NCLT Mumbai Declares Megi Agro Chem Insolvent, Reiterates OTS Proposal Amounts To Acknowledgement Of Debt

Background Facts

Megi Agro Chem Ltd. ("Corporate Debtor") is a public company engaged in the oil and gas sector business and had proposed establishment of a grain based ethanol producing plant in collaboration with a Swedish company. In 2010 and 2012, the Bank of India had disbursed loans amounting to Rs. 29,67,00,000/- and Rs. 7,30,00,000/- to the Corporate Debtor respectively. When the Corporate Debtor failed to make the repayments of the loans availed, its account was declared NPA by the Bank of India on 31.12.2012. Thereafter, on 23.03.2015 M/s. Pridhvi Asset Reconstruction and Securitisation Company Ltd. ("Financial Creditor") entered into an assignment agreement with the Bank of India whereby the loans disbursed by the latter to the Corporate Debtor were assigned to the Financial Creditor along with all rights, title and interests.

The Corporate Debtor failed to repay the amounts due to the Financial Creditor and expressed its willingness to enter into a one-time settlement through various correspondences dated 12.10.2021 and 28.10.2021. However, the Financial Creditor declined to accept the OTS proposals of the Corporate Debtor. As on 31.05.2020, the aggregate amount in default stood at Rs. 119,55,66,488/-, inclusive of interest and penal interest.

Contentions Of The Corporate Debtor

The Corporate Debtor submitted that the petition was barred by limitation. The Financial Creditor has initiated recovery proceedings before the Debt Recovery Tribunal and had also taken measures under the SARFAESI Act, 2002 way back in 2013 after declaring the account as NPA. It was further submitted that after 2013 the Corporate Debtor had not made any payment or executed any documents which would extend the period of limitation. Hence, the petition being filed on 21.07.2020 was clearly barred by limitation.

Decision Of The Adjudicating Authority

The Bench observed that the Supreme Court in Dena Bank v C. Shivakumar Reddy had held that OTS proposals given by the Corporate Debtor would amount to an acknowledgement of debt within the meaning of section 18 of the Limitation Act, 1963 and would extend the period of limitation.

Accordingly, CIRP was initiated against the Corporate Debtor and Mr. Vakati Balasubramanyam Reddy has been appointed as the Interim Resolution Professional.

Case Title: M/s. Pridhvi Asset Reconstruction and Securitisation Company Limited v M/s. Megi Agro Chem Limited, C.P. No. 144/(IB)-MB-V/2021

Counsel For the Petitioner: Mr. Pulkitesh Dutt Tiwari, Adv.

Counsel For the Respondent: Mr. R. J. Ranawat, Adv.

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