NCLAT (18.12.2020) in Sh. Rajendra Narottamdas Sheth & Anr Vs Sh. Chandra Prakash Jain & Anr.. [Company Appeal (AT) (Insolvency) No. 621 of 2020] held that;.
Section 18 applies to not merely suits but also applications and where before expiry of the prescribed period for an Application an acknowledgment is made, the Section provides for computing fresh period of Limitation from the time when acknowledgment was so signed.
Perusal of Section 19 shows that where payment is made on account of a debt or interest before expiration of the prescribed period by the person liable to pay, a fresh period of Limitation shall be computed from the time when the payment was made.
Section 19 of the Limitation Act, 1963 is not subject to any qualification/exception that after Account is declared NPA, if the debtor makes payments on account of debt, the Section would not be applicable.
Excerpts of the order;
# 2. It is argued and the Appellants claim in the Appeal that Corporate Debtor had planned to roll out in Surat dedicated dark fibre broadband, Internet, Lease Lines etc. For such purpose, the Corporate Debtor approached the Bank for Loan. The Bank sanctioned Term Loan amounting to Rs. 20 crores 24 lakhs, through three Loan Accounts. The Accounts of the Corporate Debtor were classified as Non-Performing Assets (NPA) on 30th September, 2014, by the Bank. The Bank issued Recall Notice dated 01st October, 2014 demanding the outstanding dues reflected in the Statement of Accounts. The Bank filed DRT Proceeding bearing O.A. No. 656 of 2015 under Section 19 of Recovery of Debts Due to Banks and Financial Act, 1993 (RDDB Act) to recover Rs. 19,78,94,660.32 Paise. …….
# 3. The Appellants have filed copy of the Application under Section 7 of IBC (Annexure A6 Page 93) which shows that on 25th April, 2019 the Application was filed before the Adjudicating Authority. According to the Appellants as Respondents they appeared before Adjudicating Authority and filed Reply on behalf of Corporate Debtor claiming that there were defects in the Application. They claimed that the Account was classified as NPA on 30th September, 2014 and the Application filed in 2019 was time-barred. ………...
# 4. The Learned Counsel for the Appellant has argued the Appeal on above lines and it is argued that the Adjudicating Authority wrongly held that the Application under Section 7 of IBC was within Limitation. It is argued that under Article 137 of the Limitation Act, 1963 for Application under Section 7 of IBC the period of Limitation is three years and the time began running when the Account of the Corporate Debtor was declared NPA on 30th September, 2014. The date of NPA is seen from the Loan Recall Notice dated 01stOctober, 2014 (Annexure A3 page 36) which was sent by the Bank. According to the Learned Counsel, the Adjudicating Authority wrongly relied on the Reply filed by the Corporate Debtor and the reference in the Reply where it was stated by the Corporate Debtor that they have paid instalments even after the Account was declared NPA. The Learned Counsel referred to Judgment in the matter of Jagdish Prasad Sarda Vs. Allahabad Bank (Company Appeal (AT) (Ins.) No. 183 of 2020) dated 28th August, 2020 passed by this Appellate Tribunal to submit that the other Bench has held that the payments made after declaration of NPA would not give benefit of Section 19 of the Limitation Act if the NPA had not been regularized by the Bank and the date of default continued to be mentioned as date of NPA.
# 5. The Learned Counsel further submitted that the Bank has in its reply (Diary No. 22385) referred in Paragraph 7 with regard to the instalments and that the Bank had taken benefit of “cut back offer”. It is argued that such arrangement of taking cut back would not give benefit of Section 19 of the Limitation Act.
# 8. The Learned Counsel for the Respondent No. 2/Bank has argued that in the present matter not only Section 19 of the Limitation Act was applicable but also Section 18 of the Limitation Act applied. The Learned Counsel stated that the Limitation is three years from the date of accrual of right and the default has to be calculated from the date of NPA which is 30th September, 2014. The Learned Counsel submitted that Bank has with the application furnished all the necessary documents and the relevant particulars were incorporated in the Form which was submitted under Section 7 of IBC and the particulars submitted in the Form read with the documents clearly made out a case which would show that calculated even from the date of NPA dated 30th September, 2014 there were documents to show acknowledgments of debt by the Corporate Debtor in writing as well as the Statements of Accounts showed various instalments paid even after declaration of NPA which gives benefit under Section 19 of the Limitation Act. The Learned Counsel stated that the date of NPA would not shift but when instalments are paid and acknowledgments are given of the existing liability the period of Limitation would get extended.
# 16. The Learned Counsel for the Appellant referred to the Chart which is part of “Part IV of the Form” to say that for all these nature of loans, the dates of default were shown by the Bank as 30th September, 2014 which is the date of NPA and thus it is argued that as per Article 137 of the Limitation Act all these amounts were time-barred. The Learned Counsel also referred to Recall Notice dated 01ST October, 2014 (Annexure A3) which is referred in Paragraph 6 of Part V of the Form. According to the Learned Counsel the date of default has to be calculated from date of NPA and that the date of NPA does not shift.
# 17. The Learned Counsel for Respondent No. 2/Bank referred to the reasonings recorded by the Adjudicating Authority in Paragraph 11 of the Impugned Order which reads as under:
“11. On perusal of the records it is found that the first and foremost objection raised by the respondent is that the application is barred by limitation. On perusal of the records it is found that the applicant bank has placed on record simple debit balance confirmation letter dated 07.04.2016 (Annexure A/34 of Petition at page No. 653-657) issued by the respondent and addressed to the applicant acknowledging the debt. Moreover, the account statements show that there are regular credit entries after 7th April, 2016 till May, 2018. The corporate debtor by its letter dated 17.11.2018 has also given the details of amount repaid till 30.09.2018 and also acknowledged the amount outstanding in the respective account as on 30.09.2018. Moreover, the corporate debtor in para 29 (a) of its reply, has admitted that it has paid Rs. 16.17 lacs during the financial year 2019-20. Further, the records reveal that from time to time the respondent has executed/entered into various documents acknowledging the debt. This itself shows that the respondent company has acknowledged the debt in the financial year 2019-20. Since the application is filed on 29.04.2019, it is well within time.”
# 20. The Learned Counsel for Bank stated that the factor of Corporate Debtor making such payments is also reflected in the accounts maintained by the Bank and when even after declaration of NPA and parties proceeding to DRT the Corporate Debtor made payments on account of debt and interest, Section 19 of Limitation Act is attracted.
# 21. The Learned Counsel for the Appellant referred to above Para 30 of the Reply which was filed by Corporate Debtor before the Adjudicating Authority to submit that the amounts shown as payment of instalments is in an arrangement of “cut back” which the Appellants agreed even after NPA was declared. It is argued that the Corporate Debtor to maintain good relations accepted that the Bank may deduct particular amount as cut back. Learned Counsel for the parties at the time of arguments submitted that “Cut Back” is an arrangement whereby the Corporate Debtor agreed that from the payments the Corporate Debtor receives from its customers, the Bank could directly deduct particular percentage towards its dues. Learned Counsel for Appellant argued that in this arrangement Bank directly deducts 10 % from Receipts against its dues and this may not be taken as deposit by Corporate Debtor.
# 24. Section 18 applies to not merely suits but also applications and where before expiry of the prescribed period for an Application an acknowledgment is made, the Section provides for computing fresh period of Limitation from the time when acknowledgment was so signed. Perusal of Section 19 shows that where payment is made on account of a debt or interest before expiration of the prescribed period by the person liable to pay, a fresh period of Limitation shall be computed from the time when the payment was made. The date of NPA will not shift. It will remain the foundational date and Period of Limitation gets triggered from that date. But when prescribed period is computed in accordance with the Limitation Act and facts of this matter, Section 18 and 19 do appear to be attracted.
# 26. The Learned Counsel for the Appellant referring to Judgment in the matter of Jagdish Prasad Sharda referred (Supra.) of another bench of this Tribunal submitted that in that matter it was interpreted that even if the payments were made after the Account was declared NPA if the Account was not regularized benefit can not be taken. It may be clarified that limitation issue is decided on facts and law both and it differs from case to case. In the instant case, when Bank declared NPA to recover dues, it moved DRT. If the Corporate Debtor made some payments, as a reasonable prudent person, Bank received the payments. Section 19 of the Limitation Act, 1963 is not subject to any qualification/exception that after Account is declared NPA, if the debtor makes payments on account of debt, the Section would not be applicable. The Adjudicating Authority found that there were not merely repayments but also Acknowledgments.
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