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2020 (11) TMI 1056 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Financial Debt - existence of debt and dispute or not - Applicability of section 18 and section 19 of Limitation Act - HELD THAT - Since, much reliance has been placed by the Ld. Counsel for the petitioner on the reply filed by the Corporate Debtor in pursuant to the legal notice issued under Section 138 of the NI Act, therefore, it is deemed fit to consider this document at first and on going through the reply filed by the Corporate Debtor in response to the legal notice issued under Section 138 of the NI Act and it is noticed that at page 376, it is mentioned that Corporate Debtor had proposed for settlement of the account and on the basis of that Ld. counsel for the petitioner submitted that the Corporate Debtor has acknowledged the debt by sending the reply to the Legal Notice issued under Section 138 of the NI Act and it is also noticed that in its reply to the Legal Notice issued under Section 138 of the NI Act, in para 6 of the reply, which is at page 374 of paper book, it is mentioned that undated cheques were handed over to the petitioner and that is the reasons the date, when the cheques were handed over to the petitioner are not disclosed in the notice. Apart from that, in the case of Yogesh Kumar Jaswantlal Thakkar Vs. India Overseas Bank and Ors 2020 (9) TMI 582 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI passed by Hon ble NCLAT, where it was held that Section 19 of the Limitation Act is not applicable so far the IBC is concerned. Applicability of Section 18 of the Limitation Act - it is mentioned in the reply dated 18.03.2017 that he is ready to settle the statement of accounts, which amounts to the acknowledgement of debt - HELD THAT - In part-IV, the date of default is not mentioned. Since the last agreement was executed on 30.06.2013, therefore, the payments on the basis of that agreement must be made within 3 years from the date of last agreement, which was executed on 30.06.2013 and acknowledgement also must have been made within that period. Even if the contention of the petitioner is accepted that reply which was given in response to the legal notice under Section 138 of NI Act will be treated as as an acknowledgement of debt, the same has also been made after three years from the date of execution of last agreement, whereas in view of Section 18 of the Limitation Act, the acknowledgement must be made within the period of limitation. hence, the contention of the Ld. Counsel for the petitioner that the present application is within time, cannot be accepted. Since the present application is barred by limitation, therefore, the notice need not be issued upon the respondent rather same is liable to be Dismissed - application dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016. 2. Validity and enforceability of Associateship Agreements and subsequent amendments. 3. Acknowledgement of debt and limitation period under the Limitation Act, 1963. 4. Dishonour of cheques and legal implications under Section 138 of the Negotiable Instruments Act, 1881. 5. Applicability of Section 18 and Section 19 of the Limitation Act, 1963 in the context of IBC proceedings. Detailed Analysis: 1. Initiation of CIRP under Section 7 of the Insolvency & Bankruptcy Code, 2016: The petition was filed by the Financial Creditor, a Government of India undertaking, under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to its inability to liquidate its financial debt. The Financial Creditor had extended credit facilities to the Corporate Debtor for the procurement of iron ore lumps and sized ore under multiple Associateship Agreements. 2. Validity and Enforceability of Associateship Agreements and Subsequent Amendments: The Financial Creditor and Corporate Debtor entered into an initial Associateship Agreement on 17.09.2008, which was amended seven times. Subsequently, a new Associateship Agreement was signed on 01.07.2012, with an addendum on 30.06.2013, collectively referred to as the "Associateship Agreement of 2012." The credit facility was revised to ?16,00,00,000/-. The Corporate Debtor availed the credit facility through multiple drawdowns, and the Financial Creditor held securities under multiple Deeds of Pledge. 3. Acknowledgement of Debt and Limitation Period under the Limitation Act, 1963: The Financial Creditor argued that the petition was within the limitation period, citing the presentation and dishonour of four cheques between 01.02.2017 and 24.02.2017. The Financial Creditor sent a legal notice on 02.03.2017 under Section 138 of the Negotiable Instruments Act, 1881, to which the Corporate Debtor responded on 18.03.2017, acknowledging the debt and proposing to settle the account. The Financial Creditor contended that this response amounted to an acknowledgment of debt under Section 18 of the Limitation Act, 1963, thereby extending the limitation period. 4. Dishonour of Cheques and Legal Implications under Section 138 of the Negotiable Instruments Act, 1881: The Corporate Debtor issued four cheques of ?4 Crores each, all of which were dishonoured due to insufficient funds. The Financial Creditor initiated legal proceedings under Section 138 of the Negotiable Instruments Act, 1881, and filed Complaint Case No. 16818 of 2017, which is still pending adjudication. 5. Applicability of Section 18 and Section 19 of the Limitation Act, 1963 in the Context of IBC Proceedings: The Financial Creditor relied on multiple judicial precedents to argue that the acknowledgment of debt in the Corporate Debtor's reply to the legal notice extended the limitation period under Section 18 of the Limitation Act. However, the Tribunal noted that the last agreement was executed on 30.06.2013, and any acknowledgment of debt must occur within three years from that date to be valid under Section 18. Since the acknowledgment was made after the three-year period, the Tribunal concluded that the application was barred by limitation. Conclusion: The Tribunal dismissed the petition for initiation of CIRP against the Corporate Debtor, concluding that the application was barred by limitation. The Tribunal emphasized that the acknowledgment of debt must occur within the limitation period, and in this case, the acknowledgment was made after the expiration of the three-year period from the last agreement. Consequently, the Tribunal did not issue notice to the respondent and dismissed the petition.
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