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

Merits and the terms of contract are irrelevant for invoking of the bank guarantees

In Sabarkantha Annuity Pvt. Ltd. Vs. NHAI and Ors, the Petitioner filed before the Delhi High Court  petition under Section 9 of the Arbitration and Conciliation (Amendment) Act, 2015 with a prayer that, Respondents be restrained from acting upon the letter dated 15th September, 2017 or from invoking the Bid securities of the Petitioner to the tune of Rs. 10.93 Crores and also restraining the banks from honouring the invocation of said bank guarantees on behalf of Respondent No. 1 acting in terms of letter dated 3rd November, 2007. Petitioner has relied upon Clauses Nos. 9.1.1, 9.1.2 and 4.3 of the agreement dated 28th April, 2017 entered into between the parties to say the claim for damages since is not a claim for a sum presently due and payable and the respondent would be entitled to damages only on proof of loss, per Clause 4.3 of the agreement and hence is not entitle to the entire sum of bid security.  The Court found that Clause No. 9.1.2 speaks of an exclusiv...
Post a Comment
Read more

Right of pre-emption under West Bengal Land Reform Act

In Rabindra Nath Kundu & Anr vs Sudhir Hira, Bijoy Krishna Hira being the owner in the suit plot, gifted to Santosh Kumar Hira demarcated 11 decimals of land vide deed of gift dated 27.4.2004 and the latter sold 9 decimals out of 11 decimals of land to Sudhir Hira the preemptor/opposite party no. 1 and well demarcated 1.65 decimals of land in the said plot along with several other plots were sold, transferred and conveyed to the preemptees/petitioners herein by a registered deed of sale dated 10.8.2010, the subject matter of preemption. It is argued on behalf of the preemptees that  the present opposite party no. 1/preemptor Sudhir Hira has no relationship of co-sharership with Santosh Kumar Hira opposite party no. 2 as the demarcated portion of land has been purchased. It is settled principle of law that partial preemption is not permissible and this was what the view adopted by this Hon'ble High Court is Surendra Vs. Abhimannu reported in (1980) 1 Cal LJ 135 whe...
Post a Comment
Read more

CBI has no jurisdiction to probe affairs of medical college:HC

The Madras High Court has quashed charges against administrators of a medical college and dismissed CBI's petitions opposing discharge of officials of two other medical colleges, saying the investigation agency, or any other external agency for that matter, has no jurisdiction to probe the affairs of a medical college. Quashing the charges against the administrators of a medical college and dismissing CBI's petitions opposing the discharge of officials of two other medical colleges, Justice Aruna Jagadeesan said "contravention of rules and regulations may be an offence against the statute but is not a crime. There is no room or jurisdiction for any external agency to investigate the affairs of any medical institution coming within the purview of the Medical Council of India." In identical set of orders, all delivered on August 6, Justice Jagadeesan said "the shortfall in faculties and submissions of fake/forged documents would only disentitle the institution...
Post a Comment
Read more