The NCLAT held that the application was hopelessly time barred and that it was not permissible for the SBI to take recourse to Section 18 of the Limitation Act for triggering Corporate Insolvency Resolution Process under Section 7 of the I&B Code against the Corporate Debtor
The Appeal filed by the Appellant- State Bank of India (Financial Creditor) against the impugned order passed by the Adjudicating Authority (National Company Law Tribunal/NCLT), Indore Bench, at Ahmedabad, Court-1, has been dismissed by the National Company Law Appellate Tribunal (NCLAT).
The Adjudicating Authority had rejected the application filed by the Appellant under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) for being hit by limitation.
The Appellant assailed the impugned order primarily on the grounds of there being an acknowledgment on the part of the Corporate Debtor in the form of a revival letter extending the period of limitation which was said to have been overlooked by the Adjudicating Authority while passing the impugned order.
Herein, the Appellant had referred to a One Time Settlement (OTS) proposal stated to be emanating from the Corporate Debtor and submitted that in terms of that proposal, the Corporate Debtor, while expressing its inability to revive the company, proposed to raise funds from various investors for taking over of its business subject to settlement of its liabilities towards the lenders/ financial creditors. This, according to the Appellant amounted to acknowledgment of liability.
The Appellant also put forth that the time for limitation would begin to run from 6 November, 2015 when the OTS proposal was reiterated and the application under Section 7 of the I&B Code having been filed by the Appellant before the Adjudicating Authority on 19 September, 2018 would be within the prescribed period of three years.
The Appellate Tribunal noted that the application filed by the Appellant under Section 7 of the I&B Code before the Adjudicating Authority on 19 September, 2018 was dismissed on 16 September, 20020 in terms of the impugned order on the grounds that the same was barred by limitation.
It was also observed that the provisions of the Limitation Act, 1963 were applicable to proceedings under the I&B Code from its very inception and the provisions of Section 238A introduced subsequently are merely clarifying in nature.
It was also opined that the Hon'ble Apex Court has, in a catena of authorities, held that the applications under Sections 7 and 9 of the I&B Code not being a suit are governed under the residuary provision engrafted in Article 137 of the Limitation Act which prescribes a period of three years as limitation.
Adverting to the facts of this case, it was noted that in the application to the Adjudicating Authority filed in the prescribed format, the date of default was recorded as 10 June, 2014 whereas the application under Section 7 came to be filed on 19 September, 2018 i.e. more than four years after the default occurred. The time, for purposes of reckoning limitation in terms of Article 137 of the Limitation Act, would commence from the date of default i.e. 10 June, 2014 which would neither be shifted nor extended once a default has occurred.
On the basis of such default, the Financial Creditor in the instant case had approached the Debts Recovery Tribunal on 20 October, 2015. In the given circumstances, it could not lie in the mouth of the Appellant that the date of default gets extended on account of acknowledgment made in the OTS proposal emanating from the Corporate Debtor.
There cannot be two defaults in respect of the same debt, one for the purpose of claim filed before the Debts Recovery Tribunal and the other for the purposes of I&B Code based on OTS proposal, more so when in the application filed before the Adjudicating Authority in the prescribed format, the date of default has unambiguously been reflected as 10 June, 2014.
The Appellate Tribunal held that the application having been filed before the Adjudicating Authority beyond three years of occurrence of default was hopelessly time barred and it was not permissible for the Appellant to take recourse to Section 18 of the Limitation Act for triggering Corporate Insolvency Resolution Process under Section 7 of the I&B Code against the Corporate Debtor.