NCLAT allowed the appeal on 22.05.2020 in the case Gradient Nirman Pvt Ltd & Anr Vs. IFCI Ltd & Ors held that the time spent during proceedings under the SARFAESI cannot act as a ground to seek extension of limitation period.
The facts relevant to the case are that the 1st Respondent/Corporate Debtor, a Special Purpose Vehicle incorporated to develop end to end facilities to the Information Technology Sector and a term loan of up to Rs. 60 crores were sanctioned by M/s IFCI Ltd, out of which an amount of Rs. 9,90,00,000/- was disbursed by 21.05.2009 and the balance loan of Rs. 50,10,00,000/- was cancelled vide letter dated 31.03.2011 on account of non-payment of installments of the loan already disbursed. It was averred that the project could not be completed on account of reasons beyond their control and that in 2011, ED (Directorate of Enforcement, Government of India) had attached 150 acres of the project land and TSIIC (Telangana State Industrial Infrastructure Corporation) issued a notice for cancellation of the land allotment and resumption of SEZ (Special Economic Zone) on 24.09.2015 and hence the project came to a standstill. Learned Counsel appearing on behalf of Gradient Nirman Private Limited (Appellant) contended that the Application under section 7 of the Insolvency and Bankruptcy Code, 2016 (Code) was barred by limitation, the date of default being 15.10.2013; there was no “Acknowledgment of Debt” to take benefit under section 18 of the Limitation Act 1963. The letter dated 20.03.2018 offering OTS was beyond the limitation period of three years. The question for consideration before the bench was whether an application admitted under section 7 of the Code by the adjudicating authority is barred by limitation if the financial creditor has also initiated the proceedings under the DRT and under the SARFAESI Act, 2002 (Act).
The NCLAT held that under the Act, once the account is declared as NPA , the financial creditor can exercise its power under section 13 of the Act and the same cannot be termed as civil proceeding. As in an application under section 7 of the Code, the relief sought for resolution of a corporate debtor or liquidation on failure is not a recovery or a money suit, thus no benefit can be given to any person under section 14(2) of the Act till it is shown that the application under section 7 of the Code was prosecuting with due diligence in a court of first instance or of appeal or revision which has no jurisdiction. Also based on the ratio laid down by Sampuran Singh and Ors. v. Niranjan Kaur and Ors , the bench was of the considered view that suit for recovery based upon a cause of action even if it is within limitation, cannot in any manner impact the separate and independent remedy of a winding-up proceeding. A suit for recovery is a separate and an independent proceeding distinct from the remedy of winding-up and therefore the contention of the Learned Counsel appearing for the Respondents/ Financial Creditor that the period spent while pursuing proceedings under SARFAESI Act, should extend the period of limitation cannot be sustained. The intent of the Court is not to give a new lease of life to the debt which was already time barred.