Stressed Assets Stabilization Fund vs Royal Brushes Pvt Ltd

Stressed Assets Stabilization Fund ....Appellant Vs. Royal Brushes Pvt. Ltd. ....Respondent

Present:

Appellant: Ms. Anju Bhushan, Mr. Kanishk Rana and Mr. Aditya Goel, Advocates.

ORDER

(Through Virtual Mode) 04.11.2020: This appeal is directed against the impugned order dated 18th

March, 2020 passed by the Adjudicating Authority (National Company Law

Tribunal), Court-III, Special Bench, Mumbai in CP IB-902/I&BP/MB/2019 by

virtue whereof the application under Section 7 of the Insolvency and Bankruptcy

Code, 2016 ("I&B Code" for short) filed by the Appellant- 'Stressed Assets

Stabilization Fund' against the Corporate Debtor- 'Royal Brushes Pvt. Ltd.' came

to be dismissed on the ground that the default had occurred on 1st July, 2001

and the Corporate Insolvency Resolution Process could not be initiated beyond

three years in terms of Article 137 of the Limitation Act, 1963.

2. The sole ground on which the Appellant assails the impugned order is that

the Respondent- 'Corporate Debtor' had made an OTS proposal in the year 2006

for Rs. 353 Lakh which was subsequently revised on 7th July, 2006 but the

Contd/-......

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negotiated settlement was removed on 13th December, 2006 due to failure on the

part of the Respondent- 'Corporate Debtor' to comply with the terms of

restructuring of debt.

3. It is manifestly clear that the ground agitated for assailing the impugned

order is founded on plea of extension of limitation. The date of default being 1st

July, 2001, the cause of action would not shift and therefore, limitation for

initiating Corporate Insolvency Resolution Process would commence from the

date of default.

4. Subsequent restructuring of debt vide negotiated settlement which

admittedly aborted and failed, would not give a fresh cause of action to Appellant.

Such plea would not sustain even if the limitation is computed from the date of

failure of such negotiated settlement as the application is still hit by limitation.

5. Learned counsel for the Appellant submits that there is continuing cause

of action. This is a misplaced argument as once the date of default is there which

provides cause of action to the Appellant, limitation begins to run from such

date. The Hon'ble Apex Court in "Babulal Vardharji Gurjar v. Veer Gurjar

Aluminium Industries Pvt. Ltd. & Anr.- 2020 SCC OnLine SC 647" and

"Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company (India)

Ltd. & Anr.- (2019) 10 SCC 572" has clearly laid down that the limitation

computed in terms of Article 137 of the Limitation Act, 1963 would commence

Company Appeal (AT) (Insolvency) No. 949 of 2020 -3-

from the date of default and in the event of account being declared NPA the date

of default would be the date when the account was declared as NPA.

6. We find no merit in this appeal. The same is dismissed. However, we make

it clear that the dismissal of this appeal will not preclude the Appellant from

seeking appropriate legal remedy before the Competent Forum for recovery of the

amount.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical) AR/g

Company Appeal (AT) (Insolvency) No. 949 of 2020