TMI Blog2020 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... overy 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. As, the Corporate Debtor having committed default prior to 9th September, 2014, i.e. much before the assignment of debt to Phoenix ARC Private Limited, we hold that the Application under Section 7 of the I B Code was barred prior to 9th September, 2017 - The Application under Section 7 of the I B Code was filed on 29th September, 2017, i.e., much after three years of the cut-off period of default, which was prior to 9th September, 2017. Section 22 of the Limitation Act, 1963 relates to breaches and torts , for the purpose of counting the fresh period of limitation. The said Section 22 of the Limitation Act, 1963 may be applicable to find out whether the claim is barred by limitation or not, but cannot be made applicable for counting the period of limitation for Application under Section 7 of the I B Code, which is to be counted from the date of default/ NPA as held by the Hon ble Supreme Court in terms of Section 7(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Admittedly, I B Code has come into force since 1st December, 2016, therefore, the right to apply accrued to 1st Respondent on 1st December, 2016. Therefore, we hold that the application under Section 7 was not barred by limitation. 14. The next question is whether the claim of the Appellant is barred by the limitation. If it is barred by limitation then the Corporate Debtor has right to take plea that the debt is not payable. In the present case, we find that the immovable property of the Corporate Debtor was mortgaged in favour of the Financial Creditor by Deed of Mortgage and a further charge was made on 27th November, 2009 by the Corporate Debtor in favour of IDFC Ltd. . Thereafter by assignment agreement debt payable by Corporate Debtor to IDFC was assigned on 11th September, 2014. 15. The Financial Creditor has right to get immovable property mortgaged and thereafter may transfer the mortgage assets for a valuable consideration for which 12 years of limitation has been prescribed for filing a suit relating to immovable property under Article 61 of Part V of the First Division of the Schedule of Limitation Act. Therefore, we hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1, a sum of ₹ 17,10,20,020/- was repaid. Another Loan Agreement was reached on 24th May, 2012 for ₹ 216,00,00,000/-, out of which ₹ 46,00,00,000/- was the committed lending of Assignor. For the purpose of record, following details are shown:- S.No. Date Particulars LOAN 2 (₹ 22,00,00,000) 1. 20.11.2009 Loan Agreement executed between Assignor and Corporate Debtor 2. 24.12.2009 Disbursement Dates of amounts under Loan 2 aggregating to ₹ 22,00,00,000/- as per Form 1 3. 17.05.2010 4. 30.09.2010 5. 29.03.2011 6. 30.06.2011 7. 24.11.2011 8. 30.11.2011 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 48,75,50,000/- due and payable as per Form 1 and Certificate under Bankers Book Evidence Act. 9. 11.09.2014 Loan 1 assigned to Financial Creditor under Deed of Assignment 10. 15.03.2015 Loan account declared NPA by Assignee ARC/ Financial Creditor 11. 29.09.2017 Application under Section 7 filed by the Financial Creditor against Corporate Debtor 5. Learned Counsel for the Appellants submitted that the Financial Creditor has admitted that all sum under the Loan Agreement granted to the Corporate Debtor was due and payable prior to assignment dated 11th September, 2017. The Loan Agreements reveal that all sums under Loan Nos.2 and 3 granted to the Corporate Debtor were due and payable before Company Appeal (AT) (Insolvency) No. 177 of 2019 Interlocutory Application No.3392 3542 of 2019 Page 7 of 26 9th September, 2014. Therefore, according to him, the Application under Section 7 of the I B Code was barred by limitation. 6. Reliance has been placed on affidavit in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Learned Counsel appearing on behalf of the Phoenix ARC Private Limited - 1st Respondent ( Financial Creditor ) submitted that IDFC Limited (Assignor Bank), granted a Rupee Term Loan of ₹ 22,00,00,000/- to the Corporate Debtor / Hotel Horizon Private Limited, which was secured vide a Rupee Loan Agreement dated 20.11.2009. The said Loan Agreement provided certain terms and conditions, as follows: - a. Amortisation Schedule shall mean Schedule-III hereto being he schedule of repayment of the principal amount of the Loan to the Lender. b. 2.9 Repayment (i) The Borrower shall repay the principal amount of the Loan in 29 structured, quarterly installments commencing from July 15, 2012 as per the Amortisation Schedule. c. 8.1 Event of Default The following events shall constitute an Event of Default under the Agreement: (a) Default by the Borrowers in the payment of any installment of the principal amount under the Loan on due date. (b) Default by the Borrowers in the payment of any installment of interest on the Loan on any Interest Payment date. d. Consequence of Default (a) Declare the entire loan or part thereof and all am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing rights: (a) declare the entire loan or part thereof and all amounts payable by the Borrower in respect of the loan and under the Transaction Documents to be due and payable immediately. 12. It is submitted that as per repayment schedule of the said credit facility ₹ 161 Crores were payable to the Consortium Banks on or before 30.09.2013, and thereafter, ₹ 55 Crores were to be repaid to the lenders (including IDFC/ Assignor Bank/ Now Phoenix) on pro-rata basis by way of four equal quarterly installments, starting from 01.07.2014 till 01.04.2021. Thereafter, the Corporate Debtor requested for restructuring of the Term Loan-III. Accepting the request of the Corporate Debtor, vide Letter dated 06.03.2014, Term Loan for ₹ 46,00,00,000/- (Term Loan III) was restructured by the Assignor Bank/ IDFC. This was specifically accepted by the Corporate Debtor. As per the term of the said letter, the Corporate Debtor was required to pay ₹ 44.70 Crores, by 28.02.2015. Further, under the Rupee Loan Agreement dated 20.11.2009 (Term Loan II) the next installment also became due and payable on various dates, inter-alia, on 15.04.2014, 15.07.2014. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us 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 16. 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: 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving 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 a winding-up proceeding. In law, when time begins to run, it can only be extended in the manner pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther (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 Application Nos. 10621-622 were filed before the Gujarat High Court which resulted in the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et 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 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 Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. 22. In fact, prior to the said date, Phoenix ARC Private Limited was not in picture and it was assigned with debt subsequently. The 1st Respondent has also failed to bring on record any such acknowledgement made by the Corporate Debtor with the IDFC Bank or other Lenders prior to 9th September, 2017. 23. Section 22 of the Limitation Act, 1963 relates to breaches and torts , for the purpose of counting the fresh period of limitation. The said Section 22 of the Limitation Act, 1963 may be applicable to find out whether the claim is barred by limitation or not, but cannot be made applicable for counting the period of limitation for Application under Section 7 of the I B Code, which is to be counted from the date of default/ NPA as held by the Hon ble Supreme Court in terms of Section 7(5) of the I B Code. 24. The aforesaid issue was not decided by this Appellate Tribunal in its earlier judgment, which has been noticed by the Hon ble Supreme Court, which held that the decision in B. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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