2020 (9) TMI 1230 - Tri - 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 - time limitation - HELD THAT - It can be said that the amount which the petitioner claimed or mentioned in the application was paid by the petitioner lastly in the month of June 2014 and according to the petitioner, the last payment was received by the petitioner on 15.03.2016 and we further noticed that the present application is filed on 20.03.2020 and the contention of the petitioner is that since the respondent in its balance sheet for the Financial Year 2016-17, which ended on 31.03.2017 acknowledged that amount therefore, from that period the debt is not barred by limitation and in support of its contention, the petitioner has not placed any law before us that the amount mentioned in the balance sheet comes under the definition of acknowledgement of debt under Section 18 of the Limitation Act. In view of Section 18 of the Limitation Act, there must be any acknowledgement in writing and signed by the person by the borrower or any person authorised on his behalf, the statement made in the balance sheet, in our considered view does not comes under the purview of Section 18 of the Limitation Act, therefore, on this ground, petitioner is not entitled to take the advantage that since the acknowledgement is made in the balance sheet, therefore, the date of default runs when the balance sheet was signed for the Financial Year 2016-2017 - the date of default is 11.06.2015 and the last payment was received on 15.03.2016, hence, the petitioner was required to file application if any within 3 years from 11.06.2015 which comes to end on 10.06.2018, whereas the present application was filed on 20.03.2020 that is beyond the 3 years, when the right to apply accrues under Article 137 of the Limitation Act. Mere plain reading of the provisions shows that the debt means a liability or obligation in respect of a claim, which is due from any person and includes a financial debt and operational debt and when we shall read the definition of debt and financial debt together then, the debt includes the Financial Debt and Operational Debt but all the debts are not Financial Debt or Operational Debt, only debt defined under Section 5(8) of the IBC, comes under the definition of Financial Debt and debt defined under Section 5(21) of the IBC comes under the definition of Operational Debt. The present application is not maintainable - Application dismissed.

Summary

Issues:
- Initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016
- Determination of financial debt and limitation period for filing the application

Analysis:
1. The petitioner filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process due to the respondent's inability to repay a loan. The petitioner disbursed a principal amount to the respondent based on promises of repayment and agreed interest rates.

2. The petitioner claimed that the respondent partially repaid the loan but failed to respond to requests for confirmation of accounts and repayment demands. The petitioner argued that the financial debt of ?39,00,000/- was due and payable, as acknowledged by the respondent in its balance sheet for the FY 2016-17.

3. The Tribunal analyzed the limitation period for filing the application. The petitioner last received a payment from the respondent in March 2016, and the application was filed in March 2020. The Tribunal noted that the debt acknowledgment in the balance sheet did not constitute an acknowledgment under Section 18 of the Limitation Act.

4. The Tribunal concluded that the application was time-barred, as the petitioner failed to file within the limitation period. Additionally, the petitioner could not establish that the amount disbursed constituted financial debt, as no interest payments were evidenced, and the debt did not fall under the definition of financial debt as per Section 5(8) of the IBC.

5. The Tribunal clarified the distinction between debt, financial debt, and operational debt under the IBC. As the petitioner's claim did not meet the criteria for financial debt, the application was deemed not maintainable. Consequently, the Tribunal dismissed the application, declining to issue notice to the respondent and admitting the petition.