Vedika Credit Capital Ltd vs Shriram Power & Steel Pvt Ltd

[Arising out of Order dated 08.10.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) in CP(IB) No. 280/KB/2018]

IN THE MATTER OF:

Vedika Credit Capital Limited, Through its authorized signatory, Mr. Gautam Jain having office at Village-Collage Pally, P.O. - Shiuli Telini Para, P.S. Titagar Kolkata, Parganas North, WB 700121 ...Appellant

Versus

Shriram Power and Steel Private Limited, Through its authorized signatory, Having office at 33A, Jawaharlal Nehru Road, 17th Floor Chatterjee International Centre, Flat No. 8 Kolkata WB 700071 ...Respondent

Present:

For Appellant: Mr. Akhilesh, Mr. Mratyunjay Singh, Mr. Nimit Bhola, Advocates Mr. Kapil Kachawa, CS For Respondents: Mr. Sudhir Mehta, Mr. Pandey Neeraj Rai, Ms. Rachitta Rai and Mr. Shashank Gupta, Advocates

JUDGMENT

ASHOK BHUSHAN, J.

1. This Appeal has been filed by the Financial Creditor challenging the

Order dated 08.10.2021 passed by the National Company Law Tribunal,

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Kolkata Bench, Kolkata (the Adjudicating Authority) by which CP(IB) No.

280/KB/2018 filed by the Appellant under Section 7 of the Insolvency

and Bankruptcy Code, 2016 (IBC in short) has been dismissed.

2. Aggrieved by the Order dated 08.10.2021, this Appeal has been

filed.

3. The brief facts of the case necessary to be noted for deciding this

Appeal are:

i. The Financial Creditor claimed to have entered into a Loan

Agreement with Corporate Debtor on 09.04.2011 for granting Rs.

1.5 Crore repayable on demand. The Financial Creditor claimed to

have paid the amount in three tranches on 19.04.2011 a sum of

Rs. 56 Lakh, on 02nd May, 2011 a sum of Rs. 75 Lakh and on

19.02.2012 a sum of Rs. 19 Lakh. On 13th August, 2014, notice

demanding the repayment of loan was issued by the Financial

Creditor.

ii. According to the Financial Creditor, the debt fell due on

12.09.2014. Financial Creditor claims to have initiated arbitration

proceedings on 22.09.2014 which proceedings were discontinued

due to death of arbitrator. Winding up petition being C.P. No.

957/2014 was filed by the Financial Creditor on 11.11.2014 before

the High Court of Kolkata. Above Company Petition was claimed to

be pending. On 12.02.2018, Section 7 Application has been filed by

the Financial Creditor.

iii. The Adjudicating Authority issued notice to the Corporate Debtor

who filed a Reply to Section 7 Application. In the Reply it was

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mentioned that the management of the Corporate Debtor was with

the Sonthalia Group which was taken over in the year 2012 by

Sharda's Group. On 01st March, 2016, the Rungta Group

purchased the entire shareholding of the Corporate Debtor

Company from Sharda Group and agreement dated 01st March,

2016 was entered which enumerated and disclosed all loans

acquired by the Corporate Debtor Company as outstanding in its

books as on 1st March, 2016. The loan claimed by the Financial

Creditor was not disclosed in the agreement. The balance sheet of

the Corporate Debtor ending 31st March, 2012 also does not

disclose any loan and for three years preceding its acquisition by

Rungtas, the Balance Sheet does not reveal any such loan. It was

pleaded in the Reply that loan agreement dated 09.04.2011 relied

on by the Financial Creditor is a fabricated document. The Loan

Agreement does not bear the name of the Corporate Debtor and the

rubber stamp of the Corporate Debtor. No proceedings were

initiated by the Financial Creditor for loan amount and for the first

time in 2017, on 20th November, 2017 Demand Notice was issued.

iv. It was further pleaded that claim raised in the Application is barred

by limitation as default occurred on 02nd December, 2014 and no

demand notice was raised till 20th November, 2017 and the

application was filed on 12.02.2018. The Adjudicating Authority

heard the Learned Counsel for the parties and by the Impugned

Order has rejected Section 7 Application.

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v. The Adjudicating Authority took the view that Financial Creditor

has not been able to cross the threshold hurdle of limitation and

materials brought on record creates a shadow of doubt on the

authenticity of the loan agreement which according to the

Corporate Debtor is a fabricated piece of document. The

Adjudicating Authority further held that Financial Creditor failed to

produce any document which would prove that pursuant to the

loan agreement regular transaction of repayment took place within

three years immediately preceding the filing of the Section 7

Application.

vi. Aggrieved by the Order of the Adjudicating Authority, this Appeal

has been filed.

4. Learned Counsel for the Appellant challenging the Order contends

that the Application was not barred by time. It is submitted that in view

of the filing of the winding up petition which was pending in the Kolkata

High Court, Appellant was entitled to take benefit of Section 14 of the

Limitation Act, 1963. It is submitted that the amount was disbursed

through the bank channel hence Corporate Debtor cannot deny the loan

agreement. It is further submitted that present management of the

Corporate Debtor who has come in 2016 want to distance from loan taken

by the Corporate Debtor through earlier management. There is no ground

to doubt the loan transaction.

5. Learned Counsel for the Respondent refuting the submissions of

Learned Counsel for the Appellant contends that Application was clearly

barred by time. Date of Default having been mentioned in Section 7

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Application as 12.09.2014 and Section 7 Application having been filed on

12.02.2018, the Application was clearly barred by time. There was no

grounds mentioned in the Application seeking extension of limitation and

it was only during the course of argument that Financial Creditor sought

to raise arguments based on Section 14 of the Limitation Act. The

Company Petition which is sought to be relied on, shall not extend the

limitation for the Financial Creditor. The Financial Creditor has filed CP

No. 814 of 2014 which was dismissed on 28.10.2014. Thereafter C.P. No.

957/2014 was filed on same cause of action by suppression of facts and

after dismissal of earlier Company Petition. Instead of filing Application

for transfer of Company Petition, Appellant has filed Section 7 Application

which is barred by time. With the connivance of Mr. Anoop Sonthalia, the

earlier promoter of Corporate Debtor, certain bank documents were

obtained by the Financial Creditor on basis of which loan agreement was

manufactured, the entries alleging payment of amounts to the Corporate

Debtor were only parking entries and in no manner there is any financial

debt due on the Corporate Debtor. The Balance sheets of the Corporate

Debtor for the year 2011-12 did not disclose any loan by the Financial

Creditor nor the balance sheets thereafter for three years preceding the

acquisition of the Corporate Debtor by Rungta Group contains any

mention of the loan. There is no ledger of the Corporate Debtor or the

Bank Documents produced to show the transactions. The amount

according to the Appellant became due on 12.09.2014 and for the first

time demand notice was issued on 28th November, 2017 to the Corporate

Debtor which indicates that there is no genuineness in the transaction.

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Appellant did not pursue the arbitration proceeding and has also

abandoned the winding up proceeding hence is not eligible for any benefit

of Section 14 of the Limitation Act.

6. We have considered the submissions of Learned Counsel for the

parties and have perused the record.

7. We may first notice the averments made in the Application under

Section 7 of the Code. Part-IV of the Section 7 Application is as follows:

"Part-IV

PARTICULARS OF FINANCIAL DEBT Total amount of debt Rs. 1,50,00,000/-

1 granted Date(s) of 19th April, 2011 disbursement Amount claimed to be Total amount claimed 2 in default and the date Rs. 3,41,06,997/-

on which the default upto 31.10.2017 occurred (attach the Date of Default: workings for 12.09.2014 computation of amount and days of default in tabular form)

8. Part-V of the Section 7 Application pertaining to Particulars of

Financial Debt (Documents, Records and Evidence of Default), there are

no mention of any material or any document on basis of which benefit of

Section 14 of the limitation can be claimed. In Section 7 Application, the

filing of winding up petition was in fact concealed. Law is well settled that

for taking benefit of extension of limitation under the limitation act, 1963

there has to be relevant materials brought on record to extend the benefit

of Section 14 of the limitation Act, 1963. The Hon'ble Supreme Court in

the matter of "Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium

Company Appeal (AT) (Insolvency) No. 1066 of 2021 -7-

Industries Pvt. Ltd. & Anr." [2020 15 SCC 1] laid down that question of

limitation is essentially a mixed question of law and facts and when a

party seeks application of any particular provision for extension or

enlargement of the period of limitation, the relevant facts are required to

be pleaded and requisite evidence is required to be adduced. The said

judgment was delivered by the Supreme Court in reference to IBC, 2016.

In paragraph 35.1, following has been stated:

"35.1. Therefore, on the admitted fact situation of the present case, where only the date of default as '08.07.2011' has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgement or any other date of default, in our view, the submissions sought to be developed on behalf of the respondent No. 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, the respondent No. 2 never came out with any pleading other than stating the date of default as '08.07.2011' in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same

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would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgement. In this view of the matter, reliance on the decision in Mahaveer Cold Storage Pvt. Ltd. does not advance the cause of the respondent No. 2."

9. Before the Adjudicating Authority, the Appellant did not bring any

material including the details of the winding up petition in its proceedings

to claim any benefit of Section 14 of the limitation act, 1963.

10. Learned Counsel for the Appellant has relied on the Judgment of

Hon'ble Supreme Court in the matter of "Sesh Nath Singh Vs.

Baidyabati Sheoraphuli Cooperative Bank Ltd." [2021 7 SCC 321] to

support his contention that Appellant is entitled for benefit of Section 14

of the limitation act. It is seen that in the above case, Section 14 was

sought to be relied in reference to the proceeding initiated under

SARFAESI Act, 2002 by the Financial Creditor. The proceedings under

SARFAESI Act, 2002 were challenged before the High Court and were

stayed by the High Court observing that financial creditor being

cooperative bank it could not invoke the provisions of SARFAESI Act. In

paragraph 68 of the Judgment in reference to applicability of Section

14(2) of the Limitation Act, following was observed:

"68. Section 14(2) of the Limitation Act provides that in computing the period of limitation for any application, the time during which the petitioner had been prosecuting, with due diligence, another

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civil proceeding, whether in a court of first instance, or of appeal or revision, against the same party, for the same relief, shall be excluded, where such proceedings is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of like nature, is unable to entertain it. The conditions for exclusion are that the earlier proceedings should have been for the same relief, the proceedings should have been prosecuted diligently and in good faith and the proceedings should have been prosecuted in a forum which, from defect of jurisdiction or other cause of a like nature, was unable to entertain it."

11. Paragraph 21 of the Judgment of Sesh Nath Singh (supra), Hon'ble

Supreme Court has noted that High Court has stayed the proceedings

under SARFAESI Act on the ground of want of jurisdiction. Paragraph 21

is as follows:

"21. The relevant dates reveal that the cash credit account of the corporate debtor was declared NPA with effect from 31.3.2013. Proceedings under the SARFAESI Act commenced on 18-1-2014, when a demand notice was issued under Section 13(2) of the SARFAESI Act. In other words, proceedings were initiated under the SARFAESI Act, 2002, approximately months and 18 days after the date of accrual of the right to issue. The proceedings under the SARFAESI Act, 2002 were stayed by the Calcutta high Court, by an order dated 24.07.2017, on the ground of want to jurisdiction. About 11 months thereafter, while the writ petition

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filed by the corporate debtor was still pending in the High Court, and the interim stay of the SARFAESI Act proceedings still continuing, the financial creditor initiated the application under Section IBC."

12. Thus in the above case, the benefit of Section 14 was extended

because prima facie it was proved that proceedings under SARFAESI Act

were without jurisdiction. Present is not a case where it is even contended

that winding up petition filed by the Appellant before the Kolkata High

Court were without jurisdiction proceeding or were terminated by the

defect of a like nature.

13. Learned Counsel for the Respondent has submitted that earlier

Company Petition No. 814/2014 filed by the Financial Creditor was

dismissed on 28.10.2014 and thereafter Company Petition 957 of 2014

was filed which has been actually abandoned by the Financial Creditor.

For taking benefit of Section 14 of the Limitation Act, certain ingredients

have to be proved. In the present case we have found that neither there is

any averment in Section 7 Application nor there is any material on record

before the Adjudicating Authority to give the benefit of Section 14 of the

Limitation Act hence without there being any pleading or material, no

plea for extending benefit of Section 14 of the Limitation Act can be

entertained. The date of default having been disclosed in Section 7

Application as 12.09.2014 and the Application under Section 7 having

been filed in the year 2018, was clearly filed beyond three years from the

date when cause of action arose to the Appellant. There is no material on

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record to extend the benefit of Section 14 of the Limitation Act. It is also

relevant to notice that for extending the benefit of Section 14 or even the

principles which are contained in Section 14, certain conditions are to be

proved. Section 14 (2) of the Limitation Act provides as under:

"14(2). In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it."

14. The proceedings benefit of which is sought to be claimed, it has to

be proved that proceedings are prosecuted in good faith in a court which,

from defect of jurisdiction or other cause of a like nature is unable to

entertain it. Present is not a case where winding up petition filed in the

Kolkata High Court was suffering from any defect of jurisdiction or other

cause of a like nature. We thus are of the view that foundational fact for

taking benefit of Section 14 of the Limitation Act being not laid down by

the Financial Creditor, no benefit under Section 14 can be claimed by the

Appellant. We thus are in agreement with the view of the Adjudicating

Authority that Application filed by the Financial Creditor was barred by

time. The Adjudicating Authority has also expressed its doubts over the

genuineness of the loan transaction as claimed by the Financial Creditor.

Corporate Debtor in its reply has categorically pleaded that in the balance

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sheet of the financial year 2012-13 of the Corporate Debtor there was no

mention of the loan taken from the financial creditor. Further when

Rungta Group purchased the shareholding of the Corporate Debtor, there

was no mention of debt loan in the balance sheet of the Corporate Debtor.

When there is no mention of the loan in any of the balance sheets of the

Corporate Debtor, the doubt expressed by the Adjudicating Authority

about the genuineness of the transaction is not unfounded.

15. We further notice that loan agreement claimed by the Appellant is

09.04.2011 and the resolution of the corporate debtor is subsequent

dated 25th April, 2011 wherein it was decided to request the financial

creditor for a loan. Loan Agreement filed in the record indicates the

interest, there is no claim by the financial creditor that there was any

demand made for payment of interest for loan by the Financial Creditor.

It is the case of the Corporate Debtor that only notice which was received

by the Corporate Debtor was notice dated 28th November, 2017 which

was even after three years from date of default as per Financial Creditor

itself.

16. Learned Counsel for the Appellant has also relied on the Judgment

of Hon'ble Supreme Court in "Forech India Ltd. Vs. Edelweiss Assets

Reconstruction Co. Ltd." Civil Appeal No. 818 of 2018 decided on

22.01.2019. The proposition which was laid down in the above case by

the Hon'ble Supreme Court was that proceedings under Section 7 or

Section 9 under the IBC is independent proceeding from the winding up

proceeding which are initiated under the Companies Act. The above

judgment, in no manner, help the Appellant in the present case.

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17. We thus are satisfied that Adjudicating Authority did not commit

any error in rejecting section 7 application filed by the Appellant. There is

no merit in the Appeal, the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Barun Mitra] Member (Technical)

NEW DELHI

05th January, 2023

Basant

Company Appeal (AT) (Insolvency) No. 1066 of 2021