The National Company Law Appellate Tribunal reversed the order of the National Company Law Tribunal, Ahemdabad bench, holding that the order of admission of application filed by Bank of India (BOI) as the Financial Creditor, under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) was time barred.
Justices Venugopal M, (Judicial), Kanthi Narahari (Technical) and V P Singh, (Technical) relied on the judgment of the Supreme Court in "B.K. Educational Services Pvt. Ltd. Vs ParagGupta & Associates" where it was held that the limitation period in view of Article 137 of Limitation Act, 1963 is applicable to Applications under Sections 7 & 9 of IBC.
The Bench held the application was not within the limitation period as proceedings under the SARFAESI Act, 2002 and the Debt Recovery Tribunal did not extend the period of limitation. Further, the One time settle (OTS) offer made was not accepted by BOI and therefore did not constitute acknowledgment under Section 18 of the Limitation Act. The contention that the credits were made by guarantors in the account of the Corporate Debtor also did not extend the period of limitation as per Section 19 of the Limitation Act and there was no valid acknowledgment of debt by the Corporate Debtor within the period of 3 years.
"We are of the view that the SARFAESI and DRT proceeding will not extent the period of limitation since those proceedings are independent and as per section 238 of IBC, the Insolvency and Bankruptcy Code is a complete Code and will have overriding effect on other laws. Therefore, the proceedings initiated or pending in DRT, either initiated under SARFAESI or under debts and due to Banks and Financial Institutions cannot be taken into account for the purposes of limitation. OTS was not accepted by the 1st Respondent/the Financial Creditor, therefore, the same cannot be treated as an acknowledgement in view of Section 18 of the Limitation Act, 1963. From the records it is seen that the Appellant also made OTS Proposal on 28.04.2016 prior to the OTS Proposal i.e., 01.06.2016. However, it is stated that first OTS offer was given by the Appellant by using the words as "without prejudice". However, it is contended by the Respondent No. 1 herein, that in the OTS Proposal dated 01.06.2016 there is no use of word "without Prejudice". Therefore, the second OTS Proposal dated 01.06.2016 can be treated as an acknowledge for the purpose of limitation. However, we are not inclined to accept such submission made by learned Counsel for the Respondent No. 1 herein"
The Appellant, director and shareholder of M/s. Radheshyam Agro Products Pvt. Ltd (Corporate Debtor) had obtained credit facilities worth Rs. 26.76 crores from BOI in 2011 and further entered into an agreement for restructuring credit facilities. Pursuant to the said agreement, the Corporate Debtor was granted credit facilities worth Rs. 34.69 crores. However, Corporate Debtor defaulted in repayment of the loan amount and its account was declared as Non Performing Asset on 30.09.2014.
BOI filed a petition under Section 7 of the Insolvency Code on 30.8.2018 where it had admitted that the date of default was 05.11.2014 and contended that a (OTS) was given on 01.06.2016 and payments were made by guarantors in the account on 31.03.2017 which had the effect of extending the period of limitation. Refuting their claim the honourable bench further held
"……. the stand of the Respondent No. 1 that the period of limitation will get extended from the date of payment of amount by the Guarantor on 01.04.2017 cannot be a ground and the limitation will not get extended. Therefore, the submission made by the Respondent no. 1 is negated."
The Bench as a beneficial reference, relied in the matter of "C.Shivkumar Reddy Vs. Dena Bank and Anr." in Company Appeal(AT)(Insolvency) No. 407 of 2019 after considering the judgment of the Supreme Court, in the matter of "Jignesh Shah and Anr. Vs. Union of India (UOI) and Anr." and "Gaurav Horgovindbhai Dave Vs.Asset ReconstructionCompany (India) Ltd. & Anr." and "B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta & Associates"where it was held that there was nothing on record to suggest that the Corporate Debtor or its authorised representative by its signature has accepted or acknowledged the debt within 3 years from the date of default or from the date when account was declared NPA and directed as follows-
"15. In the present case as held supra, there is no acknowledge issued by Appellant/Corporate Debtor prior to expiry of 3 years or from the date of default. Therefore, the Application filed by the 1st Respondent before the Adjudicating Authority on 30.08.2018 is beyond the period of limitation The matter is remitted back to Adjudicating Authority to decide the fee and costs of "Corporate Insolvency Resolution process" payable to IRP/RP which shall be borne by the Bank of India."
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