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2019 (9) TMI 468 - AT - Insolvency and BankruptcyMaintainability of petition - initiation of Corporate Insolvency Resolution Process - default in repayment of debt - Insolvency and Bankruptcy Code, 2016 - HELD THAT - There is no dispute with regard to the fact that the Corporate Debtor had taken credit facilities from UCO Bank on 19.01.2005, 22.02.2008, 31.03.2009, 06.11.2009 and 18th May, 2012. There is no dispute regarding the fact that Corporate Debtor had secured the credit facilities taken by equitable mortgage of immovable property and by executing other securities. The filing of proceedings before DRT in 2014 and invoking of Section 13(2) of SARFAESI in 2016 are also not disputed. Amount more than ₹ 1 Lakh is in default, is apparent from record. The proceeding in DRT is still pending. It is clear that the question of limitation has to be looked into from the angle whether the debt is payable in law or in fact. Although the proceeding under IBC is an Application, question for consideration is whether the debt is payable in law. The yardstick is to see whether there is continuous cause of action for the debt claimed. The limitation for enforcing payment of money secured by a mortgage or otherwise charged by the immovable property is twelve years at the time when money sued for becomes due. Thus for 12 years after becoming due, the debt would be payable in law. In the present matter, the sanction letters are between 19th January, 2005 to 18th May, 2012 and there were Master Restructuring Agreements executed in 2012. Apart from proceeding filed in DRT in May, 2014, which is pending, the loan was secured by equitable mortgage and as such, it cannot be said that the debt was barred by limitation, when Section 7 Application was filed on 07.08.2018. There is no substance in the arguments raised with regard to limitation. As such, there is no substance in the Appeal. Whether Corporate Debtor is MSME? - HELD THAT - The question was raised only at the time of arguments and the Financial Creditor is raising dispute on the basis that the Application for status of MSME was sought only after the CIRP process started. We need not decide this issue at present as we are on the stage of admission of proceedings under Section 7. Whether or not the Corporate Debtor can take benefit of Section 29A of IBC would have to be considered at the appropriate stage. Appeal dismissed.
Issues Involved:
1. Whether the debt is barred by the law of limitation. 2. Whether the Corporate Debtor's status as a Micro, Small, and Medium Enterprise (MSME) affects the proceedings. 3. Whether the proceedings before the Debt Recovery Tribunal (DRT) affect the limitation period. Issue-wise Detailed Analysis: 1. Whether the debt is barred by the law of limitation: The Appellants argued that the debt is barred by the law of limitation, contending that the application was filed after a delay of five years from the date the account was classified as a non-performing asset (NPA) on 31st March 2013. They claimed that the proceedings before the DRT would not save the limitation period, and the application should have been dismissed. The Financial Creditor countered by stating that the outstanding debt was ?93,93,16,689/- as of 2nd July 2019, and relied on various documents, including the Master Restructuring Agreement and the recall notice issued under Section 13(2) of the SARFAESI Act. The Tribunal referred to the Supreme Court's observation in "M/s. Innoventive Industries Ltd. versus ICICI Bank & Anr.," emphasizing that the question of limitation should be viewed from whether the debt is payable in law or in fact, and whether there is a continuous cause of action for the debt claimed. The Tribunal concluded that the debt was not barred by limitation, considering the equitable mortgage of immovable property and the continuous cause of action. 2. Whether the Corporate Debtor's status as a Micro, Small, and Medium Enterprise (MSME) affects the proceedings: The Appellants claimed that the Corporate Debtor is an MSME and made efforts to compromise with the Financial Creditor, which were not positively responded to. The Financial Creditor disputed this status, arguing that no proof of MSME status was provided and that the application for MSME status was filed after the commencement of the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted that the question of MSME status was raised only during the arguments and did not need to be decided at the current stage of admission of proceedings under Section 7. The Tribunal stated that whether the Corporate Debtor can take benefit of Section 29A of the IBC would be considered at the appropriate stage. 3. Whether the proceedings before the Debt Recovery Tribunal (DRT) affect the limitation period: The Appellants argued that the limitation period should not be extended due to the proceedings before the DRT. The Financial Creditor had moved the DRT in 2014, which was a relief available at that time. The Tribunal disagreed with the Appellants' argument, stating that Section 14 of the Limitation Act permits the exclusion of the time of proceedings bona fide in a court when the court was without jurisdiction. The Tribunal emphasized that pursuing relief in the proper forum indicated a continuous cause of action, and it could not be said that the debt became time-barred. The Tribunal concluded that the additional remedy under the IBC became available in 2016, and the Financial Creditor's application under Section 7 was not time-barred. Conclusion: The Tribunal found no substance in the arguments regarding the limitation and dismissed the appeal. The Tribunal did not make any orders as to costs and deferred the issue of the Corporate Debtor's MSME status to be considered at an appropriate stage.
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