The date of right to sue can be extended only when the debt is acknowledged by the Corporate Debtor within a limitation of three years. The judgment passed by the NCLAT New Delhi (principle bench), in its decision in B.S. Krishnan v. Stressed Assets Stabilization Fund (COMPANY APPEAL (AT) (INSOLVENCY) NO.521 OF 2020) by Hon’ble Shri Justice Jarat Kumar Jain
The facts of the case was such that – Industrial Development Bank of India on 06.03.1998 granted a term loan facility of the aggregate value of Rs. 650 lakhs and Rs. 400 lakhs on 09.06.2000 to the M/s L.S.P. Agro Ltd. /Corporate Debtor. Which the M/s L.S.P. Agro Ltd. /Corporate Debtor defaulted in repayment of loan facilities and even failed to comply with the directions made in the recall notice to regularise the account and make payment of the outstanding dues to the IDBI. In response, SASF filed an application before DRT for Initiation of CIRP on behalf of IDBI which gets transferred to DRT II. Thus the Appellant filed this appeal against the order passed by the Adjudicating Authority.
The Appellant has opposed the Application on two grounds that SASF has no locus to record the Application for the benefit of the Financial Creditor/IDBI and the Application is banned by limitation as the advance records have been pronounced NPA before 2001 and the Financial Creditor/IDBI has not shown any affirmation which is inside a long time from the date of default. Hence, the Financial Creditor can’t get an all-encompassing time of limitation as given under Section 18 of the Limitation Act.
NCLT held that as per the notification dated 29.09.2004 issued by Central Government IDBI transferred its Stressed Assets to the SASF. Thus, SASF being an assignee is Competent to file an application for initiating CIRP against the Corporate Debtor. “It is also held that there is no acknowledgment of deb”t however, DRT having passed the order for payment, on this basis, it can be inferred that the debt is not time-barred.
The Appellant Counsel submitted that in the case of Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company India Ltd. The apex court held that where the default has been taken place and the account was already declared as NPA then the application for CIRP cannot be entertained as barred by limitation.
And in the instant case, the credit record of Corporate Debtor was proclaimed NPA before 2001, from there on, there is no affirmation of obligation inside three years furthermore, the order passed by the DRT can’t advance the date of default.
The Hon’ble Supreme Court in the Case of B.K. Education Services Pvt. Ltd. Vs. Parag Gupta & Associates held that “ the right to sue accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application under Section 7 of the I&B Code; the application would be barred under Article 137 of the Limitation Act. The date of right to sue can be extended only when the debt is acknowledged by the Corporate Debtor within the limitation of three years”.
Thus, unmistakably the Corporate Debtor submitted default and the credit account pronounced as NPA before 2001 and from there on, there is no affirmation of obligation inside a limitation of three years and obviously the Judgment/order passed by the DRT-II on 29.04.2019 can’t move forward the date of default to figure the period for recording an Application under Section 7 of the I&B Code. Consequently, we hold that the Application under Section 7 of the I&B Code documented by SASF on 23.01.2019 against the M/s L.S.P. Agro Ltd/Corporate Debtor is banned by limitation and was not viable.