2023 (11) TMI 566 - AT - Insolvency and Bankruptcy

Dismissal of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - committing error in refusing to extend the benefit of Section 14 of the Limitation Act - HELD THAT - The winding up petition was filed by M/s Oswal Minerals Ltd. in the Bombay High Court. The said proceeding was initiated by third party. The period during which the winding up petition remained pending, cannot come to rescue of the Appellant, nor Section 14, sub-section (2) of the Limitation Act is attracted in the present case. The benefit of Section 14, sub-section (2) of the Limitation Act can be extended when the Applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal and such proceeding is prosecuted in good faith in a court which, form defect of jurisdiction or other cause of a like nature, is unable to entertain it. A winding up petition was filed and thereafter a civil application. Based on that benefit of Section 14 was sought, which was denied as noted above. Present is a case where winding up petition was filed by the third party - Adjudicating Authority has rightly distinguished the judgement of the Hon ble Supreme Court and rightly took the view that the Appellant is not entitled to take the benefit of judgment of the Hon ble Supreme Court in Sesh Nath Singh 2021 (3) TMI 1183 - SUPREME COURT . In the Application, which was filed under Section 7, the Appellant has not brought on record the OTS offer given by the Corporate Debtor and for the first time in the Appeal, the said document has been brought on record. The Corporate Debtor has no opportunity to file a reply to the OTS offer or to make its submission on the said letter - the ends of justice be served in granting opportunity to the Corporate Debtor to file a reply with regard to OTS offer dated 08.07.2021, which is brought on the record in this Appeal. Section 7 Application revived before the Adjudicating Authority and direct the Adjudicating Authority to consider afresh the claim of State Bank of India raised in the Appeal on the strength of One Time Settlement offer dated 08.07.2021, which needs to be decided in accordance with law - The Corporate Debtor is allowed one month s time to file reply, insofar as One Time Settlement offer made by the Appellant is concerned. The Adjudicating Authority may hear the parties and decide Section 7 Application afresh in accordance with law - appeal allowed in part.

Summary

Issues Involved:
1. Whether the Section 7 Application filed by the Appellant was barred by limitation.
2. Whether the Appellant is entitled to the benefit of Section 14 of the Limitation Act.
3. Whether the One Time Settlement (OTS) request by the Corporate Debtor extends the limitation period under Section 25(3) of the Contract Act.

Summary:

Issue 1: Limitation of Section 7 Application
The National Company Law Tribunal (NCLT) dismissed the Section 7 Application filed by the Appellant on the grounds that it was barred by time. The default occurred on 30.01.2016, and the petition was filed on 13.01.2022, which is beyond the three-year limitation period. The NCLT distinguished the Supreme Court judgment in *Sesh Nath Singh vs. Baidyabati Sheorapuli Co-op Bank Limited*, stating that the third-party winding-up petition did not benefit the Appellant in excluding the period of limitation.

Issue 2: Benefit of Section 14 of the Limitation Act
The Appellant argued that the period during which the winding-up petition and SARFAESI proceedings were pending should be excluded under Section 14 of the Limitation Act. However, the NCLT found that Section 14(2) did not apply as the winding-up petition was filed by a third party and not the Appellant. The Tribunal emphasized that the Appellant did not seek leave from the Company Judge to proceed with SARFAESI proceedings, thus not fulfilling the requirements for the benefit of Section 14.

Issue 3: One Time Settlement (OTS) and Section 25(3) of the Contract Act
The Appellant also claimed that an OTS request made by the Corporate Debtor on 08.07.2021 entitled them to an extension of the limitation period under Section 25(3) of the Contract Act. The Tribunal noted that the OTS offer was not brought on record in the original Section 7 Application but was introduced during the appeal. The Tribunal decided to revive the Section 7 Application to allow the Corporate Debtor to file a reply regarding the OTS offer and directed the Adjudicating Authority to consider this issue afresh. Other issues regarding the benefit of Section 14 of the Limitation Act were not allowed to be reopened.

Conclusion:
The appeal was partly allowed, setting aside the NCLT's order dismissing the Section 7 Application. The matter was remanded to the Adjudicating Authority to consider the effect and consequence of the OTS offer on the question of limitation, while the Appellant's claims regarding Section 14 of the Limitation Act were treated as final and not to be reopened.