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TMI Blog2020 (11) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of default. When time begins to run it can only be extended in the manner provided in the Limitation Act, has been held. Proceedings under the IBC are not execution proceedings either for the decree which was obtained or for execution of the Certificates of Recovery which have been issued by DRT. The Learned Counsel for the Financial Creditor has not shown under which provision of Limitation Act, time which had started running in November, 2007, could be extended. If filing of Suit or O.A. does not extend time, or give right to exclude period for a Winding up Proceeding, it can not extend period for an independent right under IBC. Consequently passing of Decree or issue of Recovery Certificate will not give fresh right to trigger IBC. There is substance in the submissions made by the Learned Counsel for the Appellant that the Application in the present matter was hopelessly time-barred. The Adjudicating Authority failed to see that the Financial Creditor had not indicated date of default in the format. The Adjudicating Authority was duty bound under Section 3 of the Limitation Act, 1963 to suo motu consider if or not the Application under Section 7 of IBC was within Limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontents of the Appeal show that IBMBS and IBHL by assignment deeds assigned their debts on 13th October, 2006 to Respondent No. 1/Kotak Mahindra Bank Ltd. (who may be referred as Financial Creditor) 4. The Impugned Order shows and the Reply Filed by Respondent No. 1/Kotak Mahindra Bank Ltd. (Diary No. 18053) before this Tribunal shows that IBHL had sanctioned separate financial assistance/credit facilities to the above Borrower Entities and the Respondent No. 2 Corporate Debtor stood as corporate guarantor/mortgagor and mortgaged its immovable property situated at Guttala Begampet Village in Rangareddy District of Andhra Pradesh by deposit of title deeds to secure the aforesaid credit facilities/financial assistance sanctioned to the Borrower Entities. Respondent No. 1/Financial Creditor in Reply has put up the case that the Borrower Entities defaulted in repayment of dues and subsequently IBHL classified all the facilities availed by the Borrower Entities as Non-Performing Assets (NPA) in November, 1997. Financial Creditor claims that pursuant to this IBHL filed: (i) Civil Suit No. 33 of 1999 (ii) Civil Suit No. 1023 of 1998 and (iii) Civil Suit No. 52 of 1999 before the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.A No. 46 of 2008 against M/s. Gemini Arts Pvt. Ltd. and the Corporate Debtor. (ii) O.A No. 47 of 2008 against M/s. Green Gardens Pvt. Ltd. and Corporate Debtor. (iii) O.A No. 48 of 2008 against M/s. Mahalaxmi Properties and Investments Pvt. Ltd. and the Corporate Debtor. Financial Creditor claims that DRT allowed the above OAs on 31.03.2017, 30.06.2017 and 30.03.2017 and issued separate Recovery Certificates dated 07th June, 2017 against each of the said Borrower Entities and Corporate Debtor as per the DRT Act. The Reply has annexed copies of the Recovery Certificates which have been issued. According to the Financial Creditor, on the basis of such Recovery Certificates dated 07th June, 2017, the Financial Creditor filed Application under Section 7 of IBC on 05th October, 2018 and sought initiation of CIRP against the Corporate Debtor claiming ₹ 835,93,52,369/- which Application has been admitted on 20th September, 2019 by the Impugned Order. The above history of developments is not in controversy. 6. The Appeal claims that when Financial Creditor filed the Application before Adjudicating Authority the Application Form-I did not disclose any date of default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot appear any valid defence to be raised by the Corporate Debtor. The issues which have been raised by the Corporate Debtor are an afterthought and are not substantiated with any of the documentary evidence. The defence is mere bluster, spurious and only to derail the process of adjudication. Therefore, the defence projected by the Corporate Debtor is completely hollow and stands rejected. On the other hand, the Counsel for the Financial Creditor has placed all the relevant documentary evidence on record by which the default on the part of the Corporate Debtor is ascertained. The Adjudicating Authority proceeded to admit the application and pass consequential orders. Thus the above only is that observation of Adjudicating Authority with regard to merits. Paragraph 9 of the Impugned Order makes it clear that the Adjudicating Authority has hardly recorded any reasons and proceeded to admit the Application under Section 7 of IBC. 10. At the time of arguments, the Learned Counsel for the Appellant referred to the developments of various matters between the parties to submit that when the accounts of the Borrower Entities were classified as NPA in 1997 even if the suits were fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td Anr. shows that the right to suit got triggered from the date of issuance of Debt Recovery Certificate. Learned Counsel argued that such Certificate was issued on 20th June 2017 and thus the Application filed in 2018 was within Limitation. 12. We have heard the Learned Counsel for the parties in detail with regard to the issue of Limitation. In Judgment dated 11.10.2018 in the matter of B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates (Manu/SC/1160/2018) Hon ble Supreme Court of India looked into the scheme of IBC and in Paragraph 27 observed as under: 27. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 13. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same did not extend the time for the Financial Creditor, in independent proceeding under IBC. 14. Then, there is Judgment in the matter of Jignesh Shah. Vs. Union of India (2019) SCC Online SC 1254. In Paragraph 4 of the Judgment, the Hon ble Supreme Court of India initially referred to the controversy as was arising in the Writ Petition No. 455 of 2019. 14.1. Briefly the facts may be referred from the Judgment. What appears is that on 20th August, 2009 a Share Purchase Agreement was executed between Multi Commodity Exchange India Ltd. (MCX), Multi Commodity Stock Exchange Ltd. (MCX-SX) and IL FS whereby IL FS had agreed to purchase 442 lakh equity shares of MCX Stock Exchange Ltd. from MCX. Pursuant to the Agreement La-Fin Group Company of MCX issued Letter of Undertaking on 20th August, 2009 stating that La-Fin or its appointed nominees would offer to purchase from IL FS the shares of MCX Stock Exchange after a period of one year but before a period of three years, from date of investment. Hon ble Supreme Court of India observed that on facts, this period of three years would expire in August, 2012. 14.2. It was noticed that IL FS by Letter dated 03rd August, 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Jignesh Shah Vs. Union of India reproduced portion from Judgment in the matter of B.K. Educational Services Pvt. Ltd. and after referring to the said Judgment observed in Paragraph 12 and 13 as under: 12. This Judgment clinches the issue in favour of the Petitioner/Appellant. With the introduction of Section 238 A into the Code, the provisions of the Limitation Act apply to applications made under the Code. Winding up Petitions filed before the Code came into force are now converted into petitions filed under the Code. What has, therefore, to be decided is whether the Winding up Petition, on the date that it was filed, is barred by lapse of time. If such petition is found to be time-barred, then Section 238 A of the Code will not give a new lease of life to such a time-barred petition. On the facts of this case, it is clear that as the Winding up Petition was filed beyond three years from August, 2012 which is when, even according to IL FS, default in repayment had occurred, it is barred by time. 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 7 of IBC, it was found that as the Winding up Petition itself was time-barred from the date of default, the same could not be proceeded further as Application under Section 7. 16. Keeping the above Judgment in view, when developments in the present matter are seen, if IBHL classified the Borrower Entities as NPA in November, 1997, even if the suits were filed in 1998 and 1999, that would not be relevant or helpful to extend time of Limitation for the purpose of filing of Application under Section 7 of IBC which is independent proceeding required to be filed as per Article 137 of the Limitation Act within three years of default. When time begins to run it can only be extended in the manner provided in the Limitation Act, has been held. Proceedings under the IBC are not execution proceedings either for the decree which was obtained or for execution of the Certificates of Recovery which have been issued by DRT. The Learned Counsel for the Financial Creditor has not shown under which provision of Limitation Act, time which had started running in November, 2007, could be extended. If filing of Suit or O.A. does not extend time, or give right to exclude period for a Windi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the judgment of the Hon ble Supreme Court of India in Vashdeo R Bhojwani Vs. Abhyudaya Co-operative Bank Ltd. Anr. wherein the Hon ble Apex Court while holding an Application under Section 7 of the Code seeking initiation of CIRP as time barred has held that the right to sue is triggered when the recovery certificate was issued and that non-payment of debt after the issuance of the recovery certificate would not be regarded as a continuing wrong so as to give rise to a continuing cause of action. (Emphasis Supplied) 18. The Reply itself shows that the Financial Creditor has constantly referred to defaults after defaults on the part of the Corporate Debtor right from November, 1997. The IBHL classified Borrower Entities as NPA in November, 1997. It is stated that there were defaults which led to filing of Civil Suits in 1998 and 1999. There was compromise on 07th August, 2006 which was recorded in High Court on 26th March, 2007. In spite of the decrees which were passed there was failure to make payment (and thus again, alleged default) which led to issue of Demand Notice under Section 13 (2) of SARFAESI Act. In spite of the Notice, there was default and thus Possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Certificate of 2001 plainly shows that there is a default and that there is no statable defence. 3. Having heard learned Counsel for both parties, we are of the view that this is a case covered by our recent judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates , 2018 (14) Scale 482, para 27 of which reads as follows: - 27. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 4. In order to get out of the clutches of para 27, it is urged that Section 23 of the Limitation Act would apply as a result of which Limitation would be saved in the present case. This contention is effectively answered by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng wrong to give rise to continuing cause of action. We are unable to read the last part as saying that right to sue is triggered when recovery certificate is issued. It is rather speaking of cessation of right, rather than trigger. Perusal of the Judgment in the matter of Vashdeo R Bhojwani Vs. Abhyudaya Co-operative Bank Ltd. Anr. shows that in that matter the Respondent No. 2 had been declared NPA by the Co-operative Bank on 23rd December, 1999. Recovery Certificate dated 24th December, 2001 was issued for such amount. Section 7 Application was filed on 21st July, 2017 claiming that the amount together with the interest which Kept ticking from 1998 was payable. (Default in that matter appears to have been of 1998). It is these words which have reflected in the final part of the Judgment where it was observed that the Certificate injured effectively and completely the right of Appellant which would have begun ticking as a result of the Limitation Act, Rights, as a result of which Limitation would have begun ticking were injured effectively and completely when Recovery Certificate was issued. This is what appears to us from reading the Judgment. 21. Earlier in the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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