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TMI Blog2024 (9) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Appeal are : i. The Respondent Suman Motels Limited was extended financial facilities by IDBI Bank in the Year 1995, 1996 and 1998 totalling Rs.1,587.58 Lakhs. Due to default committed by the Company, IDBI Bank issued a recall Notice dated 16.02.2001, seeking payment of Rs.17.52 Crores/- due as on 31.01.2001 and OA No.03/2002 was filed by IDBI Bank Ltd before Debt Recovery Tribunal (`DRT') for recovery of its dues. ii. On 12.09.2002, Company filed a reference before the Board for Industrial and Financial Reconstruction (`BIFR'). iii. On 01.01.2003, Notice under Section 13(2) was issued by IDBI Bank to the Company seeking repayment of Rs.25,44,85,905/-. iv. IDBI Bank sent a Notice dated 02.02.2003 inviting for One Time Settlement (`OTS') proposal from the Company in pursuance of the Notice under Section 13(2), IDBI took possession of movable and immovable Assets of the Company on 27.03.2003/22.04.2003. v. On 30.09.2004, IDBI transferred the facilities together with all underlined securities to Stressed Assets Stabilization Fund ('SASF'). vi. The Appellant Company vide letter dated 24.11.2004 was also informed about the transfer of facilities. vii. By Order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued. Transfer of debt in favour of Appellant was invalid. No, debts subsisted to be transferred debt having already been discharged. xix. Rejoinder to the Reply was also filed by the Bank. xx. Adjudicating Authority after hearing the Parties by Order dated 10.02.2023, dismissed the Application as barred by time. Adjudicating Authority recorded a finding that the date of default mentioned as 01.06.2019 in the Part IV is not correct date of default and date of default lies in the Year 2001 and not in the 2019. Adjudicating Authority, however, held that Financial Creditor having proceeded with OA No.03/2002 before the DRT in which Recovery Certificates was also issued on 19.10.2006 in favour of Financial Creditor, the embargo created under Section 22 of SICA Act 1985 was defeated. Hence, the Financial Creditor shall not be entitled for the benefit of Section 22 of SICA Act. Adjudicating Authority held that the period from 2002-2012 does not deserves to be excluded in counting the period of Limitation. xxi. Returning the aforesaid finding the Adjudicating Authority dismissed the Application as barred by time. Relevant discussion on the question of Limitation is contained in Parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that Recovery Certificate was issued on 19.10.2006 by which time reference filed by the Company stood dismissed on 06.06.2006, when the Recovery Certificate was issued, there was no reference pending. It is further submitted that Corporate Debtor has given OTS letter on 10.01.2008 and 28.07.2010, acknowledging the debt, which letters also acknowledged the debt and period of Limitation shall stand extended under Section 18 of the Limitation Act. It is further submitted that debt has further been acknowledged in Balance Sheet of 2015-16, 2016-17 & 2017-18, hence the Application which was filed on 17.12.2019 is not barred by time. 5. Learned Counsel for the Respondent refuting the submissions of the Appellants submits that Application filed by the Appellant was clearly barred by time. Learned Counsel for the Respondent referring to Paragraph 22 of the Reply filed in the Appeal submits that even by granting exclusion of the period under Section 22 of the SICA Act, Application filed by the Appellant was barred by time. It is contended that 3 Years period for filing the Application expired on 22.06.2014 after granting exclusion under SICA Proceedings. It is submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere amount of default and date on which default is occurred provides as follows : "PART - IV PARTICULARS OF FINANCIAL DEBT: 2. Amount claimed to be in default and the date on which the default occurred. (Encl: Herewith is the workings for computation of amount and days of default in tabular form) : Amount in default : Rs.65,71,72,655.10 (Rupees: Sixty Crores Seventy One Lakh Seventy Two Thousand Six hundred and Fifty Five only). Date of Default: The date of occurrence of default for the purpose of IBC is 01.06.2019. The Hon. DRT, Mumbai vide its order dated 19.10.2006 issued Recovery Certificate for a sum of Rs. 21,27,32,311/- along with interest @ 12% p.a. from the date of filing original application till payment and/or realization. Workings for computation of amount claimed to be in default payable by Corporate Debtor to Financial Creditor is attached as `Annexure - B'. 10. Part IV mentions "the date of occurrence of default for the purposes of IBC is 01.06.2019". In Part IV, Appellant also mentions the Order dated 19.10.2006 issued by the DRT issuing Recovery Certificate for 21,27,32,311/- . However, when we look into the Application, the Application did not refer to lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine hundred and forty only), the particulars whereof are mentioned in Annexure-III hereto, have become immediately due and payable by you to IDBI; and ii) THAT a sum of Rs.1610/- payable by you towards expenses incurred by IDBI, as per Annexure-IV hereto, have become immediately due and payable by you to IDBI." 12. In Para 9(ii) Company was directed to make payment within a period of 10 days from date amount aggregating to Rs.17,52,44,940/-. Para 9 is as follows: "9. In the premises, we hereby call upon you and demand form you to - (ii) pay to IDBI at Mumbai, within a period of 10 days from the date hereof, the aforesaid sums aggregating Rs.175,244,940/- (One seventy-five million two lakh forty-four thousand nine hundred and forty only), as per Annexure(s)-III and IV hereto, together with further interest thereon with effect from date of this letter, at the contractual rates upon the footing of compound interest, until payment/realisation." 13. The Appellant in its Appeal itself claim issuance of recall Notice dated 16.02.2001, which clearly recall the loan and directed the Company to pay within 10 days. The date of default as per the recall Notice is clearly 26.02.2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion shall be excluded." 18. The provision of Section 22 came for consideration before the Supreme Court in `Sabarmati Gas Ltd.' (Supra). In the above case, question arose as to whether for computation of period of Limitation in regard to Application under Section 9 of the IBC period during which right to proceed against or sue the Corporate Debtor remain suspended need to be excluded. The question which was framed by the Hon'ble Supreme Court in the above case in Para 2.1 (i) is as follows: "2.1. (i) Whether in computation of the period of limitation in regard to an application filed under Section 9 IBC the period during which the operational creditor's right to proceed against or sue the corporate debtor that remain suspended by virtue of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA") can be excluded, as provided under Section 22(5) of SICA?" 19. The Hon'ble Supreme Court, after considering the provisions of Section 22 and Section 22(5), following was laid down in Paragraphs 17 & 22 to 25: "17. Thus, Section 22(1) SICA as extracted above, would make it clear that there was a statutory bar to take to any proceeding for realisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 : (2015) 1 SCC (Civ) 462] , it is worthwhile to note that in the case on hand it was the industrial company (the respondent herein) that approached BIFR under the provisions of SICA and got it declared as "sick company" by filing Case No. 13 of 2010; that it is thereafter that the appellant filed Miscellaneous Application No. 432 of 2013 thereon praying, inter alia, to permit it under Section 22 of SICA to approach a civil court of appropriate jurisdiction for recovery of the abovementioned dues along with interest; that the said application was disposed of only on 9-9-2015, as per Annexure A-40 proceedings, that too, only with a direction to the respondent company to incorporate the dues of the applicant in the DRS and that as per Annexure A-40, Case No. 13 of 2010 and MA No. 292 of 2014 filed thereon, were then, posted for hearing. 24. In short, Case No. 13 of 2010 was pending before BIFR when SICA was repealed w.e.f. 1-12-2016 and Sections 8 and 9 IBC took its effect from 1-12-12016. Thus, obviously, proceedings under SICA were then pending before BIFR when the default from the part of the respondent allegedly occurred and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot correctly construed the provisions of Section 22 of SICA Act. The period which is covered by Section 22(1) deserves to be excluded as required by Section 22(5). In the present case, we are not required to express any opinion with regard to proceeding initiated by Appellant by OA No.03/2002 and the legal consequence of the said proceeding. It is however to be noticed that when the Recovery Certificate dated 19.10.2006 was issued, the reference under SICA had already been dismissed on 06.06.2006. Hence, on the date when Recovery Certificate was issued SICA Proceedings were not pending. 21. In view of the forgoing discussions, we answer Question No. 2 holding that the Appellant was entitled to exclude the period for the purposes of Limitation which is covered by Section 22(1) and Section 22(5) of the SICA Act and the view taken by the Adjudicating Authority in this regard is not approved in the facts of the present case. Question No. III & IV 22. We after having held that Appellant was entitled for exclusion of the period covered by Section 22(1), we need to revert to the facts of the present case as to what period the Appellant shall be entitled to reckon for exclusion. 23. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of or create any third party rights in respect of its movable properties, without the leave of the AAIFR, except in the ordinary and usual course of business ; c) the petitioner shall not take any major policy decision except with the approval of the AAIFR. iv) There shall be no order as to costs." 25. The consequence of the Order dated 05.03.2013 of the High Court is that Appeal stands restored before the AAIFR, and to be decided in accordance with law. Appeal thus shall be treated to become pending from the date from the Order of High Court dated 05.03.2013 again and the period from 05.03.2013, till the Appeal was dismissed again on 31.12.2013 also needs to be excluded. The period during which the Writ Petition was pending before the High Court cannot be treated to be excluded, since during the said period, the Appeal cannot be held to be pending under Section 22(1) of the SICA. From the date when the Appeal was dismissed, i.e., 29.09.2010 till 05.03.2013, when High Court disposed of the Writ Petition, there was no embargo on the Appellant to initiate any proceedings against the Company, and the said period needs no exclusion. 26. After the Writ Petition was dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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