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2024 (9) TMI 1425 - AT - IBCMaintainability of Section 7 Application - application barred by time limitation or not - relevant date of default - exclusion of period of Limitation as available u/s 22(5) of SICA Act, 1985 - extension of Limitation in pursuance of the Recovery Certificate. What is the date of default committed by Company, whether 01.06.2019 as claimed in Section 7 Application or the default was committed in the Year 2001 as pleaded by the Company and accepted by the Adjudicating Authority? - HELD THAT - The Appellant in its Appeal itself claim issuance of recall Notice dated 16.02.2001, which clearly recall the loan and directed the Company to pay within 10 days. The date of default as per the recall Notice is clearly 26.02.2001 - there are no valid reason for mentioning 01.06.2019 as date of default for purposes of IBC. It is well settled that for filing an Application under Section 7, Article 137 of the Limitation Act 1963 is applicable - the date of default in Section 7 was imaginary and without any basis and the date of default is the Year 2001 (26.02.2001). Whether the benefit for excluding the period of Limitation as available under Section 22(5) of SICA Act, 1985, has been rightly denied by the Adjudicating Authority on account of prosecuting the OA No.03/2002 before the DRT by the Appellant culminating into Recovery Certificate dated 19.10.2006? - HELD THAT - The Adjudicating Authority did not correctly construed the provisions of Section 22 of SICA Act. The period which is covered by Section 22(1) deserves to be excluded as required by Section 22(5). In the present case, it is not required to express any opinion with regard to proceeding initiated by Appellant by OA No.03/2002 and the legal consequence of the said proceeding. It is however to be noticed that when the Recovery Certificate dated 19.10.2006 was issued, the reference under SICA had already been dismissed on 06.06.2006. Hence, on the date when Recovery Certificate was issued SICA Proceedings were not pending - the Appellant was entitled to exclude the period for the purposes of Limitation which is covered by Section 22(1) and Section 22(5) of the SICA Act and the view taken by the Adjudicating Authority in this regard is not approved in the facts of the present case. Whether after excluding the period of Limitation as per Section 22 of SICA Act 1985, the Application filed by the applicant was within period of Limitation? - Whether the Appellant is entitled to the extension of Limitation in pursuance of the Recovery Certificate dated 19.10.2006, OTS letter dated 10.01.2008 and OTS letter dated 28.07.2010? Whether the Order of the Adjudicating Authority rejecting the Section 7 Application as barred by time deserves to be interfered with in this Appeal? - HELD THAT - The date of default being 26.02.2001, Limitation for filing the Section 7 Application under Article 137 started running which came to be arrested by filing the reference by the Company on 12.09.2002. The reference was dismissed on 06.06.2006 thus period from 12.09.2002 to 06.06.2006 needs to be excluded. Appeal having been filed against the Order dated 06.06.2006 on 23.11.2006, which came to be dismissed on 29.09.2010. The said period from 23.11.2006 to 29.09.2010 also needs to be excluded. The period after 30.09.2010 till 04.03.2013 during which the Writ Petition remain pending before the High Court needs no exclusion being not covered by Section 22(1). Further, no exclusion can be allowed after 31.12.2013, when the AAIFR dismissed the Appeal. The period during which the Writ Petition remain pending and the period after 31.12.2013, in which no exclusion is available itself exhaust period of 3 Years for filing the Application under Article 137. On 19.12.2019 when the Section 7 Application was filed the period of 3 Years had already came to an end. It is need to be seen whether after 27.07.2013, when the period extended under Section 18 of Limitation Act comes to an end, whether there is any other acknowledgement within 3 Years period. The Appellant has relied on the Balance Sheet for the Year 2015-16, which Balance Sheet has been brought on record both by the Appellant and the Company. The Balance Sheet 2015-16 have been signed on 26.09.2016. Thus, acknowledgement if any has to be treated from 26.09.2016, before which acknowledgement 3 Years period from the OTS letter 28.07.2010 has already come to an end. Thus, acknowledgement in the Balance Sheet are after 3 Years of the expiry of the period of Limitation. Thus, in any view of the matter, the Application filed by the Appellant on 19.12.2019, was much beyond period of Limitation which was available to the Appellant to file Section 7 Application. The Adjudicating Authority did not commit any error in rejecting Section 7 Application filed by the Appellant as barred by time - there is no merit in the Appeal - The Appeal is dismissed.
Issues Involved:
1. Date of Default 2. Exclusion of Period under Section 22 of SICA Act 3. Limitation Period for Filing Application 4. Extension of Limitation Period Issue-wise Detailed Analysis: I. Date of Default: The first issue is determining the date of default committed by the Company. The Appellant claimed the default date as 01.06.2019 in the Section 7 Application. However, the Adjudicating Authority found that the default occurred in 2001. The recall notice dated 16.02.2001 issued by IDBI Bank demanded payment of Rs. 17,52,44,940/- within 10 days, establishing the default date as 26.02.2001. The Tribunal concurred with the Adjudicating Authority, stating that the date of default mentioned in the Section 7 Application was "imaginary and without any basis." II. Exclusion of Period under Section 22 of SICA Act: The second issue pertains to whether the period covered by Section 22 of the SICA Act should be excluded for limitation purposes. Section 22(1) suspends legal proceedings against a company during certain periods, and Section 22(5) mandates excluding this period when computing the limitation. The Adjudicating Authority denied this benefit, reasoning that the Financial Creditor prosecuted OA No.03/2002 before the DRT, which issued a Recovery Certificate on 19.10.2006. However, the Tribunal disagreed, stating that the period covered by Section 22(1) should indeed be excluded. The Tribunal noted that when the Recovery Certificate was issued, the SICA proceedings had already been dismissed on 06.06.2006, thus no SICA proceedings were pending. III. Limitation Period for Filing Application: The third issue is whether the Section 7 Application was filed within the limitation period after excluding the period under Section 22 of SICA. The Tribunal noted that the reference before BIFR was filed on 12.09.2002 and dismissed on 06.06.2006. This period should be excluded. An appeal against the BIFR order was filed on 23.11.2006 and dismissed on 29.09.2010. The period during the appeal and a subsequent writ petition (from 05.03.2013 to 31.12.2013) should also be excluded. However, the period from 29.09.2010 to 05.03.2013, when no proceedings were pending, should not be excluded. The Tribunal concluded that the limitation period had already expired by the time the Section 7 Application was filed on 17.12.2019. IV. Extension of Limitation Period: The fourth issue is whether the limitation period could be extended based on the Recovery Certificate dated 19.10.2006, OTS letters dated 10.01.2008 and 28.07.2010, and acknowledgments in the Company's balance sheets. The Tribunal noted that even if the limitation period started afresh from the OTS letter dated 28.07.2010, it would end on 27.07.2013. The balance sheet for 2015-16, signed on 26.09.2016, acknowledged the debt but was beyond the three-year limitation period from the last OTS letter. Thus, the Tribunal concluded that the Section 7 Application filed on 17.12.2019 was time-barred. Conclusion: The Tribunal upheld the Adjudicating Authority's order, rejecting the Section 7 Application as barred by time. The appeal was dismissed.
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