TMI Blog2019 (12) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... t Reconstruction Company (India) Ltd. - (Financial Creditor) cannot derive any benefit of the action taken under SARFAESI Act, 2002 which is guided by separate provisions of limitation - Admittedly, the Financial Creditor took action under the SARFAESI Act, 2002 in the year 2013. Therefore, the second time it become NPA in the year 2013 when action under Section 13(2) was taken. In the present case, the account was declared NPA since 1st December, 2008 and therefore, the suit was filed. Thereafter, any document or acknowledgment, even after the completion of the period of limitation i.e. December, 2011 cannot be relied upon. Further, in absence of any record of acknowledgment, the Appellant cannot derive any advantage of Section 18 of the Limitation Act. For the said reason, the application under Section 7 is barred by limitation, the accounts of the Corporate Debtor having declared NPA on 1st December, 2008. The Adjudicating Authority having failed to appreciate the aforesaid fact, the impugned order dated 1st May, 2019 rejecting the objections of the Corporate Debtor and the impugned order dated 31st May, 2019 passed by the Adjudicating Authority admitting the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any coercive measures during the pendency of the appeal before the Debt Recovery Appellate Tribunal 2. The other objections were also raised. The Financial Creditor - Asset Reconstruction Company (India) Limited took plea that relief granted vide order dated 25th April, 2017 of the Hon ble High Court is confined to SARFAESI proceedings and there is no bar to initiate Insolvency proceedings. 3. It was also submitted that the Insolvency proceedings is similar to winding up proceedings and is not a mode for recovery of debt or to coerce the Corporate Debtor to make payments. The Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai, admitted the application which has been challenged by Tulip Star Hotels Limited in Company Appeal (AT) (Insolvency) No. 627 of 2019. 4. Similar plea has been taken by counsel for the Appellants relating to maintainability of the application under Section 7 in the matter where SARFAESI proceeding has been initiated. While so arguing, learned counsel for the Appellants raised the question of maintainability of the application under Section 7 on the ground of limitation. 5. The Respondent- Financial Creditor whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008. 9. Thereafter settlement talks were initiated between the parties and considerable payments were made vide certain settlement proposals, their revisions and their extensions. A sum of ₹ 17,50,00,000/- was left to be repaid out of the agreed ₹ 35,00,00,000/- payable by 31.05.2013. Consequently, vide letter dated 17.06.2013, the Petitioner revoked the settlement and rate of interest was revised to 22% under the Deed of Variation. The Financial Creditor exercised its rights under Section 13 (2) of the SARFAESI in order to enforce its security interest over the assets of the Corporate Debtor. The Corporate Debtor sought stay in DRT proceedings, which was granted, vide order dated 28.01.2014, on the condition of payment of ₹ 25,00,00,000/- within eight weeks thereafter. In terms of the order dated 28.01.2014, the Corporate Debtor paid ₹ 25,00,00,000/- to the Financial Creditor to give effect to the stay. 10. The Aggregate Assigned Debt as on 06.05.2014 inclusive of principal and interest @ 22% was ₹ 235,46,34,381/-. The Financial Creditor invoked the personal guarantee of Mr. Ajit Kerkar, Managing Director of the Corporate Debtor on 06.05.2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] was filed but rejected. The order dated 05.04.2017 was challenged by filing Writ Petition (L) No. 1046 of 2017. 14. Meanwhile, on 11.04.2017, MA No. 856 of 2016 was allowed dismissing the appeal, filed by the Corporate Debtor for non- compliance of order dated 17.05.2016. Thereafter, the Corporate Debtor filed a Writ Petition (L) No. 1100 of 2017. Both the Writ Petitions above said were disposed off vide order dated 25.04.2017 by the Division Bench of the Hon ble Bombay High Court directing the Corporate Debtor to deposit an amount of ₹ 34 Crores in instalments by. 31.07.2017. It was further ordered that, We direct that in the event the compliance is reported of the Tribunal s order and our direction issued today, the first petitioner shall not initiate any coercive measures during the pendency of the appeal before the Debt Recovery Appellate Tribunal. The Corporate Debtor deposited the entire sum of ₹ 34 Crores as directed by the Hon ble High Court by 21.07.2017. 15. The Corporate Debtor had filed MA 693/2018 praying for dismissal of the said petition on the ground of maintainability. The main contention of the Corporate Debtor therein was that this petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of debt and claim in the Code. Further, debts in winding up proceedings cannot be time-barred,3 and there appears to be no rationale to exclude the extension of this principle of law to the Code. 28.2 Further, non-application of the law on limitation creates the following problems: first, it re-opens the right of financial and operational creditors holding time-barred debts under the Limitation Act to file for CIRP, the trigger for which is default on a debt above INR one lakh. The purpose of the law of limitation is to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party's own inaction, negligence or latches 4. Though the Code is not a debt recovery law, the trigger being default in payment of debt renders the exclusion of the law of limitation counter-intuitive. Second, it re-opens the right of claimants (pursuant to issuance of a public notice) to file time-barred claims with the IRP/RP, which may potentially be a part of the resolution plan. Such a resolution plan restructuring time-barred debts and claims may not be in compliance with the existing laws for the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that basis. It is well settled law that the limitation is extended only in certain limited situations and that the existence of a suit is not necessarily one of them. In this view of the matter, the second point will have to be answered in favour of the respondents and it will have to be held that there was no enforceable claim in the year 1995, when the present petition was instituted. 14. Likewise, a Single Judge of the Patna High Court in Ferro Alloys Corporation Ltd. v. Rajhans Steel Ltd., (2000) Comp Cas 426 also held: 12 . In my opinion, the contention lacks merit. Simply because a suit for realisation of the debt of the petitioner-company against opposite party No. 1 was instituted in the Calcutta High Court on its original side, such institution of the suit and the pendency thereof in that court cannot enure for the benefit of the present winding up proceeding. The debt having become time-barred when this petition was presented in this court, the same could not be legally recoverable through this court by resorting to winding up proceedings because the same cannot legally be proved under section 520 of the Act. It would have been altogether a different matter if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings under the Act of 1993, has to be looked at from the perspective of whether or not such an action meets the requirement of Section 36 of the Act of 2002, when the secured creditor is proposing to take a measure under Section 13(4) of the Act of 2002. Although, a secured creditor, as held in Transcore (supra), is entitled to take a remedy or a measure as available in the Act of 2002, despite the pendency of other proceedings, including a proceeding under Section 19 of the Act of 1993, in respect of the self-same cause of action, in my view, the invocation of such independent right under the Act of 2002, has to be done within the period of limitation prescribed under the Limitation Act, 1963 in terms of Section 36 of the Act of 2002. The Act of 2002 gives an independent right to a secured creditor to proceed against its financial assets and in respect of which such asset the secured creditor has security interest. The right to proceed, however, is subject to the adherence to the provisions of limitation as enshrined in the Limitation Act, 1963. The provisions of the Limitation Act, 1963 are, therefore, attracted to a proceeding initiated under the Act of 2002. That being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set Reconstruction Company (India) Ltd. and Another─ 2019 SCC OnLine SC 1239 . In the said case, the Corporate Debtor was declared NPA on 21st July, 2011 whereinafter the State Bank of India filed two O.As in the Debt Recovery Tribunal in 2012 in order to recover a total debt of 50 Crores of rupees. In the meanwhile, by an assignment dated 28th March, 2014, the State Bank of India assigned the aforesaid debt to Asset Reconstruction Company (India) Ltd. , who is also Appellant in the present case. 15. In the aforesaid case, the same very Asset Reconstruction Company (India) Ltd. took plea that limitation begin running for the purposes of limitation only on and from 1st December, 2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. The National Company Law Tribunal had reached the conclusion that since the limitation period was 12 years from the date on which the money suit has become due, the aforesaid claim was filed within limitation. However, the Hon ble Supreme Court taking into consideration the fact that the Corporate Debtor was declared as NPA on 21st July, 2011 held that the application was not maintainable. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed the appeal. 5. Mr. Aditya Parolia, learned counsel appearing on behalf of the appellant has argued that Article 137 being a residuary article would apply on the facts of this case, and as right to sue accrued only on and from 21.07.2011, three years having elapsed since then in 2014, the Section 7 application filed in 2017 is clearly out of time. He has also referred to our judgment in B.K. Educational Services Private Limited v. Parag Gupta and Associates, 2018 SCC OnLine SC 1921 in order to buttress his argument that it is Article 137 of the Limitation Act which will apply to the facts of this case. 6. Mr. Debal Banerjee, learned Senior Counsel, appearing on behalf of the respondents, countered this by stressing, in particular, para 7 of the B.K. Educational Services Private Limited (supra) and reiterated the finding of the NCLT that it would be Article 62 of the Limitation Act that would be attracted to the facts of this case. He further argued that, being a commercial Code, a commercial interpretation has to be given so as to make the Code workable. 7. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). 20. Admittedly, the Financial Creditor took action under the SARFAESI Act, 2002 in the year 2013. Therefore, the second time it become NPA in the year 2013 when action under Section 13(2) was taken. 21. Section 18 of the Limitation Act, 1963 deals with effect of acknowledgment in writing as follows: 18. Effect of acknowledgment in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
