The limitation period for filing an insolvency petition starts from the date of default, and the pendency of recovery proceedings does not constitute a continuous cause of action.

J U D G M E N T

Per: Justice Rakesh Kumar Jain:

The Oriental Bank of Commerce (OBC), filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) to initiate Corporate Insolvency Resolution Process (in short ‘CIRP’) against M/s Walia Traders Limited (Corporate Debtor) before the National Company Law Tribunal, Chandigarh Bench (in short ‘Tribunal’) bearing CP (IB) No. 84/Chd/Chd/2019.

2. The OBC disbursed two terms loan on the same date i.e.26.03.2012 of an amount of Rs. 17.18 Cr. and 4.30 Cr. total amounting to Rs. 21.48 Cr.

3. The application under Section 7 was filed on the printed proforma bearing Form No. 1 for the resolution of an amount of Rs. 31,42,82,870/- as on 31.12.2018.

4. The OBC classified the account of the CD as NPA on 30.09.2014 and the amount which has been claimed on the basis of date of default i.e. 30.06.2014 is as under:-

5. During the pendency of the application, the Appellant (PNB)

filed an application bearing IA. No. 31 of 2021 under Section 60(5) of the Code for substituting the name of the appellant in place of the OBC in the main petition wherever it was occurring in the pleadings.

6. According to the Appellant, the OBC has been amalgamated with the PNB in terms of the Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and a notification was issued in this regard by Govt. of India, Ministry of Finance(Department of Financial Services) dated 04.03.2020 which has been made effective from the date 01.04.2020.

7. Although, the application bearing IA No. 31 of 2021 was contested by the CD but the Tribunal allowed the application by passing a detailed order.

8. Again during the pendency of the main petition, PNB filed an application I.A. No. 24 of 2021 under Section 5 of the Limitation Act, 1963 (in short ‘Act’) for condonation of delay of

493 days in filing of the CP under Section 7.

9. It was averred in the application that at the time of filing of petition, no application for condonation of delay was filed as it is alleged that the OBC at that time was under the bonafide impression and belief that the CP was filed well within the period of limitation.

10. The relevant averments made in I.A. No. 24 of 2021 at para

3 and 4 are reproduced as under:-

“3. That the above noted insolvency petition was filed by the petitioner financial creditor on 04.02.2019 vide Diary No. 544. At the time of filing the present company petition, no application for condonation of delay was filed before this Hon’ble Tribunal as at the time of filing the present company petition, an application u/s 19 Recovery of Debts and Bankruptcy Act, 1993 bearing OA No. 227.. of 2016 was pending before the Hon’ble Debt Recovery Tribunal-II, Chandigarh and the applicant had a bonafide belief that the pendency of the Original Application against the corporate debtor amounts to the continuous cause of action and as such the applicant can file the insolvency petition against the corporate debtor at any point oftime. However, later on there was a decision by the Hon’ble Apex Court which interpreted Section 22 ofthe LimitationAct, 1963 by contending that the pendency of recovery proceedings against the corporate debtor will not amount to a continuous cause ofaction.

4. That moreover, the Insolvency and Bankruptcy Code, 2016 came into force w.e.f. 01.12.2016 and the present petition was filed by- the applicant financial creditor on 04.02.2019 with the bonafide belief that the period of limitation for filing the insolvency petition under the 1BC, 2016 will start fromthe date when IBC, 2016 came into force i.e. w.e.f.01.12.2016. However, later on the Hon’