TaxTMI 
TaxTMI 
2022 (4) TMI 1367
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....cation under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'IB Code'). The Appellant, Suspended Director of the Corporate Debtor aggrieved by the order dated 14.12.2021 has filed this Appeal. 2. Brief facts of the case and sequence of events necessary to be noticed for deciding this Appeal are: (i) The Principal Borrower Gee Pee Infotech Pvt. Ltd. had was extended financial facility by State Bank of India on 1st April, 2006. The Corporate Debtor - M/s Infra Tie-up Pvt. Ltd. executed a Deed of Guarantee for overall unit on 1st April, 2006. Supplemental Deed of Guarantee for increasing overall limit was executed by Corporate Debtor on 19th September, 2008, 5th October, 2009, 13th October, 2010. (ii) On 10th January, 2014 the account of Principal Borrower was declared Non-Performing Asset (NPA). By a letter dated 20th August, 2014, State Bank of India invoked the Bank Guarantee against the Corporate Debtor and called upon the Corporate Debtor to make payment. (iii) On 24th September, 2015, OA No.193/2015 was filed by the State Bank of India against the Principal Borrower, Corporate Debtor (Corporate Guarantor) etc. ....
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....olkata, both against Principal Borrower and the Corporate Debtor and with effect from the date of filing of OA before the Debts Recovery Tribunal (DRT), period of limitation had stopped running. Hence, the Application under Section 7 filed by the State Bank of India on 9th March, 2018 is well within time. The Application filed before DRT was civil proceedings akin to a suit filed in a Civil Court. (ii) That within the period of three years from declaring the account of Principal Borrower NPA, there has been acknowledgement of debt by the Principal Borrower by the letters dated 19th February, 2016 and 29th March, 2016, which letters were brought before the Adjudicating Authority by means of Supplementary Affidavit filed on behalf of State Bank of India. The letters were for one-time settlement of account, which letters contained the acknowledgment of debt within the meaning of Section 18 of the Limitation Act. Hence, the Financial Creditor was entitled to file the Application under Section 7 within three years from the said acknowledgments. Hence, the Application filed on 9th March, 2018 being within three years from the date of acknowledgement was well within time. 6. W....
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.... 2015. Shri Joy Saha has relied on paragraphs 94, 95, 96, 97 and 98 of the judgment of the Hon'ble Supreme Court. The Hon'ble Supreme Court in the aforesaid judgment has held that proceedings under SARFAESI Act are undoubtedly civil proceedings. In paragraph 97 and 98 following has been laid down: "97. The Chief Metropolitan Magistrate or the Judicial Magistrate, as the case may be, exercising powers under Section 14 of the SARFAESI Act, functions as a civil court/executing court. Proceedings under the SARFAESI Act would, therefore, be deemed to be civil proceedings in a court. Moreover, proceedings under the SARFAESI Act under Section 13(4) are appealable to the DRT under Section 18 of the SARFAESI Act. Mr Dave's argument that proceedings under the SARFAESI Act would not qualify for exclusion under Section 14 of the Limitation Act, because those proceedings were not conducted in a civil court, cannot be sustained. 98. Another civil proceeding whether in a court of first instance or of appeal or revision, against the party, for the same relief, would have to be construed to include any civil proceeding in a forum, whether of first instance, or appellate, or re....
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..... Keeping in view the aforesaid principles it is required to be scrutinised whether the time spent in adjudication of the present suit and the appeal arrests the running of time for the purpose of adverse possession. 43. We have referred to the aforesaid pronouncements since they have been approved by this Court in Babu Khan v. Nazim Khan [(2001) 5 SCC 375 : AIR 2001 SC 1740] wherein after referring to the aforesaid two decisions and the decision in Ragho Prasad v. Pratap Narain Agarwal [1969 All LJ 975] , the two-Judge Bench ruled thus : (Babu Khan case [(2001) 5 SCC 375 : AIR 2001 SC 1740] , SCC p. 384, para 12) "12. ... The legal position that emerges out of the decisions extracted above is that once a suit for recovery of possession against the defendant who is in adverse possession is filed, the period of limitation for perfecting title by adverse possession comes to a grinding halt. We are in respectable agreement with the said statement of law. In the present case, as soon as the predecessor-ininterest of the applicant filed an application under Section 91 of the Act for restoration of possession of the land against the defendant in adverse possession, the ....
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....A litigant cannot suffer for no fault of his own, just because of procedural delays in sending the plaint to the Master for the necessary endorsements in terms of Rule 4 of Chapter VII." 15. The above judgment of the Calcutta High Court has no relevance in the present case and was on its own fact. 16. The judgment of Bombay High Court relied by learned Senior Counsel for the Respondent needs to be noticed is (2013) SCC OnLine Bom 181 - State of Maharashtra vs. Hindustan Construction Company Ltd. & Anr. In paragraph 19 of the judgment, following observations have been made: "19. In my view right to sue accrued when claim for depreciation made by Respondent was rejected on 31st March, 2004 and raising of demand by the Respondent by issuing debit note on 19th June, 2006 and refusal to pay the said demand by the Petitioner on 17th August 2006 would not commence fresh period of limitation, which had already commenced on 31st March, 2004. In view of Section 9 of the Limitation Act, 1963, once time is begun to run, no subsequent disability or inability to institute a suit or make an application stops it. Once time starts running, it does not stop. Limitation is not extended....
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....ion 7 petition came for consideration. In the above case, a winding-up petition under Section 433 of the Companies Act, 1956 was filed on 21.10.2016 in the Bombay High Court. After coming into force the IB Code on 01.12.2016, winding-up petition was transferred to the NCLT as Section 7 Application under the Code. The statutory form namely - Form-1 was filed by the Applicant indicting the date of default as 19.08.2012. On 28.08.2018, the winding-up petition was admitted by the NCLT. An appeal was filed challenging the admission of Application under Section 7. The matter was taken before the Hon'ble Supreme Court and a submission was made that Application under Section 7 filed by IL&FS was barred by time. In paragraph 5 of the judgment, arguments raised before the Hon'ble Supreme Court was noticed in following words: "5. Dr Abhishek Manu Singhvi, learned Senior Advocate appearing on behalf of the petitioner-appellants, did not go into the merits of the case, but has raised only the statutory bar of limitation against IL&FS. According to the learned Senior Advocate, after this Court's judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates [B.K. Educa....
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.... that a suit had been filed by the petitioner in the City Court at Calcutta for damages against the Allahabad Bank. The Bank, in turn, filed a proceeding under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in 2001 before the Debt Recovery Tribunal, Calcutta. The civil suit was also transferred to the Debt Recovery Tribunal, Calcutta where both proceedings were pending adjudication. Meanwhile, under the Securitisation and Restructure of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act"), a notice dated 3-3-2016 was issued under Section 13(2) of the SARFAESI Act. The question which arose before the Court was whether the invocation of the Sarfaesi Act, being beyond limitation, would be saved because of the pending proceedings under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Court negatived the plea of the Bank, stating : (SCC OnLine Cal para 22) "22. Section 14 of the Limitation Act, 1963 permits exclusion of the time taken to proceed bona fide in a court without jurisdiction. Such section permits a plaintiff to present the sam....
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....002 dated 5-7-2011 are quashed including such notice." The question arose before the Calcutta High Court regarding limitation for filing a proceeding under SARFAESI Act, 2002 ("2002 Act"), when a proceeding under the Recovery of Debts Due to Bank and Financial Institutions Act, 1993 ("1993 Act") was pending. The Calcutta High Court in the above case had occasion to consider the limitation qua the proceedings under the 2002 Act, despite the pendency of other proceedings under the 1993 Act. It was held that right under 2002 Act has to be done within the period of limitation prescribed under the Limitation Act and without there being an extension of the period of limitation by act of the parties, the proceedings would be barred by time. The judgment of the Calcutta High Court was approved by the Hon'ble Supreme Court in the Jignesh Shah case (supra). In paragraph 21, the Hon'ble Supreme Court laid down following: "21. The aforesaid judgments correctly hold that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy of a winding-up proceeding. In law, when time begins to run, it can only be ....
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....n 18 of the Limitation Act. The learned Senior Counsel for the Respondent rely on the acknowledgements, which were made by the Principal Borrower vide its letters dated 19th February, 2016 and 29th March, 2016. The letters have been brought on record as Annexure E to the reply, which letters were also brought on record before the Adjudicating Authority by means of Supplementary Affidavit. The law with regard to applicability of the Limitation Act is well settled by various judgments of the Hon'ble Supreme Court. In Dena Bank (supra), the Hon'ble Supreme Court in the context of the Application under Section 7 of the IB Code and Section 18 of the Limitation Act, has laid down following in paragraph 138, 139 and 140: "138. While it is true that default in payment of a debt triggers the right to initiate the corporate resolution process, and a petition under Section 7 or 9 IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238-A IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a petition in the NCLT is condonable under Section 5 ....
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....he Principal Borrower to pay all the dues on the basis of one-time settlement. It is useful to extract the letter dated 19th February, 2016, which is to the following effect: "Dear Sirs We write to you under instructions from and on behalf of our abovenamed two Clients. Our Clients have been maintaining case credit account with your Bank as per following details Name of Client Cash Credit Account No. Gee Pee Infotech Pvt. Ltd. 30044323427 Ganpatilal Pawan Kumar Traders Pvt. Ltd. 30157130517 The aforesaid two accounts having designated as Non- Performing Asset (NPA) since about 2014, and your Bank has also initiated recovery proceedings before the Debts Recovery Tribunal, Kolkata which is numbered as OA No.493 of 2015 (State Bank of India Vs. Gee Pee Infotech Pvt. Ltd. & Ors.) and OA No 492 of 2015 (State Bank of India Vs. Ganpatlal Pawan Kumar Traders Pvt. Ltd. & Ors.). The said two DRT proceedings are pending. Our Clients state and submit the above cash credit account have become irregular and overdrawn by reason of the unprecedented and unexpected business loss suffered, and despite the same only to show their bona fi....
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....tains an acknowledgement of debt. In paragraph 139, the following has been laid down: "139. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of one-time settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1] cited by Mr Shivshankar, this Court had no occasion to consider any proposal for one-time settlement. Be that as it may, the balance sheets and financial statements of the corporate debtor for 2016-2017, as observed above, constitute acknowledgment of liability which extended the limitation by three years, apart from the fact that a certificate of recovery was issued in favour of the appellant Bank in May 2017. The NCLT rightly admitted the application by its order dated 21-3-2019 [Dena Bank v. Kavveri Telecom Infrastructure Ltd., 2019 SCC OnLine NCLT 7881]." 24. We may also notice the submission of learned Counse....
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....ayment of "debt" when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 IBC enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate ....
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....bility. The financial creditor has not only the right to recover the outstanding dues by filing a suit, but also has a right to initiate resolution process against the corporate person (being a corporate debtor) whose liability is coextensive with that of the principal borrower and more so when it activates from the written acknowledgment of liability and failure of both to discharge that liability. 50. Suffice it to conclude that there is no substance even in the second ground urged by the appellant regarding the maintainability of the application filed by the respondent financial creditor under Section 7 IBC on the ground of being barred by limitation. Instead, we affirm the view taken by NCLT [Union Bank of India v. Surana Metals Ltd., 2019 SCC OnLine NCLT 9859] and which commended to NCLAT [Laxmi Pat Surana v. Union Bank of India, 2020 SCC OnLine NCLAT 217] - that a fresh period of limitation is required to be computed from the date of acknowledgment of debt by the principal borrower from time to time and in particular the (corporate) guarantor/corporate debtor vide last communication dated 8-12-2018. Thus, the application under Section 7 IBC filed on 13-2-2019 is with....