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2020 (5) TMI 424
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....Appellant Mr. G Eswara Rao, Shareholder, Director 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 t....
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....s an Exhibit. (ii) Date on which the default occurred: 17.08.2018 - Order passed by Debts Recovery Tribunal - I, Hyderabad in O.A. No.193 of 2004 admitting 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 ....
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.... they stood on the close of the financial year regarding providing different details. Under Section 92(5), if a Company fails to file its annual return under sub-section (4), before the expiry of the period specified, it is punishable 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, B....
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....end to five lakh rupees." 15. As the filing of Balance Sheet/ Annual Return being mandatory under Section 92(4), failing of which attracts penal action under Section 92(5) & (6), the Balance Sheet / Annual Return of the 'Corporate Debtor' cannot be treated to be an acknowledgement under Section 18 of the Limitation Act, 1963. 16. If the argument is accepted that 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, ....
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....proceeding was concerned. Thus, in Hariom Firestock Ltd. v. Sunjal Engg. (P) Ltd., a Single Judge of the Karnataka High Court, in the fact situation of a suit for recovery being filed prior to a winding-up petition being filed, opined: "8. ... To my mind, there is a fallacy in this argument because the test that is required to be applied for purposes of ascertaining whether the debt is in existence at a particular point 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....
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....g-up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding-up proceeding. xxx xxx xxx 28. A reading of the aforesaid provisions would show that the starting point of the period of limitation is when the company is unable to pay its debts, and that Section 434 is a deeming provision which refers to three situations in which a company shall be deemed to be "unable to pay its debts" under Section 433(e). In the first 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 aga....
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....t together with interest which now amounted to about 124 crores of rupees. In Form-I that has statutorily to be annexed to the Section 7 application in Column II which was the date on which default occurred, the date of the NPA i.e. 21-7- 2011 was filled up. The NCLT applied Article 62 of the Limitation Act which reads as follows: "Description of suit Period of limitation Time from which period begins to run 62. To enforce payment of money secured by a mortgage or otherwise charged upon immovable 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....
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....de." 22. In "Sagar Sharma & Anr. vs. Phoenix ARC Pvt. Ltd. & Anr. - Civil Appeal No.7673 of 2019 - (2019) 10 SCC 353", the Hon'ble Supreme Court vide its judgment dated 30th September, 2019, referring to the decision in B.K. Educational Services Private Limited (Supra) reminded this Appellate Tribunal that for application under Section 7 of the Code, Article 137 of the Limitation Act, 1963 will apply. Article 62, which relates to deed of mortgage executed between the parties, cannot be taken into consideration for counting the period of limitation. 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" decid....
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....the suit. In the present case, the account was declared NPA since 1st December, 2008 and therefore, the suit was filed. Thereafter, any document or acknowledgment, even after the completion of the period of limitation i.e. December, 2011 cannot be relied upon. Further, in absence of any record of acknowledgment, the Appellant cannot derive any advantage of Section 18 of the Limitation Act. For the said reason, we hold that the application under Section 7 is barred by limitation, the accounts of the 'Corporate Debtor' having declared NPA on 1st December, 2008. 24. In the present case, the 'Corporate Debtor' defaulted 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 perm....