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2020 (9) TMI 12 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of default and debt - time limitation - HELD THAT - The application of Article 137 of the Limitation Act, 1963 for moving application under Sections 7 or 9 of the I B Code, fell for consideration before the Hon ble Supreme Court and this Appellate Tribunal in number of cases. In B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT , the Hon ble Supreme Court held that the Limitation Act, 1963 has in fact been applied from the inception of the Code. Similar issue fell for consideration before the Hon ble Supreme Court in GAURAV HARGOVINDBHAI DAVE VERSUS ASSET RECONSTRUCTION COMPANY (INDIA) LTD. AND ANR. 2019 (9) TMI 1019 - SUPREME COURT . In the said case, the Hon ble Supreme Court has noticed that the Respondent was declared NPA on 21st July, 2011. The Bank had filed two OAs before the Debts Recovery Tribunal in 2012 to recover the total debt. Taking into consideration the facts, the Supreme Court held that the default having taken place and as the account was declared NPA on 21st July, 2011, the application under Section 7 was barred by limitation. As, the Corporate Debtor having committed default prior to 9th September, 2014, i.e. much before the assignment of debt to Phoenix ARC Private Limited, we hold that the Application under Section 7 of the I B Code was barred prior to 9th September, 2017 - The Application under Section 7 of the I B Code was filed on 29th September, 2017, i.e., much after three years of the cut-off period of default, which was prior to 9th September, 2017. Section 22 of the Limitation Act, 1963 relates to breaches and torts , for the purpose of counting the fresh period of limitation. The said Section 22 of the Limitation Act, 1963 may be applicable to find out whether the claim is barred by limitation or not, but cannot be made applicable for counting the period of limitation for Application under Section 7 of the I B Code, which is to be counted from the date of default/ NPA as held by the Hon ble Supreme Court in terms of Section 7(5) of the I B Code - The Corporate Debtor is released from all the rigors of Corporate Insolvency Resolution Process . The Interim Resolution Professional will handover the assets and records of the Corporate Debtor to the Promoters/ Board of Directors immediately. The case is remitted to the Adjudicating Authority (National Company Law Tribunal) for determination of fee and Corporate Insolvency Resolution cost payable to Interim Resolution Professional / Resolution Professional , which will be borne by Phoenix ARC Private Limited. Appeal allowed.
Issues Involved:
1. Applicability of Limitation Act, 1963 to applications under Section 7 of the Insolvency and Bankruptcy Code (I&B Code). 2. Determination of the period of limitation for filing an application under Section 7 of the I&B Code. 3. Classification of debt as Non-Performing Asset (NPA) and its impact on limitation. 4. Impact of assignment of debt on the period of limitation. 5. Applicability of Section 22 of the Limitation Act, 1963 to proceedings under the I&B Code. 6. Acknowledgment of debt under Section 18 of the Limitation Act, 1963. Detailed Analysis: 1. Applicability of Limitation Act, 1963: The judgment confirms that the Limitation Act, 1963 is applicable to applications filed under the I&B Code. Specifically, Article 137 of the Limitation Act, which provides a three-year limitation period for applications for which no period of limitation is provided elsewhere, is applicable to Section 7 applications. This was reaffirmed by the Hon’ble Supreme Court, which clarified that the date of coming into force of the IBC Code (1st December 2016) does not trigger the limitation period. 2. Determination of the Period of Limitation: The right to apply under Section 7 of the I&B Code accrues when a default occurs. If the default occurred more than three years prior to the date of filing the application, the application would be barred under Article 137 of the Limitation Act, unless there are grounds for condoning the delay under Section 5 of the Limitation Act. 3. Classification of Debt as NPA: The debt in question was classified as NPA on 15th March 2015. The application under Section 7 was filed on 29th September 2017, which is within the three-year limitation period from the date of NPA classification. However, the Hon’ble Supreme Court emphasized that the default must be considered from the date it first occurred, and not from the date of NPA classification. 4. Impact of Assignment of Debt: The assignment of debt from IDFC to Phoenix ARC Private Limited on 11th September 2014 does not reset the limitation period. The limitation period continues to run from the date of the original default. Therefore, the application filed on 29th September 2017 was beyond the three-year limitation period from the date of default. 5. Applicability of Section 22 of the Limitation Act, 1963: Section 22 of the Limitation Act, which relates to continuing breaches and torts, is not applicable to proceedings under the I&B Code. The limitation period for an application under Section 7 is to be calculated from the date of default, not from the date of any continuing breach. 6. Acknowledgment of Debt under Section 18 of the Limitation Act, 1963: For an acknowledgment of debt to extend the limitation period under Section 18, it must be in writing and signed by the party against whom the right is claimed. In this case, there was no evidence of any such acknowledgment by the Corporate Debtor to Phoenix ARC Private Limited or IDFC Bank within the limitation period. Conclusion: The application under Section 7 of the I&B Code filed by Phoenix ARC Private Limited was barred by limitation as it was filed beyond the three-year period from the date of default. The judgment of the Adjudicating Authority (NCLT) admitting the application was set aside, and the Corporate Debtor was released from the Corporate Insolvency Resolution Process. The case was remitted to the Adjudicating Authority for determination of fees and costs payable to the Interim Resolution Professional, to be borne by Phoenix ARC Private Limited. The appeal was allowed with no costs.
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