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2020 (6) TMI 557 - AT - Insolvency and BankruptcyCIRP process - application was admitted by the Adjudicating Authority by impugned Order dated 22nd October, 2019, against Corporate Debtor, the present Appeal by Director of the suspended Board of Corporate Debtor - dispute of limitation - Tribunal has concluded that a Decree cannot be executed by resorting to Application under Section 7 and the debt does not become in default when Judgment and Decree is passed by DRT - HELD THAT - It is clear from the judgments of Hon'ble Supreme Court referred by this Tribunal in the matter of SH G ESWARA RAO VERSUS STRESSED ASSETS STABILISATION FUND, M/S SARITHA SYNTHETICS AND INDUSTRIES LTD. 2020 (5) TMI 424 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI that the applicable provision is Article 137 of the Limitation Act 1963 and the relevant date is date of default for the purpose of Application under Section 7 or Application under Section 9 of Insolvency and Bankruptcy Code, 2016. Once, the time starts running, subsequent filing of the Application to DRT and judgment passed by DRT does not make a difference, for the purposes of provisions of I B Code. We further reject the submission that because in Section 3(10) of I B Code in definition of Creditor the decree holder is included it shows that decree gives cause to initiate application under Section 7 of I B Code. Section 3 is in Part I of I B Code. Part II of I B Code deals with Insolvency Resolution And Liquidation For Corporate Person , has its own set of definitions in Section 5. Section 3 (10) definition of Creditor includes financial creditor , operational creditor decree-holder etc. But Section 7 or Section 9 dealing with Financial Creditor and operational creditor do not include decree-holder to initiate CIRP in Part II. The impugned order passed by Adjudicating Authority is set aside and the Application under Section 7 of I B Code filed by the Respondent is dismissed - appeal allowed.
Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Limitation period for filing the application. 3. Date of default and its significance. 4. Execution of a decree through insolvency proceedings. 5. Interpretation of relevant judgments and legal provisions. Issue-wise Detailed Analysis: 1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The Respondent, a Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) against the Corporate Debtor, which was admitted by the Adjudicating Authority (NCLT, Mumbai Bench) on 22nd October 2019. The application was based on a final order dated 22.10.2016 passed by the Debt Recovery Tribunal (DRT), which issued a Recovery Certificate. 2. Limitation period for filing the application: The Corporate Debtor contested the application on the grounds of limitation, arguing that the loan default occurred in 2013, and the application filed on 07th January 2019 was time-barred. The Adjudicating Authority, however, held that the application was within the limitation period as it was based on the DRT order dated 22.10.2016. 3. Date of default and its significance: The Corporate Debtor's account was declared as Non-Performing Asset (NPA) on 30.06.2013. The Appellant argued that the limitation period should be counted from the date of NPA, making the application time-barred. The Tribunal referred to the judgment in "Sh G Eswara Rao v. Stressed Assets Stabilisation Fund," which concluded that a decree does not reset the default date for the purpose of limitation under Section 7 of the I&B Code. 4. Execution of a decree through insolvency proceedings: The Tribunal noted that a decree cannot be executed by resorting to an application under Section 7, as the debt does not become in default when a judgment and decree are passed by the DRT. The judgment in "Sh G Eswara Rao" emphasized that insolvency resolution is not a recovery proceeding and that filing an application under Section 7 to execute a decree would be covered by Section 65 of the I&B Code, which attracts penal action for fraudulent or malicious intent. 5. Interpretation of relevant judgments and legal provisions: The Tribunal analyzed various judgments, including "B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates," "Vashdevo R. Bhojwani v. Abhyudaya Co-operative Bank Limited and Another," and "Gaurav Hargovindbhai Dave v. Asset Reconstructions Company (India) Limited and Another," to conclude that the limitation period for an application under Section 7 is governed by Article 137 of the Limitation Act, 1963, and starts from the date of default, not from the date of the recovery certificate. Conclusion: The Tribunal held that the application under Section 7 was time-barred and set aside the impugned order admitting the application. The Corporate Debtor was released from the Corporate Insolvency Resolution Process (CIRP), and the matter was remitted back to the Adjudicating Authority to decide the fee and costs payable to the Interim Resolution Professional (IRP)/Resolution Professional (RP). The appeal was allowed with no costs.
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