SARFAESI / DRT proceeding not extends limitation period under IBC

Bimalkumar Manubhai Savalia Vs Bank of India (NCLAT)

Conclusion: Proceedings initiated or pending in DRT, either initiated under SARFAESI or under debts and due to Banks and Financial Institutions could not be taken into account for the purposes of limitation.  Therefore, the application filed by Bank before the Adjudicating Authority on 30.08.2018 was beyond the period of limitation. In the result, the Corporate Debtor was released from the rigor of Corporate Insolvency Resolution Process and action taken by IRP/RP and Committee of Creditor, if any, in view of the impugned order set aside.

Held: Appellant contended that Adjudicating Authority admitted the application filed by Bank herein in the capacity as Financial Creditor under Section 7 of Insolvency and Bankruptcy Code, 2016 (‘IBC’) on 30.08.2018 on the ground that the Corporate Debtor defaulted in payment of debt/loan facility availed by the Corporate Debtor. Appellant submitted that the application filed was time barred. With regard to the limitation, the Adjudicating Authority observed that the date of mortgage was 18.11.2010, The Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (‘SARFAESI’) and Debt Recovery Tribunal (in short ‘DRT’) started in 2017, One Time Settle (in short 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 had come to the loan account on 31.03.2017. Adjudicating Authority that the Application was within limitation taking into account the OTS proposal dated 01.06.2016 and the amounts which had come from the Guarantor into the loan account of the Financial Creditor on 31.03.2017. OTS was not accepted by the Financial Creditor, therefore, the same could not be treated as an acknowledgement in view of Section 18 of the Limitation Act, 1963. SARFAESI and DRT proceeding would not extend the period of limitation since those proceedings were independent and as per section 238 of IBC, the Insolvency and Bankruptcy Code was a complete Code and would 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 could not be taken into account for the purposes of limitation.  Bank further submitted that the Guarantors had transferred the amount to the Account of the Corporate Debtor on 01.04.2017, therefore the period of limitation was to be counted from 01.04.2017. Appellant contended that the amounts had been appropriated by Bank and therefore, appropriation of the Amount by Bank herein from the Guarantor would not extend the period of limitation. In the present case as held, there was no acknowledge issued  by Appellant/Corporate Debtor prior to expiry of 3 years or from the date of default. Therefore, the Application filed by Bank before the Adjudicating Authority on 30.08.2018 was beyond the period of limitation. In the result, the Corporate Debtor was released from the rigor of Corporate Insolvency Resolution Process and action taken by IRP/RP and Committee of Creditor, if any, in view of the impugned order set aside. The matter was remitted back to Adjudicating Authority to decide the fee and costs of “Corporate Insolvency Resolution process” payable to IRP/RP which should be borne by the Bank of India.

FULL TEXT OF ORDER OF  NATIONAL COMPANY LAW APPELLATE TRIBUNAL, DELHI

The Appeal preferred by a Shareholder and Director of the Corporate Debtor i.e., M/s Radheshyam Agro Products Pvt. Ltd. challenging the order dated 20t^h September, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahmedabad in CP (I.B.) No. 459/7/NCLT/AHM/2018].

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