Bank of Baroda vs Bijay Kumar Garodia

Per Rohit Kapoor, Member (Judicial)

The Company Petition has been filed under section 95(1) of the Insolvency and Bankruptcy Code, 2016 (“Code”) read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 (“IRP Rules”) and regulation 4(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 (“IRP Regulations”) by Bank of Baroda, represented by Mr. Gauri Shankar Bhaiya, seeking to initiate Insolvency Resolution Process (“IRP”) against Bijay Kumar Garodia, the Personal Guarantor of Prithvi Ferro Alloys Private Limited.

The learned Counsel appearing on behalf of the Personal Guarantor submitted that the Company Petition is not maintainable solely on the ground of limitation. Hence, this Company Petition has been reserved to decide the preliminary objection of limitation,

The Personal Guarantor has executed the Guarantee Agreement in his personal capacity on 25 April 2014 FOR Prithvi Ferro Alloys Private Limited (“Principal Borrower”) who had availed loan facilities on 20 August 2011, 16 September 2011, 25. September 2014, 12 December 2014, 20 January 2015 and lastly on 28 June 2016.

The Principal Borrower’s account was classified as Non-Performing Assets (“NPA”) on 01 December 2016.

The Petitioner issued notice on 07 February 2018 under section 13(2) of the SARFAESI Act, 2002 to the Personal Guarantor demanding a sum of Rs.52,72,07,849.62 as on 31 January 2018^{11.Annexure E at Pp. 142-143 of the CP}.

The Petitioner sent another Demand notice on 19 October 2020 in Form B to the Personal Guarantor via post.

A Company Petition under section 7 of the Code was filed against the Principal Borrower which was registered as CP(IB) No. 140/KB/2019. The Principal Borrower was admitted into Corporate Insolvency Resolution Process on 08 August 2019 and thereafter an order approving the Resolution Plan of the Principal Borrower was passed on 03 May 2021.

The Hon’ble Supreme Court in Dena Bank v. Shree Shiv Kumar Reddy & Anr. in Civil Appeal No. 1650 of 2020 and Sesh Nath Singh & Ors. v. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Ors.^{22.2021 SCC OnLine SC 244} have observed that filing of the Original Application within the period of limitation and action taken under the SARFAESI Act taken within the period of limitation of execution of guarantee which extends the period of limitation under section 18 of the Limitation Act and accordingly this Company Petition is within the period of limitation.

The Company Petition has been filed by the Petitioner alleging that the debt was due from 30 September 2016 and the date of default was 01 December 2016.

The present Company Petition was filed on 12 December 2021. Relinace has been placed on B.K. Educational Services Private Limited v. Parag Gupta and Associates^{33.AIR 2018 SC 5601} wherein the Hon’ble Supreme Court held that Article 137 of the Limitation act, 1963 is applicable to the proceedings under the Code and the right to sue therefore accrues when a default occurs.

Article 137 of the Limitation Act, 1963 provides that an application has to be filed within a period of three years. In the present case, the demand notice was sent on 19 October 2020 whereas the dated of default has been stated as 01 December 2016, thus, the period of three years expired on 01 December 2019 and the petition has been filed on 12 December 2021. Thus, this Company Petition is barred by limitation.

Reliance was placed on Bank of Baroda v. Rajiv Rai in CP 89/IB/2021, a petition under section 95 of the Code, which was dismissed on the ground of limitation.

At this stage, we shall deal with only one point i.e. whether the present Company Petition is barred by limitation.

It is a well settled law and has been reiterated by the Hon’ble NCLAT in Bimalkumar Manubhai Savalia v. Bank of India and Ors.^{44.CA(AT) (Ins.) No. 1166 of 2019} that the proceedings under SARFAESI Act and DRT proceedings does not extend the period of limitation. The date of default has been stated as 01 December 2016. The Petitioner sent a demand notice under section 13(2) of the SARFAESI Act, 2002 on 07 February 2018. Hence, the notice sent under the SARFAESI Act does not extend the period of limitation which started running on occurrence of default on 01 December 2016.

The Demand Notice in the statutory format was sent on 19 October 2020 i.e. after three years, 10 months and 18 days after the Principal Borrower was in default on 01 December 2016.

The present Company Petition was filed on 12 December 2021 i.e. approximately five years from the date of default i.e. 01 December 2016.

Therefore, this Company Petition is clearly barred by limitation and is hereby rejected.

Certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.