vs. Axis Bank Limited in which a Review Petition

has been filed i.e. Review Petition (Civil) No. 1043 of 2022 which was disposed

of on 22.09.2022 with the following observations "The elucidation in

paragraph 90 and other paragraphs were made in the context of the case at

hand. It is well settled that judgments and observations in judgments are not

to be read as provisions of statute. Judicial utterances and/or

pronouncements are in the setting of the facts of a particular case. To

interpret words and provisions of a statute, it may become necessary for the

Judges to embark upon lengthy discussions. The words of Judges interpreting

statutes are not to be interpreted as statutes."

27. We have heard Counsel for the parties and are of the considered opinion

that in the given facts and circumstances of the case Vidarbha Industries

Power Limited (Supra), relied upon by the Appellant, is not applicable because

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022 14

there is a clear admission on the part of the Corporate Debtor of the amount

of debt due in view of the letter dated 31.01.2018.

28. The Hon'ble Supreme Court in the case of M. Suresh Kumar Reddy Vs.

Canara Bank & Ors. Civil Appeal No. 7121 of 2022 decided on 11.05.2023

has held that :

"13. Thus, it was clarified by the order in review that the decision in the case of Vidarbha Industries was in the setting of facts of the case before this court. Hence, the decision in the case of Vidarbha Industries cannot be read and understood as taking a view which is contrary to the view taken in the cases of Innovative Industries and E.S. Krishnamurthy. The view taken in the case of Innovative Industries still holds good."

29. Thus, in view of the aforesaid discussion, there is hardly any merit in

these two appeals which do not require any interference and therefore, the

present appeals are hereby dismissed, however, without any order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

New Delhi

31st May, 2023

Sheetal

Company Appeal (AT) (Insolvency) No. 1526 & 1527 of 2022