2018 (8) TMI 1790 - Tri - Insolvency and Bankruptcy

Initiation of corporate insolvency resolution process - Petition time barred - Scope of amendment made in the Insolvency and Bankruptcy Code 2016 by inserting Section 238A - Limitation Act applicability to insolvency proceeding - HELD THAT - In view of the amendment made in the Insolvency and Bankruptcy Code the instant application is time barred and hit by Section 18 of the Limitation Act 1963. The amount of debt has become due and payable on 26.02.2013. While dealing with the issue of limitation in the case of Black Pearls Hotel Pvt. Ltd. v. Planet M Retail Ltd. 2017 (12) TMI 100 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI said that if the Limitation Act was even made to be applicable then the period would only be initiated from December 2016. In view of the judgment of the Hon ble Supreme Court 2018 (8) TMI 837 - SUPREME COURT OF INDIA a clarificatory amendment has retrospective effect. Under the above facts circumstances and the reasons as discussed above we have come to the conclusion that the petition is time barred.

Summary

Issues Involved:
1. Initiation of corporate insolvency resolution process.
2. Existence and acknowledgment of debt.
3. Applicability of the Limitation Act, 1963.
4. Time-barred debt under the Limitation Act.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process:
The application was filed by M/S. Agarwal Coal Corporation Private Limited for initiating a corporate insolvency resolution process against M/S. Shriram Cement Limited under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Operational Creditor, engaged in the import and trade of coal, sought to recover an outstanding amount from the Corporate Debtor, which is involved in the manufacturing and supplying of cement.

2. Existence and Acknowledgment of Debt:
The business transactions continued till 26.02.2013, with various payment collection memos issued by the Operational Creditor. The outstanding amount payable by the Corporate Debtor as on 26.02.2013 was ?58,19,490/-. A High Seas Sale Agreement was entered on 08.10.2012, and subsequent purchase orders were placed by the Corporate Debtor. Despite a Debt Settlement Agreement on 01.03.2017, the Corporate Debtor did not fully honor the terms, leaving a significant amount unpaid.

3. Applicability of the Limitation Act, 1963:
The Tribunal noted the recent amendment to the Insolvency and Bankruptcy Code, 2016, which introduced Section 238A, making the provisions of the Limitation Act, 1963 applicable to proceedings under the Code. The relevant provision under the Limitation Act is Article 137, which prescribes a three-year limitation period for applications where no specific period is provided.

4. Time-Barred Debt under the Limitation Act:
The Tribunal observed that the debt became due on 26.02.2013, and the application for insolvency was filed on 27.04.2018, well beyond the three-year limitation period. The execution of the Debt Settlement Agreement on 01.03.2017, nearly four years after the debt became due, could not revive the time-barred debt. The Tribunal cited Section 18 of the Limitation Act, which allows for a fresh period of limitation only if an acknowledgment of liability is made in writing before the expiration of the prescribed period.

The Tribunal referred to the Supreme Court's judgment in State Bank of India vs. V. Ramakrishnan, which clarified that clarificatory amendments to statutes are retrospective. This supported the application of the Limitation Act to the proceedings under the Insolvency and Bankruptcy Code.

Conclusion:
Based on the above analysis, the Tribunal concluded that the petition was time-barred and dismissed it accordingly. The significant legal principle upheld was the retrospective application of the Limitation Act to insolvency proceedings, emphasizing the importance of timely acknowledgment of debt to avoid being barred by limitation statutes.