Gulabchand Jain vs Punjab National Bank

Gulabchand Jain ...Appellant

Versus

Punjab National Bank & Anr. ...Respondents

Present: For Appellant: Mr. Rajesh Bohra and Ms. Sangeeta Bohra, Advocates. For Respondents: Mr. Shivanshu Kumar, Advocate for R-1. Mr. Atul Sharma, Advocate for R-2.

ORDER

(Virtual Mode)

01.02.2022: Heard learned counsel for the Appellant as well as learned

counsel appearing for the Respondents. This Appeal has been filed against

the judgment and order dated 13.02.2020 of the Adjudicating Authority

(National Company Law Tribunal), Ahmedabad Bench, Court No.2 by which

the application by the Punjab National Bank - the Respondent filed under

Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred

to as 'Code') has been admitted. The brief facts necessary for deciding this

appeal are:-

The Appellant, a private limited company, took financial credit from

Punjab National Bank. Account of the Appellant was declared NPA on

13.06.2009. The Punjab National Bank initiated the proceeding under

SARFAESI Act, 2002 by issuing notice dated 16.07.2009 under Section 13

sub-section (2) for an aggregate sum of Rs.43,93,54,040/-. Possession -2-

notice was issued on 30.09.2009. Punjab National Bank thereafter initiated

proceedings before the Debts Recovery Tribunal (DRT) by filing O.A. No. 27 of

2020 on 04.03.2010. The Corporate Debtor has filed its claim on

17.08.2015 before the DRT. By order dated 06.10.2017 DRT Ahmedabad

passed a Decree in favour of the Respondent - Punjab National Bank. On

31.05.2018, the Respondent filed application under Section 7 for amount of

default as on 31.05.2018 of Rs.185,92,32,695/-. The Corporate Debtor filed

its Preliminary Objections/ Reply as well as further Additional Objections.

The Adjudicating Authority after hearing the parties by the impugned

judgment dated 13.02.2020 has admitted the application.

2. Learned counsel for the Appellant in support of the Appeal contends

that the account having been declared NPA on 13.06.2009, the application

filed on 31.05.2018 was well beyond the period of limitation and could not

have been admitted. He submits that the Balance Sheets which were relied

by the Punjab National Bank before the Adjudicating Authority were for the

year 2015-16, therefore it cannot give benefit of extension of limitation under

Section 18 of the Limitation Act, 1963 since the Balance Sheets were of the

period after three years from the date when the account was declared NPA.

He submits that the Adjudicating Authority has also committed error by

giving benefit of the period during which the application of the Corporate

Debtor was pending before the DRT. He submits that the judgment of this

Tribunal in 'Sesh Nath Singh & Anr. vs. Baidyabati Sheoraphuli Cooperative

Bank Ltd. & Anr.', Company Appeal (AT) (Ins.) No. 672 of 2019 covers the

issue in favour of the Appellant. Learned counsel for the Appellant has also

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relied on the judgment of the Hon'ble Supreme Court in 'B. K. Educational

Services Pvt. Ltd. vs. Parag Gupta & Associates', reported in 2019 Vol.11 SCC

633. He submits that the application of the Respondent ought to have been

rejected as barred by limitation.

3. Learned counsel for the Respondent refuted the submissions made by

learned counsel for the Appellant contending that the application filed by the

Punjab National Bank under Section 7 of the Code was well within time. In

support of his case, he has made three submissions. Firstly, he submits

that he is covered by Section 14 of the Limitation Act for the period during

which application was pending before the DRT. He further submits that

there are acknowledgements by the Corporate Debtor in the year 2011, 2012

& 2016, in which One Time Settlement (OTS) offers were made, which is

acknowledgement within the meaning of Section 18 of the Limitation Act and

which will give extension of limitation. Lastly, he submits that in view of

Decree issued by order dated 06.10.2017 of the DRT, the Bank will have a

fresh period of limitation of three years from 06.10.2017 and the application

filed by the Bank is within three years which is well within time.

4. Learned counsel for the Appellant in rejoinder submits that letters now

submitted by the Respondent in support of his claim for acknowledgment of

debt were not placed before the Adjudicating Authority. He submits that

letters dated 24.10.2011, 12.10.2012 and 24.01.2014 were not placed before

the Adjudicating Authority, hence the Respondent cannot be permitted to

improve its case by filing such letters before this Appellate Tribunal. He

further submits that only letter which was placed was the letter dated

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31.05.2017 which has been referred to by the Adjudicating Authority. He

further submits that with regard to decree law is in grey area, therefore, it

could not be accepted for Banks claim for extension of limitation.

5. We have considered submissions of learned counsel for the parties and

perused the record. The law with regard to limitation is well settled. In 'B.

K. Educational Services Pvt. Ltd' (supra), Hon'ble Supreme Court laid down

that limitation for filing an application under Section 7 is covered by Article

137 of the Limitation Act and an application has to be filed within a period of

three years from the date of default. In the present case, admittedly the

account was declared NPA on 13.06.2009, in normal situation the

application has to be filed within three years from 13.06.2009. However, an

Applicant if files an application beyond three years can claim benefit of

provisions under Sections 5, 14 & 18 of the Limitation Act and claim for

extension of the limitation period. The present is the case where Respondent

is claiming extension of limitation under Section 18 and Section 14.

6. Coming to the submission of learned counsel for the Respondent that

he is entitled for extension of limitation under 14 because of pendency of

application before DRT, we see no reason to accept the above submission.

Section 14 of the Limitation Act is as follows:-

"14. Exclusion of time of proceeding bona fide in court without jurisdiction. --

(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil

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proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature.

Explanation.-- For the purposes of this section,--

(a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;

(b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;

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(c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction."

7. The benefit of Section 14 can be availed by a person when the

proceedings which was filed before the earlier forum suffers from lack of

jurisdiction or other similar cause. In the present case, it cannot be said

that the proceedings before the DRT were suffering from any lack of

jurisdiction. Hence, submission of counsel of the Respondent for extension

of limitation on the basis of Section 14 cannot be accepted.

8. In the judgment of 'Sesh Nath Singh & Anr. vs. Baidyabati Sheoraphuli

Cooperative Bank Ltd. & Anr.', dated 22.11.2019 in Company Appeal (AT)

(Ins.) No. 672 of 2019, this Appellate Tribunal had held that benefit of

proceeding which were prosecuted under SARFEASI would be given under

provisions of Section 14. Following was held in Para 10:-

"10. We have carefully examined the issue of

limitation. The Respondent has bonafidely prosecuted

within limitation period under SARFEASI Act.

Therefore, the Respondent is entitled for the exclusion

of time period under Section 14(2) of Limitation Act i.e.

the period of 3 years and 6 months. After exclusion of

this period the application filed under Section 7 of I&B

Code is within limitation period."

9. The above case is not applicable in the facts of the present case. Since

in the present case proceeding with regard to which benefit under Section 14

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is sought to be claimed relates to proceedings before DRT and it is not a case

of any of the parties that the proceedings before DRT were suffering from any

lack of jurisdiction. Thus, the benefit under Section 14 shall not be available

to the Bank and the submission of counsel for the Bank in this regard

cannot be accepted.

10. Now we come to submission made by counsel for the Bank with regard

to judgment in Decree dated 06.10.2017. The judgment dated 06.10.2017

was filed before the Adjudicating Authority and has been noticed by the

Adjudicating Authority in its impugned judgment. The DRT on 06.10.2017

has granted Decree in favour of the Bank for recovery of the amount. The

Hon'ble Supreme Court in 'Dena Bank vs. C. Shivakumar Reddy', (2021) 10

SCC 330 has laid down that if a judgment or decree is passed, there shall be

fresh period of limitation. In said case also, there was a decree by DRT and

the Hon'ble Supreme Court has held that in view of the aforesaid, the Decree

holder will get fresh cause of action for initiation of proceedings under

Section 7 of the Code within three years from the date of issuance of the

Recovery Certificate. In Paras 133 to 137 following has been laid down:-

"133. As observed above, the Appellant Bank filed the Petition under Section 7 of the IBC on 12th October 2018. Within three months, the Appellant Bank filed an application in the NCLT, for permission to place additional documents on record including the final judgment and order/decree dated 27.3.2017 in O.A. 16/2015 and the Recovery Certificate dated 25.5.2017, enabling the Appellant Bank to recover Rs.52 crores odd. The judgment and order/decree of

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the DRT and the Recovery Certificate gave a fresh cause of action to the Appellant Bank to initiate a petition under Section 7 of the IBC.

134. On or about 5th March 2019, the Appellant Bank filed another application for permission to place on record additional documents including inter alia financial statements, Annual Report etc. of the period from 1st April 2016 to 31st March 2017, and again, from 1st April 2017 to 31st March 2018 and a letter dated 3rd March 2017 proposing a One Time Settlement. This application was also allowed on 6th March 2021. The Adjudicating Authority, took into consideration the new documents and admitted the petition under Section 7 of the IBC.

135. Even assuming that documents were brought on record at a later stage, as argued by Mr. Shivshankar, the Adjudicating Authority was not precluded from considering the same. The documents were brought on record before any final decision was taken in the Petition under Section 7 of IBC.

136. A final judgment and order/decree is binding on the judgment debtor. Once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of Recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate.

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137. The Appellant Bank was thus entitled to initiate proceedings under Section 7 of the IBC within three years from the date of issuance of the Recovery Certificate. The Petition of the Appellant Bank, would not be barred by limitation at least till 24th May, 2020."

11. The above proposition supports the submission of counsel for the

Bank in the present case that by the Decree passed on 06.10.2017 the Bank

shall get a fresh period of limitation of three years and the application under

Section 7 having been filed within three years from 06.10.2017 cannot be

held to be barred by time.

12. Learned counsel for the Respondent has also referred to letters dated

24.10.2011, 12.10.2012 and 24.01.2014 which have been filed alongwith

reply as Annexure-8 are the letters which have been written by the Corporate

Debtor giving proposal for OTS for outstanding dues. Although letters have

been brought in the Appeal alongwith reply but same has not been disputed

before us in the rejoinder affidavit. Submission of learned counsel for the

Appellant is that the said letters were not brought before the Adjudicating

Authority hence they cannot be looked into. We are of the view that the

Respondent can support the impugned order on any other ground or

material which is available to them. The letters having not been denied by

which OTS proposal was made, which are acknowledgement within the

meaning of Section 18 of the Limitation Act. In 'Dena Bank' (supra), Hon'ble

Supreme Court has laid down that if there is any acknowledgment by giving

proposal for OTS that would amount to acknowledgment of debt within the

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meaning of Section 18 of the Limitation Act. Learned counsel for the

Respondent - Bank submits that OTS proposals were not accepted by the

Bank but this fact is not relevant as the letters are referred to only for the

purpose of acknowledgment. In view of the aforesaid, letters acknowledging

the debt issued by the Corporate Debtor shall give benefit to the Respondent

for extension of limitation within the meaning of Section 18. We, thus, do

not find any error in the judgment of the Adjudicating Authority admitting

application under Section 7 of the Code. The Application under Section 7

filed by the Bank cannot be said to be barred by limitation. We, thus, do not

find any merit in the Appeal. Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical) Archana/nn

Company Appeal (AT) (Insolvency) No. 416 of 2020