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TMI Blog2022 (4) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Bank of India is able to satisfy that the limitation for filing Section 7 Application stands extended by virtue of provision of Limitation Act, 1963. There can be no dispute to the proposition that limitation for suit is to be calculated as on the date of filing of the suit, meaning thereby that date for filing of the suit is a crucial date to find out as to whether the suit is within the period of limitation or not. Whether the letters on which reliance is being placed by the State Bank of India dated 19th February, 2016 and 29th March, 2016 contain an acknowledgement, which can be treated as acknowledgement within the meaning of Section 18 of the Limitation Act? - HELD THAT:- It is well settled that any request by Borrower for one-time settlement tantamount to acknowledgement under Section 18 of the Limitation Act. In Dena Bank [ 2019 (3) TMI 1751 - THE NATIONAL COMPANY LAW TRIBUNAL - BENGALURU BENCH] itself Hon ble Supreme Court has laid down that offer of one-time settlement contains an acknowledgement of debt. The acknowledgement made by the Principal Borrower within three years period from the date of account being declared NPA, there shall be fresh period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r recovery of amount. (iv) On 20th February, 2018 Company Petition (IB) No.355 of 2018 was filed by State Bank of India against the Principal Borrower M/s Gee Pee Infotech Private Limited for recovery of ₹ 84,53,923.50/-. On 9th March, 2018, Company petition (IB) No.346/KB/2018 was filed by the State Bank of India against the Corporate Debtor (Appellant herein) before the NCLT, Kolkata. Section 7 Application against Principal Borrower was admitted on 2nd August, 2018 and the Principal Borrower went into liquidation by order dated 31st January, 2020 and was subsequently dissolved by an order dated 12th December, 2020. (v) In the Application filed under Section 7 against the Appellant, the pleadings were exchanged, the parties were heard and the Adjudicating Authority by the impugned order dated 14th December, 2021 admitted the Section 7 Application, against which order this Appeal has been filed by the Suspended Director of the Corporate Debtor. 3. We have heard Shri Soumya Dutta, learned Counsel appearing for the Appellant and Shri Joy Saha, learned Senior Counsel for State Bank of India. 4. Learned Counsel for the Appellant submitted that the Application filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties and have perused the record. 7. There is no dispute between the parties that account of Principal Borrower was declared NPA on 10th January, 2014. The filing of OA No.493 of 2015 by the State Bank of India against the Principal Borrower and the Corporate Debtor on 24th September, 2015 is also not disputed. The OA No.493 of 2015 filed before the DRT is stated to be pending consideration as on date. The Application under Section 7 against the Corporate Debtor has been filed on 9th March, 2018 and the limitation for filing the Application under Section 7, under Article 137 of the Limitation Act, 1963 is three years from the date when right to sue accrue. Normally, period of three years is to be counted from the date, the account is declared NPA, thus taking three years period from 10th January, 2014, the Application ought to have been filed on or before 9th January, 2017. The Application under Section 7 filed by the State Bank of India is admittedly beyond the period of three years from the date of declaration of NPA and can be held to be barred by time, unless the State Bank of India is able to satisfy that the limitation for filing Section 7 Application stands extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g regard to the language and tenor of Section 238-A of the Limitation Act which applies the provisions of the Limitation Act as far as may be , to proceedings in NCLT/NCLAT. To the same effect is the judgment of the Hon ble Supreme Court in Dena Bank (supra). 9. We, thus, proceed on the premises that the proceedings before DRT initiated by the State Bank of India against the Corporate Debtor by filing an OA No.493 of 2015 is civil proceedings. The question to be answered is as to what is the effect of proceedings under the DRT initiated by State Bank of India on the period of limitation for filing an Application under Section 7 of the IB Code. To buttress this submission, Mr. Joy Saha has placed reliance on number of judgments of Hon ble Supreme Court, Calcutta High Court and Bombay High Court, which we shall be referring hereinafter. 10. We may first notice the judgment of Hon ble Supreme Court in this regard. The first judgment of Hon ble Supreme Court relied by Mr. Joy Saha is (2008) 2 SCC 444 J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. and Anr. The Hon ble Supreme Court in the said judgment has held that limitation for suit is calculated as on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position that such adverse possession does not continue to run after filing of the suit. We are, therefore, of the view that the suit brought by the plaintiffs for recovery of possession of the land was not barred by limitation. 44. Coming to the case at hand the appellant had filed the suit for eviction. The relief sought in the plaint was for delivery of possession. It was not a forum that lacked inherent jurisdiction to pass a decree for delivery of possession. It showed the intention of the plaintiff to act and to take back the possession. Under these circumstances, after the institution of the suit, the time for acquiring title by adverse possession has been arrested or remained in a state of suspension till the entire proceedings arising out of suit are terminated. Be it ingeminated that if by the date of present suit the defendant had already perfected title by adverse possession that would stand on a different footing. 13. The above observations were to the effect that when a suit is filed for eviction, the time for acquiring title by adverse possession stands arrested and shall remain in a state of suspension. The above observations were made in reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent that the Petitioner acknowledged its alleged liability or there was any part payment made by the Petitioner after 31st March, 2004. In my view, correspondences does not extend the period of limitation. 19. Mr Kumbhakoni, the learned counsel also placed reliance upon the Judgment of Supreme Court in case of J.C. Budhraja v. Chairman, Orissa Minig Corporation Ltd. and more particularly paragraphs 25 and 26 in support of his plea that limitation for a suit is calculated as on the date of filing of suit, whereas in case of arbitration, limitation of the Claim is to be calculated on the date on which the arbitration is deemed to have been commenced. 17. The Court held that once time starts running, it does not stop and the limitation is not extended unless there is acknowledgement of liability or part payment. The Court further held that limitation for suit is calculated as on the date of filing of suit. The observations of the Court regarding calculation of the limitation as on the date of filing of the suit was relevant only with regard to computation of limitation of suit in question. The observation cannot be stretched to govern period of limitation for any subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation Act, 1963 (hereinafter referred to as the Limitation Act ) would apply to all Section 7 applications that are filed under the Code and that the residuary article i.e. Article 137 of the Limitation Act would be attracted to the facts of this case. Inasmuch as the winding-up petition that has been transferred [IL FS Financial Services Ltd. v. La-Fin Financial Services (P) Ltd., Company Petition No. 847 of 2016, order dated 1-2-2017 (Bom)] to the NCLT was filed on 21- 10-2016 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. He relied heavily on B.K. Educational Services (P) Ltd. [B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633] which, according to him, covered this case on all fours. In addition, he relied upon High Court judgments, judgments from the United States of America, and one English judgment to buttress the proposition that the mere filing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like nature, being unable to entertain it. In the present case, a secured creditor is not withdrawing a proceeding pending before the Debts Recovery Tribunal under Section 19 of the Act of 1993 to invoke the provisions of the Act of 2002. Rather the secured creditor is proceeding, independent of its right to proceed under the Act of 1993, while invoking the provisions of the Act of 2002. This choice of the secured creditor to invoke the Act of 2002 is independent of and despite the pendency of the proceedings under the Act of 1993, has to be looked at from the perspective of whether or not such an action meets the requirement of Section 36 of the Act of 2002, when the secured creditor is proposing to take a measure under Section 13(4) of the Act of 2002. Although, a secured creditor, as held in Transcore [Transcore v. Union of India, (2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116] , is entitled to take a remedy or a measure as available in the Act of 2002, despite the pendency of other proceedings, including a proceeding under Section 19 of the Act of 1993, in respect of the selfsame cause of action, in my view, the invocation of such independent right under the Act of 2002, has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 20. Applying the ratio of Hon ble Supreme Court in the facts of the present case, the proceedings under Section 7 of IB Code is separate and independent proceedings, distinct from the remedy under the 1993 Act and the fact that proceedings under the 1993 Act, that is, filing of OA 493 of 2015, which was well within limitation has no bearing on the question of limitation for filing the Application under Section 7 of the Code. We, thus, are of the considered opinion that mere fact that OA 493 of 2015 filed on 24th September, 2015, within the limitation period, shall have no bearing on the question of limitation for filing Application under Section 7, nor by filing Application under the 1993 Act by State Bank of India the period of limitation for filing Application under Section 7 shall remain under suspension. The limitation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Act are also applicable to proceedings under the IBC. 139. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of one-time settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1] cited by Mr Shivshankar, this Court had no occasion to consider any proposal for one-time settlement. Be that as it may, the balance sheets and financial statements of the corporate debtor for 2016-2017, as observed above, constitute acknowledgment of liability which extended the limitation by three years, apart from the fact that a certificate of recovery was issued in favour of the appellant Bank in May 2017. The NCLT rightly admitted the application by its order dated 21-3-2019 [Dena Bank v. Kavveri Telecom Infrastructure Ltd., 2019 SCC OnLine NCLT 7881]. 140. To sum up, in our considered opinion an application under Section 7 IBC would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional securities in your Bank s favour covering the outstanding overdrawn amount. Our Clients business for lack of finance has come to a standstill and need pumping in of funds for which our Clients have been able to now locate a potential Funder ready and willing to payoff the dues of your Bank on the basis of One Time Settlement (OTS) amount that could be arrived at by and between the Bank and our Clients in keeping with bank s policy and similar settlement offered to various other parties. With this intent, our Clients also caused the said Funder to issue a letter dated 12 February 2016 together with letter of consent addressed by each of the Clients to the said Funder to be deposited with your Bank. A copy each of the said letter dated 12 February 2016 issued by the said Funder, Mascot Charitable Trust, Bangalore, to your Bank together with the respective consent letter of our Clients is attached for your ready reference. Our Clients have till date not received any proposal for the One Time Settlement (OTS) from your Bank and accordingly, our Clients hereby call upon your Bank to forthwith inform our Clients the possible OTS amount for their respective account so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be an acknowledgement. It is submitted that the letters were issued by the Principal Borrower only and there is no acknowledgement by the Corporate Debtor, hence there shall be no extension of period of limitation under Section 18 of the Limitation Act. 25. The above question is no more res-integra. The Hon ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India and Anr. (2021) 8 SCC 481 has considered the above submission as advanced by the learned Counsel for the Appellant and held that acknowledgement made by the Principal Borrower is equally binding on the Corporate Guarantor. In Laxmi Pat Surana an Application under Section 7 was filed against the Corporate Guarantor M/s Surana Metals Ltd., who had offered a guarantee to the loan advanced to Principal Borrower M/s Mahaveer Construction. The loan was declared NPA on 30.01.2010 and Financial Creditor issued a recall notice on 19.02.2010 to the Principal Borrower as well as the Corporate Debtor. Application under Section 19 was also filed against the Principal Borrower before the Debt Recovery Tribunal. During the pendency under the Debt Recovery Tribunal, the Financial Creditor proceeded to file an Application u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 IBC. Further, the acknowledgment must be of a liability in respect of which the financial creditor can initiate action under Section 7 IBC. 44. In the present case, NCLT as well as NCLAT have adverted to the acknowledgments by the principal borrower as well as the corporate guarantor-corporate debtor after declaration of NPA from time to time and lastly on 8-12-2018. The fact that acknowledgment within the limitation period was only by the principal borrower and not the guarantor, would not absolve the guarantor of its liability flowing from the letter of guarantee and memorandum of mortgage. The liability of the guarantor being coextensive with the principal borrower under Section 128 of the Contract Act, it triggers the moment principal borrower commits default in paying the acknowledged debt. This is a legal fiction. Such liability of the guarantor would flow from the guarantee deed and memorandum of mortgage, unless it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above case, i.e. Laxmi Pat Surana is complete answer to submission made by learned Counsel for the Appellant that acknowledgement made by the Principal Borrower cannot be read as acknowledgement against the Corporate Guarantor. It was held that liability of Corporate Debtor is coextensive with that of the Principal Borrower. 27. We, thus, are of the view that acknowledgement made by the Principal Borrower within three years period from the date of account being declared NPA, there shall be fresh period of limitation available to the Financial Creditor and the Application under Section 7 having been filed within three years from the date of acknowledgement, cannot be held to be barred by time. We, thus, are of the view that Application filed by the State Bank of India under Section 7 was within the period of limitation and has rightly been admitted by the Adjudicating Authority. We reject the submission of the learned Counsel for the Appellant that Application filed under Section 7 was barred by time. 28. In view of the foregoing discussions, we do not find any error in the judgment of the Adjudicating Authority admitting the Application. There is no merit in the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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