2021 (1) TMI 1120 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - time limitation - account of Corporate Debtor was classified as NPA - whether appeal was barred by limitation as default occurred in the year 2013? - HELD THAT - The account of Corporate Debtor was classified as NPA on 17thJune 2013. The Corporate Insolvency Resolution Process (CIRP) was triggered by the Financial Creditor by filing application under Section 7 of the Insolvency and Bankruptcy Code 2016 (I B Code) on 1st April 2019. It is by now well settled by a catena of judicial pronouncements from the Hon ble Apex Court as also by this Appellate Tribunal that the application under Section 7 is governed by Article 137 of the Limitation Act providing for limitation period of three years which has to be reckoned from the date of default viz. the date on which the Account of Corporate Debtor was classified as NPA. The impugned order admitting application under Section 7 filed by Respondent No.1- (Financial Creditor) in terms of the impugned order dated 4th February 2020 cannot be sustained - Appeal allowed.

Summary

Issues: Claim of the Financial Creditor barred by limitation.

Analysis:
The National Company Law Appellate Tribunal heard the appeal regarding the claim of the Financial Creditor, State Bank of India, being barred by limitation as the default occurred in 2013. The Corporate Debtor's account was classified as Non-Performing Asset (NPA) on June 17, 2013, and the application for Corporate Insolvency Resolution Process (CIRP) was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, on April 1, 2019. The Tribunal referred to various judicial pronouncements, including those by the Supreme Court and the Appellate Tribunal, establishing that the application under Section 7 is governed by Article 137 of the Limitation Act, with a limitation period of three years from the date of default, i.e., the date of NPA classification. Citing relevant cases such as "B.K. Educational Services Private Limited Vs. Parag Gupta and Associates," "Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Ltd," "Jignesh Shah & Anr. Vs. Union of India & Anr.," and "V. Padmakumar vs. Stressed Assets Stabilization Fund (SASD) & Anr.," the Tribunal concluded that the application filed by the Financial Creditor was indeed barred by limitation.

In light of the legal position established through various judgments, the Tribunal held that the impugned order admitting the application under Section 7 by the Financial Creditor could not be sustained. Consequently, the impugned order was set aside, the proceeding was closed, the Interim Resolution Professional was relieved from duties, and the Corporate Debtor was allowed to function independently through its Board of Directors. The Tribunal directed that the fee of the Interim Resolution Professional for the period worked would be decided by the Adjudicating Authority. The appeal was allowed with the mentioned observations, and no costs were awarded in the circumstances of the case. The Tribunal clarified that the disposal of the appeal would not prevent the Financial Creditor from pursuing any legal remedy for recovery in accordance with the law.