Limitation Period under IBC 2016 & SARFAESI Act, 2002

Limitation Period under IBC 2016 & SARFAESI Act, 2002

Limitation Period under IBC 2016

• This application filed by Corporate Debtors to restructure the debt or payment of the interest doesn’t amount to an acknowledgment of debt.

(C. Shiv Kumar Reddy Vs. Dena Bank and Other, 2019)

• The minutes of the board meeting of the Corporate Debtors can be considered as an acknowledgment u/s 18 of the Limitation Act, 1963.

(Rupesh Kumar Gupta vs. PNB (NCLAT), 2020)

• One time settlement letters, the Corporate Debtors accepted the jural relationship between the Creditor and Debtor than the Financial Creditors, and thus, it is the acknowledgment of debt.

(Ashish Kumar vs. Vinod Kumar Pukhraj Ambavat, 2020)

• An acknowledgment must be made before the deadline of the limited duration as mentioned under section 18 of the Limitation Act, 1963.

(Vivek Jha vs. Daimler Financial Services India, 2020)

• The application of the recovery proceeding before the Debts Recovery Tribunals and the eventually decreed claim does not change the default date.

(Rajendra Kumar Tekriwal vs. BOB, 2020)

• Steps were taken under subsection (2) under Section 13 of the ‘SARFAESI Act, 2002’ can’t be counted for the purpose of exclusion of the limitation period under subsection (2) under Section 14 of the Limitation Act, 1963.

(Ishrat Ali vs. Cosmos Cooperative Bank Ltd. 2020)

• The default period is extended by the debit confirmation letters assured by the borrower from the CD to the o/s debt.

(Yogesh Kr. Jashwantlal Thakkar vs. IOB, 2020)

• Keeping that balance sheet entry would not amount to an acknowledgment of responsibility for the purpose of limitation, the position of law which has long been acknowledged by separate courts and tribunals has been disturbed.
• The dissenting view of Hon’ble Justice AIS Cheema is in line with the established example for the acknowledgment of debt for restriction in respect of balance sheet/annual return entries as well as in the one-time settlement proposal.
• Thus, the Reflection of the Debt in the BS/Annual Return of the Corporate Debtors can’t be considered as an acknowledgment under Section 18 of the Limitation Act, 1963.

(V. Padmakumar vs. SASF, 2020)

• Steps were taken under subsection (2) under Section 13(2) of the ‘SARFAESI Act, 2002′ can’t be counted for the intention of exclusion the restriction period under subsection (2) under Section 14 of the Limitation Act.

(Ishrat Ali vs. Cosmos Cooperative Bank Ltd., 2020)

Applicability of Limitation Act to Insolvency and Bankruptcy Code

• “Purpose of the Code should not have been to grant a new lease of life to debts that are time-barred. It is established law that, since the debt is restricted by time, the right to remedy is time-barred.
• The provisions of the Limitation Act, 1963 shall, as far as possible,  apply to proceedings or appeals before the Adjudication Authority, the NCLAT, the DRAT, as the case may be.’-Section 238A of IBC

• “The Limitation Act is applicable to applications submitted Under section 7 and section 9 of the IBC Code from the inception of the Code and same would be filed within three years from the date of default” –

(Supreme Court in B.K. Educational Services, Jignesh Shah, Gaurav Hargovindbhai Dave, Babulal Vardhaji Gurjar)

• An application under section 10 of the insolvency and bankruptcy Code can’t be made applicable as the ‘Corporate Applicant’ does not clam money buts prays for Initiation of ‘Corporate Insolvency Resolution Process’ against itself, having defaulted to pay the dues of creditors” –

(NCLAT in B.K. Educational Services vs. Parag Gupta)

The notion of the limitation Act  

• Law of limitation is based on the fundamental principle of fixing or prescribing a time limit for barring legal action beyond such duration.

Fundamental Principles/concept of Limitation Act

• A fresh period of limitation starts to run at every moment of the time period at which the breach of offense continues.
• The Limitation Act does not extinguish a right, hence its only solution to behind the bars
• Duration of stay is excluded
• Limitation duration to start afresh from the period when the acknowledgment was made,
• Any payment/ interest made towards a legacy, then fresh limitation period begins

Although the limitation Act does not extinguish a right would be a time-barred claim filed by the Financial Creditor/Operational Creditors be allowed during the Corporate Insolvency Resolution Process? If yes, is it not a matter of granting a new lease of life to a time-barred claim?

SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002

S. No.	SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002,
1	Narasimham Committee I and II and Andhyarujina Committee	SARFAESI Act, 2002
2	Applicability	Whole of India
3	Net owed Funds of ARC	Not less than 2 crores
4	ARC to make application to RBI for Registration	within 6 months from the commencement
5	Sponsor	Holding not less than 10% of the paid up capital of the ARC
6	Appeal by ARC	30 Days
7	In case of Joint Financing	Action only when creditor holding 60% of amount outstanding agrees
8	If dues are not fully satisfied from sale of secured assets	Creditor can then proceed against borrower by applying to DRT
9	What is the time limit within which Chief Metropolitan Magistrate or District Magistrate shall pass an order after receipt of the affidavit from the authorised officer of the secured creditor	Within 30 days of receipt of application and within such further period not exceeding in aggregate 60 days
10	Taking over of the management of business of a borrower by an asset reconstruction company	Section 9(a)
11	Taking over of the management of business of a borrower by a Secured Creditor	Section 13(4)(b)
12	Appeal to DRT by person aggrieved by action of creditor	45 Days
13	DRT must dispose of the application filed under Section 17	Within 60 days of the application extension of not more than 4 months
14	If borrower resides in J&K	Court of District Judge in that State (where borrower resides)
15	Appellate Tribunal for borrower in J&K	High Court
16	Time limit for validity of Notice of Caveat	90 days from date of lodgment
17	CG power delegate power for establishment of Central Registry	RBI
18	Central Register shall not record particulars of transactions relating to	Extinguishment of security interest
19	Whi is responsible for furnishing information on modification and satisfaction of security interest	ARC or Secured Creditor
20	Central Registrar be intimated regarding satisfaction of security interest	30 days from the date of such payment or satisfaction
21	If a person contravenes or abates contravention of any provision of the Act	Imprisonment for a term which may extend to one year or with fine or both
22	Time limit within which appeal against penalties can be made	30 days from the date on which such order was passed
23	Appeal by ARC for cancellation of Registration Certificate	30 days to Central Government (Ministry of Finance)
24	Who can cancel the ARC Registration	RBI
25	An Asset Reconstruction company Works as	Agent, manager & Receiver
26	CERSAI	Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI)
27	Chg in Management or Takeover	If o/s more than 25 crs
28	If any person contravenes or attempts to contravene the provisions of this Act, he shall be punishable with–	Imprisonment which may extend to 1 year and Fine
29	Where any ARC or any person fails to comply with any direction issued by the RBI under this Act, penalty is imposed—	Not exceeding Rs. 1 crore or twice the amount involved in such failure, whichever is more
30	penalty imposed under section 30A shall be payable within a period of	30 Days
31	If the ARC fails to comply with the directions issued by RBI?	5 lakhs

 

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