The NCLT and subsequent National Company Law Appellate Tribunal (NCLAT) rulings denied the benefit of Section 14 and emphasized SBI's failure to seek leave from the court to proceed with recovery actions during the winding-up proceedings. The NCLAT partially allowed the appeal, reviving the Section 7 application based on a one-time settlement offer, providing Dharamraj Aluminium an opportunity to respond.
Brief Facts:
SBI sanctioned a Cash Credit Facility and Forward Contract to Dharamraj Aluminium Industries Pvt Ltd in 2013. The company defaulted on payments on January 30, 2016, and its account was classified as a Non-Performing Asset (NPA) on April 29, 2016. SBI issued a notice under Section 13(2) of the SARFAESI Act, 2002, on May 2, 2016. Subsequently, SBI filed a recovery certificate for the outstanding amount in O.A. No. 762 of 2017. Another entity, M/s Oswal Minerals Limited, filed a winding-up petition against Dharamraj Aluminium Industries. The Bombay High Court allowed the petition on January 25, 2018, directing the company's winding-up under court supervision. SBI filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, on January 13, 2022, seeking Rs. 22,52,02,115.61 as the outstanding amount. The Adjudicating Authority dismissed SBI's application, citing it as time-barred, filed three years after the default date. SBI appealed against the dismissal, arguing for the extension of limitation under Section 14 of the Limitation Act, citing reasons like the pending winding-up proceedings affecting its ability to proceed with recovery actions.
Contention of Dharamraj Aluminium Industries Pvt Ltd:
They contend that SBI's application under Section 7 of the IBC is time-barred. They emphasize the three-year limitation period from the date of default, stating that SBI failed to adhere to this limitation in filing the application, rendering it invalid. Dharamraj Aluminium Industries asserts that SBI did not actively pursue remedies during the winding-up proceedings nor sought permission from the court to continue proceedings against them. They argue that this lack of diligence from SBI nullifies their claim under Section 14 of the Limitation Act. Dharamraj Aluminium Industries made a one-time settlement offer on July 8, 2021, which they believe should be considered and might affect the quantum of the claimed amount.
Observation of the tribunal:
The tribunal deliberated on the application of Section 14(2) of the Limitation Act, noting that its benefit can be extended only when a party diligently prosecutes another civil proceeding for the same relief against the same party, which was unable to be entertained due to jurisdictional issues. However, in this case, the winding-up petition initiated by a third party (M/s Oswal Minerals Ltd.) and not by SBI itself did not qualify for such an extension of benefit under Section 14(2). The tribunal highlighted that the pendency of the winding-up petition, even though not initiated by SBI, had implications on the applicability of the limitation period for SBI's case under Section 7.
The tribunal observed that SBI failed to seek leave from the Company Judge to proceed with SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) proceedings during the winding-up process. A significant point brought forth was a one-time settlement offer made by Dharamraj Aluminium Industries Private Limited on July 8, 2021. The tribunal deemed it crucial and warranted further consideration and reply from the Corporate Debtor as it was introduced for the first time during the appeal process and had not been previously presented or responded to.
Decision of the Tribunal:
The decision of the tribunal essentially nullified the earlier dismissal order and necessitated a fresh examination of SBI's Section 7 Application. The tribunal underscored the need to account for the one-time settlement offer, a previously unconsidered element, in the course of the new proceedings to appropriately determine its impact on the limitation issue.
Case title: (SBI) Vs. Dharamraj Aluminium Industries Private Limited
Case No.: Company Appeal (AT) (Insolvency) No.93 of 2023."
Coram: Justice Ashok Bhushan, Justice Barun Mitra
Advocates for the Appellant: Mr. Harshit Khare, Mr. Praful Saini
Advocates for the Respondent: Mr. Dhruv Gupta, Bhumi Agarwal
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