Sesh Nath Singh & Anr vs Baidyabati Sheoraphuli Co-Operative ...

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI COMPANY APPEAL(AT) (INSOLVENCY) NO.672 OF 2019 (Arising out of impugned order dated 25th April, 2019 passed by the Adjudicating Authority, National Company Law Tribunal, Kolkata Bench, Kolkata in CP(IB)No.1202/KB/2018). In the matter of: 1. Sesh Nath Singh, Director, Debi Fabtech Private Ltd, 96/3, S.C.M. Road, Suvotala, Baidyabati, West Bengal.

2. Akhsar Kumar Singh, Director, Debi Fabtech Private Ltd, 96/3, SCM Road, Suvotala, Baidyabati, West Bengal. Appellants Vs 1. Baidyabati Sheoraphuli Cooperative Bank Ltd, 6, Kalahata Lane, Sheoraphuli, Hooghly 712223

2. Animesh Mukhopadhyay, Syndicon Enclave 25/1A/1, Naktala Road, Kolkata 700047 Respondent Mr. Aritra Basu, Ms Parshali Banerjee and Ms Sreenita Ghosh, Advocates for appellants. Mr. J. Sai Deepak and Ms Anjali Gupta, Advocates for R1. Mr. Pranay Agarwal, Mr. Avinash Kumar Sharma, Advocates for R2.

JUDGEMENT

( 22nd NOVEMBER, 2019)

JUSTICE JARAT KUMAR JAIN, MEMBER(JUDICIAL)

The Appellants, in the present Company Appeal (AT) (Insolvency)

No.672 of 2019 are the Directors of M/s Debi Fabtech Pvt Ltd, 'the Corporate Company Appeal (AT)(Insolvency) No.672 of 2019 2

Debtor' against whom the Corporate Insolvency Resolution Process ('for short

CIRP) has been initiated and moratorium has been imposed from the date of

the admission till the completion of CIRP by the impugned order passed by

National Company Law Tribunal, Kolkata Bench vide their order dated

25.4.2019. The Appellants are Mr.Sesh Nath Singh and Mr. Akshay Kumar

Singh, Directors of the Corporate Debtor i.e. M/s Debi Fabtech Pvt Ltd in the

said appeal filed under Section 61 of the Insolvency & Bankruptcy Code ('for

short I&BC) 2016 r/w Section 7 of I&BC, 2016. The appellants have sought

the following relief:-

a) To set aside the order dated 25.4.2019 passed by National Company

Law Tribunal, Kolkata Bench initiating CIRP against the Corporate

Debtor.

b) To stay the aforementioned order till disposal of the present Appeal and

all further proceedings in the CIRP of the Corporate Debtor that has

commenced in terms of the impugned order dated 25.4.2019.

2. The Financial Creditor (Respondent No.1 herein) granted cash credit

facility of Rs. 1 crore to the corporate debtor vide sanction letter dated

12.2.2012. The Corporate Debtor execute agreement of hypothecation of book

debts. The Corporate Debtor availed cash credit from time to time.

3. According to financial creditor, the corporate debtor committed default

in paying financial debt. The account was declared NPA on 31.03.2013 on

account of irregularities in payment by the corporate debtor. Demand Notice

under Section 13(2) of SARFEASI Act, 2002 was issued on 18.01.2014.

Thereafter on 13.2.2014 notice under Section 13(4) of SARFEASI Act, 2002

was issued to corporate debtor. On 19.12.2014 the Corporate Debtor filed a

Company Appeal (AT)(Insolvency) No.672 of 2019 3

writ petition bearing No.33799(W) of 2014 against the financial creditor

challenging the notice under Section 13(2) of SARFEASI Act, 2002. Hon'ble

Kolkata High Court by order dated 24.7.2017 restrained financial creditor

from taking any steps against the corporate debtor under the SARFEASI Act,

2002 till further orders. Before that on 24.12.2014 possession notice under

Section 13(4) of SARFEASI Act, 2002 alongwith Rule 9 of Security Interest

(Enforcement) Rules 2002 has been issued against the corporate debtor and

the possession order was issued on 11.5.2017 by the District Magistrate,

Hooghly. On 27.8.2018, financial creditor has filed application under Section

7 of I&B Code before the Adjudicating Authority, NCLT, Kolkata Bench,

Kolkata.

4. Learned Adjudicating Authority by its impugned order found that the

corporate debtor did not dispute two facts that it has received loan from

financial creditor and there is default in paying loan amount. Hence the

application under Section 7 of I&B Code has been admitted and Corporate

Insolvency Resolution Process against the corporate debtor has been ordered.

5. Learned counsel for the appellant submits that the account of

Corporate Debtor was declared NPA on 31.03.2013 whereas the application

under Section 7 of I&B Code has been filed on 27.08.2018 i.e. after about 5

years and 5 months from the date of accrual of cause of action. Hon'ble

Supreme Court in the case of B.K. Educational Services Pvt Ltd Vs Parag

Gupta and Associates 2018 SCC OnLine SC 1921 held that the Limitation

Act is applicable to applications filed under Section 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

Company Appeal (AT)(Insolvency) No.672 of 2019 4

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.

6. It is also submitted that Hon'ble Supreme Court in the recent

judgement "Vashdeo R Bhojwani Vs Abhyudaya Cooperative Bank Ltd ^

Anr, Civil Appeal No.11020 of 2018 decided on 2nd September, 2019 and

Gaurav Hargovindbhai Dave Vs Asset Reconstruction Company (India)

Ltd & Anr, Civil Appeal No.4952 of 2019 decided on 13th September,

2019 again held that Article 137 of the Limitation Act is applicable to Section

7 of the I&B Code and the intent of the I&B Code is not to give a new lease of

life to debts which are already time barred. In this case the Respondent has

filed the application under Section 7 of I&B Code on 27.08.2018 after about

5 years and 5 months from the date of accrual of cause of action i.e.

31.03.2013 whereas as per Article 137 of Limitation Act the application may

be filed within three years from the date of accrual of cause of action i.e. till

30.03.2016. Thus the application filed under Section 7 of I&B Code is

apparently time barred, therefore, the Adjudicating Authority has wrongly

admitted the application. Hence the impugned order is liable to be set aside.

7. Learned counsel for the Respondent vehemently opposed the

arguments and submitted that it is true that the account was declared NPA

on 31.03.2013. Thereafter, the Respondent exercised his remedy under the

existing law within the prescribed limit i.e. on 18.1.2014 demand notice under

Section 13(2) of SARFEASI Act was issued to the corporate debtor and

thereafter the respondent bonafidely prosecuted the application under the

SARFEASI Act and ultimately he has got the possession order on 11.5.2017

Company Appeal (AT)(Insolvency) No.672 of 2019 5

issued by the District Magistrate, Hooghly. In the meanwhile the

appellant/corporate debtor has filed the Writ Petition under Article 226 before

the Hon'ble Kolkata High Court on 19.12.2014 and on 24.7.2017 the Hon'ble

High Court of Kolkata ordered not to proceed under SARFEASI Act.

Thereafter, the Respondent has filed the application under Section 7 of I&B

Code on 27.08.2018. It is true that in the light of judgement of Hon'ble

Supreme Court in the case of B.K. Educational Services Pvt Ltd Vs Parag

Gupta and Associates 2018 SCC OnLine SC 1921 that the application

under Section 7 of the I&B Code be governed by Article 137 of the Limitation

Act and within three years the Financial Creditor/respondent can file

application. The respondent was quite vigilant in his rights and cannot be

said that the respondent was negligent. He has bonafidely prosecuted his

application under SARFEASI Act. Therefore, as per Section 14(2) of Limitation

Act in computing the period of limitation the time during which the

respondent has been prosecuting with due diligence another civil proceedings

against the corporate debtor for the same relief shall be excluded. The period

from 18.01.2014 (date of notice under Section 13(2) of SARFEASI Act) to

24.07.2017 (when the Kolkata High Court has passed the order against the

Respondent), this period will be excluded and if this period of 3 years and 6

months is excluded then the application filed under Section 7 of the I&B Code

is within limitation period.

8. We have considered the submissions of the learned counsel for the

parties.

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9. The corporate debtor has taken a ground that the application under

Section 7 of I&B Code is time barred in the appeal itself. Such ground is not

agitated before the Adjudicating Authority. Therefore, there is no finding of

Adjudicating Authority on this issue.

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.

11. In such circumstances we find that the application under Section 7 is

within limitation and there is no force in the argument of Learned counsel for

the Appellant that the application is time barred. No interference is called for.

Hence the appeal is dismissed. No order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Dr. Ashok Kumar Mishra) Member (Technical) New Delhi

Bm

Company Appeal (AT)(Insolvency) No.672 of 2019