Friday, 23 October 2020

Mr. Basab Biraja Paul & Ors. Vs.Edelweiss Asset Reconstruction Company Limited - Application U/s 7 is within Limitation, as action was initiated in DRT within Limitation.

 NCLAT (06.09.2019) in Mr. Basab Biraja Paul & Ors. Vs.Edelweiss Asset Reconstruction  Company Limited [Company Appeal (AT) (Ins) No.772 of 2019] held that when the Financial Creditor was pursuing its remedies in proper forum, there was continuous cause of action existing and it cannot be said that the debt became time barred. The IBC was enforced in 2016 and the additional remedy became available. Financial Creditor resorted additionally to it and the Application was filed under Section 7. It could not be said to be time barred.

 

Excerpts of the order;

# 1. Edelweiss Asset Reconstruction Company Limited, assignee of debt from original lender – UCO Bank (Assignor), filed CP 2987(IB)/MB/2018 under the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate corporate insolvency resolution process against Octaga Green Power and Sugar Company Limited – Corporate Debtor claiming outstanding debt which was Rs.69,70,15,694/- as per recall Notice dated 15th March, 2018. The Financial Creditor claimed that there was debt which was in default and thus, the Application in format.

 

# 2. The matter came up before Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) and the Section 7 Application was admitted on 2nd July, 2019. The present Appeal has been filed by the shareholders of the Corporate Debtor.

According to the Appellants, the Corporate Debtor had availed financial assistance/cash credit facility and term loan from UCO Bank which was sanctioned on 19th January, 2005, 22nd February, 2008, 31st March, 2009, 6th November, 2009 and 18th May, 2012 of a total amount of Rs.29,96,00,000/-. Necessary documents were executed. Later, the Appellants claim that the Corporate Debtor entered into Master Restructuring Agreement (MRA – in short) dated 31st March, 2012 with the Assignor on 22nd June, 2012. Mortgage of properties was created under the Master Restructuring Agreement and other ancillary documents. It is claimed that the account of the Corporate Debtor was classified as non-performing asset (NPA) on 31st March, 2013 and the bank had moved the Debt Recovery Tribunal. ………..  However, the Financial Creditor filed Section 7 proceedings. The Appellants claim that the proceeding has been filed after a delay of 5 years from the date of the account of the Corporate Debtor being classified as NPA.

 

# 3. The Appellants claim that the debt is clearly barred by law of limitation and proceedings before DRT would not save the limitation. The Company Petition has been filed in 2018 for loan facility availed in 2012 which was classified as NPA on 31st March, 2013. Thus, according to the Appellants, the admission of the Application of Financial Creditor (Respondent No.1) is bad in law and the Application should have been dismissed.

 

# 6. Having gone through the matter, there is no dispute with regard to the fact that the Corporate Debtor had taken credit facilities from UCO Bank on 19.01.2005, 22.02.2008, 31.03.2009, 06.11.2009 and 18th May, 2012. There is no dispute regarding the fact that Corporate Debtor had secured the credit facilities taken by equitable mortgage of immovable property and by executing other securities. The filing of proceedings before DRT in 2014 and invoking of Section 13(2) of SARFAESI in 2016 are also not disputed. Amount more than Rs.1 Lakh is in default, is apparent from record. The proceeding in DRT is still pending.


# 9. The Financial Creditor had moved DRT in 2014 which was a relief available at that time. We do not agree with the argument of the Appellants that Section 14 of Limitation permits exclusion of time of proceedings bona fide in a Court when the Court was without jurisdiction, and so pursuing relief in proper Court will not be helpful. It would be strange to say that if you prosecute relief in wrong Court, it would save limitation but if you prosecute relief in right Court, you cannot resort to additional relief which becomes available later. In our view, when the Financial Creditor was pursuing its remedies in proper forum, there was continuous cause of action existing and it cannot be said that the debt became time barred. The IBC was enforced in 2016 and the additional remedy became available. Financial Creditor resorted additionally to it and the Application was filed under Section 7. It could not be said to be time barred.


# 10. We do not find any substance in the arguments raised with regard to limitation. As such, there is no substance in the Appeal.

 

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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.