2020 (1) TMI 106 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - time limitation - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - For counting the period of limitation in filing the application under Section 7, we find that Part II of Third Division of Schedule of Limitation Act, 1963 i.e. Article 137 is applicable - It is clear that the limitation will start from the date of accrual of right. The accrual of right is also to be noticed from the date of confirmation or acknowledgment of the debt and to be read along with Section 18 of the Limitation Act, 1963. The application under Section 7 is not barred by limitation and the Adjudicating Authority has rightly admitted the application under Section 7 - application admitted - appeal dismissed.

Summary

Issues:
- Barred by limitation under Section 7 of the Insolvency and Bankruptcy Code, 2016.
- Acknowledgment of debt by the Corporate Debtor.
- Application of Section 18 of the Limitation Act.
- Calculation of the period of limitation under Article 137 of the Limitation Act, 1963.

Issue 1: Barred by Limitation under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The case involved an application filed by a Financial Creditor against a Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The appellant argued that the application was barred by limitation since the loan was availed in 2010, and the Corporate Debtor confirmed the debt in 2018 due to the invocation of the I&B Code, which was allegedly in violation of the Indian Contract Act. The appellant relied on a Supreme Court decision to support this claim.

Issue 2: Acknowledgment of Debt by the Corporate Debtor:
The Respondents contended that the application was not time-barred as the Corporate Debtor had acknowledged the debt multiple times through letters, offers of One-Time Settlement, part payments, and inclusion of the debt in financial statements filed with the Registrar of Companies. The Respondents also highlighted actions taken under the SARFAESI Act, including symbolic possession of properties and a subsequent stay application in the High Court, which led to a part payment shared among secured lenders.

Issue 3: Application of Section 18 of the Limitation Act:
The Respondents invoked Section 18 of the Limitation Act to argue that the application was not barred by limitation, as fresh limitation periods start from the date of acknowledgment of liability. They provided various instances of acknowledgment by the Corporate Debtor, including letters, part payments, and financial statements, to support their argument.

Issue 4: Calculation of the Period of Limitation under Article 137 of the Limitation Act, 1963:
The Tribunal analyzed the period of limitation under Article 137 of the Limitation Act, which specifies a three-year limitation period for applications where no specific period is provided elsewhere. The Tribunal concluded that the limitation period starts from the accrual of the right, which, in this case, was linked to the acknowledgment of debt by the Corporate Debtor as per Section 18 of the Limitation Act.

In its judgment, the Tribunal held that the application under Section 7 was not barred by limitation based on the acknowledgment of debt by the Corporate Debtor and the provisions of the Limitation Act. The appeal was dismissed, and no costs were awarded.