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<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"> <html xmlns="http://www.w3.org/1999/xhtml"> <head> </head> <body> <div style="font-family:Verdana, Geneva, sans-serif; font-size:12px; text-align:justify"> <table width="800" border="0" style="border:1px solid #ccc;padding:5px;" align="center" cellpadding="6" cellspacing="0"> <tr> <td align="left" valign="top"> NATIONAL COMPANY LAW APPELLATE TRIBUNAL “Right to sue" accrues when a default occurs and if the default has occurred over three years prior to the date of filing of the Application, the Application would be barred MANU/NL/0376/2020 - (14 Oct 2020) </td> </tr> <tr> <td align="left" valign="top">B. Prashanth Hegde vs State Bank Of India and Ors.</td> </tr> <tr> <td align="left" valign="top" style="background-color:#FDEDCE">Present Appeal emanates from the Impugned Order passed by the Adjudicating Authority, whereby the Adjudicating Authority has admitted the Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code'). The Appellant submits that, the initiation of the CIRP was fraudulent, malicious and not intended for any resolution. 
Admittedly, in the year 2007, State Bank of India granted credit facilities to the Corporate Debtor Metal Closures Private Limited. The account of the Corporate Debtor was classified as NPA by SBI on 31st January 2010. However, it was restructured on 17th February 2010, and the Punjab National Bank entered into the Consortium by sanctioning certain credit facilities to the Corporate Debtor on 26th June 2010. As a member of Consortium, the UCO Bank sanctioned 'Working Capital Cash Credit' and 'Letter of Credit Limit 'to the Corporate Debtor on 11th April 2012. The Consortium executed the Master Joint Lenders Forum Agreement on 21st June 2014. The Corporate Debtor's account was classified as NPA by SBI on 28th May 2014; by Corporation Bank on 30th June 2013. After the failure of restructuring, the NPA date of the Corporate Debtor was changed to 31st January 2010. 
The Appellant contends that, due to repeated failures of Metal Closures Pvt Ltd ('Corporate Debtor') to regularize the accounts of the members of the Consortium of Banks, the debts of the Corporate Debtor were classified as Non Performing Asset on 31st October 2010 by State Bank of India; by Punjab National Bank on 30th June 2014; by Corporation Bank on 31st December 2014; and by UCO Bank on 31st December 2014. Even if the date of default is taken to be the last of the four dates, when the account of the Corporate Debtor was classified as NPA, i.e. 31st December 2014, then also it is clear that default occurred prior to 31st December 2014. As per Article 137 of the Limitation Act, 1963 three years period of Limitation ended on 30th December 2017. However, this petition is filed on 23rd July 2018, i.e. beyond three years from the time, when account of the Corporate Debtor was classified as NPA on 31st December 2014. 
It is clear that, the Application filed by the Respondents under Section 7 of the I & B Code in the present case is an effort to revive a dead debt. The date of default is crucial to determine the date when the cause of action accrued. In this case, the Respondent has not mentioned the date of default. In the case of Gaurav Hargovindbhai Dave, Hon'ble Supreme Court has considered that the date of default to be the date of NPA. Therefore, the date of default, in this case, is 31st January 2010. The right to sue under IBC occurs, when default occurs. If the default has occurred over three years period prior to the date of filing the Application, the Application would be time-barred given the law laid down by Hon'ble Supreme Court in B K Educational Services vs. Parag Gupta and Associates. 
Admittedly, in this case the Corporate Debtor was declared to be Non-performing Asset on 28th May 2014. The date was later changed to 31st January 2010. Therefore, if the position taken by the Financial Creditor Bank is taken as correct, 'Default' occurred on or before 31st January 2010. The period of Limitation for the same would expire on 30th January 2013. The Application for initiation is filed on 23rd July 2018. The contention of the Respondent that, their right accrued only on 01st December 2016 is not consonant to the ratio of judgement in B K Educational Services vs. Parag Gupta and Associates wherein the Hon'ble Supreme Court has held that "It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the I & B Code from the inception of the I & B 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". 
In view of the law enunciated by the Hon'ble Supreme Court of India and the facts and circumstances of this case, it is clear that the Application filed under Section 7 of the I & B Code by the Financial Creditor is barred by Limitation. The Impugned Order is set aside. The Application preferred by Respondent No.1 State Bank of India, against the Corporate Debtor under Section 7 of the I & B Code is dismissed. The Appellant' Corporate Debtor' (Company) is released from all rigours of 'Moratorium' and is allowed to function through its Board of Directors with immediate effect.</td> </tr> <tr> <td align="left" valign="top" ></td> </tr> <tr> <td align="left" valign="top" >Tags : Initiation, CIRP, Legality</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr>  <td align="left" valign="top">Source : newsroom.manupatra.com</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr> <td align="left" valign="top">Regards</td> </tr> <tr> <td align="left" valign="top">Team Manupatra</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> </table> </div> </body> </html>