Ramdas Dutta vs Idbi Bank Limited & Anr

Suspended Director of D.P. Agro Mills Pvt. Ltd., Son of Late Dhanapati Dutta, Working for gain at Alamganj (Near S.B.S.T.C Garage), P.O. Nutanganj, P.S. and District - Burdwan, ...Appellant Alamganj, West Bengal - 713 102

Versus

IDBI BANK LIMITED

A Banking Company constituted under the Industrial Development Bank of India Act, 1964, Having its registered office at: IDBI Tower, WTC Complex, Cuffe Parade, Mumbai 400 005 Acting through NPA Management Group, IDBI Bank Limited, 44, Shakespeare Sarani, Kolkata - 700 017 ...Respondent No. 1

MR. PANKAJ KUMAR TIBREWAL

Interim Resolution Professional of D.P. Agro Mills Pvt. Ltd. having his office at: Chita 3E, Duke Residence, 13, Chanditalal Lane, Ashok Nagar, Tollygunge, Regent Park, Kolkata ...Respondent No. 2 West Bengal, 700 040 Present: For Appellant : SR. Adv. Malvika Trivedi, Adv. Ashish Choudhury, Adv. Arpit Choudhury, Adv. Anand Kamal, Adv. Shailendra Salria, Adv. Sujal Gupta, Adv. Akash Agarwal. For Respondent : Adv. S.K. Garg, Adv. Girish Verma, for IDBI Adv. Aditya Gauri, Adv. Abhinav Tyagi, for R2 2

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is filed by the Suspended Director of the Corporate Debtor

(D.P. Agro Mills Pvt. Ltd) against the order dated 26.08.2022 passed by the

Adjudicating Authority (National Company Law Tribunal, Kolkata Bench -I,

Kolkata) in CP(IB) No. 1847/KB/2019 by which an application filed under

Section 7 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 4 of the

Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,

2016 (in short 'Code') by the IDBI Bank Limited (Financial Creditor) has

been admitted and Pankaj Kumar Tibrewal has been appointed as the

Interim Resolution Professional (in short 'IRP'). However, at the time of

preliminary hearing of this appeal on 20.12.2022, notice was issued to the

Respondents and Interim order was granted to the effect that "no further

steps shall be taken in pursuance of the impugned order".

2. Brief facts of this case are that the IDBI Bank Limited (in short 'Bank')

filed an application under Section 7 of the Code before the Adjudicating

Authority on 01.11.2019 for the resolution of the defaulted amount of Rs.

31,57,17,939.56 calculated as on 08.01.2019 which includes interest

@10.75%. According to the Bank, it sanctioned cash credit limit of the

Corporate Debtor to the tune of Rs. 5,00,00,000/- which later on enhanced

to Rs. 7,50,00,000/-. The Bank had allegedly issued a loan recall notice on

26.02.2013 and also issued notice on 17.08.2013 invoking personal

guarantee of the directors of the Corporate Debtor, namely, Shri Ramdas

Dutta, Shri Debdas Datta and Shri Biprodas Dutta. It also issued letter

Company Appeal (AT) (Ins) No. 1286 of 2022 3

dated 17.08.2013 to the Corporate Debtor regarding redemption of mortgage

for the default committed by the Corporate Debtor and took recourse under

the SARFAESI Act, 2002 by issuance of notice dated 10.10.2013 under

Section 13(2) of the said Act. Subsequently, the Bank issued notice dated

01.01.2014 under Section 13(4) of the SARFAESI Act, 2002 to the Corporate

Debtor.

3. It is averred that the Bank, with the concurrence of the Corporate

Debtor offered One Time Settlement (OTS) vide letter dated 01.11.2018

under SARAL KARJ BHUGTAN YOJNA which was accepted by the Corporate

Debtor on 28.12.2018 and the said OTS was extended from time to time but

the Corporate Debtor failed to pay and hence OTS proposal was cancelled on

01.08.2019 and on 01.11.2019 the petition under Section 7 of the Code was

filed before the Adjudicating Authority.

4 It is an admitted fact that the Bank did not mention the date of

default in Part IV of Form 1 which is a mandatory requirement in view of the

fact that Section 7 of the Code can be invoked only if there is a debt and

default. Consequently, the Adjudicating Authority passed an order dated

15.11.2021 providing an opportunity to the Bank to file a supplementary

affidavit to place on record formal date of default, the balance sheet of the

Corporate Debtor and one time settlement related communications. In this

regard, it would be relevant to refer to the order dated 15.11.2021 which

read as under:-

"Ld. Counsel on both sides present.

Ld. Counsel appearing for the Financial Creditor seeks leave to file a Supplementary Affidavit to place on record the formal date of default and the Balance Sheet of the Corporate Debtor and OTS related communication. In view of the judgment of the Hon'ble

Company Appeal (AT) (Ins) No. 1286 of 2022 4

Supreme Court in Bank of Baroda (Dena Bank) Vs. Shiva Kumar Reddy dated 04.08.2021.

At request leave to file Supplementary Affidavit is granted. Supplementary Affidavit is to be filed within a period of three weeks and copy shall be served on the Counsel on record for the Corporate Debtor, who shall have 10 days thereafter to file the reply affidavit.

List this matter upon completion of pleadings on 14.01.2022."

5. Pursuant to the aforesaid order, Supplementary Affidavit was filed in

which the following averments were made in Para 26 which read as under:-

"26. A statement showing the series of events for the accounts maintained of the Corporate Debtor maintained with the Applicant Bank:-

D.P. Agro Mills Pvt. Ltd.

Sl. Particulars Date No. 1. Date of Default 30.06.2011 2. Date of NPA 28.09.2011 3. Recourse under SARFAESI Act, 2002 10.10.2013 4. Date of Representation /s 13(3) of 04.12.2013 SARFAESI Act, 2002 5. Balance Sheet of the CD showing loan 31.03.2015 6. Balance Sheet of the CD showing loan 31.03.2016 7. Balance Sheet of the CD showing loan 31,03.2017 8. Balance Sheet of the CD showing loan 31.03.2018 9. Letter issued by the Applicant Bank for 01.11.2018 OTS under SKBY 10. OTS Offer under SKBY accepted and 28.12.2018 signed by the CD 11. Letter of Approval of OTS under SKBY 21.01.2019 accepted and duly signed again by the Corporate Debtor 12. Letter from the CD regarding 19.04.2019 acknowledgement of debt due to the Applicant Bank and acceptance of offer to replay in terms of the SKBY Yojna

6. However, it is made clear that the dates given in Para 18 of the

impugned order appears to have been inadvertently mentioned as the dates

Company Appeal (AT) (Ins) No. 1286 of 2022 5

and events mentioned in para 18 of the impugned order pertains to another

case bearing CP (IB) No. 1749/KB/2019 which was also decided on the

same date i.e. 26.08.2022 in which CA (AT) (Ins) No. 1285 of 2022 has been

filed before this Tribunal.

7. Be that as it may, the Corporate Debtor contested the application filed

under Section 7 of the Code on the ground that it has been filed beyond the

period of limitation and is not maintainable. The Adjudicating Authority

framed a question as to whether the petition filed under Section 7 of the

Code is barred by limitation or not. The Adjudicating Authority recorded

following findings of fact in Para 20, 21, 22, 25 & 26 of the impugned order

to arrive at the conclusion that the application filed under Section 7 of the

Code by the Bank is within limitation:-

"20. Upon perusal of the record, it is apparent that transaction between the parties was purely financial in nature and there is an existence of Financial Debt. From the above records it is apparent that from time to time the Financial Creditor under SARAL KARJ BHUGTAN YOJNA extended One Time Settlement offer to the Corporate Debtor and the OTS was accepted by the Corporate Debtor [at page 233 of the Company Petition].

21. Balance sheet for year ending as on 2014 - 2015, 2015 -

2016, 2016 - 2017 & 2017 - 2018 of the Corporate debtor reflects that Corporate Debtor has certain short term borrowings which is showing that there exists cash credit facilities from the Bank. Further the Balance sheet also reflects secured term loans (Long term borrowings). Thus it is evident that the Corporate Debtor is still acknowledging the debt due to the financial creditor being the Financial Creditor in the instant case.

22. Further, as per the Auditors' Report of the Corporate Debtor for financial year ending as on 2014 - 2015 (page 61 of the Supplementary Affidavit), 2015 - 2016 (page 80 of the Supplementary Affidavit), 2016 - 2017 (page 101 of the Supplementary Affidavit) & 2017 - 2018 (page 125 of the

Company Appeal (AT) (Ins) No. 1286 of 2022 6

Supplementary Affidavit), it states that the Corporate Debtor has defaulted in the repayment of loans or borrowings to financial institutions, banks.

25. In light of the above facts and circumstances there has been continuous acknowledgement in the Balance Sheet of the Corporate Debtor for the Financial Balance sheet for year ending 2011, 2012, 2013 & 2018 of the Corporate Debtor, which would extend the limitation period from time to time.

26. Further, it is seen from the record that the date of default has been mentioned as 30 June, 2011, which stood revived with the acceptance of the OTS proposal by the Corporate Debtor on 28 December, 2018. Moreover, upon perusal of the records at page 231 and 232 of the Petition, it is apparent that the Corporate Debtor also made part payment of the OTS proposed amount. Further, the settlement proposal under the SARAL KARJ BHUGTAN YOJNA provided for the payment of the balance amount within 31 March, 2019."

8. Counsel for the Appellant has vehemently argued that an application

under Section 7 of the Code can be filed for initiation of Corporate

Insolvency Resolution Process (in short 'CIRP') only on the occurrence of the

default. In this regard, Section 7(1) of the Code has been referred to which is

reproduced as under:-

"7. Initiation of corporate insolvency resolution process by financial creditor.

(1) A financial creditor either by itself or jointly with 2[other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred."

9. She has further submitted that it is now well settled that the

limitation to file an application under Section 7 of the Code is to be taken

Company Appeal (AT) (Ins) No. 1286 of 2022 7

from Article 137 of the Limitation Act, 1963 (in short 'Act') which is also

reproduced as under:-

Description of suit Period of limitation Time from which period begins to run Any other Three years. When the right to application for apply accrues.

which no period of limitation is provided elsewhere in this division.

10. It is further submitted that the Bank has itself given the date of

default as 30.06.2011 which shall be the date when the right to apply

accrued and thereafter the limitation of three years is to be counted which

stand expired w.e.f. 01.07.2014. It is contended that the Adjudicating

Authority has made contradictory observations in Para 21 and 25 of the

impugned order because in Para 21 it has been observed that "Balance

sheet for year ending as on 2014-15, 2015-16, 2016-17 & 2017-18 of the

Corporate Debtor reflects that the Corporate Debtor has certain short term

borrowings which is showing that there exists cash credit facilities from the

Bank." In para 25 it has been observed that "In light of the above facts and

circumstances there has been continuous acknowledgement in the balance

sheet of the Corporate Debtor for the Financial year ending on 2011, 2012,

2013 & 2018 of the Corporate Debtor, which would have extended the

limitation period from time to time". It is further submitted that the

Adjudicating Authority appears to have mixed the facts of two cases which

were disposed of on the same day i.e. CP(IB)No. 1847/KB/2019 and CP(IB)

No. 1749/KB/2019. Otherwise, the date of default is given in the

Company Appeal (AT) (Ins) No. 1286 of 2022 8

supplementary affidavit, which has been referred to above, and balance

sheet for the year 31.03.2015 onwards till 31.03.2018 have been mentioned

but there is no balance sheet of the year 2011, 2012 & 2013 on record. It is

further submitted that since there is no balance sheet of the year 2011,

2012 and 2013 filed by the Bank, therefore, there is no question of

acknowledging the debt during this period which has to be counted from

30.06.2011 to 30.06.2014 for the purpose of further extending the

limitation. It is further submitted that as per Section 18 of the Act the

acknowledgement of a debt has to be unambiguous and unequivocal which

would further extend the period of limitation from the date of

acknowledgment. She has referred to Section 18 of the Code which is

reproduced as under:-

"18. Effect of acknowledgment in writing.--(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an 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) (Ins) No. 1286 of 2022 9

(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."

11. She has also referred to a judgment of the Hon'ble Supreme Court

rendered in the case of 'Sampurna Singh & Ors. Vs. Niranjan Kaur & Ors.,

AIR 1999 SC 1047' in which it has been held that the acknowledgment, if

any, has to be prior to the expiration of the prescribed period for filing of the

suit, and if the limitation has already expired it would not revive under this

Section. She has further submitted that the Bank cannot take refuge to the

OTS because if the OTS is an acknowledgment then it has to be within the

period when the limitation was subsisting whereas according to the

Respondent OTS was allegedly accepted in January, 2019.

12 In reply, Counsel for Respondent has admitted that the date of default

was not mentioned in the Part IV of Form 1 and has been mentioned only in

the supplementary affidavit which is 30.06.2011. It is also not denied that

the balance sheet of the year 2011, 2012 & 2013 are also not on record,

however, it is argued that the Appellant had admitted its liability while

replying to the notice dated 10.10.2013 issued under Section 13(2) of the

SARFAESI Act, 2002 on 04.12.2013. It is also submitted that the Appellant

had also admitted its liability when it accepted the OTS offer made by the

Bank on 21.01.2019 whereas the Application under Section 7 was filed on

01.11.2019.

13. We have heard Counsel for the parties and perused the record.

14. The issue involved in this appeal is as to whether the application filed

under Section 7 of the Code is within the period of limitation?

Company Appeal (AT) (Ins) No. 1286 of 2022 10

15. It has now been repeatedly held by the Hon'ble Supreme Court and

followed by this Tribunal that Article 137 of the Act would apply for counting

the period of limitation in respect of an application filed under Section 7 of

the Code. Article 137 of the Act provides three years from the date when the

right to apply accrues. Right to apply accrues from the date of default as has

been provided in Section 7 of the Code itself.

16. Admittedly, the Bank did not mention the date of default in Part IV of

Form 1 of the application filed under Section 7 of the Code and disclosed the

date of default as 30.06.2011 only in the supplementary affidavit. The

trigger date is thus 30.06.2011 for the purpose of counting the period of

three years which is up to 30.06.2014. Meaning thereby, w.e.f 01.07.2014

the limitation to apply under Section 7 of the Code had expired. However,

Section 18 of the Act deals with acknowledgement of the debt for the

purpose of extension of limitation but it categorically provides that the

acknowledgement has to be made during the period of three years and not

beyond that. In the present case, the Bank could not produce any evidence

to prove that there has been acknowledgment in writing and signed by the

Appellant for the purpose of extension of period of limitation except for the

reply to the notice issued under Section 13(2) of the SARFAESI Act, 2002 in

which the Appellant did not make any unambiguous and unequivocal

acknowledgement which could extend the period of limitation. The Bank has

also relied upon OTS offer dated 28.12.2018 which is purported to have

been approved and accepted by the Corporate Debtor on 21.01.2019 but

that too was not during the period of limitation and cannot be counted for

Company Appeal (AT) (Ins) No. 1286 of 2022 11

the purpose of extension of period of limitation in terms of Section 18 of the

Act.

17. Thus, the limitation counted from the date of default i.e. 30.06.2011

had expired on 30.06.2014 and there is no acknowledgement of debt during

this period in terms of Section 18 of the Act. The Bank did not place on

record the balance sheet prior to 2014 and the only balance sheets placed

on record are from 31.03.2015 to 31.03.2018 and the OTS also took place

on 21st January, 2019 much beyond the period of three years.

18. Thus, looking from any angle, we do not find any substance in the

argument of Counsel for Respondent for the purpose of maintaining the

impugned order which is patently erroneous and based upon mis-reading of

evidence. Hence, the appeal is hereby allowed and the impugned order is set

aside. No order as to costs.

19. Before parting with the order, it would be relevant to refer to the

prayer made by the IRP during the course of hearing about the cost incurred

for which he may avail any other remedy available to him in accordance with

law.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

New Delhi

26th April, 2023.

Sheetal

Company Appeal (AT) (Ins) No. 1286 of 2022