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Basab Biraja Paul and Ors. Vs. Edelweiss Asset Reconstruction Company Limited and Ors. - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (06 Sep 2019)

When Financial Creditor was pursuing its remedies in proper forum, there was continuous cause of action existed and debt cannot be considered as time barred



In facts of present case, Edelweiss Asset Reconstruction Company Limited, assignee of debt from original lender - UCO Bank (Assignor), filed Company Petition under the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate corporate insolvency resolution process against Octaga Green Power and Sugar Company Limited - Corporate Debtor claiming outstanding debt which was Rs. 69,70,15,694 as per recall Notice dated 15th March, 2018. The matter came up before Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) and the Section 7 of Code Application was admitted. The present Appeal has been filed by the shareholders of the Corporate Debtor.

Financial Creditor - Edelweiss issued Notice under Section 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) calling upon the Corporate Debtor to pay Rs. 50,44,37,258 and on 15th March, 2018 sent recall Notice demanding repayment of Rs. 69,70,15,694 from the Corporate Debtor. The Corporate Debtor had offered one-time settlement of Rs. 10 Crores and later, revised the same to Rs. 11 Crores within 90 days or Rs. 18 Crores over 9 years. However, the Financial Creditor filed Section 7 proceedings. The Appellants claim that the proceeding has been filed after a delay of 5 years from the date of the account of the Corporate Debtor being classified as NPA.

The Appellants claim that, the debt is clearly barred by law of limitation and proceedings before DRT would not save the limitation. The Company Petition has been filed in 2018 for loan facility availed in 2012 which was classified as NPA on 31st March, 2013. Thus, according to the Appellants, the admission of the Application of Financial Creditor (Respondent No. 1) is bad in law and the Application should have been dismissed.

There is no dispute with regard to the fact that, the Corporate Debtor had taken credit facilities from UCO Bank. There is no dispute regarding the fact that Corporate Debtor had secured the credit facilities taken by equitable mortgage of immovable property and by executing other securities. The filing of proceedings before DRT in 2014 and invoking of Section 13(2) of SARFAESI in 2016 are also not disputed. Amount more than Rs. 1 Lakh is in default, is apparent from record. The proceeding in DRT is still pending.

It is clear that, the question of limitation has to be looked into from the angle whether the debt is payable in law or in fact. The yardstick is to see whether there is continuous cause of action for the debt claimed. The limitation for enforcing payment of money secured by a mortgage or otherwise charged by the immovable property is twelve years at the time when money sued for becomes due. Thus, for 12 years after becoming due, the debt would be payable in law. In the present matter, the sanction letters are between 19th January, 2005 to 18th May, 2012 and there were Master Restructuring Agreements executed in 2012. Apart from proceeding filed in DRT in May, 2014, which is pending, the loan was secured by equitable mortgage and as such, it cannot be said that the debt was barred by limitation, when Section 7 Application was filed on 7th August, 2018.

The Financial Creditor had moved DRT in 2014 which was a relief available at that time. When the Financial Creditor was pursuing its remedies in proper forum, there was continuous cause of action existing and it cannot be said that the debt became time barred. The IBC was enforced in 2016 and the additional remedy became available. Financial Creditor resorted additionally to it and the Application was filed under Section 7. It could not be said to be time barred. There is no substance in the Appeal. The Appeal is dismissed.


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