9911796707
TMI Blog2019 (12) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and Mr. Anshul Sehgal, Advocates. Mr. V. Seshagiri, Mr. Siddharth Sacchar and Mr. Shubhangi Mehrish, Advocates for R-5. JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. 'Asset Reconstruction Company (India) Limited'- ('Financial Creditor') filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short) for initiation of the 'Corporate Insolvency Resolution Process' against 'V. Hotels Limited'- ('Corporate Debtor'). In the said petition, 'V. Hotels Limited'- ('Corporate Debtor') filed application raising question of maintainability of application under Section 7 preferred by 'Asset Reconstruction Company (India) Limited'- ('Financial Creditor') intimating that the matter is pending before the Debt Recovery Appellate Tribunal against the order passed under the 'Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002' ("SARFAESI Act, 2002" for short) and in a Writ Petition (L) No. 1046 of 2017 and Writ Petition No. 1100 of 2017, the Hon'ble Bombay High Court by an order dated 25th April, 2017 has restrained the 'Financial Creditor' from initiating any coercive steps subject to deposit of money by the 'C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement dated 08.03.2002. 4. The Corporate Debtor, on 05.06.2003 entered into an ECB arrangement for USD 29,000,000/- with Abu Dhabi Commercial Bank (ADCB) to repay the loan under the Loan Agreement. In lieu of repayment, the Bank of India converted the facility under the Loan Agreement into non-fund based Bank guarantees for the same amount by way of a sanction letter dated 23.08.2003. The Loan Agreement was varied and converted into a non-fund based bank guarantee facility vide a Deed of Variation dated 15.09.2003. 5. Subsequently, in terms of the Deed of Variation, the amount disbursed by Bank of India, under the Loan agreement was repaid in the year 2003 out of the funds disbursed to the Corporate Debtor by ADCB. 6. In the year 2008, the bank guarantee issued by Bank of India was invoked by ADCB and Bank of India made payment of Rs. 24,49,59,208/- on 02.09.2008. This amount constituted the debt claimed herein which was admittedly disbursed on 02.09.2008. 7. The Financial Creditor submits that on account of persistent defaults in payment of principal and interest instalments, the account of the Corporate Debtor with Bank of India was classified as a Non-Performing Asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand notice dated 10.07.2013 U/s 13 (2) of the SARFAESI Act, 2002 for an aggregate sum of Rs. 235,46,34,381/- in respect of the "loan taken" by the Corporate Debtor from four banks, out of which Rs. 90,15,22,069/- is the principal amount. In compliance of the above order, on 16.06.2016, the Corporate Debtor deposited Rs. 5,04,30,672/-. Therefore, an amount of Rs. 72,54,30,672/- has been paid by the Corporate Debtor out the principal amount as aforesaid. Thereafter, MA No. 856 of 2016 was filed by the Financial Creditor on 27.06.2016 for dismissal of the appeal filed due to non-compliance of order dated 17.05.2016. The Financial Creditor claimed interest on Rs. 150,75,83,970/- contrary to the demand notice dated 10.07.2013 in the above said MA. It came to notice during the course of the arguments in the above said MA that apparent error and mistake has crept in the order dated 17.05.2016 in not specifying the recovery of Rs. 42.50 Crores during the period from 01.07.2010 to 30.06.2013 and the amount of "loan taken" on which the interest at the rate of 14.85% per annum is to be calculated. 13. Thereafter, a review application was filed but was time barred. Hence, rejected vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4" wherein the Hon'ble Supreme Court while noticed the introduction of Section 238A into the Code and the decision in "B.K. Educational Services Private Limited V. Parag Gupta and Associates" (Supra) observed: "8. In paragraph 7 of the said judgment, the Report of the Insolvency Law Committee of March, 2018 was referred to as follows: "7. Having heard the learned counsel for both sides, it is important to first set out the reason for the introduction of Section 238A into the Code. This is to be found in the Report of the Insolvency Law Committee of March, 2018, as follows: "28. APPLICATION OF LIMITATION ACT, 1963 28.1 The question of applicability of the Limitation Act, 1963 ("Limitation Act") to the Code has been deliberated upon in several judgments of the NCLT and the NCLAT. The existing jurisprudence on this subject indicates that if a law is a complete code, then an express or necessary exclusion of the Limitation Act should be respected.1 In light of the confusion in this regard, the Committee deliberated on the issue and unanimously agreed that the intent of the Code could not have been to give a new lease of life to debts which are time-barred. It is settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be construed as having either revived a period of limitation or having extended it, insofar as the winding up proceeding was concerned. Thus, in Hariom Firestock Limited v. Sunjal Engineering Pvt. Ltd., (1999) 96 Comp Cas 349, a Single Judge of the Karnataka High Court, in the fact situation of a suit for recovery being filed prior to a winding up petition being filed, opined: "8 ...To my mind, there is a fallacy in this argument because the test that is required to be applied for purposes of ascertaining whether the debt is in existence at a particular point of time is the simple question as to whether it would have been permissible to institute a normal recovery proceeding before a civil court in respect of that debt at that point of time. Applying this test and de hors that fact that the suit had already been filed, the question is as to whether it would have been permissible to institute a recovery proceeding by way of a suit for enforcing that debt in the year 1995, and the answer to that question has to be in the negative. That being so, the existence of the suit cannot be construed as having either revived the period of limitation or extended it. It only means tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as the "SARFAESI Act"), a notice dated 3rd March, 2016 was issued under Section 13(2) of the SARFAESI Act. The question which arose before the Court was whether the invocation of the SARFAESI Act, being beyond limitation, would be saved because of the pending proceedings under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Court negatived the plea of the Bank, stating: "22. Section 14 of the Limitation Act, 1963 permits exclusion of the time taken to proceed bona fide in a Court without jurisdiction. Such section permits a plaintiff to present the same suit, if the Court of the first instance, returns a plaint from defect of jurisdiction or other causes of like nature, being unable to entertain it. In the present case, a secured creditor is not withdrawing a proceeding pending before the Debts Recovery Tribunal under Section 19 of the Act of 1993 to invoke the provisions of the Act of 2002. Rather the secured creditor is proceeding, independent of its right to proceed under the Act of 1993, while invoking the provisions of the Act of 2002. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding up proceeding." 13. Learned counsel appearing on behalf of the Respondent- 'Financial Creditor' submitted that in addition to rehabilitate and revive the 'Corporate Debtor', one of the purposes of filing the insolvency application was to enforce the payment of money secured by a mortgage of immovable property. Article 62 of Schedule I of the Limitation Act, 1963 provides that the limitation period for enforcement of payment of money secured by a mortgage of immovable property is twelve years from when the money becomes due. In the instance case, as admitted by the 'Corporate Debtor' that first it defaulted in the year 2008 when its account was declared as NPA. The present insolvency application was filed on 3rd April, 2018 i.e. less than 10 years when the money became due. Therefore, it is stated, the Adjudicating Authority has correctly held that the limitation period is twelve years. 14. However, such submissions can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the original debt together with interest which now amounted to about 124 Crores of rupees. In the Form-I that has statutorily to be annexed to the Section 7 application in Column II which was the date on which default occurred, the date of the NPA i.e. 21.07.2011 was filled up. The NCLT applied Article 62 of the Limitation Act which reads as follows:- Description of suit Period of limitation Time from which period begins to run To enforce payment of money secured by a mortgage or otherwise charged upon immovable property Twelve years When the money sued for becomes due 4. Applying the aforesaid Article, the NCLT 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 and hence admitted the Section 7 application. The NCLAT vide the impugned judgment held, following its earlier judgments, that the time of limitation would begin running for the purposes of limitation only on and from 01.12.2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. Consequently, it dismissed the appeal. 5. Mr. Aditya Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et Reconstruction Company (India) Limited' (Applicant of Section 7 application) is similar to its earlier case in "Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. and Another" (Supra). 17. In the present case, in fact the default took place much earlier. It is admitted that the debt of the 'Corporate Debtor' was declared NPA on 1st December, 2008 as has been noticed by the Adjudicating Authority. 18. 'Asset 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. 19. Section 13(2) of the 'SARFAESI Act, 2002' reads as follows: "13. Enforcement of security interest.- ......(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Books of Account cannot be treated as an acknowledgment of liability in respect of debt payable to the 'Asset Reconstruction Company (India) Ltd.'- ('Financial Creditor') signed by the 'Corporate Debtor' or its authorised signatory. 24. In "Sampuran Singh and Ors. v. Niranjan Kaur and Ors.─ (1999) 2 SCC 679", the Hon'ble Supreme Court observed that the acknowledgment, if any, has to be prior to the expiration of the prescribed period for filing the suit. 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, we hold that the application under Section 7 is barred by limitation, the accounts of the 'Corporate Debtor' having declared NPA on 1st December, 2008. 25. In fact, the case of 'Asset Reconstruction Company (India) Ltd.'- ('Financial Creditor') is covered by its own decision in "Gaurav Hargovindbhai Dave v. Asset Recons ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
