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Judgment
Shreesha Merla, Member (T)]
Aggrieved by the Order dated 25/02/2021 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court-IV, New Delhi) in C.P. (IB) No. 3005(ND)/2019, M/s. Canara Bank, preferred this Appeal. By the Impugned Order, the Adjudicating Authority has dismissed the Application filed under Section 7 of the Insolvency and Bankruptcy Code (hereinafter referred to as ‘the Code’) by M/s. Canara Bank/the Appellant on the ground that it was ‘barred by Limitation’. The Adjudicating Authority relied on the Judgement of this Tribunal in ‘Ishrat Ali’ Vs. ‘Cosmos Cooperative Bank Ltd. & Anr.’ Company Appeal (AT) (Insolvency) No. 1121 of 2019 and observed in para 16 of the Impugned Order as follows:
“16. In the light of the aforementioned decision passed by Hon’ble NCLAT when we shall consider the case in hand then we noticed that NPA was declared on 05.04.2008. Consequently, applicant bank has initiated action against the corporate debtor under the provisions of SARFAESI Act, 2002 as well as under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 on 19/10/2015 and case is registered as OA no. 461/2015 and on 02/07/2019 DRT passed the order and directed to pay the amount within 30 days from the date of order and on the basis of that petitioner claimed the date of default is on 02/08/2019. In our considered view, in view of the decision referred supra, action taken under SARFAESI Act cannot be counted for the period of exclusion u/s 14 of the limitation Act and since NPA was declared on 05/04/2008, therefore, the date of default is date of NPA. And if we shall calculate the period of limitation from 05/04/2008, i.e. date of NPA then the present application is filed in the year 2019, much after the period of limitation prescribed under Article 137 of Limitation Act, i.e., three years when right to apply accrue. Hence, the present petition is barre by limitation.”
Learned Counsel for the Appellant/‘Financial Creditor’ submitted that the period of Limitation began ticking from the date of issuance of the Recovery Certificate, which was issued by the Debt Recovery Tribunal on 07/02/2021 and Application filed on 18/11/2019, is well within the Limitation period of three years; that the account of the Respondent was declared as NPA on 05/04/2008, but the same was restructured on various occasions within the period of three years, which automatically extends the Limitation to the ‘date of acknowledgement’, of the OTS. The Learned Counsel in support of his submissions placed reliance on the following Judgements:-
• ‘Vashdeo R. Bhojwani’ Vs. ‘Abhyudaya Cooperative Bank Ltd. & Anr.’ Civil Appeal No. 11020 of 2018.
• ‘M/s. Ugro Capital Ltd.’ Vs. ‘Bangalore Dehydration and Drying Equipment Co. Pvt. Ltd. (BDDE)’ Company Appeal (AT) (Insolvency) No. 984 of 2019.
• ‘Sesh Nath Singh & Anr.’ Vs. ‘Baidyabati Sheoraphuli Cooperative Bank Ltd. & Anr.’ Company Appeal (AT) (Insolvency) No. 672 of 2019.
• ‘Sesh Nath Singh & Anr.’ Vs. ‘Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr.’ Civil Appeal No. 9198 of 2019.
• ‘M.M. Ramachandran’ Vs. ‘South Indian Bank Ltd. & Ors.’ Company Appeal (AT) (Insolvency) No. 1509 of 2019.
• ‘M.M. Ramachandran’ Vs. ‘South Indian Bank Ltd.’ Civil Appeal No. 2951 of 2020.
As against this argument, the Learned Counsel for the Respondent submitted that the Adjudicating Authority has rightly relied on the ratio of this Tribunal in ‘Ishrat Ali’ (Supra) as action taken under Section 13(2) of the SARFAESI Act, 2002 cannot be counted for the purpose of exclusion of the period of Limitation under Section 14(2) of the Limitation Act, 1963. He further contended that this is not a money claim or a recovery suit and therefore no benefit can be given to any person under Section 14(2), till it is shown that the Application under Section 7 was prosecuting with due diligence in a Court of First Instance or of Appeal or Revision which has no jurisdiction and therefore the present Application is ‘barred by Limitation’. It is also contended by the Learned Counsel for the Respondent that the Appellant had taken no action for five years between 28/10/2010 and 24/02/2015.
Assessment:
Having regard to the facts and circumstances of the case on hand and that the Section 7 Application has been dismissed solely on the ground of Limitation, we are of the considered view that the subject matter needs to be adjudicated on the touchstone of the principles laid down by the Hon’ble Supreme Court in ‘Asset Reconstruction Company (India) Limited’ Vs. ‘Bishal Jaiswal & Anr.’ AIR 2021 SC 5249 and in ‘Dena Bank (Now Bank of Baroda)’ Vs. ‘C. Shivkumar Reddy & Anr.’ (2021) 10 SCC 330, in which the Hon’ble Supreme Court has discussed in detail, the applicability of Sections 18 and 19 of the Limitation Act, 1963. It is apposite to reproduce the relevant paragraph of ‘Dena Bank (Now Bank of Baroda)’ (Supra) detailed as hereunder:
“138. While it is true that default in payment of a debt triggers the right to initiate the corporate resolution process, and a petition under Section 7 or 9 IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238-A IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a petition in the NCLT is condonable under Section 5 of the Limitation Act unlike delay in filing a suit. Furthermore, as observed above Sections 14 and 18 of the Limitation Act are also applicable to proceedings under the IBC.
Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of one-time settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave cited by Mr. Shivshankar, this Court had no occasion to consider any proposal for one-time settlement. Be that as it may, the balance sheets and financial statements of the corporate debtor for 2016-2017, as observed above, constitute acknowledgment of liability which extended the limitation by three years, apart from the fact that a certificate of recovery was issued in favour of the appellant Bank in May 2017. The NCLT rightly admitted the application by its order dated 21-3-2019.
To sum up, in our considered opinion an application under Section 7 IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the corporate debtor as NPA, if there were an acknowledgment of the debt by the corporate debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years.
Moreover, a judgment and/or decree for money in favour of the financial creditor, passed by the DRT, or any other tribunal or court, or the issuance of a certificate of recovery in favour of the financial creditor, would give rise to a fresh cause of action for the financial creditor, to initiate proceedings under Section 7 IBC for initiation of the corporate insolvency resolution process, 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.”
(Emphasis Supplied)
In the instant case, the loan was sanctioned on 11/09/2006; was declared as NPA on 05.04.2008; attempts were made to restructure the debt; Notice under Section 13(2) of SARFAESI Act, 2002 demanding an outstanding amount of Rs.7,64,52,372.57/- was issued on 28/10/2010, in response to which, the Learned Counsel for the Respondent offered Rs.740 Lakhs/- for settlement of the loan amount.
It is an admitted fact that on 24/02/2015, the Appellant issued possession Notice under Section 13(4) of SARFAESI Act, 2002 and subsequently on 19/04/2015 the Appellant filed O.A. No. 461 of 2015 before the Debt Recovery Tribunal-1, New Delhi. The material on record evidences that O.A. No. 461 of 2015 filed by the Appellant against the Respondent Company and Guarantors was allowed vide Order dated 02/07/2019, directing the Respondent Company to pay a sum of Rs.14,68,17,342.58/-together with penal interest. It is not in dispute that the Respondent Company failed to make the payments in compliance of the Order dated 02/07/2019. It is seen from the record that the Section 7 Application was preferred by the Appellant on 18/11/2019. The Appellant Bank was thus entitled to initiate proceedings under Section 7 within three years from the date of issuance of the Recovery Certificate and we are of the considered view that the ratio of Hon’ble Apex Court in ‘Dena Bank (Now Bank of Baroda)’ (Supra) is squarely applicable to the facts of this case, as Recovery Certificate was issued on 02.07.2019 and the Application was filed on 18/11/2019 well within three years from the date of cause of action.
For all the aforenoted reasons this Appeal is allowed and the Impugned Order is set aside. Having regard to the fact that we hold that the Application is well within the Limitation, we direct the Adjudicating Authority to proceed in accordance with law and decide the ‘Admission’ under the provisions of the Code, as expeditiously as practicable but not later than 6 weeks from 10/03/2022, on which date, both parties are directed to appear before the Adjudicating Authority.
The Registry is directed to upload the Judgement on the website of this Tribunal and send the copy of this Judgement to the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi Bench) forthwith.