Asset Reconstruction Company (India) Limited vs Tulip Star Hotels Limited & Ors.

Case Number: Civil Appeal Nos. 84-85 OF 2020

Judges Name: Hon’ble Judges Indira Banerjee J, J.K. Maheshwari J. 

Order dated: 01.08.2022

Facts of the case: 

  1. The appeal is preferred by M/s. Asset Reconstruction Company (India) Limited (“Appellant”) against M/s. Tulip Star Hotels Limited & Others (“Respondents”). M/s. V Hotels Limited (“Corporate Debtor”) entered into a loan agreement with a consortium of banks on 08.03.2002. The account of the Corporate Debtor was declared as Non-Performing Asset (“NPA”) on 01.12.2008 and further, the debt was assigned to the Appellant on 31.12.2008. 
  2. There were several confirmations on part of the Corporate Debtor from the year 2008 onwards as the Corporate Debtor sought extensions for the payment of the debt to the Appellant. As the Corporate Debtor failed to make the payments, the Appellant initiated proceedings under Section 7 of the Insolvency & Bankruptcy Code, 2016 (“Code”) before the Hon’ble National Company Law Tribunal (“NCLT”). The Corporate Debtor moved a miscellaneous application contending that the proceedings are time barred. The Hon’ble NCLT dismissed the miscellaneous application and admitted the Corporate Debtor into Corporate Insolvency Resolution Process (“CIRP”). 
  3. The Corporate Debtor preferred appeals before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”), which were allowed by the Hon’ble NCLAT. Aggrieved by the Hon’ble NCLAT’s judgment, the Appellant has approached the Hon’ble Supreme Court.

Supreme Court observed/held as follows:

  • The Appellant contended that the Corporate Debtor has acknowledged the debt in its financial statement from the year 2014-15 onwards. The proceedings under the Code were initiated on 03.04.2018 which is within the time period and therefore, the claims are not time barred. The amounts paid first by the Corporate Debtor was to be appropriated towards the interest payable. 
  • The Corporate Debtor contended that there were no dues payable and it has paid more principal amount than that of as claimed in the SARFESAI Notice. There are no amounts payable towards the principal and there is a dispute regarding the amount of interest payable. In any case, the debt has become time barred and proceedings have be dismissed. 
  • The process under Section 7 of the Code was discussed in depth and landmark decisions such as Swiss Ribbons Private Limited v Union of India, Sesh Nath v Baidyabati Sheroaphuli, Jignesh Shah v Union of India etc., were also discussed. 
  • It was observed that the Corporate Debtor made acknowledgement on 07.02.2011, which is within three years from the date on declaration of NPA and there were several requests for extension of time for making payments and also the amounts were acknowledged in the financial statements. Thus, the application under the Code is within the extended time period. 
  • The Hon’ble Supreme Court allowed the appeal and set aside the order of the Hon’ble NCLAT.

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