NATIONAL COMPANY LAW APPELLATE TRIBUNAL

Bimalkumar Manubhai Savalia Vs Bank of India

MANU/NL/0175/2020

05.03.2020

Insolvency

Limitation period will not be extended in SARFAESI & DRT Proceedings on part payment under IBC

The Appeal preferred by a Shareholder and Director of the Corporate Debtor challenging the order passed by the Adjudicating Authority (National Company Law Tribunal). The Adjudicating Authority admitted the Application filed by the Respondent No. 1 herein in the capacity as Financial Creditor under Section 7 of Insolvency and Bankruptcy Code, 2016 ('IBC') on the ground that the Corporate Debtor defaulted in payment of debt/loan facility availed by the Corporate Debtor.

Learned Counsel for the Appellant submitted that the Application filed by the Respondent No. 1 herein before the Adjudicating Authority was contested by filing objections to the said Application and took a specific stand that the Application filed by the Financial Creditor was time barred. He submits that the Adjudicating Authority admitted the Application and initiated Corporate Insolvency Resolution Process (in short 'CIRP') of the Corporate Debtor. Learned Counsel for Appellant submitted that the Adjudicating Authority did not consider the objections taken by the Corporate Debtor. Hence, the present Appeal has been filed.

The main ground taken by the Appellant is with regard to the Application filed by 1st Respondent under Section 7 of IBC is time barred. Issue raised in present case is whether the Application filed on 30th August, 2018 is within limitation period in view of Article 137 of Limitation Act, 1963 which is applicable to Application under Sections 7 & 9 of IBC as held by Supreme Court in "B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta & Associates".

With regard to the limitation, the Adjudicating Authority observed that the date of mortgage is 18th November, 2010, The Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 ('SARFAESI') and Debt Recovery Tribunal ('DRT') started in 2017, One Time Settle (OTS) revised offer from 12 Crores to 14.56 Cores, vide letter dated 01.06.2016 was submitted by the Corporate Debtor to the Financial Creditor-Bank and the credits have come to the loan account on 31st March, 2017. The Adjudicating Authority, held that the Application is within limitation taking into account the OTS proposal dated 1st June, 2016 and the amounts which have come from the Guarantor into the loan account of the Financial Creditor on 31st March, 2017.

Present Tribunal is 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.

The Respondent No. 1 failed to establish the Application filed within the period of limitation. In view of the judgment of the Hon'ble Supreme Court in the matter of "B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta & Associates", application is barred by limitation. In the present case, 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 30th August, 2018 is beyond the period of limitation. The Impugned Order passed by the Adjudicating Authority is quashed and set aside. Appeal allowed.

Tags : Limitation period Extension Validity

Share :