2019 (12) TMI 1391 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Time Limitation - HELD THAT - The petition is barred by limitation. The Tribunal observed that The right to sue expired in the year 2018 as the last installment of the unsecured loan was made on 29.12.2015. Hence, the present petition being filed in August, 2019 is barred by limitation, not being within three years from the date of the cause of action. This Bench is of the view that the prayer for initiating Corporate Insolvency Resolution process against the Corporate Debtor is not sustainable as the present application is barred by limitation - Petition dismissed.

Summary

Issues:
- Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016.
- Default in repayment of loan by the Corporate Debtor.
- Barred by limitation: Application filed beyond the prescribed period.

Initiation of Corporate Insolvency Resolution Process:
The petition was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 by the Earth Gracia Buildcon Pvt. Ltd. against the Corporate Debtor (Connoisseur) due to its inability to liquidate financial debt. The Financial Creditor had advanced a loan to the Corporate Debtor between 2013-2015, with a significant outstanding amount remaining unpaid. The Corporate Debtor had failed to pay off the debt, leading to the initiation of Corporate Insolvency Resolution Process.

Default in Repayment of Loan:
The Financial Creditor had advanced a substantial loan to the Corporate Debtor, which remained largely unpaid despite multiple installments being made. The Corporate Debtor had only repaid a small portion of the loan, leading to a significant outstanding amount. The Financial Creditor took steps to recover the debt, including sending a demand notice to the Corporate Debtor and its directors. However, the Corporate Debtor failed to repay the debt within the stipulated time, resulting in a default situation.

Barred by Limitation:
The Tribunal referred to Article 137 of the Limitation Act and a relevant Supreme Court decision to analyze the limitation period for applications under the Insolvency & Bankruptcy Code. It was observed that the right to sue accrues when a default occurs, and applications filed beyond three years from the date of the cause of action are barred by limitation. In this case, the last installment of the loan was made in 2015, and the petition filed in 2019 was deemed barred by limitation as it exceeded the prescribed three-year period. Consequently, the petition for initiating Corporate Insolvency Resolution Process was dismissed as it was not sustainable due to being time-barred.

In conclusion, the Tribunal dismissed the petition as it was found to be barred by limitation, not being within the three-year period from the date of the cause of action. The application for initiating Corporate Insolvency Resolution Process against the Corporate Debtor was deemed unsustainable due to exceeding the prescribed limitation period, leading to the dismissal of the petition.