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TMI Blog2020 (3) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... w Tribunal), Mumbai Bench, Mumbai, by impugned order dated 23rd September, 2019 admitted the application. 2. The Appellant, Director and Shareholder of the 'Corporate Debtor' challenged the impugned order on the ground that the application under Section 7 was barred by limitation. 3. Learned counsel for the Respondents appeared and relied on the decision of this Appellate Tribunal in "Sesh Nath Singh & Ors. v. Baidyabati Sheoraphuli Cooperative Bank Ltd.─ Company Appeal (AT) (Insolvency) No. 672 of 2019". In the said Judgment, a Bench of three Hon'ble Members of this Appellate Tribunal held that the 'Financial Creditor' bonafidely prosecuted his application under SARFAESI Act, 2002 and therefore, as per Section 14(2) of the Limitation Act, 1963 in computing the period of limitation the time during which the Respondent has been prosecuting with due diligence another civil proceedings against the 'Corporate Debtor' for the same relief shall be excluded. 4. The aforesaid Judgment was doubted, the matter was referred to Larger Bench to decide the issue. 5. The application of Article 137 of Limitation Act, 1963 for moving application under Sections 7 or 9 of the I&B Code, fell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court, in the fact situation of a suit for recovery being filed prior to a winding-up petition being filed, opined: "8. ... To my mind, there is a fallacy in this argument because the test that is required to be applied for purposes of ascertaining whether the debt is in existence at a particular point of time is the simple question as to whether it would have been permissible to institute a normal recovery proceeding before a civil court in respect of that debt at that point of time. Applying this test and dehors that fact that the suit had already been filed, the question is as to whether it would have been permissible to institute a recovery proceeding by way of a suit for enforcing that debt in the year 1995, and the answer to that question has to be in the negative. That being so, the existence of the suit cannot be construed as having either revived the period of limitation or extended it. It only means that those proceedings are pending but it does not give the party a legal right to institute any other proceedings on that basis. It is well-settled law that the limitation is extended only in certain limited situations and that the existence of a suit is not necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisions would show that the starting point of the period of limitation is when the company is unable to pay its debts, and that Section 434 is a deeming provision which refers to three situations in which a company shall be deemed to be "unable to pay its debts" under Section 433(e). In the first situation, if a demand is made by the creditor to whom the company is indebted in a sum exceeding one lakh then due, requiring the company to pay the sum so due, and the company has for three weeks thereafter "neglected to pay the sum", or to secure or compound for it to the reasonable satisfaction of the creditor. "Neglected to pay" would arise only on default to pay the sum due, which would clearly be a fixed date depending on the facts of each case. Equally in the second situation, if execution or other process is issued on a decree or order of any court or tribunal in favour of a creditor of the company, and is returned unsatisfied in whole or in part, default on the part of the debtor company occurs. This again is clearly a fixed date depending on the facts of each case. And in the third situation, it is necessary to prove to the "satisfaction of the Tribunal" that the company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurred, the date of the NPA i.e. 21-7-2011 was filled up. The NCLT applied Article 62 of the Limitation Act which reads as follows: "Description of Suit Period of limitation Time from which period begins to run 62. To enforce payment of money secured by a mortgage or otherwise charged upon Immovable property Twelve Years When the money sued for becomes due." Applying the aforesaid Article, the NCLT reached the conclusion that since the limitation period was 12 years from the date on which the money suit has become due, the aforesaid claim was filed within limitation and hence admitted the Section 7 application. The NCLAT vide the impugned judgment held, following its earlier judgments, that the time of limitation would begin running for the purposes of limitation only on and from 1-12-2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. Consequently, it dismissed the appeal. 4. Mr Aditya Parolia, learned counsel appearing on behalf of the appellant has argued that Article 137 being a residuary article would apply on the facts of this case, and as right to sue accrued only on and from 21-7-2011, three years having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces Private Limited (Supra) reminded this Appellate Tribunal that for application under Section 7 of the Code, Article 137 of the Limitation Act, 1963 will apply. Article 62, which relates to deed of mortgage executed between the parties, cannot be taken into consideration for counting the period of limitation. The Hon'ble Supreme Court specifically observed that Article 141 of the Constitution of India mandates that its judgments are followed in letter and spirit. The date of coming into force of IBC Code does not and cannot form a trigger point of limitation for application filed under the Code. Equally, since "applications" are petitions, which are filed under the Code, it is Article 137 of the Limitation Act, 1963 which will apply to such applications. 10. This Appellate Tribunal also considered the same issue in "V Hotels Limited vs. Asset Reconstruction Company (India) Limited - Company Appeal (AT) (Insolvency) No.525 of 2019" decided on 11th December, 2019, by referring to the aforesaid judgment of the Hon'ble Supreme Court observed: - "17. In the present case, in fact the default took place much earlier. It is admitted that the debt of the 'Corporate Debtor' was declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment, the Appellant cannot derive any advantage of Section 18 of the Limitation Act. For the said reason, we hold that the application under Section 7 is barred by limitation, the accounts of the 'Corporate Debtor' having declared NPA on 1st December, 2008. 11. The aforesaid decisions of the Hon'ble Supreme Court and this Appellate Tribunal make it clear that for the purpose of computing the period of limitation of application under Section 7, the date of default is 'NPA' and hence a crucial date. 12. In "Jignesh Shah and another vs. Union of India and another - (2019) 10 SCC 750", the Hon'ble Supreme Court noticed the decision of the Hon'ble Patna High Court in "Ferro Alloys Corpn. Ltd. v. Rajhans Steel Ltd.", wherein the Hon'ble Patna High Court held that simply because a suit for realisation of the debt of the petitioner Company against Opposite Party 1 was instituted in the Calcutta High Court on its original side, such institution of the suit and the pendency thereof in that Court cannot enure for the benefit of the present winding-up proceeding. 13. In the said case, Hon'ble Patna High Court further held that since the debt of the petitioner Company has become time-barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation.- For the purposes of this section,- (a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted; (b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding; (c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction." 18. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing measures to recover his secured debt, namely:- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset; (c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.............." 21. An action taken by the 'Financial Creditor' under Section 13(2) or Section 13(4) of the 'SARFAESI Act, 2002' cannot be termed to be a civil proceeding before a Court of first instance or appeal or revision before an Appellate Court and the other forum. Therefore, action taken under Section 13(2) of the 'SARFAESI Act, 2002' cannot be counted for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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