The National Company Law Tribunal, Hyderabad Bench vide its order dated 24.06.2022 admitted an Insolvency Resolution Petition filed by L & T Finance Limited (Financial Creditor) against the Promoter and Personal Guarantor of Deccan Chronicle Holdings Limited (DCHL), Mr. T. Venkataram Reddy. DCHL is one of the biggest defaulters being faced with several proceedings by law enforcement authorities such as Enforcement Directorate, SFIO and CBI on account of bank loan fraud of approximately Rs. 2500 crores. The bench comprising of Dr. N. Venkata Ramakrishna Badarinath (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member) was faced with the question, whether the Personal Insolvency Petition was barred by limitation in view of the fact that the debt payable by the Corporate Debtor (DCHL) became due in the year of 2012.
In the present case, the Financial Creditor sanctioned a loan under a Facility Agreement executed between the Financial Creditor and DCHL in the year 2011, the Promoter executed a Deed of Guarantee guaranteeing the repayment of the said facilities extended to DCHL. DCHL and Mr. T. Venkatarami Reddy committed default under the Deed of Guarantee. In view of the same the Financial Creditor initiated arbitration proceedings in the year 2012 against both, DCHL and Mr. T. Venkatarami Reddy. On 15.03.2013, the Arbitral Tribunal passed an Award against DCHL as well as Mr. T. Venkatarami Reddy, directing them to pay the Financial Creditor a sum of Rs.25,02,61,350/- along with interest @ 15% per annum. The Financial Creditor, in order to enforce the Arbitral Award instituted an Execution Application before the Bombay High Court which is still pending. In the meanwhile, DCHL was admitted into CIRP on 19.07.2017 pursuant to an application filed under Section 7 of the IBC. Thereafter, the Financial Creditor filed an Application under Section 95 of the IBC against the Personal Guarantor.
The Personal Guarantor argued before the NCLT that the debt payable by DCHL became due in the year of 2012, and the present Company Petition was barred by limitation since the present Company Petition was filed beyond the period of limitation i.e., three years, which is antithetical to Article 19 and 137 of the Limitation Act, 1963. The Personal Guarantor relied upon the judgement of the Supreme Court in Jignesh Shah and Anr vs. Union of India & Anr [WP (Civil) No. 455 of 2019] wherein it was held that in the absence of any acknowledgement of liability by the debtor, parallel proceedings such as a suit for recovery initiated by the creditor would be a separate and independent proceeding distinct from the remedy of winding up and pendency of such suit will not extend the limitation for the purpose of winding up.
On the other hand, the Financial Creditor countered the arguments of the Personal Guarantor by relying upon the judgement of Dena Bank vs C. Shivakumar Reddy & Anr (Civil Appeal No.1650 of 2020) wherein the Supreme Court held that an Application under Section 7 or 9 of the IBC may be time barred, even though some other recovery proceedings might have been instituted earlier in respect of the same debt, however, if the Applicant approached the Adjudicating Authority after obtaining a Final Order/Decree and the Decree remains
unsatisfied, the creditor gets a fresh limitation to initiate an action for insolvency against the judgement debtor.
The NCLT, while accepting the arguments advanced by the Financial Creditor, held that since the Arbitral Award in favour of the Financial Creditor attained finality and an execution application was pending before the Bombay High Court, the Arbitral Award remained unsatisfied by the Personal Guarantor. The NCLT rejected the argument of the Personal Guarantor and held that the judgement rendered in Jignesh Shah and Anr vs. Union of India & Anr is not applicable in the present case. In the case of Jignesh Shah, the Supreme Court has dealt with “a pending suit for recovery based upon a cause of action that was within limitation, on the separate and independent remedy of a winding up proceeding and held that the same cannot impact limitation which was already set in motion ” and since in the present case no suit was pending and the fact that the Personal Guarantor is also a Judgement Debtor in view of the pendency of the execution proceedings before the Bombay High Court, the Company Petition against the promoter of DCHL, Mr. T. Venkatrami Reddy was admitted and Insolvency Resolution Process was initiated.
L & T Finance Limited was represented by Senior Counsel Vivek Reddy who was briefed by IndusLaw, Hyderabad team comprising of Shabbeer Ahmed (Partner), V. Aneesh (Principal Associate) and Indraprateek Naidu (Associate).