TMI Blog2020 (3) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it - An action taken by the Financial Creditor under Section 13(2) or Section 13(4) of the SARFAESI Act, 2002 cannot be termed to be a civil proceeding before a Court of first instance or appeal or revision before an Appellate Court and the other forum. Therefore, action taken under Section 13(2) of the SARFAESI Act, 2002 cannot be counted for the purpose of exclusion of the period of limitation under Section 14(2) of the Limitation Act, 1963. The application under Section 7 filed by the Cosmos Co Operative Bank Limited was barred by limitation - appeal allowed. - Company Appeal (AT) (Insolvency) No. 1121 of 2019 - - - Dated:- 12-3-2020 - Justice S.J. Mukhopadhaya, Chairperson, Justice Bansi Lal Bhat, Justice Venugopal M., Member(Judicial) AND Kanthi Narahari, Member (Technical) For the Appellant : Mr. Avishkar Singhvi, Mr. Dhruv Surana, Mr. Ashish Choudhury and Mr. Nipun Katyal, Advocates. For the Respondent : Mr. Gourab Banerji, Senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment 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 7. In Jignesh Shah and another vs. Union of India and another (2019) 10 SCC 750 , the Hon ble Supreme Court taking into consideration th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dency thereof in that Court cannot ensure for the benefit of the present windingup 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 correctly hold that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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- 2016, the Tribunal holding that the OAs filed before it were not maintainable for the reasons given therein. 2. As against the aforesaid judgment, Special Civil Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el, 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 itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. 7. This being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured 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 subsection (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. - ( Financial Creditor ) has failed to bring on record any acknowledgment in writing by the Corporate Debtor or its authorised person acknowledging the liability in respect of debt. The Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of action that is within limitation cannot in any manner impact the separate and independent remedy of a winding-up proceeding. Thus, while holding so, the Hon ble Supreme Court says that the date of default is the date for the purpose of computing the period of limitation of application under Section 7. The same principle is applicable in the present case. Mere filing of a suit for recovery or a decree passed by a Court cannot be held to be deferment of default. 15. A suit for recovery of money can be filed only when there is a default of dues. Even if the decree is passed, the date of default does not shift forward to the date of decree or date of payment for execution. Decree can be executed within specified period i.e. 12 years. If it is executable within the period of limitation, one cannot allege that there is a default of decree or payment of dues. 16. Therefore, we hold that a Judgment or a decree passed by a Court for recovery of money by Civil Court/ Debt Recovery Tribunal cannot shift forward the date of default for the purpose of computing the period for filing an application under Section 7 of the I B Code . 17. Section 14 of the Limitation Act, 1963 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. 19. Therefore, to take advantage of Section 14(2), the Applicant must satisfy: (i) That the applicant has been prosecuting with due diligence in another civil proceeding, whether in a court of first instance or of appeal or revision. (ii) against the same party; and (iii) for the same relief. 20. Under the SARFAESI Act, 2002, once the account is declared as NPA, the Financial Creditor can exercise its power under Section 13 of the SARFAESI Act, 2002 which is required to issue Demand Notice under Section 13(2) and reads as follows: 13. Enforcement of security interest.- (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882 ), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a court of first instance or of appeal or revision which has no jurisdiction. 22. The decision rendered in Sesh Nath Singh Ors. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. (Supra) thereby cannot be held to be a correct law laid down by the Bench. 23. In the present case, the account of the Corporate Debtor was classified as NPA on 30th March, 2014. Thereafter, on 6th December, 2014, Demand Notice under Section 13(2) of the SARFAESI Act, 2002 was issued by the Respondent- Cosmos Co-operative Bank Ltd. The Bank also initiated Arbitration under Section 84 of the Multi-State Cooperative Societies Act on 4th December, 2015. The Bank had also taken possession of the movable assets under Section 13(4) of the SARFAESI Act, 2002 as back as on 16th January, 2017. 24. In the circumstances, instead of remitting the case to the Bench, we hold that application under Section 7 filed by the Cosmos Co Operative Bank Limited was barred by limitation. We, accordingly, set aside the impugned order dated 23rd September, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai. 25. In effect, order(s), passed by the Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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