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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2021 (2) TMI Tri This

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2021 (2) TMI 450 - Tri - Insolvency and Bankruptcy


Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Role and liability of the Corporate Guarantor.
3. Admissibility of the claim within the period of limitation.
4. Continuous cause of action and its impact on limitation.

Detailed Analysis:

1. Initiation of CIRP under Section 7 of the Insolvency & Bankruptcy Code, 2016:
The application was filed by the Financial Creditor, M/s. State Bank of India, to initiate CIRP against the Corporate Debtor, M/s. Hackbridge Hewittic and Easun Limited. The Financial Creditor had disbursed a sum of ?134.88 Crores to M/s. Victory Electricals Limited, the Principal Borrower, which defaulted on repayment. The Corporate Debtor stood as a Corporate Guarantor to secure the repayment of the financial assistance availed by the Principal Borrower.

2. Role and Liability of the Corporate Guarantor:
The Corporate Debtor, as a Corporate Guarantor, executed various documents including a Declaration cum Indemnity and a Memorandum of Deposit of Title Deeds, thereby undertaking to repay the loan limits with interest accrued thereon. The Tribunal noted that the liability of the Principal Debtor and the Guarantor are co-extensive, relying on judgments from the Hon'ble Supreme Court.

3. Admissibility of the Claim within the Period of Limitation:
The Tribunal scrutinized the application from the angle of limitation, referencing the Supreme Court's decision in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr. The Financial Creditor stated the date of default as 09.03.2012 and 31.05.2012. The Financial Creditor argued that the limitation period was extended by a revival letter dated 01.06.2012 and an OTS proposal on 06.10.2016. However, the Tribunal found that the OTS letter does not extend the period of limitation and the claim was time-barred as the application was filed on 06.09.2019, beyond the three-year limitation period from the date of default.

4. Continuous Cause of Action and Its Impact on Limitation:
The Financial Creditor contended a continuous cause of action due to the OTS proposal and subsequent correspondence. However, the Tribunal rejected this argument, citing the Supreme Court's ruling in Vashdeo R Bhojwani v. Abhyudaya Co-operative Bank Ltd. & Anr, which held that the limitation starts ticking from the date of default. The Tribunal emphasized that Section 18 of the Limitation Act only extends the period of limitation and does not shift the date of default. The Tribunal concluded that the debt was time-barred as the Financial Creditor failed to provide any document extending the limitation period beyond 01.06.2012.

Conclusion:
The Tribunal dismissed the application filed by the Financial Creditor as barred by limitation, stating that the debt on the part of the Corporate Guarantor was time-barred. The Tribunal underscored the statutory duty to ascertain whether the debt is time-barred, even if not raised by the Respondent. The application was dismissed with no costs.

 

 

 

 

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