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2021 (2) TMI 450 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor or not - existence of debt and dispute or not - Time Limitation - HELD THAT - The present Application is filed before this Tribunal on 06.09.2019. The Financial Creditor has obtained a copy of the revival letter dated 01.06.2012 as per Section 18 of the Limitation Act in and by which the period of limitation is being extended for the further period of three (3) years from 01.06.2012. For the purpose of bringing the present Application within the period of limitation it is submitted that the Principal Borrower has given an OTS proposal on 06.10.2016. It is now well settled from the judgments of the Hon'ble Supreme Court and Hon'ble NCLAT that the OTS letter does not extend the period of limitation. Even for the sake of argument if the said OTS letter is taken into consideration, the same was obtained only on 06.10.2016 which is much after the expiry of 3 years from the date of default i.e. 31.05.2012. Therefore, in all respects, it is seen that the claim of the Financial Creditor is against a time barred debt. In the present case, the Financial Creditor has not placed on record any Revival Letter obtained from the Respondent after 01.06.2012. From the records, it is also to be noted that the Account of the Principal Borrower had been declared as Non Performing Asset (NPA) on 06.06.2012 as evident from the Demand Notice issued to the Principal Borrower which is presently under Liquidation before this Tribunal, the CIRP of which was initiated by this Tribunal based on an Application filed by its Operational Creditor in the matter of M/S. CORTICA MANUFACTURING (INDIA) PRIVATE LIMITED VERSUS M/S. VICTORY ELECTRICALS LIMITED 2019 (4) TMI 1938 - NATIONAL COMPANY LAW TRIBUNAL, CHENNAI . The CIRP in relation to the principal borrower was triggered not at the instance of the present Financial Creditor but by an Operational Creditor under Section 9 of the Insolvency Bankruptcy Code, 2016. Even though the liability of the Principal borrower is co-extensive to that of the Guarantor, in an Application filed under Section 7 of IBC, 2016, the Applicant is required to satisfy the debt and default on the part of the Respondent independently and also it is a statutory duty of this Tribunal to ascertain as to whether the debt is a time barred debt or not, eventhough a defence to such an effect is not raised by the Respondent. The Demand Notice to the Respondent / Corporate Guarantor annexed at Page 335 and issued by the Applicant is to be noted is of the year 2013. Thus, from the very documents filed by the Financial Creditor, we are of the considered view that the debt as claimed by the Financial Creditor is time barred and the Financial Creditor has failed to place on record any iota of document recognized under the law to substantiate that the debt falls well within the period of limitation - the debt on the part of the Respondent/Corporate Guarantor is time barred and as such the Application filed by the Financial Creditor is liable to be dismissed - Application dismissed.
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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