TMI Blog2020 (5) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... ver 3years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act, 1973. In the instant case, the date of default as mentioned in part IV of the Application is 15.10.2013. It is the Respondent s case that the date of default is to be taken as 30.06.2014 as observed by the Adjudicating Authority - We observe from the letter dated 02.07.2014, that the date of default is 30.06.2014 though the date of default mentioned in Part IV of the Application, is 15.10.2013. In this case the right to sue accrues on 30.06.2014 and 3 years limitation period ends on 29.06.2017, whereas the Application was filed on 08.11.2017 - the contention of the Learned Counsel that the Financial Creditor has also initiated proceedings under DRT and under the SARFAESI Act 2002, and therefore this period should be excluded, cannot be sustained. Applicability of benefit under Section 14 (2) - HELD THAT:- In the instant case benefit under Section 14 (2) cannot be given to the Applicant as there is no material on record to show that the subject Application was being prosecuted with due diligence in a court of First Instance or of Appeal or Revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation under Section 7 of the Code. 2. Succinctly put, the facts relevant to the case are that the 1st Respondent/Corporate Debtor is a Special Purpose Vehicle incorporated to develop end to end facilities to the Information Technology Sector and was sanctioned by the first respondent, M/s IFCI LTD, a term loan of upto ₹ 60,00,00,000/-,out of which an amount of ₹ 9,90,00,000/- was disbursed by 21.05.2009 and the balance loan of ₹ 50,10,00,000/- was cancelled vide letter dated 31.03.2011on account of nonpayment of installments of the loan already disbursed. It is averred that the project could not be completed on account of reasons beyond their control;that in 2011 ED had attached 150 acres of the project land and TSIIC issued a notice for cancellation of the land allotment and resumption of SEZ on 24.09.2015 and hence the project had come to a standstill. 3. The Adjudicating Authority while admitting the Application observed as follows: 32. Keeping in view the above facts, it is clear that the Corporate Debtor has acknowledged the debt in writing as late as on 20.03.2018 and therefore provisions of section 18 of the Limitation Act will apply. As such, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e written submissions filed by the Enforcement Directorate (ED) before the Adjudicating Authority and enclosed herewith by the Appellant, shows that the ED prayed not to consider the property of the Corporate Developer for liquidation during Insolvency Process as the same has been attached and taken possession by them under Section 8 (5) PMLA, 2002, by the PMLA Special Court. 5. Learned Counsel appearing on behalf of the Appellant contended that the Application under Section 7 is barred by limitation, the date of default being 15.10.2013; there is no Acknowledgment Of Debt to take benefit under Section 18 of the Limitation Act 1963; the letter dated 20.03.2018 offering OTS is beyond the limitation period of three years; there is no proper authorization under which the letter was issued; the first Respondent had made several claims for the same debt and that it was only on 16.12.2019 that the first Respondent had expressed its intention to withdraw from the CIRP of Respondent No. 3. 6. Learned Counsel appearing for the 1st Respondent submitted that though initially they had filed a claim in the CIRP of the 3rd Respondent that is M/s. Indu Projects Limited,the Corporate Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led under Section 7 and 9 of the Code from the inception of the Code and that Article 137 of the Limitation Act, getsattracted. The right to sue therefore accrues when a default occurs. If the default has occurred over 3years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act, 1973. 12. In Jignesh Shah and another vs. Union of India and another (2019) 10 SCC 750 , the Hon ble Supreme Court taking into consideration the fact of filing of an Application under Sections 433 and 434 of the Companies Act, 2013 observed as follows: 13. Dr Singhvi relied upon a number of judgments in which proceedings under Section 433 of the Companies Act, 1956 had been initiated after suits for recovery had already been filed. These judgments have held that the existence of such suit cannot 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 Ltd. v. Sunjal Engg. (P) Ltd., 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 a winding-up proceeding. In law, when time begins to run, it can only be extended in the manner provided in the Limitation Act. For example, an acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period, but a suit 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. 28. A reading of the aforesaid provisions would show that the starting point of the period of limitation is when the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver 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 Application Nos. 10621-622 were filed before the Gujarat High Court which resulted in the High Court remanding the aforesaid matter. From this order, a special leave petition was dismissed on 27- 3-2017. 3. An independent proceeding was then begun by Respondent 1 on 3-10-2017 being in the form of a S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the case, we fail to see how this para could possibly help the case of the respondents. Further, it is not for us to interpret, commercially or otherwise, articles of the Limitation Act when it is clear that a particular article gets attracted. It is well settled that there is no equity about limitation - judgments ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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: - Company Appeal (AT) (Insolvency) No. 1121 of 2019 14 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 Books of Account cannot be treated as an acknowledgment of liability in respect of debt payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) observed that 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 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation For the purposes of this section, - (a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted; (b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding; (c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction. 18. While addressing this issue, the majority view of the Larger Bench in Ishrat Ali (Supra) is noted as hereunder: 18. Section 14(2) of the Limitation Act, 1963 makes it clear that in computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset; (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.............. 21. 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 Company Appeal (AT) (Insolvency) No. 1121 of 2019 21 Section 13(2) of the 'SARFAESI Act, 2002' cannot be counted for the purpose of exclusion of the period of limitation under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to the provisions of the Indian Evidence Act, 1872 (1 of 20 Company Appeal (AT) (Insolvency) No.57 of 2020 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 (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. 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. (Emphasis Supplied) 21. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
