2019 (10) TMI 216 - Tri - Insolvency and Bankruptcy

Maintainability of application - time limitation - initiation of CIRP - it is alleged that the petition is barred by limitation as alleged date of default is of 30.06.2009 and present proceedings are filed on 05.07.2018 - HELD THAT - In the case on hand, admittedly, the default occurred on 30th June, 2009 (as per Part IV, Column 2 at Page 5 of the Petition). Therefore, if the period of limitation is computed from the date of default mentioned in the Petition, this Petition which is filed on 11th July, 2018, is barred by limitation. But the special feature in this case is within the period of limitation, the Petitioner Bank filed OA No. 334 of 2015 before the DRT No. 2, at Ahmedabad on 21.04.2015. When already the bank filed OA No. 334 of 2015 before the DRT within the period of limitation, whether the petition filed before this tribunal under Section 7 of the Code on 11.07.2018 shall be treated as a Petition within limitation or not? - HELD THAT - Before Insolvency Code coming into force, the remedy of winding up was available to the Petitioner Bank under Sections 433 and 434 of the Companies Act, 1956, but, no such remedy was availed by the Petitioner. It is only after the Insolvency and Bankruptcy Code came into force, the Petitioner Bank issued a notice dated 10th April 2012 and filed this Petition. There is no bar in filing application under section 7 of the Code when DRT/SARFAESI proceedings are pending, as decided in catena of cases. Hence the period consumed in DRT/SARFAESI cannot be a ground for exemption of the limitation period. Since the Limitation Act is applicable to applications filed under sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case Section 5 of the Limitation Act may be applied to condone the delay in filing such application. The period of limitation would commence three years preceding the date of filing the petition. The petition was filed on (sic) 11.07.2018 and acknowledgement, if any, within the meaning of section 18 of the Limitation Act, 1963 has to be shown before (sic) 11.07.2015. The petitioner has failed to show any iota of evidence to prove acknowledgement of debt and default. There are no ground to admit the petition as no acknowledgement before 11.07.2015 has been placed on record to extend the period of limitation beyond three year - petition dismissed.

Summary

Issues:
- Application under section 7 of the Insolvency and Bankruptcy Code, 2016 seeking reliefs under Section 7(5)(a) and Section 13(l)(a)(b)(c) of the Code.
- Objections raised by the respondent: (a) Petition is time-barred (b) Pending application before Debts Recovery Tribunal (DRT) (c) Validity of resolution to institute insolvency proceedings.

Analysis:
1. Time Barred Petition:
- The respondent argued that the petition is time-barred as the alleged default date was in 2009, and the petition was filed in 2018.
- The petitioner contended that the limitation period should be calculated from the date of default mentioned in the petition.
- The petitioner had filed an application before the DRT within the limitation period, which raised the question of whether the subsequent petition under Section 7 of the Code was within the limitation period.
- The Supreme Court's decision in BK Educational Services case clarified the retrospective applicability of the Limitation Act to proceedings under the Code.
- The lack of evidence of acknowledgment of debt and default before the limitation period led to the dismissal of the petition on grounds of being time-barred.

2. Applicability of Limitation Act:
- The Supreme Court's decision emphasized that the Limitation Act applies to NCLT proceedings, including those under Sections 7 and 9 of the Code.
- The Court's interpretation of Section 238A highlighted the retrospective application of the Limitation Act to prevent time-barred claims from being resurrected.
- The need for acknowledgment of debt within the limitation period was crucial to extending the period of limitation beyond three years.

3. Validity of Insolvency Proceedings:
- The respondent's objections regarding the validity of the resolution to institute insolvency proceedings were not specifically addressed in the judgment.
- The focus was primarily on the time-barred nature of the petition and the applicability of the Limitation Act to the case.

4. Conclusion:
- The petition was dismissed due to the lack of evidence of acknowledgment of debt within the limitation period.
- The judgment highlighted the importance of meeting the requirements of the Limitation Act in insolvency proceedings to prevent time-barred claims.
- The decision emphasized the retrospective application of the Limitation Act to maintain the integrity of the insolvency resolution process.