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The National Company Law Appellate Tribunal (NCLAT) has held that proceedings before the Debt Recovery Tribunals (DRT) under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) etc will not extend the period of limitation for the purpose of the Insolvency & Bankruptcy Code, 2016. (Bimal Kumar vs BOI)
The Judgment was passed by a three-member Bench of Member (Judicial) Venugopal M, Members (Technical) Kanthi Narhari and VP Singh.
Respondent, Bank of India had filed a Section 7 IBC plea against the Corporate Debtor, M/s Radheshyam Agro Products Pvt. Ltd. for default in payment of debt/loan facility.
The plea was admitted by the National Company Law Tribunal (NCLT) Ahmedabad in September 2019.
In appeal against the initiation of corporate insolvency resolution process, the shareholders and directors of the Corporate Debtor argued that the application filed by the financial creditor, Bank of India was time-barred.
The Respondent submitted that the date of default, as mentioned in statutory form-1, was November 5, 2014. However, the Section 7 plea which was filed on August 20, 2018 was within the limitation period for the reason that in a letter pursuant to a One-Time Settlement offer under SARFAESI, dated June 1, 2016, the Corporate Debtor had acknowledged the debt.
It was added that the Guarantor also paid the amount of Rs. 1,26,619 and Rs. 1,28,645 by transferring the same to the account of the Corporate Debtor in April 2017, in accordance with the Deed of Guarantee.
For the aforesaid reasons, the Respondent stated that the Section 7 Application was within limitation.
After considering the submissions made by the parties, the NCLAT reiterated that the limitation period for the purpose of Sections 7 & 9 of IBC was governed by Article 137 of Limitation Act, 1963.
The NCLAT noted that pursuant to the mortgage created in November, 2010, SARFAESI and DRT proceedings started in 2017, a revised one-time Settlement offer was made on June 1, 2016 and payment were recieved through the guarantor in March 2017.
The NCLAT added it was on the basis of the last two developments that the NCLT opined that the Section 7 plea was within the period on limitation.
Disagreeing with the NCLT's conclusion, the NCLAT stated,
The NCLAT ruled that the proceedings initiated or pending before DRT, either initiated under SARFAESI or other debts, could not be taken into account for the purposes of limitation under IBC.
It added that the OTS was not accepted by the Respondent, Bank of India, and therefore, the same could not be treated as an acknowledgement in view of Section 18 of the Limitation Act, 1963.
As far as payment by the guarantors was concerned, the NCLAT held that the date of payment of amount by the Guarantor could not be a ground for extending the period of limitation in terms of Article 19 of the Limitation Act.
"Article 19 of the Limitation Act will fall under the category of first division of schedule which applies to the suits. However, Section 7 of the IBC is not a suit and as held by Hon’ble Supreme Court, Section 7 is an Application under the IBC which falls under the category of Application in para II of 3rd division. Therefore, the Hon’ble Supreme Court held that the Article 137 will apply to the Applications filed under Section 7 & 9 of the IBC."
In view of the above, the NCLAT stated that there was no acknowledgement issued by the Corporate Debtor prior to expiry of 3 years or from the date of default and held that the Section 7 application was filed beyond the period of limitation.
The Appeal was accordingly allowed.
The Petitioner was represeneted by Advocate Mohit Gupta and AR Gupta & Associates.
Bank of India was represented by Advocates Ashish Rana, Harshit Garg.
Resolution Professional was represented by Advocate Ravi Raghunath.
Read the Judgement: