2023 (5) TMI 612 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Period of limitation - NCLT rejected the application - Corporate Guarantor who had guaranteed the obligation of the Borrower - The Adjudicating Authority observed that on the one hand the facility agent and the trustee participated in the proceedings before BIFR and at the same time they were pursuing the foreign suit - seeking exclusion of period during the pendency of the reference till 01.12.2016 when the SICA was repealed - HELD THAT - There is no dispute raised regarding the liability of the Corporate Debtor towards the Financial Creditors and the guarantee by the Respondent. The account of the Borrower was declared as NPA in 2011 but the proceedings were initiated by the Financial Creditors against the Guarantor after issuance of loan acceleration notice dated 03.02.2012 issue to Borrower recalling the entire outstanding loan amount with interest and by invocation of the corporate guarantee given by the Respondent, vide invocation notice dated 21.02.2012, calling upon the Respondent to pay the entire outstanding amount due. However, no payment was made by the Respondent and hence the date of default cannot be taken to be a date of NPA of the Borrower but the date of default has to be taken when the guarantee invocation notice dated 21.02.2012 was given. While the foreign suit was pending the Respondent filed a reference with the BIFR on 06.11.2012 which was registered on 07.12.2012 and the Respondent was restrained from disposing of or alienating in any manner any fixed assets without the consent of the BIFR. Neither the foreign suit was contested by the Respondent mentioning the pendency of the reference nor mentioned about the foreign suit in the reference. The foreign suit was decreed on 08.04.2014. The Facility Agent also filed an application for intervention before the BIFR for their impleadment but the said application was not decided. It has also been held in the case of Hyderabad Abrasives Minerals 2002 (12) TMI 497 - HIGH COURT OF ANDHRA PRADESH that the benefit of exclusion of period for computing the limitation period, spent while the Company was before BIFR shall be applicable even to those creditors who did not approach BIFR. However, in the present case, the Appellant made an effort to become a party by filing a Miscellaneous Application before the BIFR but the said application was not decided though the Respondent filed the reply also to the said application - In the present case, on referring to the dates then date of invocation of guarantee is 21.02.2012. Form A Case No. 74 of 2012 (reference) is 06.11.2012, the reference was registered on 07.12.2012 and the SICA was repealed w.e.f. 01.12.2016 vide notification dated 25.11.2016, therefore, the limitation would start running from 01.12.2016 and shall go up to 01.12.2019. The application under Section 7 has admittedly been filed on 30.08.2019 which is prior to the expiry of period of limitation. It has been held in the case of Gouri Prasad Goenka Vs. Punjab National Bank 2020 (5) TMI 65 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI and a Judgment of Delhi of Delhi High Court rendered in the case of IFCI FACTORS LIMITED VERSUS RAMSARUP INDUSTRIES LIMITED ORS. 2019 (8) TMI 1866 - DELHI HIGH COURT that the period shall start running from the date of repeal of SICA. The order under challenge is patently illegal - Appeal allowed.

Summary

Issues Involved:
1. Limitation period for filing the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Exclusion of the period under Section 22(5) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
3. Validity of proceedings in a foreign court while BIFR proceedings were pending.

Summary of Judgment:

1. Limitation Period for Filing the Application:
The primary issue was whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was barred by limitation. The Respondent argued that the default occurred on 21.02.2012, and the application filed on 30.08.2019 was beyond the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963. The Tribunal found that the date of default should be considered as 21.02.2012, when the corporate guarantee was invoked, not the date when the Borrower's account was declared NPA.

2. Exclusion of the Period Under Section 22(5) of SICA:
The Tribunal examined whether the period during which the Respondent was before the BIFR should be excluded from the limitation period. The Respondent filed a reference with BIFR on 06.11.2012, which was registered on 07.12.2012. The SICA was repealed on 01.12.2016. The Tribunal held that the period from 07.12.2012 to 01.12.2016 should be excluded, thus extending the limitation period to 01.12.2019. The application under Section 7 of IBC filed on 30.08.2019 was within this extended period.

3. Validity of Proceedings in a Foreign Court:
The Tribunal also addressed whether the Appellants could pursue proceedings in a foreign court while the BIFR proceedings were pending. The Respondent argued that the Appellants could not take advantage of Section 22(5) of SICA since they continued with the foreign suit without seeking BIFR's permission. The Tribunal referred to the Bombay High Court's decision in Ashapura Minechem Ltd. Vs. Armada (Singapore) Pte. Ltd., which clarified that SICA's provisions do not extend to properties outside India, and hence, no prior consent from BIFR was required for proceedings in a foreign court.

Conclusion:
The Tribunal concluded that the application under Section 7 of IBC was filed within the extended limitation period, considering the exclusion under Section 22(5) of SICA. The order of the Adjudicating Authority dismissing the application on the ground of limitation was set aside. The appeal was allowed, and no costs were imposed.