Sanjay Lamba Vs. Union Bank of India &Anr. - Code has not excluded application of Section 4 to Section 24 of the Limitation Act, to proceedings under the IBC in the NCLT/NCLAT

NCLAT (08.04.2021) in Sanjay Lamba Vs. Union Bank of India &Anr.  [Company Appeal (AT) (Insolvency) No. 276 of 2020] held that;

• Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible.”

• All this reflects that the Code has not excluded application of Section 4 to Section 24 of the Limitation Act, 1963 while determining period of limitation and Section 29(2) of the Limitation Act appears to be applicable. Hence, Section 18 & 19 of the Limitation Act, 1963 is applicable to the Code.

Excerpts of the order;

# 2. The Appellant is the member of the suspended Board of Directors of the Corporate Debtor - M/s. Sainov Spirits Pvt. Ltd. The Appellant has taken various facilities from the Respondent Bank vide sanction letter dated 01.01.2011, 29.12.2012 etc. involving cash credit facility, term loan facility, Ad hoc working capital limit etc. and the amount is in default mentioned as above. The Appellant has stated that they have paid over Rs.700 Crore as excise duty in 2019 and Rs.800 Crore plus as excise duty in 2018. They have also stated that 1000 families are dependent on the Corporate Debtor. They have also stated that an OTSSettlement was arrived at between the Respondent bank and CorporateDebtor on 11.06.2019 and they have paid an amount of Rs.8,22,28,000/- towards one time Settlement out of Settlement Amount of Rs. 67 Crore. The Appellant is willing to pay the entire amount by 31.05.2020 which was not accepted by the Bank. They have also stated that the Banks are moving in forum shopping and also online auction under Section 13(4) of the SARFAESI ACT.

 

# 3. The Appellant has further submitted that the date of default being NPA date is 30.09.2016 and the Petition was filed on 22.11.2019 (as mentioned by Appellant in its Written Submission Diary No. 26369 dated 24.03.2021) and the same is clearly barred by limitation as it has been filed more than three years after the default has occurred and thus the impugned order needs to be set aside. They have supplemented it with the following citations:

• a. BK Educational Services Pvt Ltd. Vs. Parag Gupta (2019) 11 SCC 633, 

• b. Gaurav Harigovindbhai Dave Vs. ARC (India) Ltd, (2019) 10 SCC 572, 

• c. Jignesh Shah & Ar. V. Union of India & Anr. (2019) 10 SCC 750

• d. Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd and Anr. (Civil Appeal No. 6347 of 2019

• e. Kaustav Ray Vs. State Bank of India (Company Appeal (AT) (Ins) No. 804 of 2020 dated 20.01.2021

• f. State bank of India Vs. Krishidhan Seeds Pvt. Ltd, (Company Appeal (AT) (Ins) No. 972 of 2020

• g. Jagdish Prasad Sharda Vs. Allahabad Bank (Company Appeal (AT) (Ins) No. 183 of 2020

• h. V.Padmakumar Vs. Stressed Assets Stabilization Fund (SASF) & Anr.  Company Appeal (AT) (Ins) No. 57 of 2020

• i. Bishal Jaiswal Vs. ARC (India) Ltd. & Anr. Company Appeal (AT) (Ins) No. 385 of 2020.

 

# 4. It has also been mentioned by the Appellant that revival letter and OTS Proposal cannot shift the date of default and so also payments made by the Appellant cannot extend limitation. The Appellant is accepting that they have made an offer around April, 2019 and made a payment of Rs. 8.3 Crore between 13.05.2019 to 16.07.2019 and subsequently the OTS was cancelled by the Bank on 15.11.2019. They have also stated that Balance Sheets cannot be treated as acknowledgment of debt as held by this Tribunal in V.Padmakumar Vs. Stressed Assets Stabilization Fund (SASF) & Anr., Company Appeal (AT) (Ins) No. 57 of 2020. They have also placed reliance on RBI Master Circular to submit that once an account become NPA, the date of default cannot be shifted.

 

# 5. However, Respondent No.1 Bank/ Financial Creditor is still affirming in their Petition before the Adjudicating Authority that the date of default / NPA date is 30.09.2016. They have also stated that the Corporate Debtor on account of continuous default issued revival letter dated 21.06.2017 wherein they have categorically acknowledged for the purpose of Section 18 of the Indian Limitation Act, 1963 and the Corporate Debtor has given multiple letters dated 22.04.2019, 26.04.2019 and 12.06.2019 proposing one time settlement offer and the bank has finally agreed for a settlement at Rs. 67 Crore towards the settlement its debt and liabilities vide its letters of June, 2019. All this amounts to acknowledgment of liability as provided under Section 18 of the Limitation Act.

 

# 6. The Bank /Financial Creditor has further stated that they have received a part payment of Rs. 8.28 Crore towards its debt and obligations between May, 2019 to July, 2019. They have also stated that they meet the criteria of Section 19 of the Limitation Act for computation of a fresh period of limitation from the date of such payments.. . . . . .

 

# 7. Apart from the above stated judgment, we have the privilege to go through the following two judgments of Hon’ble Apex Court as mentioned below which have been delivered in the last week of March, 2021:

• a. Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-operative Bank Ltd and Anr. in Civil Appeal No. 9198 of 2019 delivered on 22.03.2021

• b. Laxmi Pat Surana Vs. Union Bank of India & Anr. In Civil Appeal No. 2734 of 2020 delivered on 26.03.2021.

In case of Laxmi Pat Surana (as stated supra) the specific question raised was whether an application under Section 7 of the Code filed after 3 years from the date of declaration of the loan account as NPA being the date of default is not barred by limitation. It has been made amply clear that right to initiate action within 3 years from such acknowledgement of debt accrues to the Financial Creditor.  However, needs to be exercise within 3 years when the right to sue /apply accrues as per Article 137 of the Limitation Act. This is the affect of Section 18 of the Limitation Act, in that a fresh period of limitation is required to be computed from the time when the acknowledgment was so signed by the principal borrower or corporate guarantor as the case may be.

 

In respect of Sesh Nath Singh and Anr. (as stated supra) certain extracts are given below for clarity on this subject:

• 54. In B.K. Educational Services Private Limited v. Parag Gupta and Associates , this Court held:- “42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.”

• 55. In Radha Export (India) Private Limited v. K.P. Jayaram and Anr. , this Court referred to B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates (supra) and held the application under Section 7 of the IBC to be barred by limitation.

• 66. Similarly under Section 18 of the Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires.

• 67. As observed above, Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible.”

 

# 8. All this reflects that the Code has not excluded application of Section 4 to Section 24 of the Limitation Act, 1963 while determining period of limitation and Section 29(2) of the Limitation Act appears to be applicable. Hence, Section 18 & 19 of the Limitation Act, 1963 is applicable to the Code. For clarity Section 18, 19 and Section 29 of The Limitation Act, 1963 is reproduced below for ease of convenience: . . . . . . .. . .

 

# 9. After going through the various submissions and the recently judgments delivered by the Hon’ble Apex Court, a clarity has come that Article 137 of the Limitation Act, 1963 defining a period of 3 years will be computed after considering Section 18 or 19 of The Limitation Act, 1963 with a fresh period of limitation in spite of these dates being after the date of NPA.

 

# 10. In view of the aforesaid submission and the Appellant acknowledging the debt on 21.06.2017 itself shifts the 3 years period to June, 2020 whereas the Application before the Adjudicating Authority itself is filed on 22.11.2019. If we consider the part payment which has been made between May, 2019 to June / July, 2019, then naturally the application has been filed within a period of 3 years. 

 

# 11. Hence, we do not find any merit in this appeal based on law laid down and hence the appeal deserves to be dismissed and is dismissed.

 

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