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TMI Blog2021 (9) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... ing such application only on the ground that sufficient cause has been shown to condone such delay. It is well settled expression sufficient Cause is to receive liberal construction and that the judicial discretion is to be exercised with vigilance and circumspection. It is not the case of the Respondent/ Corporate Debtor that grave injustice would be occasioned if the delay is condoned, this Bench is adopting a liberal approach considering that the applicant is a public sector undertaking of Government of India involving public interest/public money. This proceedings under Section 7 is not a recovery proceedings but to initiate Corporate Insolvency Resolution Process of the Corporate Debtor and as such this Adjudicating Authority is exercising its judicial discretion in condoning the delay in filing the petition under Sec.7 as an exceptional case. On perusal of the documents filed by the Financial Creditor, is of the view that the Premier Limited and the Corporate Debtor defaulted in repaying the loan availed. The existence of debt and default is reasonably established by the Petitioner as a major constituent for admission of a Petition under Section 7 of the Code. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy Tribunal- III, Mumbai on 03.06.2014 against the Corporate Debtor for recovery of its entire dues. 4. The Mumbai Debt Recovery Tribunal-III in the said Original Application No. 726/2014 on 08.01.2015 granting interim relief to the Petitioner by restraining the Corporate Debtor to create any third party rights on the secured assets. The said Order of the Mumbai Debts Recovery TribunalIII was extended vide Order dated 19.05.2016 with few modifications which is in operation till date. 5. Later, the loan account of the Corporate Debtor was declared as fraud and a FIR bearing no. RC0682016E0014 was lodged with Central Bureau of Investigation (CBI) on 30.09.2016 by the Petitioner against the Corporate Debtor. The Petitioner also filed a Securitisation Application bearing No. 416 of 2014 under Section 14 of the SARFAESI Act, 2002 before the Hon ble District Magistrate, Palghar, at Palghar for taking physical possession of certain secured assets mortgaged in favor of the Petitioner and the said Application was allowed vide Order dated 09.03.2017. 6. The Counsel for the Petitioner further submits that the Directors of the Corporate Debtor vide Letter dated 16.05.2019 had appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition. The Petitioner/ Applicant has also completely failed to explain the sufficient cause for delay in filing the Company Petition beyond the prescribed limitation period of three years as required under Section 5 of the Limitation Act, 1963 and now, without any sufficient cause and in complete abuse of the process of law, the Petitioner is trying to get the delay condoned to recover a time barred debt against the Corporate Debtor. It is a settled law that when a debt is barred by time, the right to a remedy is also time barred. In the present case, the cause of action arose on the date of default, i.e., 31.03.2013 and hence, the limitation period ended on 31.03.2016 which is three years from the date of default. 10. The Counsel for the Corporate Debtor submits that during the implementation of Insolvency and Bankruptcy Code, 2016, the statute was silent on the applicability of principles of limitation for filing of applications/ claims under the Code. But, after the inclusion of Section 238A in the Code from 06.06.2018, this anomaly was resolved. However, the Code was not legislated to renew the time barred claim, therefore, right to apply did not arise then also when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Submission No. 2: The period of limitation for filing petition under Section 7 of the Code is 3 years from the date of default i. Article 137 of the Schedule to the Limitation Act is the residuary provision for computing the period of limitation for 'Other Applications'. Under Article 137, the period of limitation for filing any other application for which no period of limitation is otherwise provided, is 3 years form when the right to apply accrues. The said Article is reproduced hereinbelow for ease of reference: PART II- OTHER APPLICATION 137. Any other application for which Three years When the right to apply no period of limitation is accrues provided elsewhere in this Division. ii. In B. K. Educational Services Pvt. Ltd. v Parag Gupta and Associates and thereafter, in Babulal Vardharji Gurjar v Veer Gurjar Aluminium, the Supreme Court has held that the period of limitation for filing petitions under Section 7 of the Limitation Act would be governed by Article 137 of the Limitation Act. Accordingly, the period of limitation would be three years from the date of default. Relevant extracts of the judgments are reproduced below for ease of reference: B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d] iii. The Limitation Act is applicable to petitions under Section 7 and 9 of the Code; iv. Article 137 of the Limitation Act applies for the purpose of computation of the period of limitation; v. The right to sue accrues when the default occurs; vi. Limitation will start to run from the date on which the debt became due and payable; vii. If the default occurred three years prior to the date of filing of the application, the application would be time barred; viii. Article 62 of the Limitation Act does not apply to petitions under Section 7 of the Code ix. Section 5 of the Limitation Act applies to applications under the Code. x. The CIRP is not an adversarial procedure, and is intended to protect the interests of the corporate debtor by giving it a chance of revival. 14. Submission No. 3: Section 18 of the Limitation Act is application to petitions under Section 7 of the Code, and entries in balance sheets of the Corporate Debtor amount to acknowledgment of debt i. Section 18 of the Limitation Act provides for computation of a fresh period of limitation from the date of acknowledgement of debt. The said provision is reproduced below for ease of reference: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case so warrants. Considering that the purport of Section 238A of the Code, as enacted, is clarificatory in nature and being a procedural law had been given retrospective effect; which included application of the provisions of the Limitation Act on caseto-case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time barred debts under the Limitation Act. At the same time, accrual of fresh period of limitation in terms of Section 18 of the Limitation Act is on its own under that Act. It will not be a case of giving new lease to time barred debts under the existing law (Limitation Act) as such. 36. Notably, the provisions of Limitation Act have been made applicable to the proceedings under the Code, as far as may be applicable. For, Section 238 A predicates that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactment of Section 238A of the Code on 06.06.2018, validity whereof has been upheld by this Court, it is not open to contend that the limitation for filing application under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the debtor or the corporate debtor, as the case may be. In cases where the corporate person had offered guarantee in respect of an transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgements, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgement in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to any the debt. Such acknowledgement, however, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qually, the auditor's report may also enter, caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills (supra), that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act. v. In view of the aforesaid acknowledgment of debt in the Corporate Debtor's balance sheets for the financial year 2014-15, which is within the limitation period of 3 years from the date of default of 31.3.2013, a fresh period of limitation commenced from 31.3.2015. The said period of limitation continued till 31.3.2018. vi. Therefore, the initial period of 1392 days that was sought to be condoned, now stands reduced to 662 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stern Refrigeration Pvt. Ltd. (NCLT, Ahmedabad) held that the Limitation Act was applicable to proceedings under the Code, whereas the NCLAT, vide its judgment in Neelkanth Township Construction Pvt. Ltd. v. Urban Infrastructure Trustees Ltd. and Speculum Plast Private Limited v. PTC Techno Private Limited held that the provisions of the Limitation Act were not applicable to proceedings under the Code. NCLT Chandigarh thereafter relied on Neelkanth Township Construction Pvt. Ltd. v. Urban Infrastructure Trustees Ltd. while passing orders in Visa Drugs and Pharmaceuticals Private Limited v M/s Swan Aluminiums Private Limited. Relevant extracts from the aforesaid judgments are reproduced below for ease of reference: iv. judgment of NCLT (Principal Bench) (25.05.2017) in Sanjay Bagrodia v Satyam Green Power Pvt. Ltd: ₹ 10.... claim made before the NCLT must also be within the period of limitation as prescribed by the Limitation Act, 1963' v. judgment of NCLT (Ahmedabad Bench) (26.05.2017) i n S t a te B an k o f In d i a, C o l o mb o v . W e s t e r n Refrigeration Pvt. Ltd.: '26.1 There is no provision in the Insolvency Code providing limitation for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 1963 is applicable to I B Code. The Hon'ble Appellate Tribunal further held that the IB Code, 2016 is not an Act for recovery of money claim, it relates to initiation of Corporate Insolvency Resolution Process. 27. In view of the above, the aforesaid contention, therefore, cannot be accepted ix. Amidst this controversy regarding the applicability of the Limitation Act, on 6.6.2018, vide the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, Section 238- A inserted in the IBC, whereby provisions of Limitation Act were made applicable to proceedings under the Code. x. Further, the Supreme Court, on 11.10.2018, vide its judgement in B. K. Educational Services Pvt. Ltd. v Parag Gupta and Associates held that the provisions of Limitation Act were applicable to petitions filed under Sections 7 and 9 of the Code. The judgment also held that the period of limitation for filing such petitions was three years from the date of default under Article 137 of the Schedule to the Limitation Act. xi. Judgment of NCLAT in Sagar Sharma Another v PhoenixARC Private Limited (05.09.2019) 13. Admittedly, `I B Code' has come into force since 1st December, 2016, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re ready and delivered on July 5, 1967 and the appeal was filed on July 6, 1967. A preliminary point was raised before the learned Civil Judge of Budaun to the effect that the appeal was barred by time. The learned Civil Judge, relying upon the cases of Udairaj Singh v. Jugal Kishore Mehra; Munshi Mohton v. Lachmanlaland Devi Charan Lal v. Mehni Husain, held that the appeal was within limitation. 7. In Siyadat-un-nissa v. Muhammad Mahmud, a Division Bench of this Court, on facts similar to the facts of the present case, came to the conclusion that the appeal was within time. In Mukat Beharilal Agarwal Vakil v. Additional District Magistrate (Executive), another Division Bench came to the conclusion that the cases decided prior to the decision of their Lordships of the Privy Council in Maqbul Ahmad v. Onkar Pratap Namin Singh were no longer good law. 14. Our conclusion, therefore, is that, technically, the appeal filed in the Court below was barred by limitation. The question, however, is whether this is a fit case for interference in revision. In view of the conflicting decisions mentioned above, the defendant No. 1, Municipal Board of Ujhani, could very well have been mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nacting Section 5 [ Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.] of the Indian Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on merits . The expression sufficient cause employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice - that being the life-purpose for the existence of the institution of courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that: 1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re prone to red tapism and considerable delay of such procedural red tape in the process of decision making is a common feature. Further, as the State represents the collective cause of the community, `sufficient cause' of delay by State should be approached with pragmatism, to ensure that public interest does not suffer. Relevant extracts from the judgment are reproduced below for ease of reference: 7. In O.P. Kathpalia v. Lakhmir Singh [(1984) 4 SCC 66] , a Bench of three Judges had held that if the refusal to condone the delay results in grave miscarriage of justice, it would be a ground to condone the delay. Delay was accordingly condoned. In Collector, Land Acquisition v. Katiji[(1987) 2 SCC 107 : 1989 SCC (Tax) 172) , a Bench of two Judges considered the question of the limitation in an appeal filed by the State and held that Section 5 was enacted in order to enable the court to do substantial justice to the parties by disposing of matters on merits. The expression sufficient cause is adequately elastic to enable the court to apply the law in a meaningful manner which subserves the ends of justice - that being the life-purpose for the existence of the institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ultimate analysis suffers is public interest. The decisions of Government are collective and institutional decisions and do not share the characteristics of decisions of private individuals. The law of limitation is, no doubt, the same for a private citizen as for governmental authorities. Government, like any other litigant must take responsibility for the acts or omissions of its officers. But a somewhat different complexion is imparted to the matter where Government makes out a case where public interest was shown to have suffered owing to acts of fraud or bad faith on the part of its officers or agents and where the officers were clearly at crosspurposes with it. Written Submissions of the Corporate Debtor 20. Therefore, it is settled law that section 238A of the Code was inserted on 06.06.2018 and has the prospective application and therefore where the matters are filed after the insertion of amendment, by the cause of action preceded the amendment, have been filed due to wrong interpretation of law of limitation under the Code. The Blacks Law Dictionary defines the time barred debt as bar to a legal frame arising from the lapse of a defined length of time, esp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the judgement of Jignesh Shah and Anr. v. Union of India and Anr. (2019) 10 SCC 750 stated that enforcement of the IBC in 2016 will not give a new life to the time-barred debts and if the application is filed beyond three years from the date of default, then the same will be barred by time. 27. The Corporate Debtor also claimed that it is admitted position that the present application is filed by the delay of662 days which is public sector bank. The Hon'ble Supreme Court in the matter of the Chief Postmaster General Ors. V. Living Media India Ltd. Ors. (2012) 3 SCC 563. Para 28 29.@Pg-574, wherein it was held that the law of limitation binds everyone equally including government and defence by Government of impersonal machinery and inherited bureaucratic methodology cannot be accepted in view of modern technologies being available. 28. The Petitioner has not shown sufficient cause to pursuit the court in exercise of judicial discretion to treat the delay on an excusable one. The Hon'ble Supreme Court further in the matter of Esha Bhattacharjee V. Raghunathpur Nafar Academy (2013) 12 SCC 694@ Para 21.1-22.3. Pg. 658-659, the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Apex Court in B.K. Educational Services Private Limited Vs. Parag Gupta and Associates- (2019) 11 Supreme Court Cases 633 ; Gaurav Hargovindbhai Dave. Vs. Asset Reconstruction 'Company (India) Ltd Anr. -(2019) 10 Supreme Court Cases 572 ; Jignesh Shah Anr. Vs. Union of India Anr.-(2019) 10 Supreme Court Cases 750 and this Appellate Tribunal in V. Padmakumar vs. Stressed Assets Stabilization Fund (SASD) Anr.- Company Appeal (AT) (Insolvency) No. 57 of 2020 and with the latest pronouncement and dictum of the Hon ble Apex Court in Invent Assets Securitization and Reconstruction Private Limited vs. XylonElectrotechnic Private Limited- Civil Appeal No. 3783 of 2020 (decided on 7thJanuary, 2021) . Respondent No.1 (Financial Creditor) could not have triggered CIRP by filing application under Section 7 of the I B Code which was barred by limitation. 30. The Corporate Debtor further contended that the condonation of delay of 662 days is not only cause the grave injustice to the Corporate Debtor but also result in setting up the precedent which can be casually exploited who approached the Tribunal with their whims and fancies. 31. It is settled principle of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to uncertainty in law pertaining to the applicability of limitation Act to the proceedings under the Code, which prevented the applicant from preferring the Company Petition after the relevant provisions under the Code. Therefore, the applicant claims that the uncertainty in law is a sufficient cause in section 5 of the Limitation Act and hence sought for condonation of delay. The applicant have been diligent in exercising their legal rights and have filed the proceedings under the RRDB Act and SARFAESI Act. 35. The Corporate Debtor has filed reply with the additional affidavit and stated that the Petitioner has failed to give sufficient reasons to condone the days of 662 days and the Petition is liable to be dismissed. The Petitioner cannot be allowed to improve his case at the stage of judgement, which is not permissible as per settled principles of law. Therefore, the Corporate Debtor claimed that the Hon ble Tribunal cannot look in to the additional affidavit filed by the petitioner in view of the recent judgement of the Hon ble Supreme Court in Asset Reconstruction (India) Company Ltd. Vs. Bishal Jaiswal and Ors delivered on 15.04.2021. the financial creditor could have bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be. 41. It is relevant to refer to Sec.5 of Limitation Act, which grants extension of prescribed period of limitation in any appeal or application, if the appellant or applicant satisfies the Court that he had sufficient cause for not preferring the appeal or making application within such period. Sec. 5 of Limitation Act is extracted below: Section 5 in The Limitation Act, 1963 5 Extension of prescribed period in certain cases. -Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. Explanation.- The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under article 137 of the Limitation Act, save and except in those case where, in the facts of the case section 5 of the Limitation Act may be applied to condone the delay in filing such applications. b. The Applicant has not been negligent in the exercise of its rights for recovery of debt from the Respondent and there are no mala fides attributable to the Applicant. The applicant has further filed proceedings before the DRT under section 19 of RRDB Act vide OA No. 726 of 2014, initiated proceedings under section 14 of SARFAESI Act and filed petition bearing no. 416 of 2014 before the District Magistrate Palghar to take possession of secured assets, the applicant has conducted the forensic audit and has lodged CBI, FIR bearing no. RC0682016E0014 against the Corporate Debtor. c. The Petitioner being a public sector undertaking of Government of India and represent the collective cause of the community and in public interest. Therefore, if the delay in filing a Petition under section 7 is not condoned, there will be a great miscarriage of public justice and loss of public money. 45. In the present case, the total financial debt owed by the Corporate Debtor is ₹ 681. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is extracted below: (i) There should be a liberal, pragmatic,. justice-oriented, nonpedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove injustice. (ii) The terms sufficient cause should be understood in their proper spirit, philosophy and purpose regard being had to the fact that these terms are basically elastic and are to be applied in proper perspective to the obtaining fact-situation. (iii) Substantial justice being paramount and pivotal the technical considerations should not be given undue and uncalled for emphasis. (iv) No presumption can be attached to deliberate causation of delay but, gross negligence on the part. of the counsel or litigant is to be taken note of. (v) Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact. (vi) It is to be kept in mind that adherence to strict proof should not affect public justice and cause public mischief because the courts are required to be vigilant so that in the ultimate eventuate there is no real failure. of justice. (vii) The concept of liberal appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with regard to applicability of Limitation Act and Article 137 of Limitation Act 1963, this bench is bound to conclude that an application under Sec.7 is to be filed within three years as construed under Article 137 save and except in those cases where, in the facts of the case, sec.5 of Limitation Act may be applied to condone the delay in filing such application only on the ground that sufficient cause has been shown to condone such delay. It is well settled expression sufficient Cause is to receive liberal construction and that the judicial discretion is to be exercised with vigilance and circumspection. It is not the case of the Respondent/ Corporate Debtor that grave injustice would be occasioned if the delay is condoned, this Bench is adopting a liberal approach considering that the applicant is a public sector undertaking of Government of India involving public interest/public money. This proceedings under Section 7 is not a recovery proceedings but to initiate Corporate Insolvency Resolution Process of the Corporate Debtor and as such this Adjudicating Authority is exercising its judicial discretion in condoning the delay in filing the petition under Sec.7 as an excepti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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