TMI Blog2020 (8) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... ifestly clear that the right to sue accrues when a default occurs and if such default has occurred over three years prior to the date of filing of application, the application would be barred by limitation except in cases where on the facts of the case such delay is condoned. Computation of a fresh period of limitation from the date of acknowledgment of liability - HELD THAT:- Such acknowledgment in respect of any right has to be in writing and signed by the borrower against whom such debt is claimed well before the expiration of the prescribed period for a suit or application in respect of such right. Any acknowledgment made after the period for enforcement of such right, recovery of such property or debt would not fall within the purview of Section 18 of the Limitation Act, 1963 for the purpose of commencement of fresh period of limitation. In the instant case, the account of the Corporate Debtor was classified as NPA on 1st May, 2000 which is admitted as the date of default. This being an admitted fact and clearly discernible from Form-1 (application by Financial Creditor to initiate Insolvency Resolution Process under Section 7 of the I B Code ) Column 2 of Part-IV at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing raised as a ground in appeal that the financial debt in respect whereof the Financial Creditor sought triggering of Corporate Insolvency Resolution Process was not payable in law, same being barred by limitation. 2. Learned counsel for the Appellant submitted that in the instant case the admitted date of the default of the financial debt is 1st May, 2000 which is the date on which such debt was declared as NPA and in view of the same, such debt could be claimed by the Financial Creditor within three years from such date. It is further submitted that any subsequent acknowledgment would not change the date of default which remains static. It is further submitted that the Corporate Insolvency Resolution Process not being a recovery proceeding, triggering thereof is permissible within the limitation commencing from the date of default and not the date of acknowledgment of liability. The argument is further elaborated by canvassing that the Financial Creditor gets the right to file an application when a default has occurred and such default surfaces when the Corporate Debtor has defaulted in repayment of liability and the Financial Creditor has classified the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable to applications relating to triggering of Corporate Insolvency Resolution Process under I B Code and Article 137 of the Limitation Act, 1963 prescribing a period of three years applies to such applications. In Vashdeo R. Bhojwani vs. Abhyudaya Co-operative Bank Limited and another (2019) 9 SCC 158 , the Hon ble Apex Court referring to its Judgment rendered in B.K. Educational Services Private Limited vs. Parag Gupta and Associates (2018) SCC Online SC 1921 held: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of limitation Time from which period begins to run 62. To enforce payment of money secured by a mortgage or otherwise charged upon immovable property Twelve years When the money sued for becomes due. 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 1-12-2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. Consequently, it dismissed the appeal. 4. 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 21-7-2011, three years having elapsed since then in 2014, the Section 7 application filed in 2017 is clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Supreme Court and this Appellate Tribunal make it clear that for the purpose of computing the period of limitation of application under Section 7, the date of default is NPA and hence a crucial date. 9. In the aforesaid Judgment rendered by this Appellate Tribunal, it has been laid down in unambiguous terms that mere filing of a suit for recovery or a decree passed by a Court cannot be held to be deferment of default. In this regard, it would be appropriate to extract paras 15 and 16 of the aforesaid Judgment as under: 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 Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 7 of the I B Code has been brought into force on 1st December, 2016 vide S.O. 3594(E) dated 30th November, 2016. Therefore, triggering of Corporate Insolvency Resolution Process in respect of defaults occurring prior to 1st December, 2013 would be impermissible in view of application of Article 137 of the Limitation Act, 1963. This view is fortified by the Judgments referred to hereinabove. 11. In view of the foregoing discussion, we find that the arguments canvassed on behalf of the Appellant that initiation of Corporate Insolvency Resolution Process at the instance of the Financial Creditor was unsustainable as the same had been filed well beyond the period of three years from the date the account of Corporate Debtor was classified as NPA. In these circumstances, we uphold the argument advanced on behalf of the Appellant that the subsequent developments in the form of recovery proceedings before the Debts Recovery Tribunal culminating in passing of recovery order/ decree would not shift the date of default leading to classification of Corporate Debtor s account as NPA. We find that on the date of triggering of Corporate Insolvency Resolution Process at the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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