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2020 (8) TMI 340 - HC - Companies LawPossession of secured assets of the company in liquidation - permission to sell the secured assets by public auction - SARFAESI Act - time limitation - HELD THAT - Prima facie, the reliance placed by the counsel for the appellant on Article 62 of the Schedule to the Limitation Act is misplaced. Article 62 provides limitation for a suit to enforce payment of money secured by a mortgage or otherwise charged upon immovable property. The proceedings under the SARFAESI Act are not for recovery of money but are more akin to a proceeding for foreclosure of mortgage, limitation for a suit wherefor provided in Article 63 (a) of the Schedule to the Limitation Act is of 30 years commencing from the date when the money secured by the mortgage became due. It thus appears that Article 63(a) and not Article 62 of the Schedule to the Limitation Act would apply. However, it is not deemed apposite to deal further on the said aspect because we have also enquired from the counsel for the appellant, whether not the challenge to the SARFAESI Act proceedings, on the ground of the same being barred by limitation, is required to be made by way of a proceeding under Section 17 of the SARFAESI Act and before the DRT and the jurisdiction of this Court would be barred by Section 34 of the SARFAESI Act - the SARFAESI Act came into force only in the year 2002 and going by Article 63(a) of the schedule to the Limitation Act, it cannot be said that the limitation of 30 years, even if counted from 31st December, 1991 has not expired or had expired, for that matter, even by 20th July, 2015 when the notice under Section 13(2) of the SARFAESI Act was issued. Since the possession of the secured assets was with the respondent no.1 OL pursuant to the recommendation of the BIFR and the order of liquidation, respondent no.2 RIICO Ltd., for the purpose of proceedings under the SARFAESI Act, was in any case required to apply to the Company Court for direction to the respondent no.1 OL to handover possession of the property for sale under the SARFAESI Act - We have not been able to decipher any clear reply from the counsel for the appellant to our aforesaid queries, qua jurisdiction of the Company Court or of this Court in appeal against the order of the Company Court, to go into the aspect of bar of limitation, if any to the proceedings under the SARFAESI Act and jurisdiction therefor being exclusively of the DRT or qua limitation. Appeal dismissed.
Issues Involved:
1. Exemption application. 2. Condonation of delay in filing the appeal. 3. Maintainability of the appeal under Section 483 of the Companies Act, 1956. 4. Validity of SARFAESI proceedings. 5. Jurisdiction of the Company Court and DRT. 6. Limitation period for SARFAESI proceedings. 7. Role and rights of secured creditors and the Official Liquidator. 8. Maintainability of the appeal by the ex-Director. Detailed Analysis: Exemption Application: 1. The application for exemption (CM No.18563/2020) was allowed subject to just exceptions and as per extant rules, and the application was disposed of. Condonation of Delay: 2. The appeal was filed with a condonation of delay of 114 days (CM No.18562/2020). The court proceeded to hear the appeal despite the delay. Maintainability of the Appeal: 3. The appeal under Section 483 of the Companies Act, 1956, read with Rule 9 of the Companies (Court) Rules, 1959, challenged the order dated 13th March 2020 of the Company Court. The order directed the Official Liquidator to hand over possession of secured assets to RIICO Ltd. and permitted RIICO Ltd. to sell the assets under the SARFAESI Act. Validity of SARFAESI Proceedings: 4. The appellant contended that the SARFAESI proceedings initiated by RIICO Ltd. were time-barred. The appellant argued that the money became due on 31st December 1991, and the 12-year limitation period expired before the notice under Section 13(2) of the SARFAESI Act was issued on 20th July 2015. Jurisdiction of the Company Court and DRT: 5. The court questioned whether the Company Court had jurisdiction to address the limitation issue for SARFAESI proceedings or if it should be addressed by the DRT under Section 17 of the SARFAESI Act. The court noted that the SARFAESI Act has an overriding effect over other laws and that the jurisdiction for such matters lies with the DRT. Limitation Period for SARFAESI Proceedings: 6. The court found that Article 63(a) of the Limitation Act, which provides a 30-year limitation period for foreclosure of mortgage, was applicable rather than Article 62, which provides a 12-year limitation for payment of money secured by a mortgage. Role and Rights of Secured Creditors and the Official Liquidator: 7. The court highlighted that secured creditors, like RIICO Ltd., can stay outside the winding-up process and realize their security without the leave of the winding-up court. However, they must ensure the distribution of sale proceeds in accordance with Sections 529 and 529A of the Companies Act, which prioritize workmen’s dues. Maintainability of the Appeal by the Ex-Director: 8. The court noted that the appeal was filed by the ex-Director of the company in liquidation. It referenced a previous order and the Supreme Court ruling in Innoventive Industries Ltd. Vs. ICICI Bank, which held that appeals by erstwhile directors of a company in insolvency are not maintainable. Conclusion: 24. The court dismissed the appeal, finding no merit due to lack of jurisdiction and the non-maintainability of the appeal by the ex-Director.
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