Stressed Assets Stabilization Fund vs Suman Motels Ltd

[Arising out of order dated 10.02.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench - I), in C.P. (IB) No.172/MB/2020]

IN THE MATTER OF: Stressed Assets Stablization Fund, IDBI Tower, 3rd Floor, D-Wing, WTC Complex, Cuffe Parade, Mumbai - 400005. ...Appellant

Versus

Suman Motels Limited 208, Parshva Chambers, 19/21, Essaji Street, 2nd Floor, Masjid Bunder, Mumbai - 400003. ...Respondent

Present: For Appellant : Mr. Abhijeet Sinha Sr. Advocate with Mr. Anand Varma and Ms. Apoorva Pandey, Advocates.

For Respondent : Mr. Sajeev Deora, Mr. Harsh Gurbani and Ms. Tripty Rajput, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by the Financial Creditor has been filed challenging the

Order dated 10.02.2023 passed by the Learned Adjudicating Authority

(National Company Law Tribunal, Mumbai, Bench - I) by which Order Section

7 Application find by the Appellant against the Respondent, Suman Motels

Limited has been dismissed as barred by time. Aggrieved by the Order dated

10.02.2023, this Appeal has been filed.

2. Brief facts of the case and sequence of the events necessary to be

noticed for deciding the Appeal are:

i. The Respondent Suman Motels Limited was extended financial facilities

by IDBI Bank in the Year 1995, 1996 and 1998 totalling ₹1,587.58

Lakhs. Due to default committed by the Company, IDBI Bank issued a

recall Notice dated 16.02.2001, seeking payment of ₹17.52 Crores/-

due as on 31.01.2001 and OA No.03/2002 was filed by IDBI Bank Ltd

before Debt Recovery Tribunal (`DRT') for recovery of its dues.

ii. On 12.09.2002, Company filed a reference before the Board for

Industrial and Financial Reconstruction (`BIFR').

iii. On 01.01.2003, Notice under Section 13(2) was issued by IDBI Bank to

the Company seeking repayment of ₹25,44,85,905/-.

iv. IDBI Bank sent a Notice dated 02.02.2003 inviting for One Time

Settlement (`OTS') proposal from the Company in pursuance of the

Notice under Section 13(2), IDBI took possession of movable and

immovable Assets of the Company on 27.03.2003/22.04.2003.

v. On 30.09.2004, IDBI transferred the facilities together with all

underlined securities to Stressed Assets Stabilization Fund ('SASF').

vi. The Appellant Company vide letter dated 24.11.2004 was also informed

about the transfer of facilities.

Comp. App. (AT) (Ins.) No. 466 of 2023 2 of 21 vii. By Order dated 06.06.2006, BIFR dismissed the reference filed by the

Company. DRT vide its OA No. 3/2002 issued a Recovery Certificate

on 19.10.2006 for an amount of ₹21,27,32,311/- along with interest.

viii. On 23.11.2006, Company filed an Appeal against the Order of BIFR

before the Appellate Authority for Industrial and Financial

Reconstruction (`AAIFR').

ix. On 10.01.2008, Company issued an OTS offer to the Appellant.

Another OTS letter was sent by the Company on 28.07.2010 to the

Appellant proposing an OTS offer of ₹175 Lakhs.

x. The AAIFR dismissed the Appeal filed by the Company on 29.09.2010.

xi. Writ Petition No. 2666/2010 was filed by the Company, challenging the

Order of the AAIFR on 16.11.2010.

xii. High Court vide its Order dated 05.03.2013 in Writ Petition filed by the

Company directed the Appeal to be restored before AAIFR and be

decided. Consequent to the Order of the High Court dated 05.03.2023,

AAIFR heard the Appeal and finally dismissed the same by its Judgment

dated 31.12.2013.

xiii. The Company had challenged the Order dated 13.12.2003 before the

High Court. In Balance Sheet of the Company for the Year 2015-16

prepared on 26.09.2016, loan of IDBI Bank of ₹13,03,25,000/- as on

31.03.2016 has been acknowledged.

xiv. Subsequent Balance Sheet of 2016-17, 2017-18 & 2018-19 also

reflected the loan of IDBI Bank.

Comp. App. (AT) (Ins.) No. 466 of 2023 3 of 21 xv. On 17.12.2019, Appellant filed Section 7 Application claiming an

amount in default as ₹65,71,72,655/-.

xvi. Date of default in Part IV is mentioned as 01.06.2019.

xvii. Reply to the Section 7 Application was filed by Company. In the Reply

filed by the Company, it was pleaded that loan was recalled by Notice

dated 26.02.2001. Company also pleaded that Section 7 Application

filed by the Appellant is barred by time. Date of default as mentioned

in Section 7 Application, i.e., 01.06.2019 was denied.

xviii. It was further pleaded by the Company that after issuance of Notice

under Section 13(2) in response to letter of the Bank, inviting of OTS

proposal, OTS proposal was given and Agreement was reached between

the Parties that IDBI Bank to take physical possession of two Resorts,

possession at Mangaon was taken on 27.03.2003 and the possession of

Resort at village Kashid, Raigad was taken by 22.04.2003. After

handing over possession of both the Resorts, Company wrote to the

IDBI to issue satisfaction letter which was not issued. Transfer of debt

in favour of Appellant was invalid. No, debts subsisted to be transferred

debt having already been discharged.

xix. Rejoinder to the Reply was also filed by the Bank.

xx. Adjudicating Authority after hearing the Parties by Order dated

10.02.2023, dismissed the Application as barred by time. Adjudicating

Authority recorded a finding that the date of default mentioned as

01.06.2019 in the Part IV is not correct date of default and date of

Comp. App. (AT) (Ins.) No. 466 of 2023 4 of 21 default lies in the Year 2001 and not in the 2019. Adjudicating

Authority, however, held that Financial Creditor having proceeded with

OA No.03/2002 before the DRT in which Recovery Certificates was also

issued on 19.10.2006 in favour of Financial Creditor, the embargo

created under Section 22 of SICA Act 1985 was defeated. Hence, the

Financial Creditor shall not be entitled for the benefit of Section 22 of

SICA Act. Adjudicating Authority held that the period from 2002-2012

does not deserves to be excluded in counting the period of Limitation.

xxi. Returning the aforesaid finding the Adjudicating Authority dismissed

the Application as barred by time. Relevant discussion on the question

of Limitation is contained in Paragraphs 29 and 30 of the Order which

is as follows:

"29. However, we note that the Original Application No. 03 of 2002 was proceeded before the DRT against the Corporate Debtor from the year 2002 to 2006, after which the DRT also issued a recovery certificate dated 19.10.2006 in favor of the Financial Creditor. Thus, this shows that the embargo was defeated by proceeding against the Corporate Debtor during the period of ongoing embargo under Section 22 of SICA. The Financial Creditor was thus not deprived of taking legal recourse in view of Section 22 of the SICA. Therefore, the provisions cannot only be interpreted in favour of the Financial Creditor. Thus, in the light of justice the period from 2002 to 2013 does not deserve to be excluded in counting the period of limitation.

30. Thus, the issue of limitation raised by the Corporate Debtor before the Adjudicating Authority on the ground that the last date of the loan repayment is around the year 2001 whereas the application under Section 7 of the Code was filed in the year 2019, therefore, having filed after almost two decades, hence it was barred by limitation having been filed after the limitation period of three years, is justified."

Comp. App. (AT) (Ins.) No. 466 of 2023 5 of 21

3. We have heard Learned Sr. Counsel Mr. Abhijeet Sinha and Learned

Counsel Mr. Anand Varma appearing for the Appellants and Learned Counsel

Mr. Harsh Gurbani appearing on behalf of the Respondent.

4. Mr. Abhijeet Sinha Learned Sr. Counsel for the Appellant submits that

view taken by the Adjudicating Authority that Appellant shall not be entitled

for the benefit of Section 22 of SICA Act on account of issuance of Recovery

Certificate on 19.10.2006 by DRT is an erroneous view. It is submitted that

when the period during which the Company is under SICA benefit of Section

22(5) cannot be denied which period deserves to be excluded and the

Adjudicating Authority committed an error in refusing to exclude the period

under Section 22(5) of SICA Act. Learned Counsel for the Appellant in support

of his submission relied on the Judgment of the Hon'ble Supreme Court in

the matter of `Sabarmati Gas Ltd.' Vs. `Shah Alloys Ltd.', reported in

(2023) 3 SCC 229. Mr. Sinha submitted that the fact that Financial Creditor

was prosecuting his OA No.3/2002 before the DRT in which Recovery

Certificate was issued on 19.10.2006, the benefit under Section 22 of SICA

Act cannot be denied. It is submitted that Recovery Certificate was issued on

19.10.2006 by which time reference filed by the Company stood dismissed on

06.06.2006, when the Recovery Certificate was issued, there was no reference

pending. It is further submitted that Corporate Debtor has given OTS letter

on 10.01.2008 and 28.07.2010, acknowledging the debt, which letters also

acknowledged the debt and period of Limitation shall stand extended under

Section 18 of the Limitation Act. It is further submitted that debt has further

Comp. App. (AT) (Ins.) No. 466 of 2023 6 of 21 been acknowledged in Balance Sheet of 2015-16, 2016-17 & 2017-18, hence

the Application which was filed on 17.12.2019 is not barred by time.

5. Learned Counsel for the Respondent refuting the submissions of the

Appellants submits that Application filed by the Appellant was clearly barred

by time. Learned Counsel for the Respondent referring to Paragraph 22 of the

Reply filed in the Appeal submits that even by granting exclusion of the period

under Section 22 of the SICA Act, Application filed by the Appellant was

barred by time. It is contended that 3 Years period for filing the Application

expired on 22.06.2014 after granting exclusion under SICA Proceedings. It is

submitted that the debt stood discharged, since Appellant has taken

possession of 2 Resorts of the Company in 2003. After issuance of the Notice

under Section 13(2) of the SARFAESI Act 2002, and after receipt of letter of

OTS which was responded by the Company, offering the Holiday Resorts

which was accepted by the IDBI Bank. It is submitted that Application filed

under Section 7 was highly barred by time, the date of default mentioned as

01.06.2019 in Section 7 Application is without any basis and was incorrect

date to somehow make the Application within time. It is submitted that from

the relevant document which was filed before the Adjudicating Authority,

including the loan Recall Notice dated 16.02.2021 default occurred in 2001

and the Application filed in 2019 was clearly barred by time.

6. We have heard the submissions of the Counsel for the Parties and

perused the record.

7. From the submission which has been advanced by the Counsel for the

Parties, following issues arise for consideration in this Appeal:

Comp. App. (AT) (Ins.) No. 466 of 2023 7 of 21 I. What is the date of default committed by Company, whether 01.06.2019

as claimed in Section 7 Application or the default was committed in the

Year 2001 as pleaded by the Company and accepted by the Adjudicating

Authority?

II. Whether the benefit for excluding the period of Limitation as available

under Section 22(5) of SICA Act, 1985, has been rightly denied by the

Adjudicating Authority on account of prosecuting the OA No.03/2002

before the DRT by the Appellant culminating into Recovery Certificate

dated 19.10.2006?

III. Whether after excluding the period of Limitation as per Section 22 of

SICA Act 1985, the Application filed by the applicant was within period

of Limitation?

IV. Whether the Appellant is entitled to the extension of Limitation in

pursuance of the Recovery Certificate dated 19.10.2006, OTS letter

dated 10.01.2008 and OTS letter dated 28.07.2010? Whether the Order

of the Adjudicating Authority rejecting the Section 7 Application as

barred by time deserves to be interfered with in this Appeal?

Question No. I

8. The first question to be considered is as to what is the date of default

committed by the Company for purposes of computation of Limitation in

reference to Section 7 Application filed by the Appellant.

Comp. App. (AT) (Ins.) No. 466 of 2023 8 of 21

9. We need to first Notice Part IV of the Application filed by the Appellant

and the pleadings made therein. Part IV, Column 2, where amount of default

and date on which default is occurred provides as follows:

"PART - IV PARTICULARS OF FINANCIAL DEBT:

2. Amount claimed : Amount in default:

to be in default Rs.65,71,72,655.10 and the date on which the default (Rupees: Sixty Crores Seventy occurred. One Lakh Seventy Two Thousand Six hundred and (Encl: Herewith is Fifty Five only). the workings for computation of Date of Default: The date of amount and days occurrence of default for the of default in purpose of IBC is 01.06.2019. tabular form) The Hon. DRT, Mumbai vide its order dated 19.10.2006 issued Recovery Certificate for a sum of Rs. 21,27,32,311/- along with interest @ 12% p.a. from the date of filing original application till payment and/or realization.

Workings for computation of amount claimed to be in default payable by Corporate Debtor to Financial Creditor is attached as `Annexure - B'.

10. Part IV mentions "the date of occurrence of default for the purposes of

IBC is 01.06.2019". In Part IV, Appellant also mentions the Order dated

19.10.2006 issued by the DRT issuing Recovery Certificate for 21,27,32,311/-

. However, when we look into the Application, the Application did not refer to

loan recall Notice dated 16.02.2001 rather first date mentioned for default

committed by Company was 01.01.2003, i.e., Notice issued under Section

13(2). It was also pleaded that in exercise of power under Section 13(4), 2

Comp. App. (AT) (Ins.) No. 466 of 2023 9 of 21 properties were taken possession on 27.03.2003 and 22.04.2003. Reply was

filed by the Company in Section 7 Application. In the Reply Affidavit, the

Company has categorically pleaded that Application is barred by time and no

due is payable. In Paragraphs 5 & 6 of the Reply, following has been pleaded:

"5. Without prejudice to the contention of the Respondent (alleged Corporate Debtor) that the purported debt was duly discharged in the year 2003 itself, assuming whilst denying that monies remained outstanding, it is submitted that the purported debt is time barred and/or barred by the law of limitation and hence, no debt is due and/or payable as alleged or at all.

6. A Recall Notice dated 16.02.2001 was issued by IDBI and was served upon the Respondent Company on 23.02.2001 in respect of the same three loan transactions on the basis of which the present application is filed. The Due Dates of the loan amounts as per this letter were between 1999 and 2001. Hereto annexed and marked as Exhibit-B is a copy of the said Recall Notice dated 16.02.2001. The present Petition is, however, filed on 17.12.2019 after almost two decades. Hence, it is submitted that the petition is time barred and there is no debt which is due and/or payable."

11. The Appellant himself in the Appeal has brought on the record the copy

of the loan recall Notice dated 16.02.2001 as (Annexure A-10). The recall

Notice dated 16.02.2001 has been addressed to the Company. Notice

categorically mentions that the amount of loan aggregating to

₹13,03,25,000/- together with interest aggregating to ₹17,52,44,940/- have

become immediately due and payable. Paragraph 8 of the Notice mentions:

"8. Accordingly, IDBI, hereby declares in writing as follows:-

i) THAT the outstanding principal amounts of the Loans aggregating Rs.130,35,000/-

(Rupees One thirty million three lakh and twenty five thousand only) together with

Comp. App. (AT) (Ins.) No. 466 of 2023 10 of 21 interest further interest, liquidated damages, etc. aggregating Rs.44,919,940/- (Rupees Forty-four million nine lakh nineteen thousand nine hundred and forty only), making the aggregate of Rs.175,244,940/-

(One seventy-five million two lakh forty-four thousand nine hundred and forty only), the particulars whereof are mentioned in Annexure-III hereto, have become immediately due and payable by you to IDBI;

and ii) THAT a sum of Rs.1610/- payable by you towards expenses incurred by IDBI, as per Annexure-IV hereto, have become immediately due and payable by you to IDBI."

12. In Para 9(ii) Company was directed to make payment within a period of

10 days from date amount aggregating to ₹17,52,44,940/-. Para 9 is as

follows:

"9. In the premises, we hereby call upon you and demand form you to -

(ii) pay to IDBI at Mumbai, within a period of 10 days from the date hereof, the aforesaid sums aggregating Rs.175,244,940/- (One seventy-five million two lakh forty-four thousand nine hundred and forty only), as per Annexure(s)-III and IV hereto, together with further interest thereon with effect from date of this letter, at the contractual rates upon the footing of compound interest, until payment/realisation."

13. The Appellant in its Appeal itself claim issuance of recall Notice dated

16.02.2001, which clearly recall the loan and directed the Company to pay

within 10 days. The date of default as per the recall Notice is clearly

26.02.2001. We, thus concur with the findings of the Adjudicating Authority

that date of default is 2001.

Comp. App. (AT) (Ins.) No. 466 of 2023 11 of 21

14. We failed to see any valid reason for mentioning 01.06.2019 as date of

default for purposes of IBC. It is well settled that for filing an Application

under Section 7, Article 137 of the Limitation Act 1963 is applicable. We,

thus are satisfied that date of default in Section 7 was imaginary and without

any basis and the date of default is the Year 2001 (26.02.2001).

Question No. II

15. The issue pertains to the effect and consequence of Section 22 of the

SICA Act. The question is as to whether filing of OA No. 03/2002 and issue

of Recovery Certificate on 19.10.2006 by the DRT can be reason for denying

the benefit which is available to a Company under Section 22.

16. We need to first Notice the provisions of Section 22 of the SICA Act,

1985. Section 22(1) deals with suspension of legal proceedings contract, etc.

Section 21(1) is as follows:

"22. Suspension of legal proceedings, contracts, etc.--(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded

Comp. App. (AT) (Ins.) No. 466 of 2023 12 of 21 with further, except with the consent of the Board or, as the case may be, the appellate authority."

17. Section 22(5) provides as follows:

"22. Suspension of legal proceedings, contracts, etc.--

(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded."

18. The provision of Section 22 came for consideration before the Supreme

Court in `Sabarmati Gas Ltd.' (Supra). In the above case, question arose

as to whether for computation of period of Limitation in regard to Application

under Section 9 of the IBC period during which right to proceed against or

sue the Corporate Debtor remain suspended need to be excluded. The

question which was framed by the Hon'ble Supreme Court in the above case

in Para 2.1 (i) is as follows:

"2.1. (i) Whether in computation of the period of limitation in regard to an application filed under Section 9 IBC the period during which the operational creditor's right to proceed against or sue the corporate debtor that remain suspended by virtue of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA") can be excluded, as provided under Section 22(5) of SICA?"

19. The Hon'ble Supreme Court, after considering the provisions of Section

22 and Section 22(5), following was laid down in Paragraphs 17 & 22 to 25:

"17. Thus, Section 22(1) SICA as extracted above, would make it clear that there was a statutory bar to take to any proceeding for realisation of a right referred to in the said section against an industrial company when once an enquiry under Section 16 SICA is pending against it or any scheme referred to under Section 17 thereof is under preparation or

Comp. App. (AT) (Ins.) No. 466 of 2023 13 of 21 consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, except with the consent of the Board or the appellate authority, as the case may be. As noticed earlier, SICA came to be repealed and IBC came into force (Sections 7 to 9 and various other Sections), on the same day viz. on 1-12-2016.

22. Thus, it is obvious that the three-Judge Bench in KSL & Industries [KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 : (2015) 1 SCC (Civ) 462] considered the question whether a recovery application under the Recovery of Debts Due to Banks and Financial Institutions Act, 1963 ("the RDDB Act") would lie or be proceeded with against a sick company in view of the bar contained in Section 22(1) of SICA. Evidently, even after finding that an "application for recovery" under the RDDB Act could not specifically be described as proceedings for execution, distress or the like against any of the properties, it was held that it is certainly a proceeding which may result in the execution and distress against the property of the company and is therefore, liable to be construed as a proceeding for the execution, distress or the like against any of the properties of the industrial company. Accordingly, it was held that such a construction would be within the intendment of Parliament. Moreover, it was held therein that there would be no purpose in construing that Parliament intended that such an application for recovery by summary procedure should lie or be proceeded with, but only its execution be interdicted or inhibited. That apart the three-Judge Bench found nothing contrary in the intention of SICA to exclude a recovery application from the purview of a Section 22 thereof, taking note of the fact that the purpose of the said provision is to protect the properties of sick company, so that they may be dealt with in the best possible way for the purpose of its revival by BIFR.

23. In view of the provisions under Section 22(1) of SICA and the decisions in Paramjeet Singh case [Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322] and in KSL & Industries [KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 : (2015) 1 SCC (Civ) 462] , it is worthwhile to note that in the case on hand it was the industrial company (the respondent herein) that approached BIFR under the provisions of SICA and got it declared as "sick

Comp. App. (AT) (Ins.) No. 466 of 2023 14 of 21 company" by filing Case No. 13 of 2010; that it is thereafter that the appellant filed Miscellaneous Application No. 432 of 2013 thereon praying, inter alia, to permit it under Section 22 of SICA to approach a civil court of appropriate jurisdiction for recovery of the abovementioned dues along with interest; that the said application was disposed of only on 9-9-2015, as per Annexure A-40 proceedings, that too, only with a direction to the respondent company to incorporate the dues of the applicant in the DRS and that as per Annexure A-40, Case No. 13 of 2010 and MA No. 292 of 2014 filed thereon, were then, posted for hearing.

24. In short, Case No. 13 of 2010 was pending before BIFR when SICA was repealed w.e.f. 1-12-2016 and Sections 8 and 9 IBC took its effect from 1-12-12016. Thus, obviously, proceedings under SICA were then pending before BIFR when the default from the part of the respondent allegedly occurred and by virtue of Section 22(1) SICA and the decisions referred above, the appellant could not have, then, resorted to any legal proceedings for enforcing any right which may result in recovery from the properties of the respondent company. For the same reasons, the contention of the respondent that pending the proceedings before BIFR the appellant could have resorted to arbitration proceedings also has to fail.

25. Now, we will have to consider the purported intent of Section 22(5) SICA. The intention appears to be to protect the interest of such a party who was prevented from lawfully enforcing the right to seek for recovery of dues during the operative period of the bar under Section 22(1) SICA, if it is otherwise available even after the conclusion of proceedings before BIFR, to the extent specifically mentioned therein. According to us, any other understanding of the provisions under Section 22(5) would be wholly pointless and purposeless. When the appellant being a party to BIFR in the sense, on intervention obtained an order to the respondent company to incorporate its dues in the Draft Rehabilitation Scheme ("DRS") in an application seeking permission to effect recovery of the dues and such a stage had not reached till 1-12-2016, whether there would be any justification to hold that on the repeal of SICA it could not claim the benefit flowing from the provisions under Section 22(5) of SICA, subject to the provisions under the relevant laws governing the appropriate forum chosen?"

Comp. App. (AT) (Ins.) No. 466 of 2023 15 of 21

20. When law provides for excluding the period for purpose of Limitation

under Section 22(5) of the SICA Act for purposes of computation of the

Limitation for filing an Application, the period covered by Section 22(5) has to

be excluded. What period is covered by Section 22 is mentioned in Section

22(1) i.e.:

i. An enquiry under Section 16 is pending;

ii. Any scheme referred to Section 17 is under preparation or

consideration or sanction Scheme under Limitation or where an Appeal

under Section 25 relating to Industrial Company is pending;

As noted above, Adjudicating Authority in Paragraph 29 of the Judgment

took the view that since Appellant has proceeded to prosecute OA No.

03/2002 before the DRT in which Recovery Certificate was issued on

19.10.2006, the period from 2002-2013 does not deserves to be excluded. We

are of the view that the Adjudicating Authority did not correctly construed the

provisions of Section 22 of SICA Act. The period which is covered by Section

22(1) deserves to be excluded as required by Section 22(5). In the present

case, we are not required to express any opinion with regard to proceeding

initiated by Appellant by OA No.03/2002 and the legal consequence of the

said proceeding. It is however to be noticed that when the Recovery Certificate

dated 19.10.2006 was issued, the reference under SICA had already been

dismissed on 06.06.2006. Hence, on the date when Recovery Certificate was

issued SICA Proceedings were not pending.

21. In view of the forgoing discussions, we answer Question No. 2 holding

that the Appellant was entitled to exclude the period for the purposes of

Comp. App. (AT) (Ins.) No. 466 of 2023 16 of 21 Limitation which is covered by Section 22(1) and Section 22(5) of the SICA Act

and the view taken by the Adjudicating Authority in this regard is not

approved in the facts of the present case.

Question No. III & IV

22. We after having held that Appellant was entitled for exclusion of the

period covered by Section 22(1), we need to revert to the facts of the present

case as to what period the Appellant shall be entitled to reckon for exclusion.

23. The Company filed the reference before the BIFR on 12.09.2002, which

reference came to be dismissed on 06.06.2006. The period from 12.09.2002

to 06.06.2006 is clearly covered by Section 22(1) and this period need to be

excluded for computing the Limitation. An Appeal was filed by Appellant

against the Order of BIFR on 23.11.2006, which Appeal came to be dismissed

on 29.09.2010. The period during pendency of the Appeal, i.e., from

23.11.2006 and 29.09.2010 is also clearly covered by Section 22(1) and

deserves to be excluded. Writ Petion No. 2666/2010 was filed by the

Company, challenging the Order dated 29.09.2010, which Writ Petition came

to be decided by the High Court on 05.03.2013. High Court by the said

Judgment restored the Appeal. The Appeal thus again came to be revived and

shall be treated to be pending from 05.03.2013, till the Appeal was dismissed

on 31.12.2013 by AAIFR. A question arises as to whether the period during

which the Writ Petition was pending in the High Court challenging the Order

dated 29.09.2010 also deserves to be excluded.

24. When we look into the Order of the High Court 05.03.2013, it is clear

that Appeal was dismissed by AAIFR as not maintainable, in which Writ

Comp. App. (AT) (Ins.) No. 466 of 2023 17 of 21 Petition, High Court came to conclusion that Appeal need to be heard and the

Order dismissing the Appeal was set aside. Paragraphs 11 & 12 of the

Judgment of the High Court are as follows:

"11. In view of these uncertainties, the ends of justice require that the petitioner's appeal be heard. In the circumstances, the impugned order is liable to be set- aside. However, considering the facts of the case, it is necessary to protect the rights of the petitioner's creditors. We have done so by this order.

12. In the circumstances, the writ petition is disposed of by the following order :-

i). Rule is made absolute in terms of prayer (a).

ii). The AAIFR is requested to hear the petitioner's appeal as expeditiously as possible according to it priority as on the date on which it was filed viz. 23.11.2006.

iii). Till the appeal is decided and for a period of four weeks thereafter :-

a) the petitioner shall not dispose of, alienate, encumber, part with possession of or create any third party rights in respect of its immovable properties, except with the leave of the AAIFR ;

b) the petitioner shall not dispose of, alienate, encumber, part with possession of or create any third party rights in respect of its movable properties, without the leave of the AAIFR, except in the ordinary and usual course of business ;

c) the petitioner shall not take any major policy decision except with the approval of the AAIFR.

iv) There shall be no order as to costs."

25. The consequence of the Order dated 05.03.2013 of the High Court is

that Appeal stands restored before the AAIFR, and to be decided in accordance

with law. Appeal thus shall be treated to become pending from the date from

the Order of High Court dated 05.03.2013 again and the period from

05.03.2013, till the Appeal was dismissed again on 31.12.2013 also needs to

Comp. App. (AT) (Ins.) No. 466 of 2023 18 of 21 be excluded. The period during which the Writ Petition was pending before

the High Court cannot be treated to be excluded, since during the said period,

the Appeal cannot be held to be pending under Section 22(1) of the SICA.

From the date when the Appeal was dismissed, i.e., 29.09.2010 till

05.03.2013, when High Court disposed of the Writ Petition, there was no

embargo on the Appellant to initiate any proceedings against the Company,

and the said period needs no exclusion.

26. After the Writ Petition was dismissed on 31.12.2013, the benefit of

Section 22(1) came to an end and with effect from 01.01.2014, the embargo

under Section 22(1) came to an end and the Limitation period shall run

against for filing the Application under Article 137 of the Limitation Act.

27. As noted above, the date of default being 26.02.2001, Limitation for

filing the Section 7 Application under Article 137 started running which came

to be arrested by filing the reference by the Company on 12.09.2002. The

reference was dismissed on 06.06.2006 thus period from 12.09.2002 to

06.06.2006 needs to be excluded. Appeal having been filed against the Order

dated 06.06.2006 on 23.11.2006, which came to be dismissed on 29.09.2010.

The said period from 23.11.2006 to 29.09.2010 also needs to be excluded.

The period after 30.09.2010 till 04.03.2013 during which the Writ Petition

remain pending before the High Court needs no exclusion being not covered

by Section 22(1). Further, no exclusion can be allowed after 31.12.2013,

when the AAIFR dismissed the Appeal. The period during which the Writ

Petition remain pending and the period after 31.12.2013, in which no

exclusion is available itself exhaust period of 3 Years for filing the Application

Comp. App. (AT) (Ins.) No. 466 of 2023 19 of 21 under Article 137. On 19.12.2019 when the Section 7 Application was filed

the period of 3 Years had already came to an end.

28. Now we also need to consider the submissions of Appellant basis on

OTS letter dated 10.01.2008, 28.07.2010 and Recovery Certificate dated

19.10.2006.

29. Even if the fresh period of Limitation can be treated to start of the

Appellant from 19.10.2006, the said period will come to an end on

18.10.2009. Though we already held that period during which the Appeal

filed, i.e., 23.11.2006 to 29.09.2010 is entitled to be excluded under Section

22(1) thus 3 Years period which can be treated to commence from 06.06.2006

shall be subsumed in the period which is being excluded under Section 22(1).

30. Now we come to OTS letter dated 10.01.2008 and 28.07.2010 extending

the period of Limitation, from the last OTS letter dated 28.07.2010, Appellant

at best may be entitled for extension of Limitation of 3 years period, which

period will come to an end on 27.07.2013. We need to see as to whether after

27.07.2013, when the period extended under Section 18 of Limitation Act

comes to an end, whether there is any other acknowledgement within 3 Years

period. The Appellant has relied on the Balance Sheet for the Year 2015-16,

which Balance Sheet has been brought on record both by the Appellant and

the Company. The Balance Sheet 2015-16 have been signed on 26.09.2016.

Thus, acknowledgement if any has to be treated from 26.09.2016, before

which acknowledgement 3 Years period from the OTS letter 28.07.2010 has

already come to an end. Thus, acknowledgement in the Balance Sheet are

after 3 Years of the expiry of the period of Limitation. Thus, in any view of the

Comp. App. (AT) (Ins.) No. 466 of 2023 20 of 21 matter, the Application filed by the Appellant on 19.12.2019, was much

beyond period of Limitation which was available to the Appellant to file Section

7 Application.

31. We, thus are satisfied that the Adjudicating Authority did not commit

any error in rejecting Section 7 Application filed by the Appellant as barred

by time. We for the reasons as given in this Order uphold the Order of the

Adjudicating Authority, rejecting Section 7 Application as barred by time.

There is no merit in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

25th September, 2024

himanshu

Comp. App. (AT) (Ins.) No. 466 of 2023 21 of 21