Benefit of Limitation Act's Section 14 Not Applicable to DRT Recovery Proceedings: NCLAT

Benefit of Limitation Act's Section 14 Not Applicable to DRT Recovery Proceedings: NCLAT

Introduction

The National Company Law Appellate Tribunal (NCLAT) has held that the benefit of Section 14 of the Limitation Act cannot be extended to a creditor who initiated recovery proceedings before the Debt Recovery Tribunal (DRT) under the Recovery of Debt and Bankruptcy Act, 1993.

Factual Background

United Bank of India (now Punjab National Bank) had initiated recovery proceedings against Concast Morena Road Projects Pvt. Ltd. before the DRT. Subsequently, the bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal (NCLT), Kolkata.

Procedural Background

The NCLT rejected the bank's application under Section 7 of the IBC on grounds of limitation and failure to prove disbursement. The bank appealed against the NCLT's order before the NCLAT.

Issues

1. Limitation: Whether the benefit of Section 14 of the Limitation Act can be extended to the creditor who initiated recovery proceedings before the DRT.

2. Disbursement: Whether the bank had proved disbursement of the loan amount.

Contentions of the Parties

Appellant's Contention: The NCLT erred in holding that there was no disbursement despite the availability of the NeSL certificate confirming the debt. The DRT proceedings constitute civil proceedings under Section 14 of the Limitation Act, and the time spent therein should be excluded.

Respondent's Contention: The application under Section 7 of the IBC was time-barred, and the benefit of Section 14 of the Limitation Act cannot be extended.

Reasoning and Analysis

The bench comprising Chairperson Justice Ashok Bhushan and Mr. Arun Baroka Technical Member held that the benefit of Section 14 of the Limitation Act can be given only when the forum before which the proceedings were initiated lacked jurisdiction or suffered from a defect of a similar nature. The Tribunal observed that the DRT proceedings were filed for recovery purposes and not due to a lack of jurisdiction.

Decision

The NCLAT dismissed the appeal, holding that the application under Section 7 of the IBC was time-barred. The Tribunal distinguished the case of Sesh Nath Singh, where proceedings under the SARFAESI Act were stayed by the High Court for want of jurisdiction.

Implications

The judgment clarifies the applicability of Section 14 of the Limitation Act in cases where recovery proceedings are initiated before the DRT.

In this case the appellant was represented by Mr. Rajesh Kumar Gautam, Mr. Deepanjal Choudhary, Mr. Azal Aekram and Ms. Likivi Jakhalu, Advocates.