2020 (6) TMI 660 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Extension of period of limitation by acknowledgement of debt - Corporate Debtor failed to make repayment of its dues - HELD THAT - A limitation can be extended based on acknowledgement in writing, provided the said acknowledgement is made before the expiration of the prescribed period of limitation for a suit or application in respect of any property or right. An acknowledgement of liability in respect of such property or right has been made in writing, signed by the party, against whom such property or right is claimed, or by any person through whom he derives his title or liability, if the acknowledgement is made before the expiry of the period of limitation, then a fresh period of limitation shall be computed, from the time, when the acknowledgement was so signed. Admittedly, in this case, the account of the Corporate Debtor was classified as NPA on 15th December 2012. The Financial Creditor has also admitted that date of default of the Corporate Debtor account is on 16th September 2012. Therefore, any acknowledgement of liability could only be made within a period of limitation; i.e. three years. It is clear that on the day of filing the petition U/S 7 of the Code, there was a subsisting liability on the corporate debtor, and due to the acknowledgement of debt in writing, though the account of the corporate debtor which was classified as NPA on 15th Dec 2012, its validity got extended from time to time by acknowledgement of debt in writing and a fresh period of limitation started after the acknowledgement of debt as per provision of Sec 18 of the Limitation Act - the petition filed by the Respondent Oriental Bank of Commerce is not barred by limitation. Appeal dismissed.

Summary

Issues Involved:
1. Maintainability of the Section 7 petition under the Insolvency and Bankruptcy Code (I&B Code).
2. Whether the claim of the Financial Creditor was barred by limitation.
3. Validity of the Adjudicating Authority's order admitting the Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Maintainability of the Section 7 Petition:
The Appellant/Corporate Debtor argued that the Section 7 petition was not maintainable as no default had been committed and the application was incomplete and not in proper form. However, the Adjudicating Authority rejected these objections and admitted the application filed under Section 7 of the I&B Code for initiation of CIRP against the Corporate Debtor. The appeal contended that the Adjudicating Authority erred in admitting the application despite no debt being payable in law.

2. Limitation:
The Corporate Debtor argued that the claim was barred by limitation. The Adjudicating Authority observed that the Corporate Debtor had paid part of the loan amount until 29th July 2017, and the default occurred in respect of ?7,54,68,438/- as on 30th September 2018. The Financial Creditor contended that the limitation period was extended due to acknowledgments of debt and security made by the Corporate Debtor on 01st August 2017. The Tribunal referred to Section 18 of the Limitation Act, 1963, which states that an acknowledgment of liability in writing before the expiration of the prescribed period of limitation renews the debt and starts a fresh period of limitation from the date of acknowledgment.

The Tribunal noted that the Corporate Debtor's account was classified as NPA on 15th December 2012, and the default date was 16th September 2012. The Financial Creditor provided evidence of acknowledgments of debt, including an agreement dated 04th March 2015 and a balance and security confirmation letter dated 01st August 2017. These acknowledgments extended the limitation period, making the petition filed on 08th December 2018 within the limitation period.

3. Validity of the Adjudicating Authority's Order:
The Tribunal upheld the Adjudicating Authority's order admitting the CIRP against the Corporate Debtor. It concluded that the petition filed by the Financial Creditor was not barred by limitation due to the acknowledgments of debt in writing, which extended the limitation period. The Tribunal directed the Interim Resolution Professional (IRP) to proceed with the CIRP forthwith.

Conclusion:
The Tribunal rejected the appeals, upheld the Adjudicating Authority's order, and directed the IRP to proceed with the CIRP immediately. The appeals were rejected based on the finding that the petition was not barred by limitation due to the acknowledgments of debt in writing, which extended the limitation period as per Section 18 of the Limitation Act.