Reliance Asset Reconstruction Company ... vs Hotel Poonja International Pvt. Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Company Appeal (AT)(INS) No.1011 of 2019

(Arising out of Order dated (20.08.2019) passed by the (National Company Law Tribunal) Bengaluru Bench in C.P(IB) No 170/BB/2018)

IN THE MATTER OF:

M/s.Reliance Asset Reconstruction Company Ltd. Reliance Centre, North Wing, 6th Floor, Off Western Express Highway, Santacruz, Mumbai - 400 055 ...Appellant

Versus

M/s.HotelPoonja International Private Limited. Registered office at : K.S.Rao Road, Hanpankatta, Mangalore, Karnataka - 575 001 ...Respondent

Present:

For the Appellant: Mrs. Usha Singh and Mr. Vipin Meena Advocates.

For the Respondent : Mr. Sanjay R.Hegde, Senior Advocate and Mr. Abdul

Azeem Kalebudde, Advocates

JUDGMENT

VENUGOPAL M.J.

1. The Appellant/Applicant/Financial Creditor has filed the instant Company

Appeal being aggrieved against the order dated 20.08.2019 passed by the

Adjudicating Authority ('National Company Law Tribunal') Bengaluru Bench

in rejecting the Section 7 Application.

Company Appeal (AT)(INS) No.1011 of 2019

1

2. Earlier, the Adjudicating Authority ('National Company Law Tribunal')

Bengaluru Bench while passing the impugned order dated 20.08.2018 at para

6 to 7 had observed the following:

" 6. In the present case we note that certain matters

have been dealt with before the Hon'ble High Court of

Karnataka viz. (i) W.P . 28437 of 2011, which has since

been disposed off; (ii) W.P No. 3520 of 2018 which has

granted an interim stay in respect of the DRT order

dated 14.12.2017 and directed the repayment of rent

to the Corporate Debtor and to that extent does not

interfere with the order of the DRT in O.A 597 of 1988;

(iii) W.P No. 39858 of 2018 filed by one Mr. Vinay Bhat

in furtherance of DRT order O.A 547 of 1998 which has

since been disposed off and the said order has not

been submitted before us; and (iv) W.P No. 17390 of

2017 filed by the Corporate Debtor in respect of the DRT

order dated 15.03.2017 which again deals with the

rent payable vide DRT order in DCP 2691 of 2017 dated

15.03.2017 and the same stands currently adjourned.

7.It is a settled position of law that the provisions of

Code cannot be invoked for recovery of outstanding

amount but it can be invoked to initiate CIRP for

justified reasons as per the Code. The Hon'ble Supreme

Court in the case of Mobilox Innovations Private Limited

Vs. Kirusa Software Private Limited, has inter alia held Company Appeal (AT)(INS) No.1011 of 2019

2 that IBC, 2016 is not intended to be substituted to a

recovery forum. In another judgment rendered in

Transmission Corporation of A.P.Ltd. Vs. Equipment

Conductors and Cables Ltd., Supreme Court of India, it

is, interalia held that existence of undisputed debt is

sine qua non of initiation CIRP."

And ultimately rejected the 'Application'.

3. The Learned Counsel for the Appellant submits that the

Respondent/Corporate Debtor with an intention to expand its business,

approached the Assignor Bank 'Vijaya Bank during the year 1986 for certain

credit facilities which were sanctioned by the 'Assignor Bank' vide its Sanction

Letter dated 20.05.1986 for a Term Loan of Rupees Forty Lakhs along with

Corporation Bank. As a matter of fact, the Respondent/Corporate Debtor

through its authorised Directors & Guarantor had executed the Loan

documents in favor of the 'Assignor Bank' for obtaining the aforesaid credit

facilities.

4. The Learned Counsel for the Appellant brings to the notice of this Tribunal

that the Respondent had mortgaged the immovable properties for securing

the said credit facilities:

All that piece and parcel of land and building held on Muli right situated in

Market Ward of Mangalore City Casaba Bazar, village Sub-District South

Canara & bearing

Sl R S No. T.S No. Kissam Which Extent No. portion A.cent 01 597/1A 217/1A Ground rent Eastern 0.79.83 02 578/2A2 216/2A2 -Do- Western 0.00.17

Company Appeal (AT)(INS) No.1011 of 2019

3

5. It is represented on behalf of the Appellant that the Corporate Debtor failed to

repay the loan of the 'Assignor Bank' and the said Bank declared the account

of the Corporate Debtor as 'Non-performing Asset' on 01.04.1993. Hence,

Vijaya Bank ('Assignor Bank') projected the Original Application bearing No.

547 of 1998 for recovery of outstanding amount aggregating to Rs.

2,61,88,403.05 from the Respondent.

6. In this connection, the contention of the Appellant is that the Respondent had

acknowledged and admitted its debt obligation and approach the Vijaya Bank

to settle the claim for Rs. One Crore (including Rupees Twenty Lakhs) which

the Respondent had already paid to the Vijaya Bank and agreed to pay Rupees

Seventy Five Lakhs alongwith interest at 12.50 % p.a. in Nine monthly equal

instalments commencing from 30.06.2011. In reality a Joint Compromise

Terms was filed by the parties before the DRT, Bengaluru and order was

passed on 27.03.2003.

7. The Learned Counsel for the Appellant proceeds to point out that the 'Assignor

Bank' became entitled to recover the decretal amount from the Respondent

because of the reason that Respondent/Corporate Debtor had failed to pay

the settlement amount and filed the Application before the Debt Recovery

Tribunal, Bengaluru for the recovery of decretal sum of Rs. 2,61,88,403.05

and a Recovery Certificate was already issued by the Tribunal.

8. Expatiating his submission, the Learned Counsel for the Appellant contends

that the 'Assignment Agreement' dated 03.05.2011 was executed between the

Vijaya Bank and the Appellant and the Substitution Application of the

Appellant was allowed by the DRT, Bengaluru and a Recovery Certificate was

Company Appeal (AT)(INS) No.1011 of 2019

4 amended. Resultantly, the Appellant continued the recovery proceedings

against the Respondent.

9. The main plea taken on behalf of the Appellant is that inasmuch as the

'Recovery Certificate' was issued based on the 'Compromise Terms' and the

said 'Recovery Certificate' became final and binding upon the Respondent.

That apart, it is the case of the Appellant that the Respondent, inspite of

numerous opportunities provided to it, had neglected and intentionally

defaulted in repayment of its dues. Further, It is stand of the Appellant that

the Respondent had acknowledged its 'Debt' payable to Appellant in its

financial statements filed under the Companies Act, 2013.

10. Moreover, the Appellant filed the application under Section 7 of the Insolvency

and Bankruptcy Code, 2016 before the Adjudicating Authority for initiation of

Corporate Insolvency Resolution Process ( 'CIRP in short') because of the fact

that the Respondent Company could not repay the decretal debt to the

Appellant/Financial Creditor.

11. The Learned Counsel for the Appellant takes a stand that the Respondent

Company had no cash flow to repay the certificate debt of Rs. 145,

44,46,651.32/-. Also that the impugned order of the Adjudicating Authority

dated 20.08.2019 in rejecting the Application was passed without applying its

judicial mind and also not adhering to the basic principles of 'Natural Justice'.

12. The Learned Counsel for the Appellant submits that the Assignor Bank

declared the Account of the Respondent/Corporate Debtor as 'Non-performing

Asset' on 01.04.1993. It comes to be known that the 'Assignment Agreement'

was executed between the Assignor Bank and the Appellant on 03.05.2011

based on which the 'Recovery Certificate' was issued. Further, it is the Company Appeal (AT)(INS) No.1011 of 2019

5 submission of the Appellant that 'pendency of any proceedings in any Court

is no bar' to initiate and proceed as per Section 238 of the I&B Code.

13. As regards the plea taken by the Respondent/Corporate Debtor relating to

delay and laches of the Appellant, it is version of the Appellant that the

Respondent had approached the 'Assignor Bank' during the 1986 for certain

credit facilities which were sanctioned by the Bank as per Sanction letter

dated 20.05.1986 for a Term Loan of Rupees Forty Lakhs together with

Corporation Bank. Besides this, a pari-passu agreement was executed

between the Corporation Bank, Vijaya Bank (Appellant Assignor)and the

Corporate Debtor, a pari-passu charge was created on the moveable and

immovable properties of the Corporate Debtor. Thereafter repeated defaults

were committed by the Respondent and that the Respondent had approached

the Appellant time and again for settlement and in this connection the

Appellant refers to the two Judgments of the Hon'ble Supreme Court (i)

B.K.Educational Services Private Limited v. Parag Gupta and Associates in Civil

Appeal No. 23988 of 2017 and (ii)TJSB Sahakari Bank Ltd. V. Unimetal

Castings Ltd., CP(IB) - 3622/I&BP/MB/2108 dated 25.01.2019.

14. The counsel for the Appellant refers to the Para 14 of the Respondent's Reply

filed before the then Adjudicating Authority and submits that the Respondent

had averred due to certain unavoidable circumstances and instances beyond

its control, the regularity of repayment of loan instalment was lost and the

repayment became irregular and it made an endeavour to settle the matter.

Further, it is pointed out that as on 31.03.1998 the Respondent had accrued

and assessed loss of Rs.1.8/- Crore.

Company Appeal (AT)(INS) No.1011 of 2019

6

15. In response, it is the submission of the Learned Counsel for the Appellant that

in Form No.1 of the Application by the Financial Creditor to initiate Corporate

Insolvency Resolution Process under the Code dated 27.07.2018 against the

Respondent, in Part IV, mentions the particulars of the Financial Debt.

However, the debt of default was not mentioned and the date of Loan as 'Non-

performing Asset' was mentioned as 01.04.1993.

16. The Learned Counsel for the Respondent cites the decision of Hon'ble Supreme

Court in the case of B.K.Educational Services Private Limited V. Parag Gupta

and Associates [2018 (14) SCALE 482],wherein it is laid down as under:

" 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".

17. The Learned Counsel for the Respondent cites the decision of Hon'ble Supreme

Court in Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India)

Ltd. And others. [(2019) 152 CLA 309 (SC), wherein it is observed and held as

under:

"Having heard the learned counsel for both sides, what is

apparent is that Article 62 is out of the way on the ground that Company Appeal (AT)(INS) No.1011 of 2019

7 it would not apply to suits. The present case being " an

application" which is filed under Section 7, would fall only

within the residuary Article 137. As rightly pointed out by the

learned Counsel appearing on behalf of the Appellant, time,

therefore, begins to run on 21.07.2011, as a result of which

the application filed under Section 7 would clearly be time

barred. So far as Mr. Banarjee's reliance on para 7 of the

B.K.Educational Services Private Limited (Supra), suffice it to

say that the Report of the Insolvency Law Committee itself

stated that the intent of the Code could not have been to give a

new lease of life of debts which are already time-barred".

18. The Learned Counsel for the Respondent refers to the judgment of this

Tribunal dated 11.12.2019 in V.Hotel Limited v. Asset Reconstruction

Company (India) Limited [Com. App. (AT) (Insolvency) No. 525/2019 wherein at

para 14 & 15, it is held as follows:

"Para 14. .........in view of the decision of the

Hon'ble Supreme Court in "Gaurav Hargovindbhai

Dave v. Asset Reconstruction Company (India) Ltd.

And Another - 2019 SCC Online Sc 1239". In the

said case, the 'Corporate Debtor' was declared NPA

on 21st July, 2011 hereinafter the 'State Bank of

India' filed two O.As in the Debt Recovery Tribunal

in 2012 in order to recover a total debt of 50 Crores

of Rupees. In the meanwhile, by an assignment

dated 28th March, 2014, the 'State Bank of India' Company Appeal (AT)(INS) No.1011 of 2019

8 assigned the aforesaid debt to 'Asset

Reconstruction Company (India) Ltd.', who is also

Appellant in the present case.

Para 15. In the aforesaid case, the same very 'Asset

Reconstruction Company (India) Ltd.' Took plea that

limitation begin running for the purpose of limitation

only on and from 1st December, 2016 which is the

date on which the Insolvency and Bankruptcy Code

was brought into force. The National Company Law

Tribunal had reached the conclusion that since the

limitation period was 12 years from the date on

which the money suit has become due, the

aforesaid claim was filed within limitation.

However, the Hon'ble Supreme Court taking into

consideration the fact that the ' Corporate Debtor'

was declared as NPA on 21st July, 2011 held that

the application was not maintainable. The said

judgment is quoted below as the present Appellant

was also the Applicant under Section 7 of the

aforesaid case:

"In the present case, the Respondent No.2 was

declared NPA on 21.07.2011. At that point of time,

the State Bank of India filed two O.As in the Debt

Recovery Tribunal in 2012 in order to recover a total

debt of 50 Crores of rupees. In the meanwhile, by Company Appeal (AT)(INS) No.1011 of 2019

9 an assignment dated 28.03.2014, the State Bank of

India assigned the aforesaid debt to Respondent

No.1. The Debt Recovery Tribunal proceedings

reached judgment on 10.06.2016, the Tribunal

holding that the O.As filed before it were not

maintainable for the reasons given therein.

2.As against the aforesaid judgment, Special

Civil Application Nos. 10621- 10622 were filed

before the Gujarat High Court which resulted in the

High Court remanding the aforesaid matter. From

this order, a Special Leave Petition was dismissed

on 25.03.2017.

3.An independent proceeding was then begun

by Respondent No.1 on 03.10.2017 being in the

form of a Section 7 application filed under the

Insolvency and Bankruptcy Code in order to recover

the original debt together with interest which now

amounted to about 124 Crores of rupees. In the

Form -I that has statutorily to be annexed to the

Section 7 application in Column II which was the

date on which default occurred, the date of NPA i.e.

21.07.2011 was filled up. The NCLT applied Article

62 of the Limitation Act which reads as follows:-

Description of suit Period of limitation Time from which period begins to run Company Appeal (AT)(INS) No.1011 of 2019

10 To enforce payment of Twelve years When the money money secured by a sued for becomes mortgage or otherwise due charged upon immovable property

4. Applying the aforesaid Article, the NCLT

reached the conclusion that since the limitation period

was 12 years from the date on which the money suit has

become due, the aforesaid claim was filed within

limitation and hence admitted the Section 7 application.

The NCLAT vide the impugned judgment held, following

its earlier judgments, that the time of limitation would

begin running for the purpose of limitation only on and

from 01.12.2016 which is the date on which the

Insolvency and Bankruptcy Code was brought into force.

Consequently, it dismissed the appeal.

5. Mr. Aditya Parolia, learned counsel

appearing on behalf of the Appellant has argued that

Article 137 being a residuary article would apply on the

facts of this case, and as right to sue accrued only on and

from 21.07.2011, three years having elapsed since then

in 2014, the Section 7 application filed in 2017 is clearly

out of time. He has also referred to our judgment in

B.K.Educational Services Private Limited v. Parag Gupta

and Associates, 2018 SCC OnLine SC 1921 in order to

buttress his argument that it is Article 137 of the

Limitation Act which will apply to the facts of this case.

6. Mr. Debal Banerjee, learned Senior

Counsel appearing on behalf of the respondents, Company Appeal (AT)(INS) No.1011 of 2019

11 countered this by stressing, in particular, para 7 of the

B.K.Educational Services Private Limited (Supra) and

reiterated the finding of the NCLT that it would be Article

62 of the Limitation Act that would be attracted to the

facts of this case. He further argued that, being a

commercial Code, a commercial interpretation has to be

given so as to make the Code workable.

7. Having heard the learned counsel for both

sides, what is apparent is that Article 62 is out of the

way on the ground that it would only apply to suits. The

present case being "an application" which is filed under

Section 7, would fall only within the residuary Article

137. As rightly pointed out by learned counsel appearing

on behalf of the appellant, time, therefore, beings to run

on 21.07.2011, as a result of which the application filed

under Section 7 would clearly be time-barred. So far as

Mr.Banarjee's reliance on para 7 of B.K Educational

Services Private Limited (Supra), suffice it to say that the

Report of the Insolvency Law Committee itself stated that

the intent of the Code could not have been to give a new

lease of life to debts which are already time-barred.

8. This being the case, we fail to see how this

para could possibly held the case of the respondents.

Further, it is not for us to interpret, commercially or

otherwise, articles of the Limitation act when it is clear

that a particular article gets attracted. It is well settled

that there is no equity about limitation - judgments have

Company Appeal (AT)(INS) No.1011 of 2019

12 stated often time periods provided by the Limitation Act

can be arbitrary in nature.

9. This being the case, the appeal is allowed

and the judgments of the NCLT and NCLAT are set aside"

19. The Learned Counsel for the Respondent contends that the Application under

Section 7 of the Insolvency and Bankruptcy Code, 2016 was filed by the

Appellant/Financial Creditor against the Respondent/Corporate Debtor on

27.07.2018 in regard to the loan which was declared as 'Non-Performing

Asset' by the Vijaya Bank on 01.04.1993 and that the Application is not

maintainable either in Law or on Facts.

20. The Learned Counsel for the Respondent refers to the Assignment Agreement

dated 03.05.2011 entered into between Vijaya Bank and the Appellant and

according to the learned Counsel for the Respondent in Clause 4.1.(u) of the

Assignment Agreement categorically states that the recovery proceedings in

respect of the present loan availed by the Respondent is still pending before

the DRT, Bengaluru and the same as under:

"4.1. xxxxxxxx

(u) no sui has been filed or other

proceedings initiated by the Seller against the

Borrower before any Court, Tribunal, Statutory

Authority or regulatory body other then those

disclosed by the seller to the purchaser (i.eO.A

No. 547/1998 filed by the seller against M/s.

Hotel Poonja International (P) Ltd. Before the

DRt, Bangalore which has been decreed and

Company Appeal (AT)(INS) No.1011 of 2019

13 Recovery proceedings DCP No. 2691 is

pending before the Recovery officer, DRT,

Bangalore.)"

21. The Learned Counsel for the Respondent submits that the Appellant before

the Adjudicating Authority by projecting an application is trying to recover the

loan which is pending before the Debt Recovery Tribunal, Bengaluru thereby

substituting the Adjudicating Authority under IBC, 2016 for recovery of the

Loan which was not the intention of the Parliament in enacting the IBC, 2016.

22. The Learned Counsel for the Respondent refers to the decisions of the Hon'ble

Supreme Court in Transmission Corporation of Andhra Pradesh Limited v.

Equipment Conductors and Cables Limited [C.A No. 9597/2018 dated

23.10.2018 (2018) 147 CLA 112 [SC], following its earlier judgment in Mobilox

Innovations Private Limited v. Kirusa Software Private Limited [(2018) 1 SCC

353], had observed as under:

"In a recent judgment of this Court in Mobilox

Innovations Private Limited v. Kirusa

Software Private Limited (2018) 1 SCC 353,

this court has categorically laid down that

IBC is not intended to be substitute to a

recovery the forum. It is also laid down that

whenever there is existence of real dispute,

the IBC provisions cannot be invoked..."

Company Appeal (AT)(INS) No.1011 of 2019

14

23. Lastly, it is stand of the Respondent that the Adjudicating Authority had

rightly dismissed the application filed by the Appellant which need not be

interfered with by this Tribunal.

24. It is to be pointed out that as per Section 238 of the I&BC, the provisions of

the Code shall have an overriding effect, notwithstanding anything

inconsistent therewith contained in any other law for the time being enforce

or any instrument having effect by virtue of any such law.

25. As per Section 60(4) of the I&BC, an Adjudicating Authority (NCLT) is vested

with the powers of the Debt Recovery Tribunal as specified in Part II of the

Code for the purpose of Section 60(2) of the Code and hence, it is for the

National Company Law Tribunal (Adjudicating Authority) to consider the

entire gamut of the matter and to pass appropriate orders thereto.

26. It is not in dispute that the Certificate Holder Bank had assigned the rights of

the Judgment Debtor Hotel Poonja International to Reliance ARC dated

03.06.2011 of the Recovery officer of the Debt Recovery Tribunal. Admittedly,

the Recovery Certificate was amended on 13.12.2012.

27. In the impugned order dated 20.08.2019 of the Adjudicating Authority, it was

mentioned that in WP. No. 3520 of 2018 and interim stay was granted in

respect of the DRT order dated 14.12.2017 and also that the Writ Petition No.

39858 of 2018 filed assailing the order O.A No. 547 of 1998 before the Hon'ble

High Court of Karnataka and repeatedly disposed of, but the copy of the said

order was not submitted before the Adjudicating Authority. Further, it was

mentioned that Writ Petition No. 17390 of 2017 filed by the

Respondent/Corporate Debtor in regard to the order of the Debt Recovery

Company Appeal (AT)(INS) No.1011 of 2019

15 Tribunal, Bengaluru dated 15.03.2017 relating to the rent payable (i.e. DRT

in DCP 2691 of 2017 dated 15.03.2017) stood adjourned.

28. An Adjudicating Authority, prior to an admission of an application preferred

by a' Financial Creditor', in terms of the ingredients of Section 7(4) of the

Insolvency and Bankruptcy Code, 2016 is to find out the existence of default

within 14 days from the date of receipt of the application based on the

subjective of satisfaction that a default had occurred, in which event, an

application under Section 7 of the Code be admitted, subject to rectification

of defects being cured within 7 days of the receipt of such notice from the

Authority by the Applicant as per Section 7(5) of the I&B Code.

29. Any sum which is due and payable by a Corporate Debtor to the Bank

(Financial Creditor) is a 'Financial Debt' as per Section 5 (8) (a) of the Code.

With a view to sustain an Application under Section 7 of the I&BC, 2016 an

Applicant is to establish an 'Existence of Debt', which is due from the

'Corporate Debtor'. A dispute is to be a bona fide, reasonable/genuine one, of

course, based on tangible materials. The 'Debt'is not due, if it is not payable

in law or on facts. A Corporate Debtor has an option to point out that the

'Default' had not occurred (inclusive of a disputed 'claim' and the same is not

due. An 'Adjudicating Authority' is to ascertain whether the record is complete

or otherwise, whether there is a 'Debt' and 'Default' was committed by the

'Corporate Debtor'. It is an established fact that existence of an 'Undisputed

Debt' is a condition precedent for commencement of 'Corporate Insolvency

Resolution Process.'

Company Appeal (AT)(INS) No.1011 of 2019

16

30. Be it noted, that in the judgment of this Tribunal dated 11.12.2019 V.Hotels

Limited V. Asset Reconstruction Company (India) Limited in Company Appeal

(AT) (Insolvency) No. 525 of 2019 at para 23 and 24, it is observed as under:

"Para 23. In the present case, 'Asset Reconstruction

Company (India) Ltd.'- ('Financial Creditor') has failed to bring on

record any acknowledgment in writing by the 'Corporate Debtor'

or its authorized person acknowledging the liability in respect of

debt. The Books of account cannot be treated as an

acknowledgment of liability in respect of debt payable to the

'Asset Reconstruction Company (India) Ltd.' - ('Financial

Creditor') signed by the 'Corporate Debtor' or its authorized

signatory.

24. In "Sampuran Singh and Ors. V.Niranjan Kaur and

Ors. - (1992) 2 SCC 679", the Hon'ble Supreme Court observed

that the acknowledgment, if any, has to be prior to the expiration

of the prescribed period for filing the suit."

31. In order to claim an exclusion of time spent bona fide in prosecuting the

proceedings under Section 14 of the Limitation Act, 1963, the essential factor

is that the matter was prosecuted before Court suffering from defect in

jurisdiction. Also that, the benefit of Section 14 of the Act, 1963, can be

availed of only when there is initial want of 'Jurisdiction'.

32. In the decision Yeshwant V. Walchand AIR 1951 Supreme Court Page 16, it

is observed that there can be no exclusion of time spent in the 'Insolvency

Proceedings' (under Section 14 of the Limitation Act, 1963) against the

Company Appeal (AT)(INS) No.1011 of 2019

17 judgment debtor, calculating the limitation period for a 'Decree' against him,

since the proceedings are not for securing the same relief.

33. In the decision Ajab Enterprises V. Jayant Vegoiles and chemicals AIR 1991

BOM Page 35, it is held that the time taken by the plaintiff to prosecute the

winding up Petition before Company Court cannot be excluded in computing

of limitation period for a suit against the Company for recovery of debt

because the matter in issue is not the same. Also, in the decision Anil Partap

Singh v. Onida Savak Ltd., AIR 2003 Delhi at page 252 it is held that benefit

of Section 14 of the Limitation Act, cannot be availed by the plaintiff even

when the winding up petition was dismissed on merits and not because of any

defect in jurisdiction or defect or objection of like nature.

34. Dealing with the aspect of that effect of an 'Acknowledgment' in writing as per

Section 18 of the Limitation Act, 1963 it cannot be gain said that

'Acknowledgment of Liability' is to be in writing, signed by a person against

whom the property or right is claimed and the same must be within the period

of Limitation. Suffice it for this Tribunal to relevantly point out that to bring

an acknowledgment within the meaning of Section 18 of the Limitation Act,

1963, it ought to be an unqualified one which gives a fresh cause of action.

35. As per Article 62 of the Limitation Act, 1963, a suit to enforce the mortgage is

to be filed within Twelve years from the date when money fell due, unless the

limitation period is extended in terms of any provision of the Limitation Act

as per decision of Hon'ble Supreme Court Manimala V. Indubala reported AIR

1964 SC at Page 1295.

36. In the decision Prabhakaran and Others V. M.Azhagiri Pillai (Dead) by lrs. And

Ors. (2006) 4 SCC at page 484 at special page 497 it is observed as follows:

Company Appeal (AT)(INS) No.1011 of 2019

18 ".............In a mortgage, both the mortgagor and

the mortgagee, have certain rights and

obligations against each other. The

rights/obligations of a mortgagor or a

mortgagee co-exist, like the two sides of a coin.

The mortgagor's right of redemption is co-

extensive with the mortgagee's right of sale or

foreclosure (where such right is recognized in

law). Any statement by either, admitting the

jural relationship with the other, will extend the

limitation for a suit by that other, against the

person acknowledging. It follows that when a

mortgagee makes a statement about his right to

recover the mortgage amount, such statement

impliedly acknowledges the corresponding right

of redemption of the mortgagor. Further, a

statement admitting jural relationship, need not

refer to or reiterate the rights and obligations

flowing therefrom. Where a party to the

mortgage, by his statement, admits the

existence of the mortgage or his rights under the

mortgage, he admits all legal incidents of the Company Appeal (AT)(INS) No.1011 of 2019

19 mortgage including rights and obligations of

both parties, that is mortgagee and mortgagor.

37. Also, at the aforesaid decision at Para 23 at Page No. 498

it is mentioned as under:

"............It sets out the circumstances in which a fresh

period of limitation can be computed for a suit. If the suit

is one for recovery of the amount due under an on-demand

promissory note, no doubt, only an acknowledgement by

the debtor can extend the period of limitation. But in regard

to mortgages, T.P. Act has created and recognized rights

as well as obligations both in the mortgagor and the

mortgagee (vide Chapter IV of the Transfer of Property Act,

in particular, Sections 60 and 67). Section 18 of the new

Act provides that where before the expiry of the prescribed

period for a suit in respect of any property or right, an

acknowledgement of liability in respect of such property or

right has been made by the party against whom such

property or right is claimed, a fresh period of limitation

shall be computed from the time when the

acknowledgement was so signed. An acknowledgement

under Section 18 can, therefore, be by a mortgagee also, Company Appeal (AT)(INS) No.1011 of 2019

20 and such acknowledgement will extend the limitation for a

suit against the mortgagee in respect of the property or

right claimed against him."

38. Section 65 of I&BC speaks of 'Fraudulent or Malicious Initiation of

Proceedings'. The word 'Fraudulent' as per Black's Law Dictionary (Fourth

Edition) means based on fraud; proceedings from or characterized by fraud;

tainted by fraud; done, made or effected with a purpose or design to carry out

fraud. In fact, the word 'Malice' means the presence of some improper and

wrongful motive with an intent to utilise a legal process in issue for some other

purpose, than for proper object. It cannot be forgotten that no penalty can be

fastened as per Section 65 (1) or Section 65 (2) of the Code on a person,

without forming a prima facie opinion that a case is made out in this regard.

An affected person in law is to expound his position and he must be provided

with an opportunity of hearing by the Adjudicating Authority, before taking a

final call in the matter.

39. As far as the present case is concerned, that Debt granted by the Assignor

Bank ('Vijaya Bank') to the Respondent was Rupees Forty Lakhs being a term

loan sanctioned on 20.05.1986. The outstanding Amount as on 18.07.2018

was of Rs. 145,44,46,651.32 (Principal outstanding amount of Rs. 40,00,000+

interest of Rs. 145,04,46,651.32). The date of 'Non-Performing Asset' is

01.04.1993. The Assignor Bank filed O.A No. 547 of 1998 before the DRT,

Bengaluru for recovery of the dues aggregating to Rs. 2,61,88,403.05. While

O.A No. 547 of 1998 was pending a 'Joint Compromise Term' was filed by the

parties based on which an order dated 27.03.2003 came to be passed by the Company Appeal (AT)(INS) No.1011 of 2019

21 Tribunal. The decretal amount of Rs. 2,61,88,403.05 and a Recovery

Certificate was already issued by the DRT, Bengaluru on 27.03.2003 and that

the Recovery Certificate was amended on 13.12.2012, based on the

Assignment Agreement executed dated 03.05.2011 between the Vijaya Bank

and the Appellant. The 'Statement of Account' of Vijaya Bank, the trust name

is mentioned as 'Reliance ARC - VB Pilve Trust' and the Respondent's is

described as 'Borrower'. The 'Statement of Account' dated 18.07.2018

mentioned the amount due as Rs.1,45,44,46,651.32 and that the 'Opening

Balance' as per 'Recovery Certificate' dated 27.03.2003 was Rs.

2,61,88,403.05 etc. Although, the Appellant has placed reliance on 'Statement

of Account' of the Respondent, the said 'Statement of Account' is not to be

treated as an 'Acknowledgment of Liability in respect of debt payable to the

Appellant/Financial Creditor, in the absence of any acknowledgment in

writing by the Respondent/Corporate Debtor or its Authorized Signatory. It is

to be remembered that the I&B Code is not a substitute for 'Debt Enforcement

Procedure'. Under the Code, an 'Adjudicating Authority' does not a money

claim or suit.

40. It is to be borne in mind Article 137 of the Limitation Act, 1963 not only

applies to the Civil Procedure Code but also to the Special Acts. As a matter

of fact, Article 137 constitutes a Residuary Article pertaining to 'Applications'.

As such it can be safely and securely be said that Article 137 will apply to the

Civil Procedure Code or in respect of any other special statute. What Article

113 of the Limitation Act, 1963 relates to suit, the Article 137 of the Limitation

Act, pertains to 'Application'.

Company Appeal (AT)(INS) No.1011 of 2019

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41. In view of the foregoing detailed upshort, and also, this Tribunal taking note

of the cumulative factors like (i) that the term loan was sanctioned to the

Respondent/Corporate Debtor on 20.05.1986, (ii) The date of determination

of 'Non-performing Asset' was on 01.04.1993, (iii) O.A No. 547 of 1998 being

filed by the Vijaya Bank (Assignor Bank) on 03.09.1998 against the

Respondent, in which an order was passed on 27.03.2003 (Based on

Comprised Terms), (iv) the right of Judgment Debtor/Respondent being

assigned by the Bank to the Appellant later (03.05.2011) (v) the Recovery

Certificate being amended on 13.12.2012 (vi) That the Recovery Certificate

issued by the Tribunal is still pending and also keeping in mind that the

Application under Section 7 of I&BC, 2016 was filed by the

Appellant/Financial Creditor before the Adjudicating Authority on

27.07.2018 (vii) the Writ Petition No. 17390 of 2017 filed by the Corporate

Debtor in regard to the Debt Recovery Tribunal order dated 15.03.2017

(pertaining to the rent payable by means of order in DCP No. 2691 of 2017

dated 15.03.2017 stood adjourned (as made mention of in the impugned order

by the Adjudicating Authority) and (viii) that since the default had occurred

well over three years before the date of filing of Section 7 Application and that

the 'Non-Performing Asset' was declared on 01.04.1993 without any haziness

comes to an escapable exclusion that the Application under Section 7 of I&BC

filed by the Appellant before the Adjudicating Authority (NCLT, Bengaluru

Bench) is clearly barred by 'Limitation'. As such, the present appeal is devoid

of merits. Consequently, the present Appeal is dismissed without costs. Before

parting with the case, it is made abundantly clear that the dismissal of the

Appeal filed by the Appellant before this Tribunal will not preclude it from Company Appeal (AT)(INS) No.1011 of 2019

23 pursuing / seeking appropriate remedy before the Competent Forum for

redressal of its grievances, if it so desires/advised, in accordance with Law.

[Justice Venugopal M.] Member (Judicial)

(V P Singh) Member(Technical)

New Delhi

5th February, 2020

RK

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