Vivek Jha vs Daimler Financial Services India Pvt. ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Company Appeal (AT) Insolvency No. 756 of 2018 [Arising out of Order dated 03.10.2018 passed by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench in Company Petition No. (IB)1802/MB/2017]

IN THE MATTER OF: Vivek Jha .....Appellant Vs. Daimler Financial Services India Private Ltd. & Anr. ......Respondents

Present :

For Appellants: Mr. Rakesh Kumar, Mr. Anjaneya Mishra, Mr. Aashish Khattar, Mr. Sahil Advocates

For Respondent: Mr.Ritesh Khare, Mr. Pathik Choudhury, Mr. Rajdev Singh, Advocates

J U D G M E N T

VENUGOPAL M. J.

The Appellant / Director of 'Corporate Debtor' has filed the instant appeal

being aggrieved against the order dated 3rd October, 2018 passed by the

Adjudicating Authority ('National Company Law Tribunal') Mumbai Bench

whereby and where under the application filed by the Respondent / Applicant

('Financial Creditor') (u/s 7 of the 'I&B' Code) admitted. Earlier, the Adjudicating

Authority ('National Company Law Tribunal') Mumbai Bench while passing the

Company Appeal (AT) Insolvency No. 756 of 2018 impugned order dated 3rd October, 2018 at para 6.4 to 6.6 had observed the

following and ultimately admitted the application: -

"6.4. It is further noticed that despite

number of notices and reminders the Debtor has

failed to make the payment. It is also noticed

that the Financial Creditor has made due efforts

to serve the Petition / Application to the Debtor

but the Debtor has left its registered office. The

RoC extract does not show any change in

Registered Address of the Debtor Company.

6.5. Hence, keeping the facts and

submissions in mind this Bench has come to

conclusion that, the nature of Debt is a

"Financial Debt" as defined under section 5(8) of

the Code. Further, admittedly there is a

"Default" as defined under section 3(12) of the

Code on the part of the Corporate Debtor.

6.6 On the basis of the evidences on record

and statement of account the Financial Creditor

has established that the loan was sanctioned

and duly disbursed to the Corporate Debtor but

2 Company Appeal (AT) Insolvency No. 756 of 2018 there is non-payment of the Balance Debt on the

part of the Corporate Debtor."

2. The Learned Counsel for the Appellant submits that the

Respondent'/Applicant's claim was that there was an agreement dated

28.03.2013 between the Appellant and the Respondent pertaining to the

securing of the Loan in respect of 'car' for an amount of Rs. 43,51,403/-.

3. According to the Appellant the remaining payment was of Rs. 34 lakhs

with interest @ 9.4012%. The total sum (including principal and interest)

payable was Rs. 39,15,180/- out of which the Appellant had made 11 Equal

Monthly Instalments.

4. The Learned Counsel for the Appellant contends that the tenure of the

Loan was from 30.03.2013 to 30.03.2016 (for three years) and the EMI was of

Rs. 1,08,775/-, to be paid in 36 equal instalments. In this connection, it is

represented on behalf of the Appellant that the 1st default of the Appellant had

occurred on 30.03.2014 and that the 1st Respondent / Applicant had issued a

loan recall cum Demand Notice dated 06.05.2014 seeking the principal amount

computed with the outstanding interest amount and the future sum upto

27.03.2016. In fact, as per the aforesaid Recall cum Demand Notice dated

06.05.2014, payable outstanding amount by the Appellant was of Rs.

29,29,149.74/-.

3 Company Appeal (AT) Insolvency No. 756 of 2018

5. The grievance of the Appellant is that the Learned Adjudicating Authority

had passed the Ex-parte impugned order dated 03.10.2019 and that the

Appellant assails the impugned order on the ground of (i) Barred by Limitation;

and (ii) the Application was never served on the Appellant.

6. The Learned counsel for the Appellant forcefully takes a plea that the

'Affidavit of Service' states the Addressee 'Left' and that the Corporate Office of

the Appellant could not be stated as 'Left' and no 'Substituted Service' was

ordered and in the absence of the same, there was 'No effective Service of notice'

on the Appellant. Apart from that, the Respondent / Applicant had not chosen

to serve the Appellant through e-mail though an e-mail address of the Appellant

was available with it.

7. The Learned Counsel for the Appellant projects an argument that the

Hon'ble Supreme Court in Civil Appeal No. 1102 of 2018 in Vashdeo R.Bhojwani

Vs. Abhudaya Co-operative Bank and Ors. had observed that if a wrongful act

causes an injury which is complete, there is no continuing wrong even though

the damage resulting from the act may continue.

8. The Learned Counsel for the Appellant submits the 'cause of action' in

favour of the Respondent / Applicant in regard to the Appellant's loan default

took place on 6th May, 2014 and that in the Recall cum demand notice the entire

principal sum including interest and future interest was recalled upto

27.03.2016.

4 Company Appeal (AT) Insolvency No. 756 of 2018

9. The Learned Counsel for the Appellant points out that the Hon'ble

Supreme Court in the decision "Jignesh Shah & Ors." Vs. Union of India &

Ors." reported in (2019) SCC Online SC 1254, and in decision Gaurav

Hargovind Bhai Dave Vs. Asset Reconstruction Company (India) Ltd. & Ors.

(2019)SCC Online SC 1239 had dealt with the aspect of Limitation under 'I&B'

Code.

10. Continuing further, the Learned counsel for the Appellant points out that

in the judgement in V.Hotels Ltd. Vs. Asset Reconstruction Company (India)

Limited in Company Appeal (AT) (Insolvency) No. 525 of 2019, the

observations of the Hon'ble Supreme Court were noted and that similar

principles of limitation were laid down in the said judgement.

11. Repelling the contentions the Learned Counsel for the Appellant, the

Learned counsel for the 1st Respondent submits that the Appellant / 'Corporate

Debtor' repeatedly committed default in making payment of instalment amount

as and when due, despite receiving several requests and reminders in this

regard from the 1st Respondent / 'Financial Creditor'. Therefore, it is the stand

of the 1st Respondent that the 1st Respondent/Applicant was perforced to

terminate the Loan agreement dated 28.03.2013 because of failure on the part

of the Appellant to repay the Loan amount due and the outstanding amount.

12. The Learned Counsel for the 1st Respondent brings it to the notice of the

this Tribunal that in the Loan Recall notice dated 6.5.2014 issued to the

5 Company Appeal (AT) Insolvency No. 756 of 2018 Appellant / 'Corporate Debtor' a sum of Rs. 28,44,423 as on 02.05.2014 claimed

together with accrued interest and expense till the date of realisation within 7

days from the date of receipt of the notice. In reality, it is the case of the 1st

Respondent / Applicant that the Appellant /'Corporate Debtor' paid a sum of

Rs. three lakhs on 18.03.2015 (through Cheque No. 51367 and subsequently,

the 'Corporate Debtor' had not made any payment towards the outstanding

sum.

13. The Learned Counsel for the 1st Respondent points out that the Demand-

cum-Insolvency Notice dated 17.08.2017 was sent to the Appellant / 'Corporate

Debtor' and Co-Borrowers by the 1st Respondent / 'Financial Creditor' claiming

a sum of Rs. 29,29,149.74/-.

14. The Learned Counsel for the 1st Respondent strenuously contends that the

application along with the hearing notice was served at the Registered address

of the Appellant / 'Corporate Debtor', available in the Master Data with ROC

but the same was returned with an endorsement "Addressee Left" and to this

effect the affidavit of service was also placed on record and these facts were

mentioned in the Impugned Order dated 03.10.2018 passed by the Adjudicating

Authority. Therefore, because of the non-appearance of the Appellant /

'Corporate Debtor', the Adjudicating Authority passed an 'Ex-parte order' on

03.10.2018.

6 Company Appeal (AT) Insolvency No. 756 of 2018

15. Lastly, the Learned Counsel for the 1st Respondent takes a stand that the

Learned Adjudicating Authority had rightly held that there was continuous

'cause of action' when Demand Notice dated 17.08.2017 was issued to the

'Corporate Debtor' and hence the 'Debt' is not time barred.

16. At the outset this court relevantly points out that a 'Hire-Purchase

Agreement' provides an alternative to an 'Hirer' to purchase the 'Goods'. The

said Agreement begins as a 'Contract' of 'Hire', may result in a complete sale.

17. Section 2(d) of the Hire-Purchase Act, 1972 defines 'Hire-Purchase price'

meaning the total sum payable by the hirer under hire-purchase Agreement in

order to complete the purchase of or the acquisition of property in the goods to

which the agreement relates etc. Section 2(e) of the Act speaks of 'hirer'.

Section 2(f) specifies the meaning of 'owner'. Section 10 relates to 'right of

hirer' to terminate agreement at any time. Section 19 pertains to 'rights' of

owner on termination. In fact, the ingredients of Section 20 of the Act, 1972

pertains to restriction of owner's right to recover possession of goods otherwise

than through Court. Section 24 concerns with 'discharge' of price otherwise

than by payment of money'.

18. Section 25 of the Hire Purchase Act, 1972, enjoins that if the Hirer is

declared 'Insolvent' during the continuance of Hire-purchase agreement then,

the official receiver or where the hirer is the Company then, in the event of

company being wound up, the Liquidator, has the same rights and obligations

7 Company Appeal (AT) Insolvency No. 756 of 2018 as an Hirer had in regard to the 'Goods'. An official Receiver or the Liquidator

with the permission of the court assign the rights of Hirer under the agreement

to any other person and the assignee shall have all the rights and is subjected

to all the obligations of the Hirer under the agreement. Besides this, Section

238 of 'I&B' Code has an over-riding effect in respect of anything inconsistent

contained in any other law.

19. It is not in dispute that the "Natconn Engineering Private Limited",

Gurgaon ('Corporate Debtor') and its Director as Applicant and Co-Applicant

had approached the Respondent / Applicant with a view to avail financial

assistance in purchasing a Mercedes Benz car (E-250-CDI) and pursuant that

too the 'Corporate Debtor' as well as Director (as borrower and co-borrower)

entered into a Loan cum Hypothecation agreement dated 28.03.2013 and

purchased the said car worth Rs. 43,51,403/- and that they made initial

payment of Rs. 9,51,403/- and that the balance amount of Rs. 34 lakhs was

financed by the Respondent / Applicant.

20. The rate of interest was @ Rs. 9.4012% p.a. and that the aggregate sum of

Rs. 39,15,180/- was the contract value within a period of three years. The

aforesaid amount was to be repaid in 36 equal monthly instalments of Rs.

1,08,775/- p.m. commencing from 30.03.2013 to 30.03.2016 subject to the

terms and conditions prescribed under the loan agreement.

8 Company Appeal (AT) Insolvency No. 756 of 2018

21. The clear cut case of the Respondent is that the 'Corporate Debtor' as well

as its Director as Borrower and co-borrower(s) are jointly and severally liable to

repay the Loan together with interest and all other dues arising out of Loan

Agreement. In short, their liability is co-extensive. It is to be noted that 'onus'

is on the Respondent/Applicant to prove that service of summons on the Debtor

Company. Even though on the side of the Appellant a plea was taken that there

was no effective service on it by the Respondent / Applicant because of the

reason that the notice on the 'Registered Address of the Debtor Company' was

returned with an endorsement as 'Addressee Left' and as such no substituted

service was either directed or effected upon the Appellant and also that no

endeavour was made on the side of the Respondent/Applicant to serve the

Appellant in the e-mail address, this Tribunal is of the considered opinion that

'Master Data' of the Debtor / available with ROC) reflected the same address

and therefore one can safely and securely come to a conclusion in the instant

case that the service was avoided by the party concerned. If a service of notice

sent through Regd. Post at the correct address, then, in Law it is a 'correct mode

of service' and in this regard a mere bald assertion that the registered notice

was not served would not be sufficient to discharge the onus cast on an

'Aggrieved person'.

22. As a matter of fact, the Adjudicating Authority had observed in the

impugned order that address of the Debtor Company from the Master data is

the same for which only the Respondent/Appellant had taken place for sending

9 Company Appeal (AT) Insolvency No. 756 of 2018 them hearing notice. Therefore, there was no necessity for a direction being

issued for a 'Substituted service' to be effected upon the Appellant. Moreover,

non-serving of notice on the e-mail address of the Appellant is not fatal to the

present case, as opined by this Tribunal.

23. It cannot be forgotten that for the Demand Notice dated 17.08.2017 of the

Respondent / Applicant ('Financial Creditor'), the 'Corporate Debtor' and the co-

borrower(s) to the Loan Agreement although received the same had not issued

a Reply and also not repaid the outstanding sum of Rs. 29,29,149.74/-. Before

that on 18.03.2015 through cheque No. 51367 payment of Rs. 3 lakhs was made

by the 'Corporate Debtor' and subsequently, the 'Corporate Debtor' has not

made any payment towards the Loan outstanding amount.

24. Section 3(8) of 'I&B' Code defines that 'Corporate Debtor' meaning a

Corporate person who owes a debt to any person.

25. Section 3(17) of the Code speaks of 'financial service provider' meaning a

person engaged in the business of providing 'Financial services' in terms of

authorisation issued or registration granted by a Financial Regulator.

26. Section 5(7) of 'I&B' Code with 'Financial Creditor' meaning any person to

whom a financial debt is owed and includes a person to whom such debt has

been legally assigned or transferred to.

10 Company Appeal (AT) Insolvency No. 756 of 2018

27. As far as the present case is concerned, the Respondent / Applicant is a

'Financial Creditor' who had initiated proceedings under Section 7 of the 'I&B'

Code against the 'Corporate Debtor'.

28. Section 3(14)(b)(iii) while defining Financial Institution (by referring to

Section 45(i) of RBI Act, 1934) means a Financial Institution as any non-

banking institution which carries on as its business or part of its business in

letting or delivering of any goods to a hirer under a Hire-Purchase Agreement as

defined in clause (c) of Section 2 of the Hire-Purchase Act, 1972.

29. It is represented before this Tribunal that the Respondent / Applicant had

incurred an expense of Rs. 9 lakhs approx. towards 'Corporate Insolvency

Resolution Process' cost, Rs. 1,50,000/- 'Litigation Cost' and Rs. one Lakh

towards Miscellaneous Expenses' and further that the Liquidation was initiated

by the Liquidator.

30. Admittedly, the Loan cum hypothecation agreement was entered into

between the parties on 28.03.2013 and the period of 36 equated monthly

instalments of Rs. 1,08,775/- per month towards the purchase of car

commenced from 30.03.2013 to 30.03.2016 on 06.05.2014, a Loan Recall notice

was issued on behalf of the Respondent for termination of loan agreement. It is

not in dispute that a payment of Rs. three lakhs through cheque dated

18.03.2015 was made by the 'Corporate Debtor'.

11 Company Appeal (AT) Insolvency No. 756 of 2018

31. The Demand Notice dated 17.08.2017 was issued by the Respondent /

Applicant for which the 'Corporate Debtor' and the co-Borrower to the loan

agreement had not responded and (not made payment of the outstanding sum

of Rs. 29,29,149.74/-. As per Section 3(12) of the 'I&B' Code the 'Corporate

Debtor' had committed default in respect of a financial debt envisaged u/s 5(8)

of the Code. In Law, an 'Acknowledgement' in writing within expiration of

prescribed period will mark a new commencement period for limitation to base

a claim and the same will not create a new contract. In fact, it only extends

the limitation period. Suffice it for this Tribunal to make a pertinent mention

that if a suit is filed within three years from the last acknowledgement the same

is not barred by limitation as per decision Union of India Vs. M.C. Pandey AIR

2009 NOC Page 494 (UTR). Further, an 'Acknowledgement' must be made

before the expiration of the limitation period as per Section 18 of the Limitation

Act, 1963. An 'Acknowledgement' of Liability not only saves limitation period

but also confers on an individual a 'cause of action' to him, to lay his claim.

32. Considering the fact that the Appellant / 'Corporate Debtor' had made a

payment of three Lakhs through Cheque on 18.03.2015 and that the said

payment was made after the issuance of Loan Recall notice dated 06.05.2014

and later a demand notice dated 17.08.2017 was issued by the Respondent to

the Appellant / 'Corporate Debtor' and co-borrower in respect of the loan

agreement dated 28.03.2018 where the 'Corporate Debtor' had agreed to pay

Rs. 1,08,755/- per month beginning from 30.03.2013 to 30.03.2016 and also

12 Company Appeal (AT) Insolvency No. 756 of 2018 this Tribunal keeping in mind that the application u/s 7 of the 'I&B' Code was

filed by the Respondent / Applicant before the Adjudicating Authority on

16.12.2017, this Tribunal comes to a consequent conclusion that the claim of

the Respondent / Applicant is not barred by the plea of Limitation.

Consequently, the present Appeal fails and the same is dismissed but without

costs. All the pending IA's are closed. The Appellant is directed to file certified

copy of the Impugned Order dated 03.10.2018 within 4 days from today.

[Justice Venugopal M.] Member (Judicial)

[Balvinder Singh] Member (Technical)

[Dr. Ashok Kumar Mishra Member (Technical)

New Delhi

13th January, 2020

ss

13 Company Appeal (AT) Insolvency No. 756 of 2018