Amar Vora vs. City Union Bank Ltd

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Page 1 Tuesday, December 20, 2022

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2022 SCC OnLine NCLAT 276
In the National Company Law Appellate Tribunal†

(BEFORE M. VENUGOPAL, MEMBER (JUDICIAL) AND KANTHI NARAHARI, MEMBER (TECHNICAL))
Amar Vora … Appellant;

Versus
City Union Bank Ltd. Represented by its Manager, Renganath and
Another … Respondents.
Company Appeal (AT) (CH) (Ins) No. 130 of 2022‡
Decided on May 11, 2022
Advocates who appeared in this case:
Ms. Tamizh Malar, Advocate for Mr. T. Lajapathi Roy, Advocate for Appellant;
Mr. Veerabathran Prasanth, Advocate.
Mr. Raghav Rajeev Menon, Advocate for Respondents.
The Judgment of the Court was delivered by
KANTHI NARAHARI, MEMBER (TECHNICAL):— The Present Appeal is filed aggrieved
by the order dated 21.03.2022 in CP 75 of 2021 passed by the Adjudicating Authority
(NCLT) Division Bench-I Chennai whereby the Adjudicating Authority admitted the
application filed by the Respondent/Financial Creditor under Section 7 of the I & B
Code 2016.
Brief Facts:
Appellant Submissions:
2. The Ld. Counsel appeared for the Appellant submitted that the Hon'ble NCLT did
not consider various factual and legal positions put forth before it and passed the
impugned order utterly ignoring the same. It is submitted that the Appellant obtained
three Credit facility from the financial Creditor/1st Respondent to develop the mall for a
tune of Rs. 5,20,00,000/- on various dates by offering the property in town bearing
survey nos. 80 to 85 of Managiri bit 1 village, KK Nagar Madurai North Taluk as
collateral. Though the financial Credits obtained from the 1st Respondent Bank on
various occasions, they have also repaid the interest without any default so far.
However, the first Respondent Bank initiated proceedings under Section 7 of I & B
Code, 2016 before the Adjudicating Authority (NCLT Chennai) alleging certain
defaults. However, the 1st Respondent did not brought to the knowledge of the Hon'ble
NCLT that it had earlier issued a demand notice to the Appellant under Section 13(2)
of SARFAESI ACT, 2002 on 30.08.2018 for a default of Rs. 14,14,61,066/- followed by
paper publication dated 27.09.2018. The authorised officer took symbolic possession
of the property mortgaged as per Section 13(4) of the SARFAESI ACT, 2002.
Thereafter, the subject property was attached with DRT Madurai Bench.
3. It is submitted that the Hon'ble NCLT did not consider the fact that OA No. 497
of 2019 on the file of DRT Madurai against the Appellant for recovery of debts and the
parallel application in CP 75 of 2021 before the Adjudicating Authority under Section 7
is amount to forum shopping. It is submitted that there is a symbolic and physical
possession of the Appellant Company in the PBPT Proceedings and SARFAESI
Proceedings, hence the initiation proceedings under Section 7 of the I & B Code, 2016
should have been kept in abeyance until the orders in PBPT had attained finality.
4. The Ld. Counsel further submitted that the Proceedings before the Adjudicating
Authority is barred by limitation and therefore prayed this Bench to allow the Appeal
by setting aside the impugned order passed by the Adjudicating Authority in
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admitting and initiating the CIRP against the Corporate Debtor.

Analysis/Appraisal:
5. This Tribunal intent to take up the Appeal and decide the same at the admission
stage itself having gone through the Appeal and the order under challenge, hence, no
notice was ordered to the Respondent. However, Counsel appearing for the
Respondents present in person at the time of taking of the Appeal.
6. After hearing the Ld. Counsel for the Appellant the three points emerge for
consideration is:
(i) Whether the pendency of proceedings under SARFAESI ACT, DRT and before
PBPT, prohibits the Respondent/financial Creditor for initiation of Proceedings
under IBC, 2016?
(ii) Whether the debt and default is proved in respect of Corporate Debtor?
(iii) Whether the application is barred by limitation?
(iv) Whether the order under challenge is reasoned order dealing with all issues as
raised by the Appellant/Corporate Debtor?
Now we take up point no. (i)
7. It is the case of the Appellant that the financial Creditor issued notice under
Section 13(2) of the SARFAESI ACT, 2002 for a default of Rs. 14,14,61,066/- for
almost 12 accounts and the financial Creditor has also filed an application bearing OA
No. 497 of 2019 before the DRT Madurai against the Appellant/Corporate Debtor for
recovery of debts Rs. 19,73,47,599/- and filing the application before the Adjudicating
Authority for default in loan amount to the tune of Rs. 8,04,86,434/- with interest for
the very same loan facility would amount to forum shopping and hence initiation of
CIRP by the Adjudicating Authority cannot be maintained. Further, the Ld. Counsel
submitted that an application being IA 844 of 2021 filed before the Adjudicating
Authority praying the Authority to keep abeyance till the matter in reference no. R-
1929 of 2020 before the prohibition of Benami Property Transaction Act, 1988 is
decided.
8. The IBC, 2016 is a special enactment and is an act to consolidate and amend the
laws relating to reorganisation and insolvency resolution of corporate persons,
partnership firms and individual in a time bound manner for maximisation of value of
assets of such persons, to promote entrepreneurship. As held by the Hon'ble Supreme
Court the aim and object of the Code is not for recovery of debts but for Resolution of
Corporate Persons. In this regard Section 238 of I & B Code, 2016 deal with provisions
of the Code to override other laws and the said provision reads as under:
“The provisions of this Code shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time being in force or any
instrument having effect by virtue of any such law.”
9. In view of the above provision of law the financial Creditor/Operational
Creditor/Corporate Persons can file an application under Section 7, 9 & 10 of the I & B
Code, 2016 before the respective Adjudicating Authorities even though in respect of
same any proceeding pending before other forums on the ground that the provisions of
I & B Code, 2016 is overriding effect of other laws. In view of the aforesaid reasons the
Appellant cannot take a stand that the proceedings are pending before DRT and PBPT
and the application under Section 7 of the I & B Code, 2016 cannot be maintained
does not merit. The application under Section 7 filed by the financial Creditor before
the Adjudicating Authority is very well maintained. Accordingly, the point is answered
against the Appellant.
Now we deal with Point no. (ii):
10. Form-1 dated 09.03.2021 filed by the Respondents/financial Creditor at part-IV
regarding particulars of financial debt shown as Rs. 5,20,00,000/- and the Appellant
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has in para 6 of the counter filed before the Adjudicating Authority admitted that the
Appellant obtained three credit facility from the financial Creditor to a tune of Rs.
5,20,00,000/- on various dates by producing the subject property as collateral. In
view of the reason the Appellant had admitted the debt and default. The Adjudicating
Authority also took the stand that the existence of debt and default had been proved
beyond reasonable doubt. Accordingly, the point is answered against the Appellant.
Now we deal with Point no. (iii):
11. The Respondent/financial Creditor in the application form-1 dated 09.03.2021
in part-IV column-2 with regard to date of default it is mentioned that the date of
default is 31.05.2018, however the fact remains that the application filed by the
Respondent/financial Creditor before the Adjudicating Authority is on 18.03.2021
which is within the period of limitation i.e. 3 years from the date of default as per
Section 137 of the limitation Act since the limitation act applicable to the proceedings
under IBC. Therefore, the application filed before the Adjudicating Authority is within
the period of limitation and accordingly the point is answered against the Appellant.
Now we deal with Point no. (iv):
12. The order passed by the Adjudicating Authority in admitting the application
filed by the 1st Respondent against the Corporate Debtor is a well reasoned order and
we do not find any legal or factual infirmity in the order and no interference is called
for.
Conclusion:
13. In view of the reasons as stated above, the Appeal sans merit and the same is
dismissed. No order as to costs.
———
† Chennai Bench
‡ Arising out of order dated 21st March, 2022 passed by National Company Law Tribunal, Division Bench-I,
Chennai Bench in CP/IB/75/2021 along with IA/839/CHE/2021 and IA/844/CHE/2021
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SCC Online Web Edition, © 2022 EBC Publishing Pvt. Ltd.

Page 1 Tuesday, December 20, 2022

2022 SCC OnLine NCLAT 276

In the National Company Law Appellate Tribunal†

Amar Vora … Appellant;

admitting and initiating the CIRP against the Corporate Debtor.

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