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TMI Blog2020 (8) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... r cannot be held to have committed a default. Admittedly, in this case, the Applicant/Financial Creditor has stated that default started from 31st December 2007 and the Application for initiation of Corporate Insolvency Resolution Process is filed on 26th February 2019. The Financial Creditor has also admitted that the consequence of default is that all the interest amount became due and payable immediately. Hence, the period of limitation began from 31st December, 2007. As per the terms of Agreement, the subscription to the debentures was done for a period of 84 months. Interest @ 12% p.a. and in case of default, an additional interest of 6% p.a. was required to be paid. In the entire duration of the Agreement, the Corporate Debtor paid interest amounting to ₹ 39,86,371/- only once, i.e. for the Quarter ending 31st September 2007. It is further contended that the Corporate Debtor defaulted on the payment of interest till the time stipulated in the Agreement, i.e. up to 20th May 2014. Thus, it is clear that the default started on 31st December 2007. Thereafter, the default continued till 20th May 2014, i.e. the expiry of the period as stipulated in the Agreement - Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it has been the debenture holder all along and that the said debentures were never converted into equity. R-1 is shown as Debenture Holder in the balance sheet of R-2/ Corporate Debtor for Financial Year 2016-17 and under the heading long term borrowings reflecting the debt repayable to the R-1. 4. The impugned Order is being assailed only on the ground that the R-1‟s Application is barred by limitation. Since no other point is contended by the Appellant during the hearing, therefore the instant Appeal is being decided only on the issue of limitation. 5. We have heard the arguments of the Learned Counsel for the parties and perused the records. 6. Admittedly, the Financial Creditor and the Corporate Debtor had entered into two agreements viz. Debenture Subscription Agreement and Master Facility Agreement dated 21st May 2007. As per the terms of Agreement, the subscription to the debentures was done for 84 months. Interest @ 12% p.a. and in case of default, an additional interest of 6% p.a. was required to be paid. In the entire duration of the Agreement, the Corporate Debtor paid interest only once, i.e. for the Quarter ending 31st September 2007. The Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of limitation admittedly started on 31st December 2007. 13. It is further submitted by the Appellant that even if the contention of the Respondent/Financial Creditor is accepted, the amount becomes due on 20th May 2014. Even in such a scenario, the present Insolvency Application is time-barred, since it is filed on 26th February 2019, i.e. after four years and nine months. 14. The Appellant has further relied on the statutory provision under Section 3 of Limitation Act, 1963, which provides that every Application made after the prescribed period shall be dismissed, even if limitation has not been set up as a defense. 15. This Appellate Tribunal in case of Gauri Prasad Goenka Vs. Punjab National Bank Others in Company Appeal No. 28 of 2019 and judgment dated 08th November 2019 has held that Section 3 of the Limitation Act is a mandatory provision and it is obligatory on the Tribunal to examine the issue of limitation. Further, if the claim is barred by limitation, the Corporate Debtor cannot be held to have committed a default. 16. The Learned Counsel for the Appellant has further placed reliance on the case of B.K. Educational Services (P) Limited Vs. Parag Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the definition section of the Code would obviously only refer to debts due and payable in law, i.e., the debts are that not time-barred. 18. Admittedly, in this case, the Applicant/Financial Creditor has stated that default started from 31st December 2007 and the Application for initiation of Corporate Insolvency Resolution Process is filed on 26th February 2019. The Financial Creditor has also admitted that the consequence of default is that all the interest amount became due and payable immediately. Hence, the period of limitation began from 31st December, 2007. As per the terms of Agreement, the subscription to the debentures was done for a period of 84 months. Interest @ 12% p.a. and in case of default, an additional interest of 6% p.a. was required to be paid. In the entire duration of the Agreement, the Corporate Debtor paid interest amounting to ₹ 39,86,371/- only once, i.e. for the Quarter ending 31st September 2007. It is further contended that the Corporate Debtor defaulted on the payment of interest till the time stipulated in the Agreement, i.e. up to 20th May 2014. Thus, it is clear that the default started on 31st December 2007. Thereafter, the defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, Hon ble the Supreme Court has clearly held that if an acknowledgement of liability is made in writing before the expiration of the period of limitation, then the limitation period gets extended as per statutory provision under Section 18 of Limitation Act. In this case, since default first started in December 2007 and after a lapse of 11 years, acknowledgement of liability in the form of Memorandum of Agreement has been executed on 18th April 2017. Therefore in this case, a fresh period of limitation will not accrue w.e.f. 18th April 2017. 22. The Learned Counsel for the Corporate Debtor further placed reliance on the case-law of Hon ble Supreme Court of India in Jignesh Shah v. Union of India, (2019) 10 SCC 750. 23. In the case of Jignesh Shah v. Union of India, (2019) 10 SCC 750: (2020) 1 SCC (Civ) 48: 2019 SCC OnLine SC 1254 at page 770 Hon ble the Supreme Court of India has reiterated the law laid down in the case of B.K. Educational (supra). The Learned Counsel for the Respondent has placed reliance on para 21 of the said judgment. 21. The aforesaid judgments correctly hold that a suit for recovery based upon a cause of action that is within limitation canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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