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TMI Blog2020 (5) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code and that Article 137 of the Limitation Act, getsattracted. The right to sue therefore accrues when a default occurs. If the default has occurred over 3years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act, 1973. In the instant case, the date of default as mentioned in part IV of the Application is 15.10.2013. It is the Respondent s case that the date of default is to be taken as 30.06.2014 as observed by the Adjudicating Authority - We observe from the letter dated 02.07.2014, that the date of default is 30.06.2014 though the date of default mentioned in Part IV of the Application, is 15.10.2013. In this case the right to sue accrues on 30.06.2014 and 3 years limitation period ends on 29.06.2017, whereas the Application was filed on 08.11.2017 - the contention of the Learned Counsel that the Financial Creditor has also initiated proceedings under DRT and under the SARFAESI Act 2002, and therefore this period should be excluded, cannot be sustained. Applicability of benefit under Section 14 (2) - HELD THAT:- In the instant case benefit under Section 14 (2) cannot be given to the Applicant as there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority admitted the Application under Section 7 of the Code. 2. Succinctly put, the facts relevant to the case are that the 1st Respondent/Corporate Debtor is a Special Purpose Vehicle incorporated to develop end to end facilities to the Information Technology Sector and was sanctioned by the first respondent, M/s IFCI LTD, a term loan of upto ₹ 60,00,00,000/-,out of which an amount of ₹ 9,90,00,000/- was disbursed by 21.05.2009 and the balance loan of ₹ 50,10,00,000/- was cancelled vide letter dated 31.03.2011on account of nonpayment of installments of the loan already disbursed. It is averred that the project could not be completed on account of reasons beyond their control;that in 2011 ED had attached 150 acres of the project land and TSIIC issued a notice for cancellation of the land allotment and resumption of SEZ on 24.09.2015 and hence the project had come to a standstill. 3. The Adjudicating Authority while admitting the Application observed as follows: 32. Keeping in view the above facts, it is clear that the Corporate Debtor has acknowledged the debt in writing as late as on 20.03.2018 and therefore provisions of section 18 of the Limitation Act will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons filed by the Enforcement Directorate (ED) before the Adjudicating Authority and enclosed herewith by the Appellant, shows that the ED prayed not to consider the property of the Corporate Developer for liquidation during Insolvency Process as the same has been attached and taken possession by them under Section 8 (5) PMLA, 2002, by the PMLA Special Court. 5. Learned Counsel appearing on behalf of the Appellant contended that the Application under Section 7 is barred by limitation, the date of default being 15.10.2013; there is no Acknowledgment Of Debt to take benefit under Section 18 of the Limitation Act 1963; the letter dated 20.03.2018 offering OTS is beyond the limitation period of three years; there is no proper authorization under which the letter was issued; the first Respondent had made several claims for the same debt and that it was only on 16.12.2019 that the first Respondent had expressed its intention to withdraw from the CIRP of Respondent No. 3. 6. Learned Counsel appearing for the 1st Respondent submitted that though initially they had filed a claim in the CIRP of the 3rd Respondent that is M/s. Indu Projects Limited,the Corporate Guaranteer of the Principal Bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Article 137 of the Limitation Act, getsattracted. The right to sue therefore accrues when a default occurs. If the default has occurred over 3years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act, 1973. 12. In Jignesh Shah and another vs. Union of India and another (2019) 10 SCC 750 , the Hon ble Supreme Court taking into consideration the fact of filing of an Application under Sections 433 and 434 of the Companies Act, 2013 observed as follows: 13. Dr Singhvi relied upon a number of judgments in which proceedings under Section 433 of the Companies Act, 1956 had been initiated after suits for recovery had already been filed. These judgments have held that the existence of such suit cannot be construed as having either revived a period of limitation or having extended it, insofar as the winding-up proceeding was concerned. Thus, in Hariom Firestock Ltd. v. Sunjal Engg. (P) Ltd., a Single Judge of the Karnataka High 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 req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings, winding up of Opposite Party 1 cannot be ordered due to non-payment of the said debt. Finally, the Hon ble Supreme Court after taking into consideration the date of default observed: - 21. The aforesaid judgments correctly hold that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy of a winding-up proceeding. In law, when time begins to run, it can only be extended in the manner provided in the Limitation Act. For example, an acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period, but a suit for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding-up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding-up proceeding. 28. A reading of the aforesaid 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 7 was barred by limitation. For proper appreciation, it is better to note the facts of the judgment as follows: - In the present case, Respondent 2 was declared NPA on 21-7-2011. At that point of time, State Bank of India filed two OAs in the Debts Recovery Tribunal in 2012 in order to recover a total debt of 50 crores of rupees. In the meanwhile, by an assignment dated 28-3-2014, State Bank of India assigned the aforesaid debt to Respondent 1. The Debts Recovery Tribunal proceedings reached judgment on 10-6- 2016, the Tribunal holding that the OAs filed before it were not maintainable for the reasons given therein. 2. As against the aforesaid judgment, Special Civil Application Nos. 10621-622 were filed before the Gujarat High Court which resulted in the High Court remanding the aforesaid matter. From this order, a special leave petition was dismissed on 27- 3-2017. 3. An independent proceeding was then begun by Respondent 1 on 3-10-2017 being in the form of a Section 7 application filed under the Insolvency and Bankruptcy Code in order to recover the original debt together with interest which now amounted to about 124 crores of rupees. In Form-I that has statutoril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out by the learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21-7- 2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr Banerjee's reliance on para 11 of B.K. Educational Services (P) Ltd., suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. 7. This being the case, we fail to see how this para could possibly help the case of the respondents. Further, it is not for us to interpret, commercially or otherwise, articles of the Limitation Act when it is clear that a particular article gets attracted. It is well settled that there is no equity about limitation - judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature. 8. This being the case, the appeal is allowed and the judgments of the NCLT and NCLAT are set aside. (Emphasis supplied) 9. In Sagar Sharma Anr. vs. Phoenix ARC Pvt. Ltd. Anr. - Civil Appeal No.7673 of 2019 - (2019) 10 SCC 353 , the Hon'ble Supreme Court vide its judgment dated 30th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther observed: - Company Appeal (AT) (Insolvency) No. 1121 of 2019 14 22. The aforesaid provision makes it clear that for the purpose of filing a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has to be made in writing duly signed by the party against whom such property or right is claimed. 23. In the present case, 'Asset Reconstruction Company (India) Ltd.'- ('Financial Creditor') has failed to bring on record any acknowledgment in writing by the 'Corporate Debtor' or its authorised person acknowledging the liability in respect of debt. The Books of Account cannot be treated as an acknowledgment of liability in respect of debt payable to the 'Asset Reconstruction Company (India) Ltd.'- ('Financial Creditor') signed by the 'Corporate Debtor' or its authorised signatory. 24. In Sampuran Singh and Ors. v. Niranjan Kaur and Ors.─ (1999) 2 SCC 679 , the Hon'ble Supreme Court observed that the acknowledgment, if any, has to be prior to the expiration of the prescribed period for filing the suit. In the present case, the account was declared NPA since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for recovery or a decree passed by a Court cannot be held to be deferment of default. 15. A suit for recovery of money can be filed only when there is a default of dues. Even if the decree is passed, the date of default does not shift forward to the date of decree or date of payment for execution. Decree can be executed within specified period i.e. 12 years. If it is executable within the period of limitation, one cannot allege that there is a default of decree or payment of dues. 16. Therefore, we hold that a Judgment or a decree passed by a Court for recovery of money by Civil Court/ Debt Recovery Tribunal cannot shift forward the date of default for the purpose of computing the period for filing an application under Section 7 of the 'I B Code'. 14. The brief point for consideration for the instant case is to see whether the Application admitted under Section 7 by the Adjudicating Authority, is barred by limitation keeping in view the principle laid down in the aforenoted Judgments. In the instant case, the date of default as mentioned in part IV of the Application is 15.10.2013. It is the Respondent s case that the date of default is to be taken as 30.06.2014 as observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted; (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. While addressing this issue, the majority view of the Larger Bench in Ishrat Ali (Supra) is noted as hereunder: 18. Section 14(2) of the Limitation Act, 1963 makes it clear that in computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another 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. 19. Therefore, to take advantage of Section 14(2), the Applicant must satisfy: (i) That the applicant has been prosecuting with due diligence in another civil proceeding, whether in a court of first instance or of appeal or revision. (ii) against the same party; and (iii) for the same relief. Company Appeal (AT) (Insolvency) No. 1121 of 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Company Appeal (AT) (Insolvency) No. 1121 of 2019 21 Section 13(2) of the 'SARFAESI Act, 2002' cannot be counted for the purpose of exclusion of the period of limitation under Section 14(2) of the Limitation Act, 1963. In an application under Section 7 relief is sought for resolution of a 'Corporate Debtor' or liquidation on failure. It is not a money claim or suit. Therefore, no benefit can be given to any person under Section 14(2), till it is shown that the application under Section 7 was prosecuting with due diligence in a court of first instance or of appeal or revision which has no jurisdiction. 22. The decision rendered in Sesh Nath Singh Ors. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. (Supra) thereby cannot be held to be a correct law laid down by the Bench. (Emphasis Supplied) 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent duly authorised in this behalf; and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. The aforesaid provision makes it clear that for the purpose of filing a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has to be made in writing duly signed by the party against whom such property or right is claimed. (Emphasis Supplied) 21. In the present case there is no evidence brought on record to establish that the provisions of Sec 18 have been complied with. A perusal of Annexure 5 relied upon by the counsel for the first respondent is neither signed by the concerned party against whom the right is claimed nor by any person through whom he derives his title or liability. Viewed from any angle, this statement does not construe Acknowledgement Of Debt as mandated under Sec 18. While addressing this issue, the Adjudicating Authority has failed to consider that the Acknowledgment relied upon by the Applicant and observed so in the Order, i.e. 20.03.2018 is beyond 3 years of the date of default. Further, in Sampuran Singh and Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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