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TMI Blog2025 (4) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... P (IB) No. 83/7/JPR/2021. 2. The Rajasthan Financial Corporation (Financial Creditor) is the Respondent No. 1 herein. 3. Ms. Garima Diggiwala, the Interim Resolution Professional (IRP), is the Respondent No. 2 herein. 4. The Appellant submitted that the Respondent No. 1, registered under the State Financial Corporation Act, 1951, sanctioned a loan of Rs.3.50 Crores to the Corporate Debtor in July 2009 and signed loan agreement, disbursing Rs.2.40 Crores on 17.07.2009. The loan was repayable in 19 Equal Quarterly Instalments (EQIs) of Rs.18.67 Lakhs each, after a six-month moratorium, with the first EQI due on or after 16.01.2010. However, during the moratorium period itself, on 13.01.2010, the Respondent No. 1 issued a demand notice under Section 30 of the State Financial Corporation Act, 1951 claiming that the first EQI had become due and defaulted, and subsequently recalled the entire loan amount along with interest of Rs.15.32 Lakhs. 5. The Appellant further submitted that on 23.02.2010, the Respondent No. 1 took physical possession of the mortgaged property under Section 29 of the State Financial Corporation Act, 1951 and later issued an auction notice for 16.06.2010. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority, the Respondent No. 1 failed to justify the delay adequately and later sought condonation under Section 5 of the Limitation Act, 1963. The Adjudicating Authority considered pending litigations as a statutory prevention despite the Respondent No. 1's ability to initiate CIRP, and incorrectly applied Section 14 of the Limitation Act, 1963. 9. The Appellant submitted that the Adjudicating Authority overlooked the Respondent No. 1's own admission in Form I (Particulars of Financial Debt) that a legal notice under Section 30 of the State Financial Corporations Act, 1951 was issued on 13.01.2010, and possession of the unit was taken under Section 29 of the Act on 23.03.2010. Further, there was no documentary evidence on record to suggest that the limitation period was extended or that the Corporate Debtor acknowledged its liability. 10. The Appellant submitted that the Adjudicating Authority, in its judgment, failed to appreciate the critical absence of a specific date of default in the Respondent No. 1's pleadings. The Respondent No. 1 merely stated that a notice of demand was issued on 13.01.2010 and physical possession of the mortgaged property was taken on 23.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights of the State Financial Corporation in the event of default, without any evidence or indication of subsequent steps to enforce possession or recovery as claimed. 14. The Appellant submitted that the Respondent No. 1 obtained possession of the mortgaged property without adhering to due process of law, in flagrant violation of the agreement's terms and the provisions of the State Financial Corporation Act, 1951. Furthermore, the Appellant submitted that the Adjudicating Authority overlooked that the debt, stemming from a legal notice dated 13.01.2010, could not remain due beyond the statutory limitation period of three years, rendering the claim time-barred and the proceedings legally unsustainable. 15. The Appellant submitted that the Adjudicating Authority has erred by allowing the Section 5 of the Limitation Act, 1963 application on limitation, failing to appreciate the material on record which reveals that the Respondent No. 1's claim of being statutorily prevented due to sub-judice proceedings before the Hon'ble High Court is untenable. The impugned order dated 17.05.2024 explicitly notes that on 07.03.2011, the Hon'ble High Court of Rajasthan granted liberty to Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 asserted that these actions were lawfully executed following the issuance of a legal notice, necessitated by the appellant's persistent default, thereby justifying the Respondent No. 1's of the mortgaged assets. 20. The Respondent No. 1 submitted that the Corporate Debtor initially proposed a settlement vide letter dated 22.03.2011, which the Respondent No. 1 could not accept as its terms were not in its interest, followed by subsequent settlement proposals in 2014, 2015, and 2017-18, none of which materialized into an agreement. Due to a bona fide oversight, these requests for a one-time settlement were inadvertently omitted from the initial records of CP (IB) No. 84/7/JPR/2021 before the Adjudicating Authority; however, the Respondent No. 1 contended that the appellant's own admission in the appeal i.e. acknowledging multiple settlement proposals by the Corporate Debtor effectively negates their objections to the company petition filed under Section 7 of the Code. The Respondent No. 1 asserted that these repeated attempts at settlement, coupled with the appellant's failure to honour repayment obligations, reinforce the legitimacy of Respondent No. 1's actions and the initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Adjudicating Authority. 24. The Respondent No. 1 submitted that the Adjudicating Authority correctly held that Respondent No. 1 was statutorily prevented from recovering its dues from the Corporate Debtor due to interim orders of the Hon'ble High Courts, which temporarily restrained direct recovery actions. However, it is emphasized by Respondent No. 1 that such interim orders do not bar the initiation of proceedings under the Code as the framework of the Code operates independently of such restrictions, enabling the corporation to pursue its remedies despite the pendency of matters before the Hon'ble High Court. 25. It is further submitted by the Respondent No. 1 that the Adjudicating Authority, not being subordinate to the Hon'ble High Court, was fully empowered to admit the petition filed by the Respondent No. 1 and impose a moratorium vide its impugned order dated 17.05.2024, unaffected by the interim orders. The Respondent No. 1 asserted that this legal position reinforces the authority of the Code framework, ensuring that the Respondent No. 1's rights to initiate insolvency proceedings remain intact, and the Adjudicating Authority's decision aligns with the statutory int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the claim/debt alive, with the last acknowledgment occurring vide letter dated 16.05.2017. The Hon'ble Supreme Court of India in Dena Bank v. C. Shivakumar Reddy [(2021) 10 SCC 330] has held that Section 18 of the Limitation Act should not be interpreted with pedantic rigidity in IBC proceedings, and an offer of one-time settlement within the limitation period constitutes an acknowledgment of debt, extending the limitation by a further three years from 16.05.2017 to 15.05.2020, thus supporting the maintainability of the Respondent No. 1's petition. 30. The Respondent No. 1 submitted that the homebuyers, who paid booking amounts or instalments towards homes/flats, are entitled to submit their claims to the Resolution Professional under the Code framework, ensuring their interests are addressed within the insolvency process. This mechanism provides an adequate remedy for the homebuyers to recover their dues, thereby negating any contention that their rights have been overlooked by the respondent's actions in pursuing the Corporate Debtor. 31. It is further submitted by the Respondent No. 1 that the homebuyers failed to initiate independent legal action against the appellant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion filed under the Code in addition to extending limitation due to acknowledgement of debts by the Appellant by way of various OTS by the Appellant and the Hon'ble Supreme Court of India order dated 10.01.2020 extending limitation suo moto. 35. Concluding his arguments, Respondent No. 1 prayed to this Appellate Tribunal to dismiss the Appeal with cost. 36. The Respondent No. 2 submitted that the Appellate Tribunal, vide its order dated 03.06.2024, directed that the impugned order initiating the CIRP be held in abeyance; however, the IRP was not discharged from her duties to safeguard the interests of the Corporate Debtor, including its property, and ensure compliance with the provisions of the Code and IBBI regulations. In adherence to this Appellate Tribunal's directive, the IRP duly kept the CIRP process in abeyance while continuing to fulfil her obligations by deploying security guards at the property and personally visiting the site, which had been taken into custody at the time of the CIRP orders, to ensure the Corporate Debtor's interests remained protected. 37. The Respondent No. 2 submitted that the Respondent No. 1 has contributed Rs. 2 lakhs towards the CIRP costs, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OTS of the Appellant to Respondent No. 1 dated 03.05.2011 extended the limitation period. Similarly, further OTS dated 24.11.2011 also extended the limitation period. We note that within three years of this OTS dated 24.11.2011, the Appellant is stated to have made another OTS on 16.09.2014 which was within three years and hence, same extended limitation period. This was further followed by another OTS proposal by the Appellant dated 24.02.2015 followed by various other OTS proposals by various other OTS proposals by the Appellant vide letters dated 26.05.2015, 18.06.2015, 25.05.2016, 12.05.2017 and finally dated 16.05.2017. 45. If we take the last OTS by the Appellant dated 16.05.2017 into consideration, which signifies the acknowledgement of debt by the Appellant, the limitation period gets extended up to 15.05.2020. Hence, the Company Petition could have been filed by 15.05.2020, whereas the Company Petition was filed by the Respondent No. 1 before the Adjudicating Authority on 12.08.2021. 46. Hence, we need to look into the rational for counting this period for the purpose of limitation. We take into consideration the pleading made by the Respondent No. 1 that the Hon'ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, the same is not challenged by the Appellant and on at least seventy earlier occasions the Respondent is trying to auction the mortgaged property but to no avail. 4. Issue Notice. Learned Counsel for the Respondent- Corporation may file Reply Affidavit within four weeks. Rejoinder be filed three weeks thereafter. 5. List these matters on 22nd July, 2024. Till then the operation of the impugned order qua initiation of CIRP shall remain in abeyance." 49. Another two weeks time was granted to the Appellant to file the Rejoinder by this Appellate Tribunal vide its order dated 06.09.2024, which reproduce as under:- "Learned Counsel for Respondent No. 1 submits that they have already filed the Reply. Appellant submits that Reply has not been served. Counsel for Respondent No. 1 is directed to serve the Reply to the Counsel for the Appellant within a week. Rejoinder, if any, may be filed with further two weeks. The name of Mr. Naresh Kr. Sejvani be shown as Counsel for the Appellant. IRP has also appeared in person. List these Appeals on 18th October, 2024. Interim Order to continue." 50. Further two weeks time was granted by this Appellate Tribunal to the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under :- "26. On a harmonious consideration of the provisions of the law, as aforesaid, and the law laid down by this Court, it is evident that: (i) Law of limitation is based upon public policy that there should be an end to litigation by forfeiting the right to remedy rather than the right itself; (ii) A right or the remedy that has not been exercised or availed of for a long time must come to an end or cease to exist after a fixed period of time; (iii) The provisions of the Limitation Act have to be construed differently, such as Section 3 has to be construed in a strict sense whereas Section 5 has to be construed liberally; (iv) In order to advance substantial justice, though liberal approach, justice-oriented approach or cause of substantial justice may be kept in mind but the same cannot be used to defeat the substantial law of limitation contained in Section 3 of the Limitation Act; (v) Courts are empowered to exercise discretion to condone the delay if sufficient cause had been explained, but that exercise of power is discretionary in nature and may not be exercised even if sufficient cause is established for various factors such as, where there is ino ..... 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