M/S Paragon Ceramics vs M/S Rathi Ispat Ltd

M/S PARAGON CERAMICS Through Its Proprietor Sh. K.K. Bhagi Krishna Nagar, Plot No. 3, Sector - 25, ...Appellant Faridabad, Haryana Mobile Number: 9811118066 Eamil: paragon_ceramics@yahoo.co.in

Versus

RATHI ISPAT LTD. Through Director:- Arun Kumar Rathi C-220, Savitri Nagar, Malviya Nagar, ...Respondent New Delhi - 110017 Email: info@rathisteel.net

Present: For Appellant: Mr. Narender Singh Yadav, Adv. For Respondents: Mr. Abhishek, Advocate for Liquidator.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is directed against the order dated 07.09.2020 passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi) by which

an application filed under Section 9 of the Insolvency and Bankruptcy Code,

2016 (in short 'Code') by the Appellant was dismissed on the ground of being

barred by limitation.

2. In brief, as per case set up by the Appellant, it supplied basic and high

temperature refractories items to Respondent (Rathi Ispat Ltd.). The Appellant

had filed a Civil Suit No. 81 of 2011 for recovery of Rs. 27,97,788/- before the

Civil Judge (Senior Division), Faridabad, Haryana which was decreed on 2

26.09.2016 for an amount of Rs. 27,97,788/- with interest @ 9 % per annum

from the date of filing i.e. 11.03.2011 till the date of realization and further with

a direction to handover the C forms of Rs. 17,41,792/- @ 9 % interest per annum

and Rs. 1,32,162/- towards the cost of litigation. According to the Appellant,

the outstanding dues till now has become Rs. 65,82,386. The aforesaid decree

dated 26.09.2016 has attained finality as it has not been challenged by the

Respondent in the Higher Court.

3. Initially, the Appellant had filed the execution of the decree dated

26.09.2016 and provided list of all properties and assets of Respondent for

realisation of the decretal amount but Respondent raised an objection that it is

a limited company and all its assets and records have been taken over by Punjab

National Bank on 26.05.2008, State Bank of India on 27.05.2008 and by other

banks and it has no control over the movable or immovable properties.

4. The Appellant withdrew the execution application, sent a demand notice

under Section 8 of the Code on 31.03.2018 and filed the application under

Section 9 of the Code on 28.05.2018 for the payment of Rs. 57,89,884/-. The

Respondent did not appear before the Adjudicating Authority and was proceeded

against ex-parte vide order dated 11.10.2018 but ex-parte order was set aside

on the application filed by the Respondent bearing CA No. 155 of 2018 and

thereafter, the Respondent filed the reply to the application filed under Section

9 of the Code.

5. The Adjudicating Authority dismissed the application filed under Section

9 of the Code on the ground that mere filing of a suit for recovery or a decree

passed by a court cannot be held to be a deferment of date of default for the

purpose of computing the period of limitation to file the application under

Company Appeal (AT) (Ins.) No. 1017 of 2021 3

Section 9 of the Code and relied upon a decision of the Hon'ble Supreme Court

in the matter of Jignesh Shah & Anr. Vs. Union of India & Anr., 2019 (10) SCC

750.

6. Counsel for the Appellant has submitted that after the decision in the case

of Jignesh Shah (Supra), the Hon'ble Supreme Court in the case of Dena Bank

(Now Bank of Baroda) Vs. C. Shivakumar Reddy & Anr., 2021 (10) SCC 330,

held that:

"138. 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."

7. However, since the decision in the case of Jignesh Shah (Supra) and Dena

Bank (Supra) was rendered by the bench of two Hon'ble judges, therefore,

Counsel for the Appellant has then relied upon another decision of the Hon'ble

Supreme Court delivered by a bench of three Hon'ble Judges, in the case of

Kotak Mahindra Bank Limited Vs. A. Balakrishnan and Anr. (2022) AIR (SC)

2652, dealing with the issue "as to whether the issuance of the recovery

certificate in favour of the financial creditor would give rise to a fresh cause of

action to initiate proceedings under Section 7 of the Code." In this regard, the

Hon'ble Supreme Court has held that:

"85. We further find that the view taken by the two Judge Bench of this Court in the case of Dena Bank (supra) is correct in law and we affirm the same. We further find that in the facts of the present case, the application under Section 7 of the IBC was filed within a period of three years from the date on which the Recovery Certificate was issued. As such, the application under Section 7 of the IBC was within limitation and the learned NCLAT has erred in holding that it is barred by limitation."

Company Appeal (AT) (Ins.) No. 1017 of 2021 4

8. Counsel for the Respondent could not cite any decision to the contrary.

9. Thus, in view of the aforesaid facts and circumstances much less in view

of the decision rendered by the Hon'ble Supreme Court in the case of Kotak

Mahindra Bank Limited (Supra), the decision taken by the Adjudicating

Authority in dismissing the application filed by the Appellant on the ground of

being barred by limitation is not correct and thus, the same is hereby set aside

and the application filed under Section 9 of the Code bearing no. IB-

633/ND/2018 is restored. The matter is remanded back to the Adjudicating

Authority to decide the application on merits in accordance with law.

The parties are directed to appear before the concerned Adjudicating

Authority on 10th October, 2022.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

New Delhi

22nd September, 2022

Sheetal

Company Appeal (AT) (Ins.) No. 1017 of 2021