- Bookmark
- Share
- CaseIQ
Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (I) Ltd. And Another
Factual and Procedural Background
Asset Reconstruction Company (India) Limited (ARCIL), as Financial Creditor, filed an application under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) against Shivam Water Treaters Private Limited (Corporate Debtor). The Adjudicating Authority, National Company Law Tribunal, Mumbai Bench, admitted the application by order dated 15th October 2018. The appellant challenged the maintainability of this application, citing an earlier Debt Recovery Tribunal (DRT), Ahmedabad decision that declared the assignment deed in favour of ARCIL invalid, and also argued that the claim was barred by limitation.
Legal Issues Presented
- Whether the application under Section 7 of the IBC filed by ARCIL is maintainable despite the Debt Recovery Tribunal, Ahmedabad's declaration of invalidity of the assignment deed.
- Whether the money claim by ARCIL is barred by limitation under the Limitation Act, thus affecting the maintainability of the Section 7 application.
- Whether the requirement of a Board Resolution is mandatory for the validity of the assignment deed under the IBC framework.
Arguments of the Parties
Appellant's Arguments
- The Debt Recovery Tribunal, Ahmedabad held the assignment deed in favour of ARCIL invalid, rendering the Section 7 application under the IBC not maintainable.
- The money claim is barred by limitation; thus, no debt is payable in law and the Section 7 application is not maintainable.
- The assignment deed dated 28.3.2014 was executed prior to the Board Resolution in July 2014, lacked authority and was insufficiently stamped, further invalidating it.
- Relied on the Supreme Court decision in B.K. Educational Services Private Limited vs. Parag Gupta and Associates to argue that the Limitation Act applies to IBC applications and Article 137 is attracted.
Respondent's Arguments
- There is no denial of debt or default by the Corporate Debtor or appellant.
- The DRT order declaring assignment deed invalid was set aside by the Gujarat High Court, a fact suppressed by the appellant.
- No Board Resolution is required for assignment; a Power of Attorney of ARCIL’s officer is on record.
- The debt is not barred by limitation as the Corporate Debtor made three settlement proposals in 2015 to clear the debt.
- The Section 7 petition was filed in October 2017, post the commencement of the IBC, and the Limitation Act’s Article 137 applies from 1st December 2016, as held by this Tribunal in Pushpa Shah & Anr vs IL&FS Financial Services & Anr.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| B.K. Educational Services Private Limited vs. Parag Gupta and Associates | Applicability of Limitation Act and Article 137 to applications under Sections 7 and 9 of IBC. | Referenced by appellant to argue limitation barred the claim; court considered but found limitation not applicable in this case. |
| Pushpa Shah & Anr vs IL&FS Financial Services & Anr, Company Appeal (AT) No.521 of 2018 | Article 137 of the Limitation Act applies to IBC applications filed after 1st December 2016. | Court relied on this precedent to hold that limitation does not bar the Section 7 application filed post commencement of IBC. |
Court's Reasoning and Analysis
The court examined the validity of the assignment deed and the applicability of limitation to the claim under Section 7 of the IBC. It noted that the Debt Recovery Tribunal's order declaring the assignment deed invalid was set aside by the Gujarat High Court, which the appellant failed to disclose. The court found no requirement for a Board Resolution for assignment, supported by the record of Power of Attorney. Regarding limitation, the court applied Article 137 of the Limitation Act, as interpreted in a prior decision by this Tribunal, holding that the right to file an application under Section 7 accrues from the commencement of the IBC on 1st December 2016. The Corporate Debtor’s three settlement proposals were also considered as acknowledgment of the debt, further negating the limitation argument. Consequently, the claim was held not barred by limitation and the Section 7 application was maintainable.
Holding and Implications
The court DISMISSED the appeal filed by the appellant, holding that no relief can be granted against ARCIL’s application under Section 7 of the IBC. The decision affirms that an assignment deed set aside by a tribunal but subsequently restored by a higher court remains valid, and that limitation under Article 137 applies from the commencement of the IBC, not from the original date of debt or assignment. The direct effect is that ARCIL’s insolvency application stands admitted and the appellant’s challenge fails. No new precedent beyond the application of existing principles was established.
SUDHANSU JYOTI MUKHOPADHAYA, J. Asset Reconstruction Company (India) Limited (hereinafter referred to as ARCIL), Financial Creditor, filed an application under Section 7 of Company Appeal (AT) (Insolvency) No.655 of 2018 Insolvency & Bankruptcy Code, 2016 (IBC) against Shivam Water Treaters Private Limited (Corporate Debtor), which has been admitted by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai vide order dated 15th October, 2018.
2. Learned counsel appearing on behalf of the appellant submitted that the Debt Recovery Tribunal, Ahmedabad has already held that the assignment deed in favour of Respondent, ARCIL (Financial Creditor), was invalid, therefore, the application under Section 7 of I&B Code was not maintainable.
3. Further according to the counsel for the appellant, the money claim being barred by limitation, there is no debt payable in the eyes of law and, therefore, application under Section 7 of the I&B Code was not maintainable. Learned counsel for the appellant referred to the decision of Debt Recovery Tribunal, Ahmedabad dated 10.6.2016 passed in SA No.24/2016 under Section 17 of the Securitisation and reconstruction and Enforcement of Security Interest Act, 2002 whereby assignment deed dated 28.3.2014 in favour of Respondent, ARCIL, has been declared to be invalid. Learned counsel submitted that the Respondent, ARCIL, has moved before the Honble Gujarat High Court in SCA No.1550 of 2016 but the case has been admitted without any order of stay.
4. Further it was stated that the deed of assignment dated 28.3.2014 was assigned prior to Board Resolution which was taken in July, 2014, and assignment deed having inked without power and without authority being also insufficiently stamped was declared to be invalid. Reliance has been placed on the decision of the Honble Supreme Court in the case of B.K. Educational Services Private Limited Vs. Parag Gupta and Associates Company Appeal (AT) (Insolvency) No.655 of 2018 to suggest that the Limitation Act is applicable to applications filed under Sections 7 and 9 of the I&B Code from the inception of the Code, Article 137 of the Limitation Act gets attracted.
5. Learned counsel appearing on behalf of the Respondent, ARCIL submitted that there is no denial of debt and default by Corporate Debtor or the appellant. It is submitted that the order passed by the Debt Recovery Tribunal, Ahmedabad as relied by the appellant has already been set aside and quashed by the Honble Gujarat High Court which fact has been suppressed by the appellant. It was further submitted that for the purpose of assignment there is no requirement of Board Resolution. The Power of Attorney of the relevant officer of ARCIL is on record filed with the petition. In so far debt is concerned it was submitted that the debt is not barred by limitation as the Corporate Debtor offered three settlement proposals to ARCIL dated 24.2.2015, 29.4.2015 and 26.6.2015 to clear the debts. Further it has been brought to our notice that the petition under Section 7 was filed by ARCIL in October, 2017. This Appellate Tribunal in the case of Pushpa Shah & Anr Vs IL&FS Financial Services & Anr in Company Appeal (AT) No.521 of 2018 dealt with the provisions of Article 137 of Part II of the Limitation Act 1963 which reads as follows: Part II-Other Applications Description of application Period of limitation Time from which Period begins to run
137. Any other application Three years When the right to For which no period of apply accrues Limitation is provided Elsewhere in this Division. Company Appeal (AT) (Insolvency) No.655 of 2018 In the said case the Appellate Tribunal has held that I&B Code having come into force on 1st December, 2016, the right to file application under Section
7 accrues on or after 1st December, 2016 and therefore, the application under Section 7 cannot be held to be barred by limitation.
6. The question whether the claim is barred by limitation to see that there is no debt payable in law, we hold that the claim of ARCIL is not barred by limitation, as the assignment deed was made in favour of ARCIL on 28.3.2014 which was declared invalid by DRT, Ahmedabad by an order dated 10.6.2016 and thereafter having revived pursuant to Honble Gujarat High Court order. Apart from the above fact, we find that the Corporate Debtor offered three settlement proposals for payment of debt on 24.2.2015, 29.4.2015 and 26.6.2015 to ARCIL.
7. In view of the aforesaid finding no relief can be granted to the appellant. The appeal is accordingly dismissed. No order as to costs. (Justice S.J. Mukhopadhaya) Chairperson (Justice Bansi Lal Bhat) Member (Judicial) Dated: 02-5-2019 New Delhi
Alert