AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 424
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....ctor challenged the order on the ground that Application under Section 7 of the I&B Code was barred by limitation. 3. The Adjudicating Authority (National Company Law Tribunal) taking into consideration that the Debts Recovery Tribunal-I, Hyderabad (DRT) by order dated 17th August, 2018 allowed the application of recovery of debt with pendent lite and future interest at the rate of 12% per annum, held that the application is not barred by limitation. 4. The questions arise for consideration are: (i) Whether the application under Section 7 of the I&B Code was barred by limitation? and; (ii) Whether the order of Decree passed by the Debts Recovery Tribunal-I, Hyderabad on 17th August, 2018 can be taken into consideration to hold that application under Section 7 of the I&B Code is within period of three years as prescribed under Article 137 of Limitation Act, 1963? 5. According to the learned Counsel for the Appellant, the three years' period is to be counted from the date of default/ the date on which the account was declared as Non-Performing Asset (NPA). On the other hand, according to the learned Counsel for the Stressed Assets Stabilisation Fund ('Financial Creditor'), it ....
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....ng the claim of Financial Creditor. The Corporate Debtor defaulted in complying with the orders of the DRT dated 17.08.2018. Therefore, the default date is 17.08.2018 Hence, the application is well within limitation." 8. In Part-V, the particulars of financial debt and evidence of default have been mentioned. With regard to default, except the Decree, nothing has been brought on record. 9. The Form-1 shows that loans were disbursed by 'Financial Creditor' on 30th November, 1994, 31st March, 1995, 30th October, 1995, 26th March, 1996, 27th November, 1996, 19th June, 1996, 18th July, 1996, 11th September, 1996, 5th May, 2001, 25th January, 2001 and 31st May, 2001. Some loan was also disbursed on 1st May, 1998. 10. The original application by O.A. No.193 of 2004 was filed in the year 2004 before the Debts Recovery Tribunal and the amount claimed to be in default was shown therein. The aforesaid fact shows that the default took place in the year 2004. Therefore, the account was declared as NPA in the year 2004. 11. If the period of limitation is counted from the date of default/ NPA then the period comes to an end in the year 2007. In such a case, the application under Section 7 ....
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....with fine and the Officers of the Company on such default are also punishable with imprisonment or fine or both as under: - Companies Act section 92(1), (4), (5) and (6) to be reproduced "92. Annual return.-(1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding- (a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies; (b) its shares, debentures and other securities and shareholding pattern; *** (d) its members and debenture-holders along with changes therein since the close of the previous financial year; (e) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; (f) meetings of members or a class thereof, Board and its various committees along with attendance details; (g) remuneration of directors and key managerial personnel; (h) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishme....
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....hat the Balance Sheet / Annual Return of the 'Corporate Debtor' amounts to acknowledgement under Section 18 of the Limitation Act, 1963 then in such case, it is to be held that no limitation would be applicable because every year, it is mandatory for the 'Corporate Debtor' to file Balance Sheet/ Annual Return, which is not the law. 17. Section 238A of the I&B Code, which applies provisions of Limitation Act, 1963 "as far as may be", is quoted as under: - "238A. Limitation.-The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be." 18. The application of Article 137 of Limitation Act, 1963 for moving application under Sections 7 or 9 of the I&B Code, fell for consideration before the Hon'ble Supreme Court and this Appellate Tribunal in number of cases. In "B.K. Educational Services Private Limited vs. Parag Gupta and Associates - (2018) SCC Online SC 1921", the Hon'ble Supreme Court held that the Limitation Act, 1963 has in fact been applied from the incep....
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....oint of time is the simple question as to whether it would have been permissible to institute a normal recovery proceeding before a civil court in respect of that debt at that point of time. Applying this test and dehors that fact that the suit had already been filed, the question is as to whether it would have been permissible to institute a recovery proceeding by way of a suit for enforcing that debt in the year 1995, and the answer to that question has to be in the negative. That being so, the existence of the suit cannot be construed as having either revived the period of limitation or extended it. It only means that those proceedings are pending but it does not give the party a legal right to institute any other proceedings on that basis. It is well-settled law that the limitation is extended only in certain limited situations and that the existence of a suit is not necessarily one of them. In this view of the matter, the second point will have to be answered in favour of the respondents and it will have to be held that there was no enforceable claim in the year 1995, when the present petition was instituted." 14. Likewise, a Single Judge of the Patna High Court in Ferro All....
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.... situation, if a demand is made by the creditor to whom the company is indebted in a sum exceeding one lakh then due, requiring the company to pay the sum so due, and the company has for three weeks thereafter "neglected to pay the sum", or to secure or compound for it to the reasonable satisfaction of the creditor. "Neglected to pay" would arise only on default to pay the sum due, which would clearly be a fixed date depending on the facts of each case. Equally in the second situation, if execution or other process is issued on a decree or order of any court or tribunal in favour of a creditor of the company, and is returned unsatisfied in whole or in part, default on the part of the debtor company occurs. This again is clearly a fixed date depending on the facts of each case. And in the third situation, it is necessary to prove to the "satisfaction of the Tribunal" that the company is unable to pay its debts. Here again, the trigger point is the date on which default is committed, on account of which the company is unable to pay its debts. This again is a fixed date that can be proved on the facts of each case. Thus, Section 433(e) read with Section 434 of the Companies Act, 195....
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....mmovable property Twelve years When the money sued for becomes due." Applying the aforesaid Article, the NCLT reached the conclusion that since the limitation period was 12 years from the date on which the money suit has become due, the aforesaid claim was filed within limitation and hence admitted the Section 7 application. The NCLAT vide the impugned judgment held, following its earlier judgments, that the time of limitation would begin running for the purposes of limitation only on and from 1-12-2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. Consequently, it dismissed the appeal. 4. Mr Aditya Parolia, learned counsel appearing on behalf of the appellant has argued that Article 137 being a residuary article would apply on the facts of this case, and as right to sue accrued only on and from 21-7-2011, three years having elapsed since then in 2014, the Section 7 application filed in 2017 is clearly out of time. He has also referred to our judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates [B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633] in order to buttress his argum....
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....The Hon'ble Supreme Court specifically observed that Article 141 of the Constitution of India mandates that its judgments are followed in letter and spirit. The date of coming into force of IBC Code does not and cannot form a trigger point of limitation for application filed under the Code. Equally, since "applications" are petitions, which are filed under the Code, it is Article 137 of the Limitation Act, 1963 which will apply to such applications. 23. This Appellate Tribunal also considered the same issue in "V Hotels Limited vs. Asset Reconstruction Company (India) Limited - Company Appeal (AT) (Insolvency) No.525 of 2019" decided on 11th December, 2019, by referring to the aforesaid judgment of the Hon'ble Supreme Court observed: - "17. In the present case, in fact the default took place much earlier. It is admitted that the debt of the 'Corporate Debtor' was declared NPA on 1st December, 2008 as has been noticed by the Adjudicating Authority. xxx xxx xxx 19. Section 13(2) of the 'SARFAESI Act, 2002' reads as follows: "13. Enforcement of security interest.- ......(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any....
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....aulted to pay prior to 2004, due to which O.A. No.193 of 2004 was filed by Respondent ('Financial Creditor'). A Decree passed by the Debts Recovery Tribunal or any suit cannot shift forward the date of default. On the other hand, the judgment and Decree passed by Debts Recovery Tribunal on 17th August, 2018, only suggests that debt become due and payable. It does not shifting forward the date of default as Decree has to be executed within a specified period. It is not that after passing of judgment or Decree, the default takes place immediately, as recovery is permissible, all the debts in terms of judgment and Decree dated 17th August, 2018 with pendent lite and future interest at the rate of 12% per annum could have been executed only through an execution case. 25. In "Binani Industries Limited vs. Bank of Baroda & Anr. - Company Appeal (AT) (Insolvency) No.82 of 2018" decided on 14th November, 2018, this Appellate Tribunal has held that 'Corporate Insolvency Resolution Process' is not a recovery proceeding. It is not a 'litigation' nor it is an auction. 26. By filing an application under Section 7 of the I&B Code, a Decree cannot be executed. In such case, it will be covered b....