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TMI Blog2020 (11) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent - 'Stressed Assets Stabilization Fund' (SASF) - Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code') came to be admitted with consequential directions declaring moratorium and appointment of Mr. Sandeep Khaitan as Interim Resolution Professional as a sequel to the order of admission. Aggrieved thereof, the Appellant has assailed the impugned order primarily on the ground that the application was time barred and also not maintainable under Section 7 of the I&B Code. 2. For a better grasp of the issues raised in this appeal a peep into the factual matrix would be inevitable. 'Industrial Development Bank of India' (IDBI) advanced loan facilities to 'National Boards Ltd.' (NBL) - the Principal Borrower under its Project Finance Scheme for which the 'Corporate Debtor' stood as 'Corporate Guarantor'. It happened on 27th March, 1997. The Principal Borrower - NBL defaulted in repayment of loan to IDBI. IDBI recalled the loan facility on 9th November, 2001 and invoked corporate guarantee of the Corporate Debtor - NPIL vide letter dated 3rd December, 2001 raising a demand of Rs. 5,42,94,868/-. IDBI filed OA No. 27/2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her this date has any relevance for effect of Section 22 of SICA 3. Date of registration of the Second Reference by BIFR under Section 16 of SICA 01.07.2003 a. Page 61 of Appeal. Again, no dispute with this date. b. According to Appellant, this is the triggering point as held by several Supreme Court decisions for exclusion of limitation time under Section 22 of SICA. 4. No. of days from 03.12.2001 to 01.07.2003 is 575 days This period is the question of legal determination in the Appeal. 5. Date of repeal of SICA and abatement of Reference 01.12.2016 Again, no dispute with regard to this date. 6. Date of institution of Insolvency Petition (CP (IB) No. 09/GB/2019) 12.03.2019 Admitted date by SASF 7. No. of days from 01.12.2016 to 12.03.2019 is 831 days No dispute with regard to this period as SASF has also admitted the period (page 99 of Appeal & page 11 of Reply) 8. Total no. of days is 575 + 831 = 1406 days (3 years 10 months and 5 days) It is further submitted that the contention of SASF that period of the first reference filed by Corporate Debtor before BIFR on 2nd March, 2001 until 25th June, 2002 when the reference came to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vency petition was barred by limitation. It is further contended that the SASF discharged the Corporate Debtor from all liabilities during the period when CD was in BIFR. No dues certificate was issued by SASF when the Principal Borrower was already in default. Thus, the Corporate Guarantor was absolved from all liabilities under the Corporate Guarantee and SASF is deemed to have waived, surrendered, and abandoned all its claims against the Corporate Debtor. 4. Learned counsel for Respondent, relied upon the tabular chart in his written submissions which depict the relevant dates/ events and is reproduced herein below:- S. NO. EVENTS DATES A. Date of institution of First Reference Case bearing No. 160/2001, filed by the Corporate Debtor before the learned BIFR 02.03.2001 (2nd March, 2001) B. Date of invocation of Corporate Guarantee by the IDBI Bank against the Corporate Debtor 03.12.2001 (3rd December, 2001 C. Dismissal/ disposal of First Reference Case by the learned BIFR 25.06.2002 (25th June, 2002) D. Date of institution of Second Reference case bearing No. 259/2003, filed by the Corporate Debtor before learned BIFR 21.02.2003 (21st February, 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not take into consideration the period of pendency of first reference case on the date of invocation of Corporate Guarantee and till its final disposal. It is submitted that the date for purposes of calculating limitation has to be taken from date of filing of the reference and not from the date of its registration. It is submitted that with the filing of second reference by Corporate Debtor before BIFR on 21st February, 2003, the IDBI Bank was prevented from taking recovery steps against the Corporate Debtor. The period from date of disposal of first reference case till filing of second reference case has to be added in the period of limitation. It is submitted that the provision contained in Section 22 (1) of SICA, 1985 clearly provides that when enquiry under Section 16 is pending, no legal proceedings can be instituted/ proceeded with further. The statutory provision being unambiguous no external aid of interpretation was to be applied. Cause of action against the Corporate Debtor is a continuing one. IDBI Bank had issued letter dated 3rd December, 2001 invoking the Corporate Guarantee against the Corporate Debtor who did not refute the IDBI's claim. Thus, the Corporate G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the earlier proceeding initiated in 2001/2002 are kept open. The appeal stands disposed of accordingly. .........................J. (ARUN MISHRA) ........................J. (INDIRA BANERJEE) NEW DELHI; JANUARY 20, 2020. It is abundantly clear that all questions have been kept open and the appeal is to be considered afresh on all issues raised therein. The issue of limitation is the core issue. We propose to deal with the same in the light of admitted facts and the law bearing on the subject. 6. Section 238 A of the I&B Code extends the provisions of Limitation Act, 1963, as far as may be, to proceedings before the Adjudicating Authority. It is well settled by now that where periods of limitation have been laid down in the Code, same will apply notwithstanding anything to the contrary in the Limitation Act. In para 42 of the judgment rendered by the Hon'ble Apex Court in "B. K. Educational Services Private LimitedVs. Parag Gupta and Associates", reported in (2019)11 SCC 633, it was held:- "42. It is thus clear that since the Limitation Act is applicable to applications filed under Section 7 and 9 of the Code from the inception of the Code. Article 137 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of second reference as borne out by the aforesaid communication. In so far as first reference being Case No. 160/2001 before BIFR is concerned, same appears to be have been taken up by BIFR for consideration on 25th June, 2002 and dismissed as being time barred on account of delay of over six months in filing the reference. BIFR observed in its order that it did not have any powers for condonation of delay in filing the reference. This is reflected in the order of BIFR dated 25th June, 2002 forming page no. 42 to 45 of the reply filed by the Respondent. It is manifestly clear that the reference was declined to be registered, same being barred by limitation and BIFR being not vested with powers to condone delay. The first reference would therefore have to be excluded while computing limitation, in terms of provisions of Section 22 of SICA, depending on the date of commencement of enquiry taking effect from the date of registration. Learned counsel of Appellant has vehemently argued that a reference declined to be registered will be deemed to not have been made. It is submitted that since the first reference was dismissed, Respondent cannot derive any benefit from it. The question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des that if on scrutiny, the reference is not found to be in order, the Secretary/Registrar may by order decline to register the reference. In the instant case the first reference was, after its receipt, registered and assigned case number 160/2001. It was placed before the Bench, which took up the reference on 25th June, 2002 for consideration so as to determine the status of company's sickness. However, the reference came to be dismissed as being time barred. It is therefore manifestly clear that the reference was registered and came to be dismissed on consideration. Therefore, Regulation 19(7) would not come into play and the period from filing of reference with BIFR under Section 15(1) of SICA on 2nd March, 2001 till its dismissal on 25th June, 2002 will have to be excluded within the purview of Section 22 of SICA providing for suspension of legal proceedings including institution of suits for recovery of money or for enforcement of security against the industrial company or any guarantee in respect of any loans or advances granted to the industrial company. 8. It is not disputed that the original lender IDBI invoked the Corporate Guarantee on 3rd December, 2001. Subsequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do Commercial Bank Ltd.", reported in (1979) 2 SCC 396. 10. The liability of the Guarantor being coextensive to the liability of the Principal Borrower and the acknowledgment of liability by the Principal Borrower, in terms of letter dated 20th December, 2016 forming Annexure R-7 to the Reply affidavit (page 64), is binding on the Guarantor and he cannot wriggle out of its liability to discharge its obligations towards SASF. It goes without saying that in terms of Clause 11 of the Corporate Guarantee dated 16th July, 1997, the Corporate Guarantor is liable to be proceeded against by the lender or its assignee in the same manner as if it was the Principal Borrower/ Debtor. 11. For the foregoing discussion, we are of the considered opinion that the application filed by the Respondent under Section 7 of I&B Code for triggering CIRP against Respondent - Corporate Guarantor on 12th March, 2019 was not barred by limitation. Contention raised by the Appellant as regards plea of limitation and other contention in regard to discharge of obligation of Appellant - Corporate Guarantor towards SASF are accordingly repelled. 12. No other issue was pressed during hearing of Appeal. We find no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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