Skip to main content

Commencement of Limitation - Date of default will be the date of declaration of account as NPA

In Jagdish Prasad Sarada vs Allahabad Bank, appeal was filed against the order of NCLT admitting Insolvency Resolution Petition against M/s. Sarda Agro Oils Limited and initiating ‘Corporate Insolvency Resolution Process’ and appointed ‘Interim Resolution Professional’ .


The Adjudicating Authority has admitted the case based on some payments made by the Appellant- Corporate Debtor M/s. Sarda Agro Oils Limited, Hyderabad - into the current account of the Respondent Bank and the last payment being on 19.02.2016 for an amount of Rs.49,50000/- reflected in the ‘Statement in the Account’ of the Corporate Debtor in the books of the Respondent Bank inspite of NPA on 30.09.2015.


The Appellant prayed for allowing the Appeal and setting aside the ex-parte order dated 27.08.2019 as stated above apart from stay of Insolvency Proceeding against the Corporate Debtor etc primarily on the issue of limitation and the date from which the limitation period should be counted.


The Respondent Bank had argued that the only issue that deserves consideration in this matter is whether the Application under Section 7 of the I&B Code, 2016 filed by the Respondent Bank was within the period of limitation and has submitted that the Corporate Debtor/Appellant was already sanctioned the cash credit facility of Rs.20 Crore, Term Loan of Rs.14 crore and Letter of Creditor of Rs.65 Crores by way of a Common Sanction Letter dated 31.05.2012. It was also submitted that the Appellant became irregular in repayment and consequently the account was declared NPA on 30.09.2015. The Respondent Bank has taken necessary measure by invoking provisions section 13(2) & (4) SARFAESI Act, 2002. They have realized Rs.49,50,000/- on 19.02.2016 by way of cash and is reflected in the ledger of Corporate Debtor maintained with the Respondent Bank. The Respondent Bank has gone on further submission that by operation of Section 19 of the Limitation Act, 1963 read with Article 137 of the Schedule to the said Act, a fresh period of limitation of 3 years commenced from 19.02.2016 when a part of the debt/interest was repaid. The Respondent Bank has also averred that they have filed under Section 7 Application of I&B Code, 2016 on 31.12.2018 which is within 3 years from 19.02.2016. They have cited the Hon’ble Apex Court Judgment of M/s. Gaurav Hargovindbhai Dave Vs Asset Reconstruction Company (India) Ltd. & Anr., (2019) 10 SCC 572.


This decision has been followed by this Hon’ble Tribunal in the matter of Ishrat Ali Vs. Cosmos Cooperative Bank Ltd & Anr. (Company Appeal (AT) (Ins) No.1121 of 2019). Further, in the context of Section 19 of the Act, the Hon’ble Supreme Court in the case of Kamla Devi and Ors. Vs. Pt. Mani Lal Tiwari & Ors. (1976) 4 SCC 818 held that “4.... The function of Section 19 is to provide a later date to count the period of limitation afresh, and that fresh period of limitation will be computed from the time when the acknowledgement is signed....”.


The NCLAT observed that the view taken by the Hon’ble Apex Court in ‘B.K.Educational Services Private Limited Vs. Parag Gupta and Associates’ that the limitation period for application under Section 7 of the I&B Code is three years as provided by Article 137 of the Limitation Act, which commences from the date of default and is extendable only by application of Section 5 of The Limitation Act, 1963 if any case for condonation of delay is carved out, has again been reiterated in the latest pronouncement of Hon’ble Apex Court in ‘Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr. (Civil Appeal No.6347 of 2019) decided on 14th August, 2020. It is therefore manifestly clear that date of default will be the date of declaration of account as NPA and such date of default would not shift.


Allowing the appeal and setting aside the order of the NCLT including that of appointing IRP/RP, declaring moratorium, freezing of account etc. and all consequential action taken by IRP/RP including advertisement publication etc. all such orders and actions are declared illegal and set aside, the NCLAT reiterated that  the provisions of The Limitation Act,  1963 vide Section 238A of the I&B Code, 2016 will be applicable to all NPA cases provided they meet the criteria of Article 137 of the Schedule to The Limitation Act, 1963. The extension for the period of Limitation can only be done by way of application of Section 5 of The Limitation Act, 1963, if any case for the condonation of delay is made out.



Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more

Procedure to be followed on admissibility of additional evidence at appeal stage

In The Corporation of Madras vs M. Parthasarathy & Ors., the trial court had allowed the respondent company to file evidence in the form of photocopies and had dismissed all the four suits filed by the respondents with costs as the evidence were in the form of photocopies and were objected to by the respondents. On appeal the Additional District Judge allowed the respondents to file additional evidence in the form the original documents of the earlier admitted photocopies and based on the same allowed the appeal. In its turn the High Court also dismissed the appeal filed by the appellants who in turn approached the Supreme Court. The Supreme Court decided that the first Appellate Court committed two jurisdictional errors in allowing the appeals.  Referring to earlier judgements of the Supreme Court in Land Acquisition Officer, City Improvement Trust Board vs. H. Narayanaiah & Ors., , Shalimar Chemical Works Ltd. vs. Surendra Oil & Dal Mills (Refineri...
Post a Comment
Read more