2025 (2) TMI 688 - AT - IBC

Section 95 IBC petition dismissed as time-barred beyond three-year limitation period from default date

Mahdoom Bava Bahrudeen Noorul Ameen Versus State Bank of India, Mr. Deepak Mittal

The NCLAT held that the Section 95 IBC petition was time-barred as it was filed beyond the three-year limitation period from the date of default. The ... Section 95 IBC Petition barred by limitation or not - service of Demand Notice at the wrong address - correctness of amount sought in the Demand Notice and the Section 95 IBC Petition - foundation of the loan amount of SBBJ Bank. Whether the Demand Notice under Rule 7(1) of the IBC Rules, 2019, dated 28.06.2021 was sent to the wrong address by the Financial Creditor? - HELD THAT:- It is claimed that Rule 7 Notice cannot be substituted with Section 13(2) SARFAESI Notice. The nature of both the Notices are entirely different and one cannot substitute the other. The Appellant has given an example of a cheque bouncing notice under Section 138 of NI Act which cannot substitute a winding up Notice under Section 433 of the Companies Act. Similarly, a winding up notice under Section 433 cannot substitute a Section 13 (2) SARFAESI Notice. There are merit in the arguments of the Appellant but in the facts of the case sufficient time was available to the Appellant to provide repayment plan. Even though there have been claims and counter claims with respect to the service of the Demand Notice and also Section 95 Application, it is found that it was the duty of the Appellant to have notified the current address to appropriate authorities, including banks and passport office when they had moved to Chennai. The RP was in touch with him later on even on WhatsApp and the Appellant had also filed his objections on the Report of the RP. In the circumstances of the case, there are no infirmity on the findings of the Adjudicating Authority on this count. Further, the purported non-service of Demand Notice under Rule 7(1) will not have any material impact on the main issue, which is being examined in subsequent paragraphs. Whether the Section 95 IBC Petition was barred by limitation or not? - HELD THAT:- The Appellant has been able to demonstrate that the said amount of Rs 315 crores as in Section 95 application is an approximate total of SBI’s A/c No. 30451182299 [pg 535 APB] i.e. Rs 264 crores and A/c No. 61029643854 [pg 539 APB at the bottom] i.e. Rs 51.23 crores totalling to Rs 315 crores. And the later account [A/c No. 61029643854] has nothing to do with SBBJ as the account numbers mentioned in the Demand Notice under Rule 7(1) for SBBJ are 61253087296 and 61074975160 [pg 542/5 APB]. Thus, in both the Rule 7(1) Demand Notice and Section 95(1) of IBC Application, the Respondent No.1-SBI through RP has given a total claim without giving the details in the particulars. And the Appellant has been able to explain that this amount pertains to SBI only and rest amount pertains to some unrelated account of SBBJ. Calculation of period of limitation which would start running from the date of NPA of 13.06.2012 - HELD THAT:- At best the limitation would start from Section 13(2) Notice dated 26.12.2013, when demand was made from the Appellant. Since Demand Notice under Rule 7(1) was issued on 28.06.2021, and the Application under Section 95 was filed on 03.12.2022, it is found that the said Application is prima facie beyond three years and is time barred. Without giving the details of each account, the Respondent No.1-SBI cannot overcome the limitation - the notices for debt and default under Rule 7(1) and Rule 7(2) are issued much beyond three years from the date of default and are therefore barred to be proceeded under the Limitation Act. Section 95 application doesn’t satisfy the requirements of “details and documents relating to debts owed by the debtor to the creditor or creditors” as provided under Section 95 (4) of the Code. It is also found that all objections relating to Section 95 proceedings have not been disposed of, particularly relating to sufficient details and documents with respect to individual accounts in default. The total amount of default as claimed in the Section 95 application has to be individually substantiated with the details of separate accounts, particularly in the facts of the case, where two separate Banks merged and when earlier separate accounts were being maintained in different Banks and separate recovery proceedings were being pursued by both SBI & SBBJ separately. Be that as it may, in the interests of natural justice it is found appropriate to remand this case back to the Adjudicating Authority to examine all the objections relating to the details of individual accounts and their dates of default and whether debt is time barred - in full or in part amount - due to RC under SARFAESI Act 2002 and arrive at a conclusion. Conclusion - i) Section 95 IBC Petition was time-barred, as it was filed beyond the three-year limitation period, even after excluding the COVID-19 period. ii) Section 95 application doesn't satisfy the requirements of 'details and documents relating to debts owed by the debtor to the creditor or creditors' as provided under Section 95 (4) of the Code. The personal insolvency proceedings are remanded back to the Adjudicating Authority to determine afresh the limited question of whether on the basis of the materials on record the debt is barred by limitation or not and whether in full or in part amount and accordingly determine the issue of personal insolvency against the Appellant - Appeal allowed by way of remand. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:i. Whether the Section 95 IBC Petition was barred by limitation.ii. Whether the Demand Notice under Rule 7(1) of the IBC Rules, 2019, was sent to the wrong address by the Financial Creditor.iii. Whether the amount sought in the Demand Notice and the Section 95 IBC Petition are vague.iv. Whether the Demand Notice under Rule 7(1) of IBC Rules, 2019, and the Section 95 IBC Petition have no foundation of the loan amount of SBBJ Bank.ISSUE-WISE DETAILED ANALYSISi. Limitation of the Section 95 IBC PetitionThe relevant legal framework involves the Insolvency and Bankruptcy Code, 2016, particularly Section 95, which requires applications to be filed within a limitation period. The Court examined whether the application was filed within the prescribed period, considering the classification of the loan account as a Non-Performing Asset (NPA) and subsequent actions.The Court noted that the loan accounts were classified as NPA on 13.06.2012, and a Demand Notice under Section 13(2) of the SARFAESI Act was issued on 26.12.2013. The Section 95 IBC Petition was filed on 03.12.2022, raising questions about its timeliness.The Court considered the exclusion of the COVID-19 period from 15.03.2020 to 28.02.2022, as per the Supreme Court's directions, in calculating the limitation period. However, it concluded that even after this exclusion, the application was filed beyond the three-year limitation period, rendering it time-barred.ii. Service of Demand Notice under Rule 7(1)The Court evaluated whether the Demand Notice was served at the correct address. The Appellant argued that the notice was sent to an incorrect address, while the Respondent contended that it was served at the address mentioned in the Appellant's passport and bank records.The Court found that the notice was indeed sent to an address associated with the Appellant, but not the one where he resided. Despite this, the Court concluded that the non-service of the notice did not absolve the Appellant from liability, as he had ample time to respond and was aware of the proceedings.iii. Vagueness of the Amount SoughtThe Appellant contended that the amounts mentioned in the Demand Notice and the Section 95 IBC Petition were vague and lacked supporting documentation. The Court examined the details provided in the notices and the application.It was found that the amounts were not clearly itemized, and the application failed to provide sufficient details of individual accounts, dates of defaults, and statements of accounts. The Court agreed with the Appellant that the demand was vague, which affected the validity of the application.iv. Foundation of Loan Amount of SBBJ BankThe issue revolved around whether the Demand Notice and the Section 95 IBC Petition included the loan amounts from SBBJ Bank. The Appellant argued that these amounts were not properly documented, and the Respondent failed to establish a clear connection between the amounts claimed and the SBBJ accounts.The Court found that the application did not adequately link the claimed amounts to specific accounts and dates of default, particularly concerning the SBBJ accounts. This lack of clarity contributed to the Court's decision to remand the case for further examination.SIGNIFICANT HOLDINGSThe Court held that the Section 95 IBC Petition was time-barred, as it was filed beyond the three-year limitation period, even after excluding the COVID-19 period. It emphasized the necessity for applications to comply with the legal provisions requiring detailed documentation of debts.The Court noted: 'We find that the Section 95 application doesn't satisfy the requirements of 'details and documents relating to debts owed by the debtor to the creditor or creditors' as provided under Section 95 (4) of the Code.'The Court remanded the case back to the Adjudicating Authority to determine whether the debt was time-barred and to address the deficiencies in the application regarding the details of individual accounts and their dates of default.The Court set aside the order impugned dated 13.06.2024, emphasizing that the Adjudicating Authority must consider all submissions and materials on record to reach a decision.