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2020 (8) TMI 697 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - applicability of time limitation - HELD THAT - Section 18 of the Limitation Act, provides that where 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 then fresh periods of limitation shall be computed from the time when acknowledgement was so signed. In the case of J.C. BUDHRAJA VERSUS CHAIRMAN, ORISSA MINING CORPORATIONLTD. ANR. 2008 (1) TMI 963 - SUPREME COURT , Hon ble Supreme Court has specified that explanation to Section 18 provides that an acknowledgement may be sufficient though it omits to specify the exact nature of the right are avers that the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off or address to a person other than a person entitled to the right - Hon ble Supreme Court has relied on its earlier judgment passed in KHAN BAHADUR SHAPOOR FREDOOM MAZDA VERSUS DURGA PROSAD CHAMARIA AND ORS. 1961 (3) TMI 113 - SUPREME COURT . In the said case, Hon ble Supreme Court has clarified that acknowledgement as prescribed by Section 19 merely renews debt; it does not create any new right. It is a mere acknowledgement of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or either by implication. The statement of which the plea of acknowledgement is based must relate to the present subsisting liability, though the exact nature of the specific character of the said liability may not be indicated in words. Thus in the case mentioned above, the Hon ble Supreme Court has held that the limitation can only be extended in the manner provided U/S 18 of the Limitation Act. For example, an acknowledgement of liability under Section 18 of the Limitation Act would certainly extend the limitation period - In this case, admittedly the account of the Corporate Debtor was classified of NPA on 29th January 2013. Therefore, as per the law laid down by the Supreme Court case of GAURAV HARGOVINDBHAI DAVE VERSUS ASSET RECONSTRUCTION COMPANY (INDIA) LTD. AND ANR. 2019 (9) TMI 1019 - SUPREME COURT , the date of default shall be computed from the date when the account was classified as NPA, i.e.29th January 2013. Article 137 of the Limitation Act shall be applicable for an Application filed under Sections 7, 9 or 10 of the I B Code. Since the account of the Corporate Debtor was classified as NPA on 29th January 2013. Therefore, default started on 29th January 2013 and three years period of limitation was available for applying u/s Section 7 of the Code - thus, a fresh period of limitation of three years started w.e.f. 01st June 2016 in terms of Section 18 of the Limitation Act. Thus it is clear that the petition filed under Section 7 of the Code on 29th September 2018 is well within limitation. The impugned order is assailed only on the Limitation ground therefore Appeal deserves to be rejected. Impugned Order upheld - appeal dismissed.
Issues Involved:
1. Maintainability of the petition filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Whether the application is barred by limitation under Section 238A of the Insolvency and Bankruptcy Code and Article 137 of the Limitation Act, 1963. 3. Effect of the Corporate Debtor's acknowledgment of debt on the limitation period. 4. Impact of the Corporate Debtor's One Time Settlement (OTS) proposal on the limitation period. Detailed Analysis: 1. Maintainability of the Petition: The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, for initiating Corporate Insolvency Resolution Process against the Corporate Debtor. The Corporate Debtor contested the petition, arguing it was not maintainable and barred by limitation. 2. Limitation Period: The Corporate Debtor argued that the application was barred by limitation under Section 238A of the Insolvency and Bankruptcy Code, 2016, and Article 137 of the Limitation Act, 1963, which prescribes a limitation period of three years from the date of default. The default occurred on 29th January 2013, when the account was classified as Non-Performing Asset (NPA), thus the limitation period ended on 28th January 2016. 3. Acknowledgment of Debt: The Financial Creditor contended that the Corporate Debtor had acknowledged the debt through a document dated 13th April 2015, which renewed the limitation period. The Corporate Debtor, however, argued that any acknowledgment or OTS proposal submitted after the expiry of the original limitation period could not initiate a fresh period of limitation. 4. One Time Settlement (OTS) Proposal: The Corporate Debtor submitted an OTS proposal on 5th October 2018 and made a part payment of ?1.60 crores. The Financial Creditor argued that this acknowledgment and part payment extended the limitation period. The Corporate Debtor countered that the OTS submission and part payment were beyond the original limitation period and thus could not extend it. Judgment Analysis: The Tribunal referenced several Supreme Court judgments to clarify the application of the Limitation Act to insolvency proceedings. The key points included: - Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company: The limitation period starts from the date of NPA. - Jignesh Shah vs. Union of India: Separate proceedings for distinct remedies do not affect the limitation period for insolvency applications. - B.K. Educational Services vs. Parag Gupta: Article 137 of the Limitation Act applies to applications under Sections 7, 9, or 10 of the Insolvency and Bankruptcy Code. - J.C. Budhraja vs. Chairman, Orissa Mining Corporation: An acknowledgment of liability in writing before the expiration of the limitation period renews the debt and starts a fresh limitation period. The Tribunal concluded that the Corporate Debtor's acknowledgment of debt on 13th April 2015 and the OTS proposal on 1st June 2016 effectively renewed the limitation period. Consequently, the application filed on 29th September 2018 was within the extended limitation period. Conclusion: The appeal was dismissed as the petition under Section 7 of the Insolvency and Bankruptcy Code was filed within the extended limitation period due to the acknowledgments of debt by the Corporate Debtor. The Tribunal found no justification for interference with the impugned order, and thus, the appeal was dismissed with no order as to costs.
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