SARFAESI & DRT proceedings will not extend Limitation period under Insolvency and Bankruptcy Code

The National Company Law Appellate Tribunal in the matter of Bimalkumar Manubhai Savalia vs. Bank of India [Company Appeal(AT) (Insolvency) No. 1166 of 2019] decided on 10.02.2020 held that the limitation period in view of Article 137 of Limitation Act, 1963 is applicable to Applications under Sections 7 & 9 of IBC and held that the proceedings under the SARFAESI Act, 2002 and the Debt Recovery Tribunal did not extend the period of limitation.

FACTS
The Appellant, director and shareholder of M/s. Radheshyam Agro Products Pvt. Ltd (Corporate Debtor) had obtained credit facilities worth Rs. 26.76 crores from BOI in 2011 and further entered into an agreement for restructuring credit facilities. Pursuant to the said agreement, the Corporate Debtor was granted credit facilities worth Rs. 34.69 crores. However, Corporate Debtor defaulted in repayment of the loan amount and its account was declared as Non-Performing Asset on 30.09.2014.
BOI (FC) filed a petition under Section 7 of the Insolvency Code on 30.8.2018 where it had admitted that the date of default was 05.11.2014 and contended that a One Time Settlement was given on 01.06.2016 and payments were made by guarantors in the account on 31.03.2017 which had the effect of extending the period of limitation. Further, it was also contended by the Financial Creditor that proceeding under SARFAESI were initiated against the Corporate Debtor and the said period be also excluded for computing limitation.

ISSUE
Whether the Section 7 application filed by the FC was not time barred due to the One Time Settlement and proceedings being conducted under SARFAESI and DRT?

RATIO
The NCLAT relied on the Supreme Court in “B.K. Educational Services Pvt. Ltd. Vs Parag Gupta & Associates” wherein it was held that the limitation period in view of Article 137 of Limitation Act, 1963 is applicable to Applications under Sections 7 & 9 of IBC and held that the application was not within the limitation period as proceedings under the SARFAESI Act, 2002 and the Debt Recovery Tribunal did not extend the period of limitation. Further, the Onetime settlement offer made was not accepted by BOI and therefore did not constitute acknowledgment under Section 18 of the Limitation Act.
It was observed that SARFAESI and DRT proceedings do not extent the period of limitation since those proceedings are independent and as per section 238 of IBC, the Insolvency and Bankruptcy Code is a complete Code and has overriding effect on other laws. Therefore, the proceedings initiated or pending in DRT, either initiated under SARFAESI or under debts and due to Banks and Financial Institutions cannot be taken into account for the purposes of limitation.
Applying the said observations and precedence, NCLAT remitted back the matter to NCLT holding that the Application u/s 7 of the IBC was filed beyond limitation by the Financial Creditor/ Bank of India.