2020 (5) TMI 539 - AT - IBC

Time Limitation - CIRP process - attachment of property and possession taken over - appellant contended that the Application under Section 7 is barred by limitation, the date of default being 15.10.2013; there is no Acknowledgment Of Debt to take benefit under Section 18 of the Limitation Act 1963; the letter dated 20.03.2018 offering OTS is beyond the limitation period of three years - HELD THAT - The issue of limitation is to be addressed to, keeping in view the ratio laid down by the Hon ble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT where the Hon ble Supreme Court has laid down that Limitation Act is applicable to Applications filed under Section 7 and 9 of the Code from the inception of the Code and that Article 137 of the Limitation Act, getsattracted. The right to sue therefore accrues when a default occurs. If the default has occurred over 3years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act, 1973. In the instant case, the date of default as mentioned in part IV of the Application is 15.10.2013. It is the Respondent s case that the date of default is to be taken as 30.06.2014 as observed by the Adjudicating Authority - We observe from the letter dated 02.07.2014, that the date of default is 30.06.2014 though the date of default mentioned in Part IV of the Application, is 15.10.2013. In this case the right to sue accrues on 30.06.2014 and 3 years limitation period ends on 29.06.2017, whereas the Application was filed on 08.11.2017 - the contention of the Learned Counsel that the Financial Creditor has also initiated proceedings under DRT and under the SARFAESI Act 2002, and therefore this period should be excluded, cannot be sustained. Applicability of benefit under Section 14 (2) - HELD THAT - In the instant case benefit under Section 14 (2) cannot be given to the Applicant as there is no material on record to show that the subject Application was being prosecuted with due diligence in a court of First Instance or of Appeal or Revision which has no jurisdiction - In a catena of judgments it has been observed that proceedings under IBC cannot be construed to be that of a recovery or a Money Suit. In the present case there is no evidence brought on record to establish that the provisions of Sec 18 have been complied with. A perusal of Annexure 5 relied upon by the counsel for the first respondent is neither signed by the concerned party against whom the right is claimed nor by any person through whom he derives his title or liability. Viewed from any angle, this statement does not construe Acknowledgement Of Debt as mandated under Sec 18. While addressing this issue, the Adjudicating Authority has failed to consider that the Acknowledgment relied upon by the Applicant and observed so in the Order, i.e. 20.03.2018 is beyond 3 years of the date of default. Thus, the suit for recovery based upon a cause of action even if it is within limitation, it cannot in any manner impact the separate and independent remedy of a winding-up proceeding. A suit for recovery is a separate and independent proceeding distinct from the remedy of winding-up and therefore the contention of the Learned Counsel appearing for the Respondents/ Financial Creditor that the period spent while pursuing SARFAESI Proceedings should extend the period of limitation, cannot be sustained, as the intent of the Court is not to give a new lease of life to the debt which is already time barred. The Application preferred by Respondent under Section 7 of the I B Code is dismissed.

Summary

Issues Involved:
1. Barred by Limitation
2. Acknowledgment of Debt
3. Exclusion of Time Period under Section 14 of the Limitation Act
4. Proceedings under SARFAESI Act
5. Separate and Independent Remedies

Detailed Analysis:

Barred by Limitation
The appellants contended that the application under Section 7 of the Insolvency and Bankruptcy Code (IBC) was barred by limitation, as the date of default was 15.10.2013. The Adjudicating Authority, however, considered the date of default as 30.06.2014, and the application was filed on 08.11.2017. The Tribunal referred to several Supreme Court judgments, including "Gaurav Hargovindbhai Dave vs. Asset Reconstructions Company (India) Limited and another" and "B.K. Education Services Private Limited vs. Parag Gupta and Associates," which established that the limitation period for applications under Section 7 of the IBC is governed by Article 137 of the Limitation Act, 1963. According to these judgments, the right to sue accrues when the default occurs, and if the default occurred over three years before the date of filing the application, it would be barred by limitation.

Acknowledgment of Debt
The appellants argued that there was no acknowledgment of debt to take benefit under Section 18 of the Limitation Act, 1963. The Tribunal noted that the acknowledgment relied upon by the financial creditor was dated 30.09.2017, which was beyond three years from the date of default (30.06.2014). The Tribunal emphasized that for an acknowledgment to extend the limitation period, it must be made in writing and signed by the party against whom the right is claimed before the expiration of the prescribed period. In this case, the acknowledgment did not comply with these requirements, and therefore, it did not extend the limitation period.

Exclusion of Time Period under Section 14 of the Limitation Act
The financial creditor contended that the time period during which they pursued proceedings under the SARFAESI Act should be excluded under Section 14 of the Limitation Act, 1963. The Tribunal, however, referred to the majority view in "Ishrat Ali vs. Cosmos Cooperative Bank Ltd. & Anr.," which held that proceedings under the SARFAESI Act are not civil proceedings before a court of first instance or appeal and therefore cannot be counted for the purpose of exclusion of the period of limitation under Section 14(2) of the Limitation Act. Consequently, the Tribunal found that the benefit of Section 14(2) could not be given to the financial creditor.

Proceedings under SARFAESI Act
The financial creditor argued that they had initiated proceedings under the SARFAESI Act, 2002, and therefore, this period should be excluded from the limitation period. The Tribunal, however, reiterated that actions taken under the SARFAESI Act cannot be considered as civil proceedings for the purpose of exclusion of the limitation period. The Tribunal emphasized that the intent of the IBC is not to give a new lease of life to debts that are already time-barred.

Separate and Independent Remedies
The Tribunal highlighted that a suit for recovery based on a cause of action within limitation cannot impact the separate and independent remedy of a winding-up proceeding. The Tribunal referred to the Supreme Court's judgment in "Jignesh Shah and another vs. Union of India and another," which held that the date of default is crucial for computing the period of limitation for filing an application under Section 7 of the IBC. The Tribunal concluded that the application under Section 7 was barred by limitation, as the date of default was 30.06.2014, and the application was filed on 08.11.2017.

Conclusion:
The Tribunal allowed the appeal, set aside the order passed by the Adjudicating Authority, and dismissed the application under Section 7 of the IBC as barred by limitation. The Tribunal also declared all orders and actions taken by the Interim Resolution Professional as illegal and set them aside. The corporate debtor was released from all legal rigors and allowed to function independently through its Board of Directors. The Tribunal directed the Adjudicating Authority to fix the fee of the Interim Resolution Professional and the corporate insolvency resolution process cost, which the corporate debtor was ordered to pay. The appeal was allowed with no order as to costs.