2022 (2) TMI 965 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Application rejected on the ground of time limitation - HELD THAT -Having regard to the facts and circumstances of the case on hand and that the Section 7 Application has been dismissed solely on the ground of Limitation, the subject matter needs to be adjudicated on the touchstone of the principles laid down by the Hon ble Supreme Court in Asset Reconstruction Company (India) Limited Vs. Bishal Jaiswal Anr. AIR 2021 (4) TMI 753 - SUPREME COURT and in Dena Bank (Now Bank of Baroda) Vs. C. Shivkumar Reddy Anr. 2021 (8) TMI 315 - SUPREME COURT , in which the Hon ble Supreme Court has discussed in detail, the applicability of Sections 18 and 19 of the Limitation Act, 1963. In the instant case, the loan was sanctioned on 11/09/2006; was declared as NPA on 05.04.2008; attempts were made to restructure the debt; Notice under Section 13(2) of SARFAESI Act, 2002 demanding an outstanding amount of ₹ 7,64,52,372.57/- was issued on 28/10/2010, in response to which, the Learned Counsel for the Respondent offered ₹ 740 Lakhs/- for settlement of the loan amount - The material on record evidences that O.A. No. 461 of 2015 filed by the Appellant against the Respondent Company and Guarantors was allowed vide Order dated 02/07/2019, directing the Respondent Company to pay a sum of ₹ 14,68,17,342.58/- together with penal interest. It is not in dispute that the Respondent Company failed to make the payments in compliance of the Order dated 02/07/2019. It is seen from the record that the Section 7 Application was preferred by the Appellant on 18/11/2019. The Appellant Bank was thus entitled to initiate proceedings under Section 7 within three years from the date of issuance of the Recovery Certificate and the ratio of Hon ble Apex Court in Dena Bank (Now Bank of Baroda) 2021 (8) TMI 315 - SUPREME COURT is squarely applicable to the facts of this case, as Recovery Certificate was issued on 02.07.2019 and the Application was filed on 18/11/2019 well within three years from the date of cause of action. The Application is well within the Limitation - the Adjudicating Authority is directed to proceed in accordance with law and decide the Admission under the provisions of the Code, as expeditiously as practicable but not later than 6 weeks from 10/03/2022, on which date, both parties are directed to appear before the Adjudicating Authority - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal against Order of Adjudicating Authority dismissing Application under Section 7 of Insolvency and Bankruptcy Code as barred by Limitation.
2. Interpretation of the period of Limitation for filing Application under Section 7.
3. Applicability of Sections 18 and 19 of the Limitation Act, 1963 in insolvency proceedings.
4. Consideration of acknowledgment of debt and fresh cause of action in insolvency cases.

Analysis:

Issue 1:
The Appellant challenged the Order of the Adjudicating Authority dismissing their Application under Section 7 of the Insolvency and Bankruptcy Code as barred by Limitation. The Adjudicating Authority relied on the judgment in 'Ishrat Ali' case and considered the date of default from the declaration of NPA in 2008. The Appellant argued that the Limitation period started from the issuance of the Recovery Certificate in 2021, well within three years. The Tribunal analyzed the arguments and referred to relevant judgments to determine the correct starting point for the Limitation period.

Issue 2:
The key argument revolved around the interpretation of the period of Limitation for filing an Application under Section 7. The Respondent contended that action under SARFAESI Act cannot be counted for exclusion under Section 14(2) of the Limitation Act. The Appellant highlighted instances of restructuring and settlements to extend the Limitation period. The Tribunal considered these arguments and examined the applicability of Section 14(2) in insolvency cases, emphasizing the need for due diligence in prosecuting the Application.

Issue 3:
The Tribunal assessed the applicability of Sections 18 and 19 of the Limitation Act, 1963 in insolvency proceedings based on the judgments in 'Asset Reconstruction Company (India) Limited' and 'Dena Bank (Now Bank of Baroda)'. It discussed the condonable delay in filing petitions under the IBC, acknowledgment of debt, and the extension of Limitation period by three years upon acknowledgment. The Tribunal emphasized the importance of acknowledgment and fresh cause of action in determining the filing of applications under Section 7.

Issue 4:
Considering the facts of the case, the Tribunal observed the timeline of events from the loan sanction to the initiation of recovery proceedings. It noted the issuance of possession notices and the subsequent failure of the Respondent to comply with payment orders. The Tribunal found that the Application filed by the Appellant was within the Limitation period as per the 'Dena Bank' judgment, which allowed for the initiation of proceedings within three years from the date of the Recovery Certificate. Consequently, the Tribunal allowed the Appeal, set aside the Impugned Order, and directed the Adjudicating Authority to proceed with the Admission under the Code within a specified timeline.

In conclusion, the Tribunal's detailed analysis of the issues involved in the judgment provides clarity on the interpretation of Limitation periods, acknowledgment of debt, and the applicability of relevant sections of the Limitation Act in insolvency cases.