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TMI Blog2023 (10) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... , (vi) Syndicate Bank and (vii) Punjab National Bank as also the State Bank of India, who is the first respondent in this appeal. The State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Bikaner and Jaipur and State Bank of Patiala, had also extended such facilities, but they had merged with the State Bank of India on 01.04.2017. Hence, the State Bank of India is now prosecuting the composite claims of these banks. In the proceeding before the NCLT, out of which this appeal arises, it was the State Bank of India who had filed the application as financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). 2. Prior to bringing the action under the IBC, notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) was issued to the corporate debtor and recovery proceedings were instituted against them before the Debt Recovery Tribunal (DRT). Three applications were filed by the exposed lending banks, two before the DRT, Hyderabad being OA No.154 of 2014 and OA No.221 of 2014, the former having been renumbered as OA No.1653 of 2017. The third a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest levied. A request for one time settlement was also made in this communication. The NCLT treated this letter to be an acknowledgement of debt. In its decision taken on 12.01.2021 while admitting the application, it was, interalia, observed: ".... We, are therefore, of the view that by accepting liability vide their letter dated 29.01.2020, agreeing to repay the debt, the Corporate Debtor now cannot take a stand that the debt is barred by limitation. Acknowledgement of debt and agreeing to repay the same amounts to liability and it automatically extends the limitation period." The Appellate Tribunal broadly agreed with the reasoning of the NCLT and sustained the decision delivered on 12.01.2021. 4. The pleas of the appellant before the Appellate Tribunal were mainly on procedural grounds. Apart from the question of limitation, arguments were advanced that the application before the NCLT was barred under the doctrine of election, the borrower having chosen the SARFAESI mechanism first and having applied before the DRT. Point of limitation was also reiterated. On the issue involving the RBI Circular dated 12.02.2018 the case of the appellant was that the banks had approached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of fact, in the instant case when once the Company has/had defaulted and after the initiation of legal proceedings as available to the Lender on that date (Before the Debt Recovery Tribunal) and when the Financial Creditor/Lender had obtained the order(s) in the 'Original Applications' and later recovery certificates were issued, and when the Original Applications filed before the Debt Recovery Tribunal(s) had attained finality, thereafter it is for the Lender/Financial Creditor/Decree Holder as matter of 'Election' to pursue the recovery mechanism for his/its personal benefits before a 'competent forum' or to initiate Insolvency Proceedings for the benefit of 'stakeholders' and 'one and all'. In the event of the Decree Holder/Lender/Financial Creditor has/had resorted to the initiation of Insolvency Proceedings under relevant section of the I & B Code (after coming into force of the Code) he/it cannot be found fault with, since there is no fetter in 'Law', in this regard. 59. It is pointed out that the decisions cited on behalf of the Appellant before this Tribunal, in the instant case are not applicable to the facts and the circumstances of the present case, hence they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very certificate. It has further been held that issuance of a certificate of recovery in favour of the financial creditor would give rise to a fresh cause of action to the financial creditor, to initiate proceedings under Section 7 IBC for initiation of the CIRP, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the certificate of recovery, if the dues of the corporate debtor to the financial debtor, under the judgment and/or decree and/or in terms of the certificate of recovery, or any part thereof remained unpaid. xxx xxx xxx 56. Insofar as the contention of the respondents with regard to clause (a) of subsection (1) of Section 14 IBC is concerned, we do not find that the words used in clause (a) of subsection (1) of Section 14 IBC could be read to mean that the decreeholder is not entitled to invoke the provisions of the IBC for initiation of CIRP. A plain reading of the said Section would clearly provide that once CIRP is initiated, there shall be prohibition for institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the limitation period provided in the Limitation Act would apply to the applications under the IBC as well. Section 238A of the IBC itself (introduced by way of an amendment to the Code made with effect from 06.06.2018) stipulates application of the statute of Limitation on IBC. Section 18 of the Limitation Act stipulates: "18. Effect of acknowledgment in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Branch, 631090/ B/4/101, 1st Floor, "The Grand" Raj Bhavan Road, Somajiguda, Hyderabad500 082. Mailifbhyderabad@ unionbankofindla.com (Through to the Lead Bank) Dear Sir, Sub:Request for OTS with Consortium Banks Ref:Totem Infrastructure Limited We thank you very much for the support that has been extended by your bank throughout my business operations with your branch. With reference to your letter/Notice from your branch, we have taken note of it and we have discussed about this elaborately with our business partners. In principle, we have agreed among ourselves to repay the amount due to your bank. As you are aware, we are undergoing through rough phase in our business activities along with financial crisis. At this juncture we require your bank support to come out of these problems and to repay the amounts due to your bank. In this regard, we request you to inform us to the exact outstanding amount payable to your bank as on the date of our account became Non Performing Asset (NPA) in your bank. We also request you to waive off all the penal interests levied by your bank on the Loan outstanding amount from the date of account became irregular to till dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n scrutinising the document. Only the promise should be clear and unconditional." 9. We accept the submission of the appellant that this letter was a request to consider a onetime settlement. But again, in absence of averments or pleading, after initiation of insolvency proceeding, any promise made to pay the debt cannot be treated to have cured the fault of limitation in a pre-existing action. A promise of this nature would constitute an independent cause of action. 10. We shall now return to the point argued by the appellant that the date of default should go back to the date on which the loan account of the corporate debtor was declared as nonperforming asset. In the cases of B.K. Educational Services Private Limited vsParag Gupta & Associates [(2019) 11 SCC 633] and Babulal (supra), date of default has been treated to be the date on which the limitation period starts ticking. In Gaurav Hargovindbhai Dave vsAsset Reconstruction Company (India) Limited and Another [(2019) 10 SCC 572], the provision of Article 137 to the Limitation Act was applied for computing the period of limitation. But these authorities do not lay down a proposition of law which is contrary to that laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lection between the fora for enforcement of debt under the 1993 Act and initiation of CIRP under the IBC arises only after a recovery certificate is issued. The reliefs under the two statutes are different and once CIRP results in declaration of moratorium, the enforcement mechanism under the 1993 Act or the SARFAESI Act gets suspended. In such circumstances, after issue of recovery certificate, the financial creditor ought to have option for enforcing recovery through a new forum instead of sticking on to the mechanism through which recovery certificate was issued. In the case of Transcore vsUnion of India and Another [(2008) 1 SCC 125], application of SARFAESI mechanism was held permissible even though the subjectproceeding was instituted under the 1993 Act. Thus, the doctrine of election cannot be applied to prevent the financial creditors from approaching the NCLT for initiation of CIRP. 12. One factor which has come to our notice in course of hearing is that one of the recovery certificates was issued on 08.09.2015. We have already held that the letter dated 29.01.2020 cannot by itself revive the debt though it could create an independent cause of action. A question that aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g limitation period for filing an application under Section 7 of the IBC would be guided by Article 137 of the Limitation Act. That is the ratio of this Court in the case of Kotak Mahindra I (supra). The same authority has also analysed the position of a recovery certificate as a deemed decree. It has been, interalia, held in this judgment: " 79. From the plain and simple interpretation of the words used in subsection (22A) of Section 19 of the Debts Recovery Act, it would be amply clear that the legislature provided that for the purposes of windingup proceedings against a company, etc. a recovery certificate issued by the Presiding Officer under subsection (22) of Section 19 of the Debts Recovery Act shall be deemed to be a decree or order of the Court. It is thus clear that once a recovery certificate is issued by the Presiding Officer under subsection (22) of Section 19 of the Debts Recovery Act, in view of subsection (22A) of Section 19 of the Debts Recovery Act it will be deemed to be a decree or order of the Court for the purposes of initiation of windingup proceedings of a company, etc. However, there is nothing in subsection (22A) of Section 19 of the Debts Recovery Act t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain the character of a decree to lodge a claim in an IBC proceeding. But this point has not been examined by the Appellate Tribunal. We have already expressed our opinion on the reasons that weighed with the Appellate Tribunal as also the NCLT in entertaining the application. But since the first two fora did not test the legality of the 2015 certificate as a deemed decree, we are of the opinion that this question also ought to be addressed by the Appellate Tribunal. We are otherwise not satisfied with the argument of the appellant about maintainability of the application out of which this appeal arises on the ground of the application being barred under limitation. The application with respect to the two recovery certificates issued in the year 2017 is maintainable. In the event the Appellate Tribunal is of opinion that the CIRP could not lie so far as the recovery certificate of 2015 is concerned, as the decree would be still alive, the claim based on the said recovery certificate could be segregated from the composite claim and the Committee of Creditors shall, in that event, treat the sum reflected in the said recovery certificate as part of the claims made in pursuance of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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