TaxTMI 
TaxTMI 
2020 (9) TMI 12
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....uthority (National Company Law Tribunal), Mumbai Bench on 29th January, 2019. 2. The Appeal was earlier heard by this Appellate Tribunal and on hearing the Appeal, this Appellate Tribunal by judgment dated 5th September, 2019 held: - "12. It is not in dispute that the Limitation Act, 1963 is applicable to the applications filed under the 'I&B Code'. For filing the application under Section 7 of the 'I&B Code', Part II - 'Other Applications' of Third Division of schedule of Limitation Act is applicable as quoted below: PART II - OTHER APPLICATIONS Description of application Period of limitation Time from which period being to run 137. Any other application for which no period of limitation is provided elsewhere in this division. Three years When the right to apply accrues" 13. Admittedly, 'I&B Code' has come into force since 1st December, 2016, therefore, the right to apply accrued to 1st Respondent on 1st December, 2016. Therefore, we hold that the application under Section 7 was not barred by limitation. 14. The next question is whether the claim of the Appellant is barred by the limitation. If it is barred by limitation then the 'Corporate Debtor' has righ....
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....ill apply to such applications. 4) Accordingly, we set aside the judgment under appeal and direct that the matter be determined afresh. It will be open for both sides to argue the case on facts on the footing that Article 137 of the Limitation Act alone will apply. 5) The appeal is allowed in the aforesaid terms. 6) The NCLT order dated 29.01.2019 shall remain stayed until further orders from the NCLAT. 7) Mr. Rakesh Dwivedi, learned Senior Counsel, wishes to raise a plea based on Section 22 of the Limitation Act before the NCLAT. We record this statement." 4. Learned Counsel appearing on behalf of the Appellants referred to Form-1 to suggest that the Loan Agreement was reached on 20th November, 2009 for Rs. 22,00,00,000/-. As per Form-1, a sum of Rs. 17,10,20,020/- was repaid. Another Loan Agreement was reached on 24th May, 2012 for Rs. 216,00,00,000/-, out of which Rs. 46,00,00,000/- was the committed lending of Assignor. For the purpose of record, following details are shown:- "S.No. Date Particulars LOAN 2 (Rs. 22,00,00,000) 1. 20.11.2009 Loan Agreement executed between Assignor and Corporate Debtor 2. 24.12.2009 Disbursement Dates of amounts un....
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....of 2019 & Interlocutory Application No.3392 & 3542 of 2019 Page 7 of 26 9th September, 2014. Therefore, according to him, the Application under Section 7 of the I&B Code was barred by limitation. 6. Reliance has been placed on affidavit in rejoinder to the reply filed by the 'Financial Creditor', wherein it is stated that the opening balance in the statement of accounts annexed to the petition was arrived at on the basis of the amounts due and payable by the Respondent to IDFC immediately prior to the assignment of debt by IDFC to the Petitioner. Therefore, according to the Appellants, the application to initiate 'Corporate Insolvency Resolution Process' by the 'Financial Creditor' under Section 7 of the I&B Code with regard to the claimed amount pursuant to Loan Nos.2 and 3 was barred by limitation as it was filed on 29th September, 2017, i.e. after the cut-off period of three years, which expired much prior to 9th September, 2017. 7. The aforesaid contention is also corroborated by Form No.CHG-1 dated 11th September, 2014 enclosed with the Interlocutory Application No.3392 of 2019 filed by the Assignor and the 'Financial Creditor' to modify the charge pursuant to assignment of ....
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....s payable by the Borrower in respect of the loan and under the Transaction Documents to be due and payable immediately. e. Schedule-III Amortisation Schedule No. Date Repayment Amount (Rs.) 9. 15-Jul-2014 6,600,000 10. 15-Oct-2014 6,600,000 11. 15-Jan-2015 6,600,000 12 15-Apr-2015 7,150,000 29. 15-Jul-2019 16,500,000" 10. It was submitted that as per above clauses the 'Corporate Debtor' was liable to pay to Assignor Bank the installments, on their respective due dates, in accordance with the amortization/ repayment schedule. On each and every due date, on account of non-payment of the installments (every installment is much more than Rs. 1 lakh), a default occurred for the purpose of I&B Code. 11. It was further submitted that the 'Corporate Debtor' also availed certain credit facilities from a consortium of Banks. Out of the said credit facilities, IDFC Limited granted a Term Loan of Rs. 46,00,00,000/- (Term Loan-III) to Corporate Debtor/ Hotel Horizon Private Limited. The said loan was secured vide Facility Agreement (Secured Term Loan Agreement) dated 24.05.2012, executed by the 'Corporate Debtor'. The said Loan Agreement provided the follow....
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....on Company/ Reconstruction Company), vide Assignment Agreement dated 11.09.2014, IDFC Bank/ Assignor Bank assigned the loans granted to Corporate Debtor in favour of Phoenix ARC Private Limited (as the Trustee of Phoenix Trust FY-15-13). Since the Assignor Bank Assigned an SMA-2 account to Phoenix, as per Guidelines, dated 01.07.2015, issued by the Reserve Bank of India, Phoenix had 180 days from the date of acquisition of the account of Corporate Debtor to declare such an account as a Non- Performing Asset. 13. It is submitted that the 'Corporate Debtor' also committed a default each and every time when 'Corporate Debtor' failed to make payment of the installments which became due and payable, under Rupee Loan Agreement, dated 20.11.2009 (Term Loan-II). As per the Letter dated 06.03.2014 [whereby, Assignor Bank (as per request of 'Corporate Debtor') had restructured Term Loan for Rs. 46,00,00,000/- (Term Loan III), the 'Corporate Debtor' also committed a default on 28.02.2015, when the 'Corporate Debtor' failed to pay Rs. 44.70 Crores as per the terms of restructuring. 14. The application of Article 137 of the Limitation Act, 1963 for moving application under Sections 7 or 9 of ....
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.... 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 law that the limitation is extended only in certain limited situations and that the existence of....
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....xx 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 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 o....
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....ed 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 appearing on behalf of the appellant has argued that Artic....
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....sset 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 and 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 default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as nonperforming asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). 20. Admittedly, the 'Financial Creditor' took action under the 'SARFAESI ....
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.... of the I&B Code was barred prior to 9th September, 2017. 20. The Application under Section 7 of the I&B Code was filed on 29th September, 2017, i.e., much after three years of the cut-off period of default, which was prior to 9th September, 2017. 21. There is nothing on the record to suggest that the Appellant acknowledged the debt to Phoenix ARC Private Limited prior to cut-off date of three years in terms of Section 18 of the Limitation Act, 1963 which reads as follows: - 18. Effect of acknowledgment in writing.- (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its c....