TMI Blog2020 (5) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... or liquidation, attracts penal action - The Adjudicating Authority (National Company Law Tribunal) has failed to consider the aforesaid fact and wrongly held that the date of default took place when the judgment and Decree was passed by Debts Recovery Tribunal on 17th August, 2018. Thus, in absence of any acknowledgement under Section 18 of the Limitation Act, 1963, the date of default/ NPA was prior to 2004 and does not shift forward, therefore, the period of limitation for moving application under Section 7 of the I B Code was for three years, if counted, to be completed in the year 2007. As date of passing of Decree is not the date of default, we hold that the application under Section 7 of the I B Code was barred by limitation, though the claim may not be barred. Application dismissed - Corporate Debtor is released from all the rigors of Corporate Insolvency Resolution Process - appeal allowed. - Company Appeal (AT) (Insolvency) No. 1097 of 2019 - - - Dated:- 7-2-2020 - Justice S. J. Mukhopadhaya Chairperson And Justice Bansi Lal Bhat Member (Judicial) For the Appellant : Ms. Aakriti Dhawan, Mr. Mayank Jain, Mr. Parmatma Singh and Mr. Madhur Jain, Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 2,85,00,000/- (Rupees Two Crore Eighty Five Lakh only) Disbursed on 30.11.1994, 31.03.1995, 30.10.1995, 26.03.1996 and 27.11.1996. (ii) Rupee Term Loan II ₹ 4,25,00,000/- (Rupees Four Crore Twenty Five Lakh only) Disbursed on 19.06.1996, 18.07.1996 and 11.09.1996. (iii) Rupee Term Loan III ₹ 10,00,00,000/- (Rupees Ten Crore only). Disbursed on 05.05.2001. (iv) Rupee Term Loan IV ₹ 14,00,00,000/- (Rupees Fourteen Crore only). Disbursed on 25.01.2001. (v) Rupee Term Loan V ₹ 72,00,000/- (Rupees Seventy Two Lakh only) Disbursed on 25.01.2001. (vi) Rupee Term Loan VI ₹ 8,00,00,000/- (Rupees Eight Crore only) Disbursed on 31.05.2001. (vii) Foreign Currency Term Loan ₹ 3,50,00,000/- (Rupees Three Crore Fifty Lakh only) Disbursed on 01.05.1998. TOTAL AMOUNT OF DEBT GRANTED i + ii + iii + iv + v + vi = ₹ 43,32,00,000/- (Rupees Forty Three Crore thirty Two Lakh only). 7. The date of default has been shown by Respondent ( Financial Creditor ) as 17th August, 2018, the date the order passed by the Debts Recovery Tribunal, Hyderabad in O.A. No.193 of 2004, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it 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 received. Explanation.-For the purposes of this section,- (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) the word signed means signed either personally or by an agent duly authorised in this behalf; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs as may be prescribed, and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice: Provided that in relation to One Person Company and small company, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company. Provided further that the Central Government may prescribe abridged form of annual return for One Person Company, small company and such other class or classes of companies as may be prescribed . xxx xxx xxx (4) Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees as may be prescribed. (5) If a company fails to file its annual return under sub-section (4), before the expiry of the period specified [therein], the company shall be punishable with fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 3. Having heard the learned counsel for both parties, we are of the view that this is a case covered by our recent judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, para 42 of which reads as follows: 42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. Dealing with Section 23 of the Limitation Act, 1963, the Hon ble Supreme Court observed: xxx xxx xxx Following this judgment, it is clear that when the recovery certificate dated 24-12-2001 was issued, this certificate injured effectively and completely the appellant's rights as a result of which limitation would have begun ticking 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner Company against Opposite Party 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 ensure 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 the petitioner Company approached this Court for winding-up of Opposite Party 1 after obtaining a decree from the Calcutta High Court in Suit No. 1073 of 1987, and the decree remaining unsatisfied, as provided in clause (b) of sub-section (1) of Section 434. Therefore, since the debt of the petitioner Company has become time-barred and cannot be legally proved in this Court in course of the present proceedings, winding up of Opposite Party 1 cannot be ordered due to non-payment of the said debt. Finally, the Hon ble Supreme Court after taking into consideration the date of default observed: - 21. The aforesaid judgments corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default in payment of the debt in any of the three situations mentioned in Section 434. 21. Similar issue fell for consideration before the Hon ble Supreme Court in Gaurav Hargovindbhai Dave vs. Asset Reconstructions Company (India) Limited and another (2019) 10 SCC 572 . In the said case, the Hon ble Supreme Court has noticed that the Respondent was declared NPA on 21st July, 2011. The Bank had filed two OAs before the Debts Recovery Tribunal in 2012 to recover the total debt. Taking into consideration the facts, the Supreme Court held that the default having taken place and as the account was declared NPA on 21st July, 2011, the application under Section 7 was barred by limitation. For proper appreciation, it is better to note the facts of the judgment as follows: - In the present case, Respondent 2 was declared NPA on 21-7-2011. At that point of time, State Bank of India filed two OAs in the Debts Recovery Tribunal in 2012 in order to recover a total debt of 50 crores of rupees. In the meanwhile, by an assignment dated 28-3-2014, State Bank of India assigned the aforesaid debt to Respondent 1. The Debts Recovery Tribunal proceedings reached judgment on 10-6- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is argument that it is Article 137 of the Limitation Act which will apply to the facts of this case. 5. Mr Debal Banerjee, learned Senior Counsel, appearing on behalf of the respondents, countered this by stressing, in particular, para 11 of B.K. Educational Services (P) Ltd. 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. 6. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being an application which is filed under Section 7, would fall only within the residuary Article 137. As rightly pointed out by the learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21-7-2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr Banerjee's reliance on para 11 of B.K. Educational Services (P) Ltd., suffice it to say that the Report of the Insolvency Law Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 nonperforming 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 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. Referring to Section 18 of the Limitation Act, 1963, this Appellate Tribunal further observed: - 22. The aforesaid provision makes it clear that for the purpose of filing a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has to be made in writing duly signed by the party against whom such property or right is claimed. 23. In the present case, Asset Reconstruction Company (India) Ltd. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7 of the I B Code, a Decree cannot be executed. In such case, it will be covered by Section 65 of the I B Code, which stipulates that the insolvency resolution process or liquidation proceedings, if filed, fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, attracts penal action. 27. The Adjudicating Authority (National Company Law Tribunal) has failed to consider the aforesaid fact and wrongly held that the date of default took place when the judgment and Decree was passed by Debts Recovery Tribunal on 17th August, 2018. 28. As noticed above, in absence of any acknowledgement under Section 18 of the Limitation Act, 1963, the date of default/ NPA was prior to 2004 and does not shift forward, therefore, the period of limitation for moving application under Section 7 of the I B Code was for three years, if counted, to be completed in the year 2007. As date of passing of Decree is not the date of default, we hold that the application under Section 7 of the I B Code was barred by limitation, though the claim may not be barred. For the said reason, we set-aside the impugned order dated 1st October, 2019 and dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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