2020 (8) TMI 459 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - It is the stand of the 2nd Respondent/ Bank that it had only put part of the Secured Asset to an auction, which was let out by the Appellant to the Charak Hospital Research Centre and the remaining was not put to Auction - Time Limitation - HELD THAT - The provisions of I B Code override other Laws. At the same time, the IBC proceedings cannot be initiated based on time barred claims. Regardless of when IBC came into force, if more than three years had elapsed from the date of default, a creditor is not entitled to maintain an Application under the Code. IBC is not a litigation and that an Adjudicating Authority is not deciding a money claim or suit. In short, an Adjudicating Authority is not a Court of Law. Time Limitation - HELD THAT - The 1st Respondent/ Company Corporate Debtor s loan account was declared NPA by the 2nd Respondent on 31.03.2004. A Recall Notice dated 11.07.2007 was issued by the 2nd Respondent/ Bank to the Corporate Debtor for recalling the facility and demanding a sum of ₹ 17,94,54,108.73/-. The Application before the Tribunal was filed on 11.12.2018. The Application was served on the Corporate Debtor vide letter dated 11.03.2019. The Section 7 Application filed by the 2nd Respondent/ Bank in the year 2018 is a belated one because of the simple reason that in the present case the declaration of NPA or default on 31.03.2004 had occurred over three years prior to the date of filing of the Application and hence, this Tribunal comes to an inescapable conclusion that the Application filed by the 2nd Respondent/ Bank (under Section 7 of the Code) before the Adjudicating Authority is hit by Limitation, as per Article 137 of the Limitation Act, 1963. This Tribunal comes to an inevitable conclusion that Application filed under Section 7 of the Code by the 2nd Respondent/ Bank before the Adjudicating Authority (NCLAT), Mumbai-II is barred by Limitation and that the Adjudicating Authority had erred in admitting the Application, which needs to be set aside by this Tribunal and accordingly this Tribunal set-aside the impugned order dated 16.12.2019, in the interest of justice. Application dismissed - The matter is remitted to the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-II for determining the fee and costs of the Corporate Insolvency Resolution Process as incurred by him, which is to be borne and paid by the 2nd Respondent/ Bank (Financial Creditor).

Summary

Issues Involved:

1. Whether the Section 7 Application filed by the 2nd Respondent/Bank was barred by limitation.
2. Whether the Adjudicating Authority erred in admitting the Section 7 Application.
3. Whether the actions taken by the Interim Resolution Professional/Resolution Professional/Committee of Creditors were legal.
4. Determination of the fee and costs of the Corporate Insolvency Resolution Process.

Issue-wise Detailed Analysis:

1. Whether the Section 7 Application filed by the 2nd Respondent/Bank was barred by limitation:

The Appellant argued that the loan account of the 1st Respondent/Company was declared as a Non-Performing Asset (NPA) on 31.03.2004, and the recall notice was issued on 11.07.2007. The Section 7 Application under the Insolvency and Bankruptcy Code (IBC) was filed in 2019, which was beyond the three-year limitation period as per Article 137 of the Limitation Act, 1963. The Appellant cited the Supreme Court decision in "B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates" to support the claim that the application was time-barred. The Tribunal concluded that the application filed by the 2nd Respondent/Bank was indeed barred by limitation since the default occurred over three years prior to the filing date.

2. Whether the Adjudicating Authority erred in admitting the Section 7 Application:

The Tribunal found that the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-II) erred in admitting the Section 7 Application filed by the 2nd Respondent/Bank. The Tribunal noted that the Adjudicating Authority is not a 'Court of Law' and cannot determine a money claim. The Tribunal emphasized that the IBC proceedings cannot be initiated based on time-barred claims and that the NPA declaration or default on 31.03.2004 had occurred over three years prior to the filing of the application. Hence, the application was hit by limitation as per Article 137 of the Limitation Act, 1963.

3. Whether the actions taken by the Interim Resolution Professional/Resolution Professional/Committee of Creditors were legal:

The Tribunal declared all actions taken by the Interim Resolution Professional/Resolution Professional/Committee of Creditors as illegal and set them aside. The Tribunal directed the Interim Resolution Professional/Resolution Professional to hand over the records and assets of the 1st Respondent/Corporate Debtor to the Promoter and Directors of the Corporate Debtor forthwith.

4. Determination of the fee and costs of the Corporate Insolvency Resolution Process:

The Tribunal remitted the matter to the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-II) for determining the 'fee and costs' of the Corporate Insolvency Resolution Process incurred by the Interim Resolution Professional, which is to be borne and paid by the 2nd Respondent/Bank (Financial Creditor).

Conclusion:

The Tribunal set aside the impugned order dated 16.12.2019 passed by the Adjudicating Authority (NCLT), Mumbai Bench-II, and dismissed the Section 7 Application filed by the 2nd Respondent/Bank. The 1st Respondent/Corporate Debtor was released from all the rigours of the Corporate Insolvency Resolution Process. The Tribunal allowed the appeal with the aforesaid observations and directions, and closed the related interim applications.