The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson, Dr. Alok Srivastava and Barun Mitra, Technical Members was recently hearing an interesting Appeal on limitation and held that the date has been correctly considered as the date of default by the Adjudicating Authority, which the said cheques were dishonoured.
The Appellant filed the appeal under section 61 of the Insolvency and Bankruptcy Code, 2016 against the order passed by the Adjudicating Authority. The Appellant was aggrieved by the Impugned Order in that the section 7 application filed by respondent No. 1 has been admitted and CIRP has been initiated against the corporate debtor.
The Appellant’s case was that a promissory note was executed between the corporate debtor and Respondent No. 2 for a loan of Rs.50,00,000/- payable by the corporate debtor, and the requisite amount was given by Respondent No. 2 vide cheque no. 468828 dated 21.2.2012 drawn on Central Bank of India. The Appellant had stated that during the life of the promissory note i.e. up to 23.2.2015, there was no demand for repayment by Respondent No.2 and therefore, no default can be determined during this period. He has further stated that in accordance with Article 35 of the Schedule which includes periods of limitation in the Limitation Act, of 1963, a period of limitation of three years is stipulated for a promissory note, which is payable on demand. Thus the section 7 application filed by Respondent No. 2 on 25.10.2019 was clearly barred by limitation, as it was filed after more than 7 years from the date of issue of the promissory note. Lastly, he has stated that since the section 7 application has been filed beyond the limitation period, it has been incorrectly admitted by the Adjudicating Authority.
The Learned Counsel for Respondent has urged, on the basis of the dishonour of the cheques, that since the corporate debtor was paying interest on the unsecured loan, which was clear from the ledger showing ‘Confirmation of Account’ for the period 1.4.2014 to 31.3.2015, and also Form 16A showing TDS deduction, that there was no default till then i.e. 16.12.2010. He has submitted that the default date was the date of the bouncing of the cheque. 16.12.2016, and since the section 7 application was filed on 25.10.2019, it was clearly within the limitation of three years. He has strongly argued that even if he did not take any action for repayment of the amount in accordance with the promissory note, the fact that the disbursed amount was a loan could not be denied, as was coming out from the letter dated 7.8.2016 of the corporate debtor.
Thus the issues, therefore, that come for consideration in this appeal were whether the loan advanced by Respondent No. 2 to the corporate debtor regarding which the promissory note has been executed was a financial debt and further whether the letter dated 7.6.2016 constitutes an admission of such debt and whether the date of dishonouring of cheques i.e. 16.12.2016 was the date of default.
The Appellate Authority noted that the ledger statement regarding confirmation on account of the corporate debtor for the period 1.4.2014 to 2015, which was sent by the corporate debtor to Respondent No. 2 clearly showed that interest on an unsecured loan amount of Rs.170625/- paid on 9.4.2014, further an amount of Rs.172500/- was paid on 20.11.2014 and an amount of Rs.341250 was paid on 20.06.2015. Therefore, it was clear, as claimed by Respondent No. 2, that the corporate debtor was paying interest in the years 2014 and 2015 on the loan amount of Rs. 50 lakhs and hence, and so it was logical that the corporate debtor did not demand repayment of the amount of the promissory note. Further, the TDS details updated on 16.7.2014 also corroborated the payment of interests by the corporate debtor to Respondent No. 2. Thus, the argument of Respondent No. 2 that the question of demanding payment on account of the promissory note during the existence did not arise till June 2016 when he approached the corporate debtor for repayment of the loan amount convincing.
The Appellate Authority further noted that within a period of three years from the date of issue of ledger confirmation of account dated 1.4.2015, the corporate debtor issued a letter dated 7.6.2016 wherein the corporate debtor has admitted that Rs. 50 lakhs given by cheque no. 468828 drawn on Central Bank of India was by way of a business loan with interest @ 15% p.a. This letter also noted that cheque no. 964293 for Rs.50,00,000 has been given by Respondent No. 2 towards repayment with an assurance.
The Appellate Tribunal also observed that three cheques bearing no. 964293 dated 22.10.2016 for an amount of Rs. 50,00,000/-, cheque no. 958801 dated 22.10.2016 for an amount of Rs.3,41,250/- and cheque no. 964332 dated 27.10.2016 for an amount Rs.1,72,500/- relating to the principal loan amount and the interest thereon were presented in the bank for realisation when they were dishonoured and the advice notes have been sent by the Central Bank of India regarding dishonouring of the three cheques with the comments “Account Closed”.
While no date of default was mentioned in the promissory note or any other document such loan agreement has been produced, the Appellate Authority were of the view that the corporate debtor’s letter dated 7.6.2016 stated very clearly the existence of the loan and also the fact that on depositing the cheque with the bank of Respondent No. 2, the same will definitely be honoured and the dishonouring of cheques will be taken as default for which the financial creditor can take legal action. Thus the date 16.12.2016 has been correctly considered as the date of default by the Adjudicating Authority, which the said cheques were dishonoured.
The corporate debtor has admitted the fact that a loan was taken by the corporate debtor from Respondent No. 2. Further in the same reply, the corporate debtor has accepted that such cheques were given by the corporate debtor, but with an understanding that the same shall be deposited in the month of March 2017. The Appellate Authority was not inclined to accept this claim of the corporate debtor and was of the view that Respondent No. 2 deposited the cheques in accordance with the date of the cheques, i.e. 22.10.2016. Therefore, it also supported the contention of the Financial Creditor that the date of 16.12.2016, when these cheques were dishonoured, has been correctly considered as the date of default.
Thus, the Appellate Tribunal was of the clear view that the Adjudicating Authority had not committed any error in admitting the section 7 application. The Appeal being devoid of merit was consequently, dismissed.