2020 (9) TMI 1173 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - application rejected on the ground that the application is barred by limitation and was filled before it more than 3 years after the default - time limitation - HELD THAT - The Financial Creditors issued a notice of recall dated 7th December, 2017 demanding the payment of the total overdues as on that date within a period of 15 days from the date of notice of recall. Thus the payment for Quarter ending December 2017 to September 2025 will become due and payable and come under default on 22nd December, 2017 i.e. on the expiry of 15 days from the date of default notice which was served upon the Corporate Debtor for recalling the loans. Thus the default cannot occur before the amount becomes due and payable as per the Second Amendment Agreement. Also, on entering into the Second Amendment Agreement on 31st march, 2015 the earlier Agreement shall be subsumed with the Amended Agreement and all the prior Company Appeal (AT) (Insolvency) No.1448 of 2019 defaults shall become irrelevant and the date of default shall be decided as per the Second Amendment Agreement dated 31st March, 2015. Therefore, the Adjudication Authority have wrongly considered the date of default to be 16th March, 2015 for computation of limitation period to file an application before it. In case there is any discrepancy found in the application relating to the date of default being wrongly pleaded by the financial creditors as contended by the Corporate Debtor. The Adjudicating Authority may ask the financial Creditors to rectify the same. The limitation is a mixed question of law and facts therefore, unless it becomes apparent from the reading of the company petition that the same is barred by limitation the petition should not be rejected by selectively considering the documents on record. The application filed by the Corporate Debtor under Section 7 was required to be admitted by the Adjudicating Authority, but the Adjudicating Authority failed to consider the matter in proper perspective. Appeal allowed.

Issues Involved:
1. Whether the application filed before the Adjudicating Authority was barred by limitation.
2. Whether the revival letter dated 31st January 2017 extended the limitation period.
3. Whether the restructuring of the loan agreement affected the computation of the limitation period.
4. Whether the Adjudicating Authority correctly considered the date of default.

Issue-wise Detailed Analysis:

1. Whether the application filed before the Adjudicating Authority was barred by limitation:
The Financial Creditors challenged the impugned order dated 30th October 2019, passed by the National Company Law Tribunal, Hyderabad Bench, which dismissed their application under Section 7 of the Insolvency and Bankruptcy Code, 2016, on the ground that it was barred by limitation. The Adjudicating Authority had considered the date of default as 16th March 2015 and noted that the application was filed more than three years after this date, thus exceeding the limitation period prescribed under Article 137 of the Limitation Act, 1963.

2. Whether the revival letter dated 31st January 2017 extended the limitation period:
The Financial Creditors argued that the revival letter dated 31st January 2017, executed as per Section 18 of the Limitation Act, 1963, acknowledged the debt and extended the limitation period. They contended that this letter was not considered by the Adjudicating Authority while passing the impugned order. The revival letter explicitly stated that the liability of the Corporate Debtor for the payment of outstanding amounts remained in full force, which should have extended the limitation period.

3. Whether the restructuring of the loan agreement affected the computation of the limitation period:
The Financial Creditors submitted that the loan agreement was restructured, and a Second Amendment Agreement was executed on 31st March 2015, which redefined the repayment schedule. According to this agreement, the first repayment date was 31st December 2015, making the first default occur on this date. The Financial Creditors issued a notice of recall on 7th December 2017, demanding payment of the total overdues within 15 days. Therefore, the default date should be considered as 22nd December 2017, the expiry of the 15-day notice period.

4. Whether the Adjudicating Authority correctly considered the date of default:
The Adjudicating Authority had considered the date of default as 16th March 2015, based on the pleadings before it. However, the Appellate Tribunal observed that the restructuring of the loan agreement and the execution of the Second Amendment Agreement on 31st March 2015 subsumed the earlier agreement, making the date of default as per the new repayment schedule. The Tribunal noted that the application was filed within three years from the date of default as per the restructured agreement, thus within the limitation period.

Conclusion:
The Appellate Tribunal concluded that the Adjudicating Authority had erred in considering the date of default and the limitation period. The application filed by the Financial Creditors was within the limitation period, considering the revival letter and the restructured loan agreement. The appeal was allowed, the impugned order was set aside, and the matter was remanded back to the Adjudicating Authority to admit the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, after issuing notice and examining all other aspects. The case was directed to be decided expeditiously within one month. No order as to costs was made.

← Previous Next →