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2020 (9) TMI 12
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....), which was admitted by Adjudicating Authority (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 limita....
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....ons" are petitions which are filed under the Code, it is Article 137 of the Limitation Act which will 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. ....
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....s due and payable prior to assignment dated 11th September, 2017. The Loan Agreements reveal that all sums under Loan Nos.2 and 3 granted to the 'Corporate Debtor' were due and payable before Company Appeal (AT) (Insolvency) No. 177 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 aforesa....
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....allment of the principal amount under the Loan on due date. (b) Default by the Borrowers in the payment of any installment of interest on the Loan on any Interest Payment date. d. Consequence of Default ... (a) Declare the entire loan or part thereof and all amounts 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 B....
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....ebtor defaulted in payments of the said installments under Term Loan-II. Further, as per the case of the Corporate Debtor, the account of the Corporate Debtor was SMA- 2 on 14.08.2014. Since the account of the Corporate Debtor was SMA-2, as per Article 3.2 of Guidelines, dated 26.02.2014 issued by the Reserve Bank of India (which provides for assignment of SMA-2 accounts by Banks to Securitisation 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....
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.... Singhvi relied upon a number of judgments in which proceedings under Section 433 of the Companies Act, 1956 had been initiated after suits for recovery had already been filed. These judgments have held that the existence of such suit cannot be construed as having either revived a period of limitation or having extended it, insofar as the winding-up 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 19....
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....the manner provided in the Limitation Act. For example, an acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period, but a suit for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding-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 su....
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.... Court which resulted in the High Court remanding the aforesaid matter. From this order, a special leave petition was dismissed on 27-3-2017. 3. An independent proceeding was then begun by Respondent 1 on 3-10-2017 being in the form of a Section 7 application filed under the Insolvency and Bankruptcy Code in order to recover the original debt together with Company Appeal (AT) (Insolvency) No. 177 of 2019 & Interlocutory Application No.3392 & 3542 of 2019 Page 19 of 26 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 su....
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....e case of the respondents. Further, it is not for us to interpret, commercially or otherwise, articles of the Limitation Act when it is clear that a particular article gets attracted. It is well settled that there is no equity about limitation - judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature. 8. This being the case, the appeal is allowed and the judgments of the NCLT and NCLAT are set aside." 18. 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 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 cre....
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.... December, 2008. 19. It has been accepted by the Respondent that the record shows that the 'Corporate Debtor' defaulted making payment of the aforesaid Loan amount prior to 9th September, 2014. Both the Loan accounts as relied by the 'Financial Creditor' are maintained by the Assignor, which also makes it clear that the amounts under Loan Nos.2 and 3 were payable prior to the 21st September, 2014. As, the 'Corporate Debtor' having committed default prior to 9th September, 2014, i.e. much before the assignment of debt to Phoenix ARC Private Limited, we hold that the Application under Section 7 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 p....