State Bank Of India vs Hardrock Attachments Private Limited

IN THE MATTER OF: State Bank of India ....Appellant

Vs.

Hardrock Attachment Pvt. Ltd. ....Respondent

Present: For Appellant: Mr. PBA Srinivasan, Mr. Parth Tandon and Ms. Prerana Sabarwal, Advocates. For Respondent: Ms. Manju Bhuteria, Ms. Urmila Bhattacharya, Mr. Arnab Dutt, Mr. Soumya Dutta and Mr. Siddhant Upmanyu, Advocates.

ORDER

31.10.2022: Heard Learned Counsel for the Appellant and Learned

Counsel appearing for the Respondent.

2. This appeal has been filed against the order dated 18.05.2022 passed by

Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) in CP

(IB) No. 409/KB/2021 by which Section 7 application filed by the Appellant

has been rejected. Brief facts of the case necessary for deciding this appeal are:

3. The Appellant extended various financial facilities to the Corporate

Debtor 'Hardrock Attachment Pvt. Ltd.' on account of non-payment of the dues

the account of respondent was classified as NPA on 28.12.2013. Thereafter

recall notice was issued and proceeding under Section 13 sub Section 2 of

SARFAESI Act, 2002 was initiated on 08.11.2016.

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4. Decree was passed by the Debt Recovery Tribunal on 23.02.2018 and

recovery certificate was issued by DRT in O.A. No. 14 of 2017. Thereafter, the

Bank has initiated proceeding for recovery of the amount in pursuance of the

recovery certificate. A request of one-time settlement was made by the

Corporate Debtor on 15.04.2019 which was accepted on 30.08.2019.

5. However, the said OTS proposal was defaulted, the Bank filed the

application under Section 7 on 05.12.2021 for debt due on the Corporate

Debtor amounting to Rs. 64,55,80,125.70.

6. Subsequent to filing of the application further steps were taken before

the Debt Recovery Tribunal. Again an OTS proposal was submitted on

22.02.2022 by the Corporate Debtor which was not accepted.

7. The Corporate Debtor appeared before the Adjudicating Authority and

filed its reply raising various submissions including the submission that

application is barred by time.

8. It was further contended that the Bank is proceeding with recovery

before the Debt Recovery Tribunal and the application under Section 7 has

been filed as a recovery mechanism. The Corporate Debtor bonafide gave OTS

proposal on 22.02.2022 which was not accepted asking the Corporate Debtor

to withdraw the appeal pending before the Presiding Officer DRT.

9. Adjudicating Authority after hearing the parties rejected the Section 7

application. In the analysis and findings in para 8 & 9 of the Judgment

following has been stated:

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"8. The Insolvency and Bankruptcy Code, 2016 was enforced on 01

December, 2016. The Financial Creditor had filed its Original Application

No. 14 of 2017 before the Ld. DRT, Ranchi in 2017 and a Recovery

Petition in 2018, which is still pending adjudication. However, this instant

petition was filed on 05 December, 2021 i.e., almost 4.5 years after the

enactment of the Code. The said act of the Financial Creditor clearly

depicts that they were vehemently pursuing their rights before a different

forum till they realized that they would be unable to recovery their money

in a fast-track mode.

9. It is a well settled that the objective of the Code is the revival of the

Corporate Debtor by resolving insolvency in a prescribed manner, and not

as a recovery mechanism for the Financial Creditor. Further, as submitted

by the Financial Creditor, the date of Default is 28 December, 2013 and

the Balance Sheet relied upon for the purpose of extending the limitation

by taking recourse to Section 18 of the Limitation Act, is for the Financial

Year ending on 31 March, 2018. So, even if the Balance Sheet is taken to

acknowledge the debt by the Corporate Debtor, the limitation would end

on 31 March, 2021 whereas, this instant petition was filed on 05

December, 2021. Hence, in light of the above, the Petition is barred by

limitation and is dismissed."

10. Learned Counsel for the Appellant challenging the order contends that

the finding of the Adjudicating Authority that application is barred by time is

erroneous.

11. Learned Counsel for the Appellant submitted that in the appeal the

Appellant has brought on record along with the Additional Affidavit the one-

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time proposal which was submitted by Corporate Debtor on 15.04.2019 which

proposal was also accepted on 30.08.2019.

12. Learned Counsel for the Appellant has also referred to Revival letter

dated 18.05.2016 which was issued by the Corporate Debtor which has been

brought at Page 195 of the Appeal which contains an acknowledgment for

extension of limitation under Section 18 of the Limitation Act, 1963 and from

the aforesaid acknowledgment it is submitted that within three years the one

time OTS proposal was submitted by the Corporate Debtor which shall further

extends the period of limitation.

13. It is submitted that the proceedings before the DRT are no bar for

initiating the Section 7 application.

14. Learned Counsel for the Respondent opposing the submission of the

Learned Counsel for the Appellant contends that before the Adjudicating

Authority the Appellant had relied only on the balance sheet for contending

that application is not barred. The OTS letter dated 15.04.2019 was not

brought before the Adjudicating Authority.

15. It is submitted that even after filing of the application under Section 7

the Appellant proceeded to sell the properties which indicates that the

application filed under Section 7 was not bonafide filed and was only a part of

the recovery mechanism.

16. We have considered the submissions of counsel for the parties and

perused the record.

Company Appeal (AT) (Ins.) No. 1065 of 2022 5

17. We may first consider submission of the Learned Counsel for the parties

with regard to the question of limitation.

18. The account of NPA was declared on 28.12.2013. The revival letter dated

18.05.2016 which was filed before the Adjudicating Authority clearly contains

an acknowledgment within meaning of Section 18 which was signed on

18.05.2016 by the Corporate Debtor.

19. The recovery certificate was issued on 23.02.2018 by the DRT in the DRT

proceedings. The Letter which has been filed along with the appeal dated

15.04.2019 is the proposal of OTS which was submitted. The additional

documents have been filed by the appellant with of I.A No. 3120/2020 praying

for seeking the additional documents on the record i.e. the OTS letter of 2017

& 2019 as mentioned in prayer A & B:

"(a) Set aside the Impugned Order dated 18.05.2022 passed by

the Hon'ble NCLT, Hyderabad in C.P. (IB) No. 409/KB/2021;

(b) Pass any other such order as this Hon'ble Appellate Authority

may deem fit in the intent of justice, equity and good conscience."

20. The Learned Counsel for the Respondent submitted that these

documents were not before the Adjudicating Authority but veracity of the

documents is not disputed.

21. It is further relevant to notice that in pursuance of the OTS proposal

dated 15.04.2019 which was accepted on 30.08.2019 payments were made by

the Corporate Debtor which was reflected in the statement of account which

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was filed along with Section 7 application at page 52 of Volume 1 of the Reply

filed by the Respondent.

22. After the acceptance of one-time settlement the payments have been

made on 31.08.2019 and 30.09.2022 and subsequent dates which payments

are part of Section 7 application.

23. We are satisfied that one time settlement was also implemented, hence,

we deem it fit and proper to accept the said additional documents on record.

24. The one-time settlement which was submitted on 15.04.2019 contains

an acknowledgment under Section 18 of the Limitation Act, 1963 and the

application under Section 7 which was filed within 3 years from the said date

cannot be said to be barred by time. 25. Adjudicating Authority has referred

to balance sheet as on 31.03.2018 for holding the application as barred by

time.

25. With the aforesaid discussion we are satisfied that the application under

Section 7 was not barred by time and the Adjudicating Authority committed

error in rejecting the application as barred by time.

26. Now coming to the submission of Learned Counsel for the Respondent

that application under Section 7 was nothing but the recovery mechanism

resorted by the bank and cannot be said to be a bonafide application. Suffice it

to say that that bank after declaration of account NPA taking steps for recovery

of dues by invoking the provisions of SARFAESI Act, 2002 even after decree

passed by the Debt Recovery Tribunal steps has been taken.

Company Appeal (AT) (Ins.) No. 1065 of 2022 7

27. The IBC provides a forum for financial creditor to take steps for initiating

insolvency resolution process. It is not the case that all the properties of the

Corporate Debtor have been sold in the proceedings before the DRT.

28. The question as to whether there is any possibility to revive the

Corporate Debtor is question which needs to be considered in the CIRP

process. It is pre-mature to hold that it was not possible to revive the Corporate

Debtor, and the application under Section 7 is to be rejected on this ground.

29. We thus are of the view that the submission of Learned Counsel for the

Respondent that application was not bonafide cannot be accepted.

30. In view of the foregoing discussion we allow this appeal and set aside the

impugned order dated 18.05.2022.

31. We direct the Adjudicating Authority to pass an order of the admission

and all consequential orders within the period of one month from the date of

copy of the order is produced.

32. We make it clear that the admission of Section 7 application shall not

preclude the Corporate Debtor to submit any fresh proposal for OTS.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) sa/nn

Company Appeal (AT) (Ins.) No. 1065 of 2022