State Bank Of India vs Vibha Agro Tech Ltd

[Arising out of Impugned Order dated 27th February 2020 passed by the Adjudicating Authority/National Company Law Tribunal, Hyderabad Bench, Hyderabad in Company Petition (IB) No. 645/7/HDB/2008]

IN THE MATTER OF:

State Bank of India Stressed Assets Management Branch, Secunderabad Door No. 6-2-915, 5th Floor Rear Block, HMWSSB Compound Khairthabad, Hyderabad - 500004 ...Appellant

Versus

Vibha Agro Tech Limited HIG No. 501, A&B Subhan Sirisampada No. 6-3-1090/A/1, Rajbhavan Road Somajiguda, Hyderabad - 500082 ...Respondent

Present:

For Appellant : Mr. Sanjay Kapur and Mr. VM Kanan, Advocates for Appellant.

For Respondent : Mr. M Srinivasan Rao and Mr. Joydip Bhattacharya, Advocates for Respondent.

KANTHI NARAHARI, MEMBER (TECHNICAL)

The present Appeal arises out of Order dated 27th February 2020 passed

by the Adjudicating Authority (National Company Law Tribunal), Hyderabad

Bench, Hyderabad in Company Petition (IB) No.645/7/HDB/2018, whereby the

Learned Adjudicating Authority rejected the Application filed by the Appellant

herein.

Company Appeal (AT) (Insolvency) No. 636 of 2020 1 of 9 BRIEF FACTS:

2. Learned Counsel for the Appellant submitted the brief facts:

He submitted that the Appellant Bank granted various credit facilities

to the Respondent w.e.f. 26th March 2011. However, the Respondent started

defaulting in repayment of the loans. The Appellant Bank and the Consortium

of Lenders approved a CDR package for the Respondent and the terms were

contained in a Master Restructuring Agreement dated 26th September 2013.

The CDR EG decided to allow the Respondent to submit a concrete proposal

for revival. The Respondent had submitted a Revival Proposal on 15th July

2014, but the same was rejected by the Consortium of Lenders by concluding

that the lenders are not satisfied about the viability of the Revival Proposal.

3. The account of the Respondent stood exited from the CDR package on

31st January 2015, in view of the failure of the CDR package due to defaults

committed by the Respondent. While so, the Appellant Bank issued notice

dated 20th May 2015 under Section 13(2) of the SARFAESI Act. The

Respondent challenged the action of the Appellant against initiation of action

under the SARFAESI by filing S.A. No.552 of 2015 before the DRT. The

Appellant also filed O.A. No.417 of 2016 before the DRT, Hyderabad and the

said matter is pending.

4. It is submitted that at the Joint Lenders Meeting held on 22nd

September 2017, the MD of the Respondent had participated and made a

proposal for One Time Settlement (for short 'OTS') admitting the debts and

defaults. The Learned Counsel submitted that having accepted the debt and

default, the Respondent acknowledged the debt. Even the Respondent in a

Company Appeal (AT) (Insolvency) No. 636 of 2020 2 of 9 representation to the lenders dated 06th April 2018 admitted the debts and

the default and sought for an OTS.

5. The Learned Counsel submitted the Hon'ble Adjudicating Authority not

considered the fact of acknowledging the debt and default by the Respondent

and rejected the Application filed by them under Section 7 of I&B Code

seeking initiation of Corporate Insolvency Resolution Process (for short

'CIRP'). Further, the Learned Counsel for the Appellant submitted that the,

only ground taken by the Learned Adjudicating Authority is that the

Application is barred by limitation by taking into consideration the date of

declaring the NPA as date of default by following the judgments of Hon'ble

Supreme Court of India in B.K. Educational Services Pvt. Ltd. Vs. Parag

Gupta and Associates. However, Per contra the Learned Counsel relied upon

various judgements, in support of his case.

6. In view of the submissions made the Learned Counsel prayed the Bench

to allow the Appeal by setting aside the impugned Order dated 27th March

2020 passed by the Adjudicating Authority (National Company Law Tribunal),

Hyderabad Bench.

7. The Learned Counsel appearing for the Respondent filed their Counter

Affidavit to this Appeal and submitted that the Hon'ble Adjudicating Authority

rightly rejected the Application filed by the Appellant herein, under Section 7

of the I&B Code. He is submitted that in Form-I filed by the Appellant before

the Hon'ble NCLT, the debt of default clearly shown as 30th April 2013 and

the Application under Section 7 of the I&B Code filed before the Adjudicating

Company Appeal (AT) (Insolvency) No. 636 of 2020 3 of 9 Authority on 12th September 2018, therefore, the Application is barred by

limitation. In view of the judgment of the Hon'ble Supreme Court in re-B.K.

Educational Services Pvt. Ltd.

8. The Learned Counsel for the Respondent submitted that case of the

Appellant, is that since the Respondent Company had acknowledged its debt

to the Appellant and the period of limitation will get extended beyond 30th

April 2013. It is submitted that the said stand of the Appellant, is self-claimed

and the Appellants have not filed any proof, showing that the Respondent had

given acknowledgment in writing to the Appellant. The only stand taken by

the Appellant, is that since the Respondent admitted the debt, therefore,

Appellant's contended that period of limitation automatically get extended. It

is admitted fact that there was a Master Restructuring Agreement between

the Appellant and the Consortium of Lenders, however, even as per the

Appellants own admission, the Respondent Company exited out of the Master

Restructuring Agreement (MRA) on 31st January 2015. Thus, even for the

sake of arguments, if the period of limitation, is reckoned from 26th September

2013 i.e. the date of MRA or even from 31st January 2015, when the

Respondent stood exited, the Application filed by the Appellant before the

Hon'ble NCLT on 12th September 2018, is still barred by limitation. In view of

the submissions made the Learned Counsel prayed this Bench to dismiss the

Appeal as barred by Limitation.

9. Heard, the Learned Counsel appearing for the respective parties and

perused the pleadings, documents and citations relied upon by the parties.

Company Appeal (AT) (Insolvency) No. 636 of 2020 4 of 9

10. The Learned Adjudicating Authority has rejected the Application by

passing a detailed and well-reasoned order. At para 22 of the Impugned Order,

page 42 of the Appeal paper book, the Learned Adjudicating Authority has

observed as under:

"22. In the present case the account was declared as NPA on 30.04.2013, whereas the present petition under section 7 of the I&B Code was filed on 12.09.2018, which was filed beyond three years. As such the present application is liable to be rejected."

11. The Learned Adjudicating Authority rightly relied upon the judgment of

the Hon'ble Supreme Court in B.K. Educational Services Pvt. Ltd. Vs.

Parag Gupta and Associates reported in 2018 SCC OnLine SC 1921 held

that the limitation starts from the date of default i.e. when the account was

declared NPA. We have perused Form-I annexed at Annexure A-10 page 244

of Appeal paper book filed under sub-rule (1) of Rule 4 of The Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Part IV of the

form, the Appellant had given the particulars of the Financial Debts, the total

disbursed amount and the date of disbursement. Part-IV para 2 at Page 247

against column, the date on which the default occurred, it shows that the

accounts of unit were classified NPA w.e.f. 30th April 2013 due to failed

restructuring as per the provisions of classification of IRAC issued by Reserve

Bank of India.

12. Therefore, it is amply clear that the date of default is 30th April 2013

and the Application filed before the Learned Adjudicating Authority under

Section 7 of the I&B Code on 12th September 2018 which is beyond three

Company Appeal (AT) (Insolvency) No. 636 of 2020 5 of 9 years and we agree with the finding(s) given by the Learned Adjudicating

Authority, that the Application is barred by limitation. Further, the Learned

Adjudicating Authority relied upon the judgment of this Hon'ble Tribunal in

the matter of C. Shivakumar Reddy Vs. Dena Bank dated 18th December 2019

passed in Company Appeal (AT)(Ins.) No. 407 of 2019 at para 11 held as

under:

"Admittedly, the 'Corporate Debtor' the defaulted in making payments on 20th September, 2013 and the Dena Bank declared the account as NPA on 31st December, 2013. Therefore, we hold that the application filed under Section 7 of the I&B Code by the Bank is barred by limitation."

13. We are of the opinion that the Application filed by the Appellant, is hit

by Article 137 of the Limitation Act, 1963, since for filing the Application, the

period of limitation is three years. Taking into account and in following the

judgment of the Hon'ble Supreme Court in re-B.K. Educational Services Pvt.

Ltd. the date of NPA is the date of default. In the present case as stated above,

the date of default as mentioned by the Appellant in Form-I is 30th April 2013

and the Application filed by them on 12th September 2018 is beyond three

years.

14. However, the Learned Counsel for the Appellant contended that in view

of acknowledgement of the Respondent, Section 18 of the Limitation Act, 1963

applies. It is admitted fact that there was a Master Restructuring Agreement

(MRA) dated 26th September 2013 and the Learned Counsel for the Appellant

relied upon para 2.1 in Article 2 of the MRA at page 55 of the Appeal paper

book wherein, it is stated that "Acknowledgement of Indebtedness". However,

Company Appeal (AT) (Insolvency) No. 636 of 2020 6 of 9 it is an admitted fact that the Respondent exited from the MRA on 31st

January 2015. Therefore, the Appellant cannot rely upon the

acknowledgement in the Master Restructuring Agreement. Even otherwise,

taking into consideration the Master Restructuring Agreement it is well

beyond three years, therefore, the Appellant cannot take a stand with regard

to the acknowledgement. Further even taking into consideration, the OTS

proposal given by the Respondent dated 19th June 2015 as contended by the

Learned Counsel for the Appellant that at page 147 of the Appeal paper book.

It is stated as under "Proposing for One Time Settlement with banks with a

payment in 6 quarters". The Learned Counsel for the Appellant strongly relied

upon, the above statement of the Respondent, that since the Respondent had

given a One Time Settlement Proposal on 19th June 2015. Therefore, it is a

clear acknowledgement by the Respondent regarding debt. We have gone

through the said documents annexed as A-6 at page 143 with the heading as

viz:- "Note for the JLM to be held on 19.06.2015 at State Bank of India, SAMB,

Khairatabad". From the perusal of the document, it is clear that at page 147

of the Note for the JLM, it is stated as corrective action plan at Bullet Point

No.5 from the top. There is a mention that proposing for One Time Settlement

to the Banks with a payment in six quarters. However, even the said

document taken into consideration as an acknowledgement, however it is

dated 19th June 2015 and the Appellant filed an Application on 19th

September 2018 which is beyond period of three years and it is clearly hit by

Article 137 of the Limitation Act. Further, the Learned Counsel for the

Appellant relied upon judgment of this Hon'ble Tribunal passed in CA

(AT)(Ins.) No. 28 of 2019 dated 08th November, 2019. This Tribunal held that

Company Appeal (AT) (Insolvency) No. 636 of 2020 7 of 9 "there is a clear acknowledgement of the outstanding debt in writing and held

that the Corporate Debtor cannot wriggle out of the liability so acknowledged".

15. While so in the present case, there is no specific acknowledgement in

writing admitting the debt. Therefore, facts of the said judgment, is not

applicable to the facts of the present case. The Learned Counsel for the

Appellant also relied upon the judgments of this Tribunal passed in CA

(AT)(Ins.) No.1003 of 2019 dated 18th June 2020. Para 23 of the judgment,

this Hon'ble Tribunal held as under;

..

"23. Admittedly, in this case date of default is shown as 12 th May 2015. As per Article 137 of Limitation Act, the limitation period of three years was available to the applicant. But before expiration of limitation period on 03rd March 2018, the Corporate Debtor submitted an acknowledgment of debt in writing and promise to clear the dues at the earliest possible. In addition to this, the Corporate Debtor had also submitted OTS proposal which was later on accepted by the Bank. The Respondent bank has accepted that account of the Applicant companies classified the Bank approved NPA on 31st March 2015 and OTS submitted by the Corporate Debtor for all the three companies on 27th December 2018. Thus, it is clear that a fresh period of limitation started after the acknowledgement of the debt by the Corporate Debtor and the Petition was filed within the extended period of limitation on account of Section 18 of the Limitation Act. Therefore, it is a Petition is not time- barred."

16. In this judgment also it is held that as per Article 137 of Limitation Act,

1963 the limitation period of three years was available to the Applicant.

Company Appeal (AT) (Insolvency) No. 636 of 2020 8 of 9 However, it was held that before expiration of limitation period the Corporate

Debtor submitted an acknowledgement of debt in writing and promise to clear

the dues at the earliest possible. In this judgment also there was a clear

acknowledgement in writing by the Corporate Debtor, therefore, the said

judgment is also not helpful to the Appellant. In view of the distinct facts of

the present case.

17. In view of the above, we do not find any infirmity in the Order passed

by the Learned Adjudicating Authority and no interference is called for.

Accordingly, the Appeal is dismissed as devoid of merits. No order as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical) NEW DELHI 05th MARCH, 2021

pks

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