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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 ..... solution Process (CIRP in short). Thus the present Appeal. 2. When this Appeal was filed and it came up before this Tribunal, Learned Counsel for the Appellant raised questions: (i) Whether the Application was filed and CIRP initiated, fraudently or with malicious intent or purpose other than Resolution of Insolvency and Liquidation of the Corporate Debtor? (ii) Whether the Application under Section 7 filed was within Limitation? 3. The Appeal claims that the Corporate Debtor had created a charge in favour of Indbank Merchent Banking Services Ltd. (IBMBS) and secured an amount of Rs. 2 lakhs plus interest etc. This was done on 01st August, 2001. The Appeal claims that on 27th June, 2004 Corporate Debtor issued a Letter and created second charge in favour of Indbank Housing Ltd. (IBHL) and secured amounts mentioned as below: (a) ICD facility of Rs. 350 Lakhs placed by IBHL with M/s. Gemini Arts Pvt. Ltd.; (b) ICD facility of Rs. 350 Lakhs placed by IBHL for M/s. Green Gardens Pvt. Ltd.; and (c) ICD facility of Rs. 350 Lakhs placed by IBHL with M/s. Mahalaxmi Properties and Investments Pvt. Ltd. It was aggregating to Rs. 1050 Lakhs with interest etc. payable by the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to the Borrower Entities as well as the Corporate Debtor. Financial Creditor claims that the Borrower Entities as well as the Corporate Debtor defaulted in payment of the demanded amount and thus the Financial Creditor issued Possession Notice dated 10th January, 2008 to Borrower Entities and Corporate Debtor, under Section 13 (4) of SARFAESI Act. Reply states that - "Since, the Borrower entities and the Corporate Debtor neglected to make the payments" the Financial Creditor issued Winding up Notice dated 06th May, 2008 under Section 433 and 434 of the Companies Act, 1956 to the Corporate Debtor. 5. The case further put up by the Financial Creditor (Respondent No 1) in Reply is that the Borrower Entities and Corporate Debtor failed to make payment and the Financial Creditor filed Applications under Section 31(A) of the Recovery of Debts Due to Banks and Bank Institutions Act, 1993 (DRT Act) before Debt Recovery Tribunal to issue Debt Recovery Certificates in terms of the compromise/consent decree dated 26th March, 2007 in the suits mentioned above which were filed against the borrowing entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars and averments in the Appeal and thus we need not go into that aspect. 8. We are thus required to look into the question of Limitation which has been raised by the Learned Counsel for the Appellant. 9. When we have gone through the Impugned Judgment/Order passed by the Adjudicating Authority what we have noticed is that in Paragraphs 1 to 7 of the Impugned Order, the Adjudicating Authority referred to case put up by Financial Creditor and various proceedings which took place between the parties (To which we have referred above) and then in Paragraphs 8 and 9 observed as under: "8.The Corporate Debtor have filed reply and raised an objection with regard to the authorization for the purpose of filing Application and further objected that the Applicant is not a Financial Creditor to the Corporate Debtor and the Corporate Debtor is liable to offer only the mortgaged assets, in the event if it is held liable to pay. The Corporate Debtor has also stated in its Reply that the Financial Creditor has expressly denied the existence of any security and they are attempting to play a fraud on the Courts and this Tribunal. Based on this, it has been submitted that the Financial Creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of Innoventive Industries Ltd. vs. ICICI Bank & Anr. (2018) 1 SCC 407 to submit that the Hon'ble Supreme Court has held that the "debt" means liability of obligation in respect of a "claim" and "claim" means a right to payment even if it is disputed. It is argued that the Adjudicating Authority was required to only see whether there is a debt in default which is of more than Rs. 1 lakh. Ld. Counsel referred to Judgment of Hon'ble Supreme Court of India in "B.K. Educational Services (P.) Ltd. Vs. Parag Gupt" (MANU/SC/1160/2018) to submit that Hon'ble Supreme Court has held that the Limitation Act is applicable from the inception of the Code, and Article 137 of the Limitation Act gets attracted; that, "right to sue" accrues when a default occurs. Learned Counsel has further submitted that the Hon'ble Supreme Court in the matter of Vashdeo R Bhojwani vs Abhyudaya Cooperative Bank Ltd & Anr. (2019) 9 SCC 158 held that the right to suit is triggered when the Recovery Certificate was issued and non-payment of debt after issuance of the Recovery Certificate would not be regarded as a continuing wrong so as to give a continuing cause of action. It is argued that the Judgment in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and dismissed the Appeal. With such set of facts, the observations of the Hon'ble Supreme Court in Paragraph 7 of the Judgment were as under: "7. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being "an application" which is filed under Section 7, would fall only within the residuary article 137. As rightly pointed out by learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21.07.2011, 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 7 of B.K. Educational Services Private Limited (Supra), 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." It can be seen that in spite of filing of OAs within Limitation, the Hon'ble Supreme Court accepted the submissions that the time of Limitation when it began running on 21.07.2011, the Application under Section 7 filed on 03.10.2017 was time-barred. Thus, it appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst such Judgment of this Tribunal matter was carried to the Hon'ble Supreme Court. 14.5. In this matter of Jignesh shah. Vs. Union of India the Learned Sr. Advocate Dr. Abhishek Manu Singhvi raised issue of the statutory bar of Limitation. The Hon'ble Supreme Court has recorded submissions of the Counsel in Paragraph 5 of the Judgment. Part of the submissions may be reproduced for context. The same are as under: ".......Inasmuch as the Winding up Petition that has been transferred to the NCLT was filed on 21st October,2016, i.e. beyond the period of three years prescribed (as the cause of action had arisen in August, 2012), it is clear that a time-barred Winding up Petition filed under Section 433 of the Companies Act, 1956 would not suddenly get resuscitated into a Section 7 petition under the Code filed within time, by virtue of the transfer of such petition......" 14.6. After referring to arguments of Advocates for IL&FS the Hon'ble Supreme Court first adverted to the decision in the matter of B.K. Educational Services Pvt. Ltd. vs. Parag Gupta & Associates in which Section 238 A of the Code relating to the Limitation was considered. The Hon'ble Supreme Court in Paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of the winding up proceeding." (Emphasis Supplied) 14.8. It was then observed and held in Paragraph 27 of the Judgment as follows: "27. It is clear that IL&FS pursued with reasonable diligence the cause of action which arose in August, 2012 by filing a suit against La-Fin for specific performance of the Letter of Undertaking in June, 2013. What has been lost by the aforesaid party's own inaction or laches, is the filing of the Winding up Petition long after the trigger for filing of the aforesaid petition had taken place; the trigger being the debt that became due to IL&FS, in repayment of which default has taken place." For such and other reasons, the Hon'ble Supreme Court allowed the Appeal which was filed before it and held that Winding up Petition filed on 21st October, 2016 being beyond the period of three years mentioned in Article 137 of the Limitation Act was time-barred and cannot be proceeded with any further. 15. It is quite clear from the above that although the suit was filed in time the Winding up Petition was beyond three years of the default and when such Winding up Petition was transferred in view of the Rules to the NCLT to convert the same into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Notice dated 26.09.2007 under Section 13 (2) of the SARFAESI Act to the entities and the corporate debtor. Thereafter, the Answering Respondent issued a Possession Notice dated 10.01.2008 to the entities and the Corporate Debtor under Section 13 (4) of the SARFAESI Act. Since, the entities and the corporate debtor neglected to make the payments, the answering respondent issued a Winding up Notice dated 06.05.2008 under Sections 433 and 434 of the Companies Act, 1956 to the corporate debtor. Thereafter, since the entities and/or the corporate debtor failed to make payments, the answering Respondent filed Applications under Section 31(A) of the DRT Act before the Ld. DRT, for issuance of Debt Recovery Certificates in terms of the compromise/consent Decree dated 26.03.2007 in CS No. 52/1999, CS No. 33/1999, and CS No. 1023/1998 . The Ld. DRT allowed all the said three OAs and has issued Recovery Certificates dated 20.06.2017 against the said entities and the Corporate Debtor under the provisions of the DRT Act. Hence, the right to sue, in the present case, triggered from the date of issuance of the Debt Recovery Certificates i.e. on 20.06.2017. The answering Respondent seeks to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Abhyudaya Co-operative Bank Ltd. & Anr. reads as under: "1. In the facts of the present case, at the relevant time, a default of Rs. 6.7 Crores was found as against the Respondent No. 2. The Respondent No. 2 had been declared a NPA by Abhyudaya Co-operative Bank Limited on 23.12.1999. Ultimately, a Recovery Certificate dated 24.12.2001 was issued for this amount. A Section 7 petition was filed by the Respondent No. 1 on 21.07.2017 before the NCLT claiming that this amount together with interest, which kept ticking from 1998, was payable to the respondent as the loan granted to Respondent No. 2 had originally been assigned, and, thanks to a merger with another Cooperative Bank in 2006, the respondent became a Financial Creditor to whom these moneys were owed. A petition under Section 7 was admitted on 05.03.2018 by the NCLT, stating that as the default continued, no period of Limitation would attach and the petition would, therefore, have to be admitted". 2. An appeal filed to the NCLAT resulted in a dismissal on 05.09.2018, stating that since the cause of action in the present case was continuing no Limitation period would attach. It was further held that the Recovery Certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Guravs as hereditary worshippers and in claiming and obtaining possession from them by their suit in 1922 was a continuing wrong. The decree obtained by the trustees in the said litigation had injured effectively and completely the appellants' rights though the damage caused by the said decree subsequently continued...." (At page 496) Following this judgment, it is clear that when the Recovery Certificate dated 24.12.2001 was issued, this Certificate injured effectively and completely the appellant's rights as a result of which Limitation would have begun ticking. 5. This being the case, and the claim in the present suit being time barred, there is no debt that is due and payable in law. We allow the appeal and set aside the orders of the NCLT and NCLAT. There will be no order as to costs." (Emphasis supplied) 20. The Learned Counsel for Financial Creditor appears to us to be trying to misread the last part of the paragraph 4 of the above Judgment to submit that right to sue is triggered when Recovery Certificate is issued and non-payment of debt after issuance of the Recovery Certificate would not be regarded as a continuing wrong to give rise to continuing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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