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2020 (11) TMI 802 - AT - Insolvency and BankruptcyMaintainability of application - Assignment of Debt - It is argued that the Notice issued by SBI as Consortium Leader was already withdrawn and subsequent individual action of State Bank of India and Order passed in view of that action under SARFAESI cannot be reason for Adjudicating Authority to dismiss the Application under Section 7 as not maintainable - Argument is that action under Section 7 of IBC is not adversarial but to save the Corporate Debtor by bringing about resolution so that the debts can be fairly paid - time limitation - HELD THAT - It is apparent that the Adjudicating Authority did not apply itself to the Orders which were being relied on by the Corporate Debtor and simply recorded that it is not empowered to pass any Order over jurisdiction of Hon ble High Court or to clarify interim orders passed by the Hon ble High Court. It appears to us that the Adjudicating Authority avoided to decide the issues raised and without going into the Record, it has thrown out the Application under Section 7 without justifiable reasons. Adjudicating Authority accepted individual Bank can maintain application beyond consortium and there is no bar to invoke provisions of Code but without even showing how the Orders in Writ Petition in which SIB was not even party, it should wait. In the Writ Petition filed against State Bank of India and the I.A. referred above, the Appellant or SIB were not made parties. State Bank of India initially purported to act for the consortium but after filing of the Writ Petition, withdrew the Notice dated 17th October, 2015 which was the basis to file Writ Petition 52886 52887 of 2015. The prayers in the Writ Petition were in context of such Notice and that Corporate Debtor should be heard regarding declaration of N.P.A. Subsequently, State Bank of India acted on its own when it raised demand vide Annexure A-13 on 9th March, 2017 and Possession Notice (Annexure A-14) on 19th August, 2017. Directions given were to the Authorized Officer of SBI and State Bank of India which were the Respondents in Writ Petition. Present the Corporate Debtor is aware that both the Orders were against SBI as portions reproduced from its Statement of Objections (Diary No.18701) and highlighted supra show. We find it difficult to accept that there was restraint Order against SIB. The Application under Section 7 of IBC filed is not confined to debt as arising in the arrangement due to Consortium Lending which was a term loan, but was also towards independent overdraft facility and amounts due in that context. As such, even if one was to stretch the Order of High Court dated 04.12.2015 to say that it affects SIB, still the South Indian Bank was competent to maintain Section 7 Application on the basis of overdraft facility which was provided outside the Consortium. Thus, the Order passed by the Adjudicating Authority is not at all justified and deserves to be set aside. Time Limitation - HELD THAT - Under the Limitation Act, 1963, as per Section 3, it is the duty of the Court/Authority to consider whether or not the matter brought before it is within limitation. It is the duty of the authority to apply its mind to the question of limitation although limitation has not been taken as the defence. The authority under law as appearing from Section 3 of Limitation Act, is bound to raise the question of limitation suo moto - Entry - 19A shows that after the Application under Section 7 of IBC was filed in the present matter, Section 238A of IBC extending provisions of the Limitation Act was inserted in IBC with effect from 6th June, 2018. When this is so, in fairness, it would be appropriate to give opportunity to the Financial Creditor to rectify defect in the Application before the Adjudicating Authority. It is necessary for us under Rule 11 of National Company Law Appellate Tribunal Rules, 2016, to exercise inherent powers to do Justice to pass such Orders. The matter needs to be remanded back to the Adjudicating Authority so that the Appellant is given opportunity to rectify defects in the format - Appeal allowed by way of remand.
Issues Involved:
1. Maintainability of the Application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Limitation period for filing the Application under Section 7 of IBC. 3. Impact of the High Court orders on the proceedings under Section 7 of IBC. 4. Rights of the Financial Creditor to proceed individually outside the consortium arrangement. Detailed Analysis: 1. Maintainability of the Application under Section 7 of IBC: The Appellant, M/s. Pegasus Assets Reconstruction Pvt. Ltd., filed an Application under Section 7 of IBC as an assignee of South Indian Bank (SIB). The Corporate Debtor challenged the maintainability of the Application, arguing that the proceedings were pending before the High Court, which had stayed actions against the State Bank of India (SBI). The Adjudicating Authority initially dismissed the Corporate Debtor's application but was later directed by the High Court to decide on the maintainability by a speaking order. The Adjudicating Authority subsequently dismissed the Section 7 Application, stating that the issues should be clarified by the High Court first. The Appellate Tribunal found that the Adjudicating Authority erred in dismissing the Application without justifiable reasons. It was noted that the Adjudicating Authority avoided deciding the issues raised and wrongly insisted that SIB should get directions from the High Court, even though SIB was not a party to the Writ Petition. The Tribunal held that the Application was maintainable and that individual banks in a consortium could file applications under Section 7 of IBC. 2. Limitation Period for Filing the Application under Section 7 of IBC: The Appellant argued that the Application was within the limitation period as the Corporate Debtor made repayments on 28th November 2014 and 3rd December 2014, which should start a fresh period of limitation under Section 19 of the Limitation Act. Additionally, the Appellant presented an acknowledgment of debt dated 20th November 2015. The Corporate Debtor countered that the Application was time-barred, citing the Supreme Court judgments in "B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates" and "Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company (India) Ltd & Anr." The Tribunal noted that the Adjudicating Authority did not decide on the limitation issue. It observed that under Section 3 of the Limitation Act and Section 7(5) of IBC, it was the duty of the Adjudicating Authority to consider whether the matter was within limitation. The Tribunal decided to remand the matter back to the Adjudicating Authority to allow the Appellant to rectify defects in the Application and file documents to show how the debt was within limitation. 3. Impact of the High Court Orders on the Proceedings under Section 7 of IBC: The High Court had issued orders restraining SBI from taking further proceedings under SARFAESI, which the Corporate Debtor argued also affected SIB. However, the Tribunal found that the High Court orders were specifically against SBI and did not restrain SIB. The Tribunal noted that the Corporate Debtor did not make SIB a party in the Writ Petition and that SIB's actions under Section 7 of IBC were independent of SBI's actions under SARFAESI. 4. Rights of the Financial Creditor to Proceed Individually Outside the Consortium Arrangement: The Tribunal observed that the Financial Creditor (SIB) had rights to proceed individually for the debts arising from both the consortium arrangement and the separate overdraft facility. The Tribunal noted that the Application under Section 7 of IBC was based on both the term loan under the consortium and the overdraft facility outside the consortium. Therefore, even if the High Court orders affected the consortium arrangement, SIB could still proceed for the debts related to the overdraft facility. Conclusion: The Tribunal set aside the Impugned Order, dismissed the I.A. 69 of 2019 filed by the Corporate Debtor, and restored the Company Petition CP(IB)No.144/BB/2017. The Tribunal held that the Application under Section 7 of IBC was maintainable and remitted the matter back to the Adjudicating Authority to allow the Appellant to rectify defects and file documents regarding limitation. The Adjudicating Authority was directed to hear both parties and decide on the Application's admission based on the limitation and completeness of the Application.
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