Absence Of Assignee Name In Balance Sheet Of Corporate Debtor Does Not Negate Applicability Of Section 18 Of Limitation Act: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that the fact that the debt was assigned to Assignee and the assignee was not named in the balance sheets does not negate the applicability of Section 18 of the Limitation Act, 1963 (Limitation Act). It further held that the debt at the time of filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code) is only considered, and the amount mentioned in the assignment agreement has no relevance in determining debt and default against the corporate debtor for the purpose of the Section 7 application. Brief Facts: M/s. Fairdeal Supplies Limited (corporate debtor) had obtained financial facilities from Allahabad Bank in the year 2010 for an amount of Rs. 34.50 crore to purchase a property at Coimbatore through auction sale conducted in the High Court of Judicature at Madras through official liquidator. The bank declared account NPA on 30.09.2011. On 27.09.2013, Allahabad Bank assigned its debt to the Pegasus by a registered assignment deed. In the year 2017, a suit was filed by the corporate debtor, challenging the assignment agreement in favour of the financial creditor being Suit No. 195/2017. On 18.08.2022, Section 7 application was filed by Respondent Pegasus claiming an amount debt in default amounting to Rs. 145,74,89,265/- as on 04.08.2022. The Adjudicating Authority, by order dated 19.03.2024, admitted the Section 7 application after hearing both parties. It held that the application filed by the financial creditor was not barred by limitation. The Adjudicating Authority relied on the corporate debtor's balance sheets from the financial years 2013–14 to 2019–20, which acknowledged the debt of Allahabad Bank. It also held that the corporate debtor could not dispute the legality of the assignment deed. Additionally, the Authority noted a record of default issued by NeSL. It concluded that the debt and default were established. Contentions: The Appellant submitted that as per the amended Section 28 of the Registration Act, 1908, applicable to the State of Tamil Nadu, every document affecting immovable property must be presented for registration at the office of the Sub-Registrar within whose sub-district the whole or part of the property is situated. It was further submitted that under Clause (b) of the amended provision, any document registered outside the State of Tamil Nadu, in violation of Clause (a), shall be deemed null and void. It was also submitted that in view of the aforesaid, assignment agreement being void application under Section 7 filed by the Respondent No. 1 on basis of such assignment agreement is not maintainable and deserves to be rejected. It was further contended that balance sheet of the corporate debtor on which the reliance is placed, there is no acknowledgment of debt in favour of the Respondent Pegasus, hence, Respondent No. 1 cannot claim any acknowledgement for extension of limitation under Section 18 of the Limitation Act. Per contra, the Respondent submitted that even if it is accepted that any document relating to immovable property situated in Coimbatore was required to be registered at the office of the Sub-Registrar within whose sub-district the property is located, that alone does not render the entire assignment void or inoperative. It was further submitted that at most, the assignment deed may not confer rights concerning the immovable property in Coimbatore. However, since the financial debt owed by the corporate debtor to Allahabad Bank was assigned, Respondent No. 1 was fully entitled to file the Section 7 application based on the strength of the assignment. Lastly, it was submitted that the balance sheet of the corporate debtor from 2013–2014 to 2019–2020 continuously acknowledged the debt. Acknowledgement of debt, even if the balance sheet does not refer to the Respondent No. 1 and refers to only the Allahabad Bank from whom facilities was taken by corporate debtor the said is valid acknowledgment from extension of limitation. Observations: The Tribunal observed that Section 28 of the Registration Act deals with the registration of documents relating to land. Sub-clause (a) mandates that every document affecting immovable property must be registered in the office of the Sub-Registrar within whose sub-district the property is situated. It further added that sub-clause (b) provides that any document registered outside the State of Tamil Nadu, in violation of clause (a), shall be deemed null and void. Based on the above, it held that the document must be treated as null and void with respect to property situated in Tamil Nadu if it was not registered within the state. It held that consequently, the assignment agreement, to the extent it pertains to immovable...

Absence Of Assignee Name In Balance Sheet Of Corporate Debtor Does Not Negate Applicability Of Section 18 Of Limitation Act: NCLAT

Mohd Malik Chauhan

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