2022 (1) TMI 165 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - mortgage on leave and license basis - validity of condonation of delay of 1392 days in filing Section 7 Application - principles of limitation for filing applications under Section 7 of IBC - HELD THAT - After the account of the Corporate Debtor was declared NPA on 28th June, 2013, immediately i.e. in the next month itself i.e. 22nd July, 2013 notice under Section 13 sub-section (2) of SARFAESI Act, 2002 was given by the State Bank of India to the Corporate Debtor and thereafter under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 being O.A. No.726 of 2014 was filed. An order dated 09.03.2017 was passed by the District Magistrate allowing Application under Section 14 of the SARFAESI Act to take physical possession of assets of the Corporate Debtor. The State Bank of India cannot be held to be negligent in prosecuting its remedies for recovery of its debt. To find out sufficient cause for condonation of delay, all facts, circumstances and sequence of events have to be taken into consideration. In the present case, it cannot be held that Financial Creditor i.e. State Bank of India was negligent in prosecuting the proceedings for recovery of its debt. It did initiate the proceedings under SARFAESI Act and also filed an Application for recovery of debt under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in the year 2014. The Corporate Debtor having acknowledged the liability in its balance sheet as on 31st March, 2015, the Financial Creditor shall have a fresh period of limitation, which came to an end only on 31st March, 2018 - In the facts and circumstances of the present case, the delay of less than two years period has been condoned by the Adjudicating Authority, exercising its discretion under Section 5 of the Limitation Act. It cannot be said that discretion exercised by Adjudicating Authority in condoning the delay is perverse or against any provisions of law or violates any principle of law for determining the sufficient cause under Section 5 of the Limitation Act. There are no error in the order of the Adjudicating Authority condoning the delay in filing the Application under Section 7 of the IB Code by the State Bank of India - appeal dismissed.

Summary

Issues Involved:
1. Delay in filing the Application under Section 7 of the Insolvency and Bankruptcy Code (IB Code).
2. Computation of delay period.
3. Applicability of Section 18 of the Limitation Act.
4. Concept of 'sufficient cause' for condonation of delay under Section 5 of the Limitation Act.
5. Actions taken by the State Bank of India (SBI) to recover the debt.
6. Role of public sector undertakings in legal proceedings.

Detailed Analysis:

1. Delay in filing the Application under Section 7 of the IB Code:
The appeal was filed against the judgment admitting an application under Section 7 of the IB Code by SBI, which included a request for condonation of delay under Section 5 of the Limitation Act, 1963. The delay in filing the application was initially claimed to be 1392 days.

2. Computation of delay period:
The Adjudicating Authority noted that the delay in filing the application was 1392 days. However, it concluded that due to the acknowledgment of debt in the Corporate Debtor's balance sheet as of 31st March 2015, the limitation period was extended until 31st March 2018, reducing the delay to 662 days. This view was endorsed by the appellate tribunal.

3. Applicability of Section 18 of the Limitation Act:
The acknowledgment of liability in the balance sheet was considered an acknowledgment within the meaning of Section 18 of the Limitation Act. This interpretation aligns with the Supreme Court's judgments in Asset Reconstruction (India) Company Ltd. Vs. Bishal Jaiswal and Dena Bank (now Bank of Baroda) Vs. C Shivkumar Reddy and Anr., which affirmed that such acknowledgment extends the limitation period.

4. Concept of 'sufficient cause' for condonation of delay under Section 5 of the Limitation Act:
The Adjudicating Authority found that SBI had acted with due diligence and shown sufficient cause for the delay. The Supreme Court's interpretation in Collector, Land Acquisition, Anantnag and Anr. vs. Mst Katiji and Ors., and State of Haryana vs. Chandra Mani and Ors., supported a liberal approach to 'sufficient cause,' emphasizing that substantial justice should prevail over technicalities.

5. Actions taken by the State Bank of India (SBI) to recover the debt:
SBI had taken several steps to recover the debt, including issuing a notice under Section 13(2) of the SARFAESI Act, filing an application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, and obtaining an order from the District Magistrate for taking physical possession of assets. These actions demonstrated SBI's diligence in pursuing the debt recovery.

6. Role of public sector undertakings in legal proceedings:
The Adjudicating Authority noted that SBI, being a public sector undertaking, represents the collective cause of the community, and a liberal approach should be adopted in considering delays in filing legal proceedings by such entities. This perspective aligns with the principle that public sector undertakings should not be treated differently from private parties in matters of legal delay.

Conclusion:
The appellate tribunal upheld the Adjudicating Authority's decision to condone the delay, finding no error in the computation of the delay period or the application of the Limitation Act. The appeal was dismissed, emphasizing that SBI had shown sufficient cause for the delay and had acted with due diligence in recovering the debt. The tribunal's decision underscores the importance of a justice-oriented approach in interpreting 'sufficient cause' and the acknowledgment of debt under Section 18 of the Limitation Act.