[Opinion] DRT Proceedings Triggers ‘New’ Life for Limitation Under IBC

Nipun Singhvi & Rajri Patel – [2024] 159 taxmann.com 146 (Article)

Introduction

The Supreme Court of India has brought clarity to the issue concerning the computation of limitations period from the perspective of recovery certificates in terms of provision provision of the Recovery of Debts and Bankruptcy Act, 1993 The case of Tottempudi Salalith v. State Bank of India addresses a crucial issue, whether initiation of Company insolvency Resolution Proceedings (hereinafter ‘CIRP’) under section 7 of the Insolvency and bankruptcy Code, 2016 (hereinafter ‘IBC, 2016’) is barred by limitation. This analysis seeks to offer concise overview of the facts of the case, issues involved, the central question of law, and the Supreme Courts’s finding and finally it concludes with a comprehensive analysis of the implication of the Judgment.

Facts

The factual matrix of the present case involves a group of banks extended various financial facilities to Totem Infrastructure Ltd (hereinafter ‘Corporate Debtor’) in form of loans and Bank Guarantees. On 1-4-2017, three Banks i.e., State bank of Hyderabad, State bank of Mysore, State Bank of Bikaner and Jaipur and State Bank of Patiala merged with the State Bank of India (hereinafter ‘SBI’). On account of default in repayment of financial Facilities, SBI issued notice under section 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). Subsequently SBI filed two original Application before Debt Recovery Tribunal (hereinafter ‘DRT’), Hyderabad and one before DRT, Bengaluru. Based on three recovery certificates, SBI filed an application under section 7 of IBC, 2016 before Hon’ble National Company Law Tribunal (hereinafter ‘adjudicating authority’). Vide order dated 12-1-2021, Hon’ble NCLT admitted the Application and declared moratorium under section 14 IBC. The admission was challenged by Tottempudi Salalith, Mangaing Director of Totem Infrastructure Ltd (hereinafter ‘Appellant‘) before Hon’ble National Company Law Appellate Tribunal (hereinafter ‘Appellate Tribunal’). Aggrieved by the same, the Appellant filed an appeal before Hon’ble Supreme Court on the grounds of limitation.

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