NCLAT upholds NCLT’s Order initiating CIRP against M/s Totem Infrastructure Ltd.

A Division Bench of the Hon’ble National Company Law Appellate Tribunal, Chennai (NCLAT) comprising Justice Venugopal M (Judicial Member) and Balvinder Singh (Technical Member) in the matter of Tottempudi Salalith v. State Bank of India & Ors., REED 2021 NCLAT Chen 06586 upheld the order of National Company Law Tribunal, Hyderabad admitting application by the Financial Creditor under section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor.

The instant appeal before National Company Law Appellate Tribunal (NCLAT) was filed by the Tottempudi Salalith (Appellant) assailing the order dated 12 January 2021 passed by the National Company Law Tribunal, Hyderabad (NCLT) wherein the NCLT has admitted an application filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by the State Bank of India/First Respondent (Financial Creditor/SBI) against the M/s. Totem Infrastructure Ltd. (Corporate Debtor).

The Appellant contended that pursuant to the issuance of demand notices under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), the account of Corporate Debtor was declared as Non-Performing Asset (NPA) by SBI in July 2012. Hence, if the Limitation is calculated from the year July 2012 based on NPA, the Application filed under section 7 of the IBC on 6 September 2019 was beyond the limitation period of 3 years and accordingly, non-maintainable.

The SBI on the other hand argued that the Application under section 7 of IBC filed on 6 September 2019 was based on Recovery Certificate I dated 17 October 2017, Recovery Certificate II dated 5 August 2017 and Recovery Certificate III dated 8 September 2017 issued by the Debt Recovery Tribunal, Hyderabad (DRT). Hence, according to SBI, as the section 7 Application was filed within the period of 3 years, the same was admissible and not barred by the Limitations Act, 1963. The SBI also stated that the Appellant through letter dated 29 January 2020 had admitted the liability to repay the amount and requested for One Time Settlement. Therefore, the acknowledgement was also made within the limitation period from the recovery certificates, which further extends the limitation period.

The NCLAT noted that on October 17 2017, the DRT had issued a Recovery Certificate I in favour of the Financial Creditor, its association banks and other banks to recover an amount of Rs.14080314857 from the Corporate Debtor. Similarly, Recovery Certificate II dated 5 August 2017 and Recovery Certificate III was issued and hence, the aforesaid orders are binding between the parties inter se. Resultantly, the NCLAT rejected the plea raised by Corporate Debtor in relation to its account being declared as NPA in 2012.

Further, the NCLAT referred to a letter dated 29 January 2020 wherein the Corporate Debtor had agreed to pay the amount due and also made a request to consider the letter as One Time Settlement option in order to permit it to repay the amount in at least 4 to 6 installments spread over to a period of one year. The NCLAT opined that acknowledgment made in said letter also falls within the period of limitation from the dates of recovery certificates.

In view of foregoing, the NCLAT concluded that the Financial Debt was due and payable, and default was committed by the Corporate Debtor. Thus, the impugned order of NCLT admitting application under section 7 of IBC was upheld and the present appeal was accordingly, dismissed.