Name of the case: Axis Bank Ltd. Vs. Naren Sheth & Anr.

Case Number: [Civil Appeal No. 2085 of 2022]

Name of Judges: Hon’ble Judges Vikram Nath and Ahsanuddin Amanullah

Order Date: 12/09/2023

Facts of the Case:

• The appellant entered into a leave and license agreement with Universal Premises and Textiles Private Limited for the premises being Ground to 10th floor in the building named Solaris “C”. A security deposit of Rs. 87,56,24,381/- was furnished by the appellant between the period 23.06.2007 to 03.11.2008. Universal Premises executed a simple mortgage without possession in favour of the appellant for seven floors. 
• Universal Premises executed a sale deed in favour of Rajput Retail Ltd. The sale deed was for the land admeasuring 5123.90 sq. meters which included the land beneath the aforesaid building – Solaris “C” also. The Leave and License Agreements in favour of the appellant were duly acknowledged, reserved, and protected under the sale deed. RRL, having availed credit facilities from the State Bank of India (Respondent No.2), created an equitable mortgage on 29.06.2011 with respect to the land underneath the building-Solaris “C” to secure the said credit facilities. In 2012, Universal Premises was merged with RRL under the orders of the High Court of Bombay and it was renamed as Shreem Corporation Limited which is the Corporate Debtor. Between June, 2012 and 17.10.2013, the appellant issued notices for the refund of Security Deposit under the Leave and License agreement. However, as the said amount was never paid, the appellant filed eight summary suits before the Bombay High Court for refund of the Security Deposit, along with interest, during the period from 14.12.2012 to 24.12.2013. Meanwhile, Respondent No.2 declared the Corporate Debtor as Non-Performing Asset.
• The High Court of Bombay passed a common conditional order in all the Summary Suits granting leave to defend to the Corporate Debtor subject to deposit of the Security Deposit. Later, the suits were decreed.
• The appellant had applied before the High Court of Bombay for recovery of its dues in which objections were filed by respondent No.2. However, the same were rejected and a proclamation of sale was ordered in favour of the appellant.
• Respondent No.2 filed interim applications seeking lifting of attachment orders on the 11 floors of Solaris “C” and also for stay of the sale process for the seven floors.
• Respondent No.2 filed a Company Petition under Section 7 IBC against the Corporate Debtor without intimating or making the appellant a party to the said proceedings. Application under Section 5 of the Limitation Act was also filed along with the petition for condoning delay of 1392 days. Later on, respondent No.2 filed an additional affidavit stating that the delay was only of 662 days in view of the acknowledgement in the Balance Sheet of the Corporate Debtor for the financial year ending 31.03.2015. the Adjudicating Authority condoned the delay of 662 days and passed an order of admission and appointment of Interim Resolution Professional (IRP). The IRP published a notice as required under the IBC for commencement of the resolution process.
• The appellant, aggrieved by the order of admission dated 22.09.2021, preferred an appeal before the NCLAT under Section 61 of IBC which was registered as Company Appeal (AT) (Ins.) No.930 of 2021. By the impugned order dated 04.01.2022, NCLAT dismissed the said Company Appeal, giving rise to the present Civil Appeal.

The Hon’ble Supreme Court Observed and Held as Follows:

• The main question involved in this appeal is, whether a petition under Section 7 IBC would be barred by limitation, on the sole ground that it had been filed beyond a period of 3 years from the date of declaration of the loan account of the corporate debtor as NPA, even though the corporate debtor might subsequently have acknowledged its liability to the appellant Bank, within a period of three years prior to the date of filing of the petition under Section 7 IBC, by making a proposal for a one-time settlement, or by acknowledging the debt in its statutory balance sheets and books of accounts.
• The SC observed that in this appeal the said issue cannot be taken up for two reasons:
  1. The Adjudicating Authority as well as NCLAT have accepted the explanation of Respondent No.2 for the delay caused in filing the Section 7 IBC petition to be satisfactory and have condoned the same
  2. In view of the first and second OTS proposals by the Corporate Debtor being not questioned by the suspended Directors, there is no reason to disbelieve or to cast any doubt on the said documents at the instance of the appellant.
• Since there are no merits in the appeal, the same is dismissed.