NCLT Mumbai: Mere Mention Of SARFAESI Proceeding Is Not “Sufficient Cause” For The Condonation Of Delay Under Section 5 Of Limitation Act, 1963
The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Justice Virendrasingh Bisht (Retd.) (Judicial Member) and Mr Prabhat Kumar (Technical Member) has rejected an application filed under Section 5 Limitation Act, 1963 (“Limitation Act”) and disposed of a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). NCLT observed that...
The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Justice Virendrasingh Bisht (Retd.) (Judicial Member) and Mr Prabhat Kumar (Technical Member) has rejected an application filed under Section 5 Limitation Act, 1963 (“Limitation Act”) and disposed of a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). NCLT observed that the mere initiation of SARFESI Proceedings wasn't sufficient reason to condone delay in filing a time-barred petition under Section 7 of IBC.
Background Facts
Ace Agro Industries Pvt. Ltd.(“Corporate Debtor”) is a Private company involved in the Manufacture of basic chemicals. On 31st July 2013 the Corporate Debtor made a default in making payments to its financial creditor.
As per the Limitation Act, a petition for filing of Corporate Insolvency Resolution Process (“CIRP”) should be made within 3 years from the date of making such default. On 21-09-2019, the State Bank of India (“Applicant”) filed a petition under Section 7 of IBC for initiating CIRP proceedings against the Corporate Debtor. Therefore, there is a delay of 1155 days in the filing of the petition. The Applicant also filed an application under Section 5 of the Limitation Act for condonation of delay.
Contentions of Applicant
The Applicant argued that following the declaration of the respondent's account as NPA, the Applicant took SARFAESI actions and also filed an Original Application in the Debt Recovery Tribunal, Mumbai for debt recovery and bankruptcy. Therefore, there was no intentional delay in initiating the current proceeding.
Contentions of Respondent
The Respondent opposed the submissions of the applicant and argued that the abnormal delay has not been satisfactorily explained and there is no sufficient cause to warrant the indulgence of this Tribunal. The Respondent relied upon the judgment given in the matter of State Bank of India Vs. M/s. Deccan Florabase Ltd wherein the Tribunal dealt with similar facts and held that the prosecution of the SARFAESI proceeding is not a reasonable reason for the delay.
NCLT Verdict
The NCLT disposed of the petition stating that the applicant had miserably failed to give any acceptable and cogent reason sufficient to condone such a huge delay.
“No reasonable and acceptable explanation for the huge delay is given except mentioning the prosecution of SARFAESI proceeding and the settlement (fact of settlement). No evidence of subsequent proceedings or communication from the Corporate Debtor in any form is placed on record. According to us, applicant has miserably failed to give any acceptable and cogent reason sufficient to condone such huge delay. Simply stating the present is a case of gross negligence and smacks of bonafides.”
Case Title: State Bank of India Vs. M/s. Ace Agro Industries Pvt. Ltd. & Ors
Case No.: Company Petition No. 3454/2019
Counsel for Applicants: O. A. Das
Counsel for Respondents: Mr A. P. Steenson i/b APS Law Associates