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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 ..... ling an Application under Section 7, Article 137 of the Limitation Act 1963 is applicable - the date of default in Section 7 was imaginary and without any basis and the date of default is the Year 2001 (26.02.2001). Whether the benefit for excluding the period of Limitation as available under Section 22(5) of SICA Act, 1985, has been rightly denied by the Adjudicating Authority on account of prosecuting the OA No.03/2002 before the DRT by the Appellant culminating into Recovery Certificate dated 19.10.2006? - HELD THAT:- The Adjudicating Authority did not 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, it is 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 - the Appellant was entitled to exclude the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re after 3 Years of the expiry of the period of Limitation. Thus, in any view of the matter, the Application filed by the Appellant on 19.12.2019, was much beyond period of Limitation which was available to the Appellant to file Section 7 Application. The Adjudicating Authority did not commit any error in rejecting Section 7 Application filed by the Appellant as barred by time - there is no merit in the Appeal - The Appeal is dismissed. - [ Justice Ashok Bhushan ] Chairperson , [ Barun Mitra ] Member ( Technical ) And [ Arun Baroka ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha Sr. Advocate with Mr. Anand Varma and Ms. Apoorva Pandey , Advocates For the Respondent : Mr. Sajeev Deora , Mr. Harsh Gurbani and Ms. Tripty Rajput , Advocates JUDGMENT ASHOK BHUSHAN , J. This Appeal by the Financial Creditor has been filed challenging the Order dated 10.02.2023 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai, Bench I) by which Order Section 7 Application find by the Appellant against the Respondent, Suman Motels Limited has been dismissed as barred by time. Aggrieved by the Order dated 10.02.2023, this Appeal has been filed. 2. Brief fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Year 2015-16 prepared on 26.09.2016, loan of IDBI Bank of ₹13,03,25,000/- as on 31.03.2016 has been acknowledged. xiv. Subsequent Balance Sheet of 2016-17, 2017-18 2018-19 also reflected the loan of IDBI Bank. xv. On 17.12.2019, Appellant filed Section 7 Application claiming an amount in default as ₹65,71,72,655/-. xvi. Date of default in Part IV is mentioned as 01.06.2019. xvii. Reply to the Section 7 Application was filed by Company. In the Reply filed by the Company, it was pleaded that loan was recalled by Notice dated 26.02.2001. Company also pleaded that Section 7 Application filed by the Appellant is barred by time. Date of default as mentioned in Section 7 Application, i.e., 01.06.2019 was denied. xviii. It was further pleaded by the Company that after issuance of Notice under Section 13(2) in response to letter of the Bank, inviting of OTS proposal, OTS proposal was given and Agreement was reached between the Parties that IDBI Bank to take physical possession of two Resorts, possession at Mangaon was taken on 27.03.2003 and the possession of Resort at village Kashid, Raigad was taken by 22.04.2003. After handing over possession of both the Resorts, Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed after the limitation period of three years, is justified. 3. We have heard Learned Sr. Counsel Mr. Abhijeet Sinha and Learned Counsel Mr. Anand Varma appearing for the Appellants and Learned Counsel Mr. Harsh Gurbani appearing on behalf of the Respondent. 4. Mr. Abhijeet Sinha Learned Sr. Counsel for the Appellant submits that view taken by the Adjudicating Authority that Appellant shall not be entitled for the benefit of Section 22 of SICA Act on account of issuance of Recovery Certificate on 19.10.2006 by DRT is an erroneous view. It is submitted that when the period during which the Company is under SICA benefit of Section 22(5) cannot be denied which period deserves to be excluded and the Adjudicating Authority committed an error in refusing to exclude the period under Section 22(5) of SICA Act. Learned Counsel for the Appellant in support of his submission relied on the Judgment of the Hon ble Supreme Court in the matter of `Sabarmati Gas Ltd. Vs. `Shah Alloys Ltd. , reported in (2023) 3 SCC 229. Mr. Sinha submitted that the fact that Financial Creditor was prosecuting his OA No.3/2002 before the DRT in which Recovery Certificate was issued on 19.10.2006, the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Year 2001 as pleaded by the Company and accepted by the Adjudicating Authority? II. Whether the benefit for excluding the period of Limitation as available under Section 22(5) of SICA Act, 1985, has been rightly denied by the Adjudicating Authority on account of prosecuting the OA No.03/2002 before the DRT by the Appellant culminating into Recovery Certificate dated 19.10.2006? III. Whether after excluding the period of Limitation as per Section 22 of SICA Act 1985, the Application filed by the applicant was within period of Limitation? IV. Whether the Appellant is entitled to the extension of Limitation in pursuance of the Recovery Certificate dated 19.10.2006, OTS letter dated 10.01.2008 and OTS letter dated 28.07.2010? Whether the Order of the Adjudicating Authority rejecting the Section 7 Application as barred by time deserves to be interfered with in this Appeal? Question No. I 8. The first question to be considered is as to what is the date of default committed by the Company for purposes of computation of Limitation in reference to Section 7 Application filed by the Appellant. 9. We need to first Notice Part IV of the Application filed by the Appellant and the pleadings m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001. Hereto annexed and marked as Exhibit-B is a copy of the said Recall Notice dated 16.02.2001. The present Petition is, however, filed on 17.12.2019 after almost two decades. Hence, it is submitted that the petition is time barred and there is no debt which is due and/or payable. 11. The Appellant himself in the Appeal has brought on the record the copy of the loan recall Notice dated 16.02.2001 as (Annexure A-10). The recall Notice dated 16.02.2001 has been addressed to the Company. Notice categorically mentions that the amount of loan aggregating to ₹13,03,25,000/- together with interest aggregating to ₹17,52,44,940/- have become immediately due and payable. Paragraph 8 of the Notice mentions: 8. Accordingly, IDBI, hereby declares in writing as follows:- i) THAT the outstanding principal amounts of the Loans aggregating Rs.130,35,000/- (Rupees One thirty million three lakh and twenty five thousand only) together with interest further interest, liquidated damages, etc. aggregating Rs.44,919,940/- (Rupees Forty-four million nine lakh nineteen thousand nine hundred and forty only), making the aggregate of Rs.175,244,940/- (One seventy-five million two lakh forty-four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority. 17. Section 22(5) provides as follows: 22. Suspension of legal proceedings, contracts, etc. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainly a proceeding which may result in the execution and distress against the property of the company and is therefore, liable to be construed as a proceeding for the execution, distress or the like against any of the properties of the industrial company. Accordingly, it was held that such a construction would be within the intendment of Parliament. Moreover, it was held therein that there would be no purpose in construing that Parliament intended that such an application for recovery by summary procedure should lie or be proceeded with, but only its execution be interdicted or inhibited. That apart the three-Judge Bench found nothing contrary in the intention of SICA to exclude a recovery application from the purview of a Section 22 thereof, taking note of the fact that the purpose of the said provision is to protect the properties of sick company, so that they may be dealt with in the best possible way for the purpose of its revival by BIFR. 23. In view of the provisions under Section 22(1) of SICA and the decisions in Paramjeet Singh case [Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322] and in KSL Industries [KSL Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther there would be any justification to hold that on the repeal of SICA it could not claim the benefit flowing from the provisions under Section 22(5) of SICA, subject to the provisions under the relevant laws governing the appropriate forum chosen? 20. When law provides for excluding the period for purpose of Limitation under Section 22(5) of the SICA Act for purposes of computation of the Limitation for filing an Application, the period covered by Section 22(5) has to be excluded. What period is covered by Section 22 is mentioned in Section 22(1) i.e. : i. An enquiry under Section 16 is pending; ii. Any scheme referred to Section 17 is under preparation or consideration or sanction Scheme under Limitation or where an Appeal under Section 25 relating to Industrial Company is pending; As noted above, Adjudicating Authority in Paragraph 29 of the Judgment took the view that since Appellant has proceeded to prosecute OA No. 03/2002 before the DRT in which Recovery Certificate was issued on 19.10.2006, the period from 2002-2013 does not deserves to be excluded. We are of the view that the Adjudicating Authority did not correctly construed the provisions of Section 22 of SICA Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard and the Order dismissing the Appeal was set aside. Paragraphs 11 12 of the Judgment of the High Court are as follows: 11. In view of these uncertainties, the ends of justice require that the petitioner's appeal be heard. In the circumstances, the impugned order is liable to be setaside. However, considering the facts of the case, it is necessary to protect the rights of the petitioner's creditors. We have done so by this order. 12. In the circumstances, the writ petition is disposed of by the following order :- i). Rule is made absolute in terms of prayer (a). ii). The AAIFR is requested to hear the petitioner's appeal as expeditiously as possible according to it priority as on the date on which it was filed viz. 23.11.2006. iii). Till the appeal is decided and for a period of four weeks thereafter :- a) the petitioner shall not dispose of, alienate, encumber, part with possession of or create any third party rights in respect of its immovable properties, except with the leave of the AAIFR ; b) the petitioner shall not dispose of, alienate, encumber, part with possession of or create any third party rights in respect of its movable properties, without the leave of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad already came to an end. 28. Now we also need to consider the submissions of Appellant basis on OTS letter dated 10.01.2008, 28.07.2010 and Recovery Certificate dated 19.10.2006. 29. Even if the fresh period of Limitation can be treated to start of the Appellant from 19.10.2006, the said period will come to an end on 18.10.2009. Though we already held that period during which the Appeal filed, i.e., 23.11.2006 to 29.09.2010 is entitled to be excluded under Section 22(1) thus 3 Years period which can be treated to commence from 06.06.2006 shall be subsumed in the period which is being excluded under Section 22(1). 30. Now we come to OTS letter dated 10.01.2008 and 28.07.2010 extending the period of Limitation, from the last OTS letter dated 28.07.2010, Appellant at best may be entitled for extension of Limitation of 3 years period, which period will come to an end on 27.07.2013. We need to see as to whether after 27.07.2013, when the period extended under Section 18 of Limitation Act comes to an end, whether there is any other acknowledgement within 3 Years period. The Appellant has relied on the Balance Sheet for the Year 2015-16, which Balance Sheet has been brought on record bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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