2020 (11) TMI 550 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Time Limitation - acknowledgment on the part of the Corporate Debtor in the form of revival letter extending the period of limitation which is said to have been overlooked by the Adjudicating Authority while passing the impugned order - HELD THAT - In the application to Adjudicating Authority filed in prescribed format the date of default is recorded as 10th June, 2014 whereas the application under Section 7 came to filed on 19th September, 2018 i.e. more than four years after the default occurred. The time, for purposes of reckoning limitation in terms of Article 137 of the Limitation Act, would commence from the date of default i.e. 10th June, 2014 which would neither be shifted not extended once a default has occurred. On the basis of such default the Financial Creditor, in the instant case, has approached Debts Recovery Tribunal on 20th October, 2015. In the given circumstances, it cannot lie in the mouth of the Appellant that the date of default gets extended on account of acknowledgment made in the OTS proposal emanating from the Corporate Debtor. There cannot be two defaults in respect of the same debt, one for the purpose of claim filed before the Debts Recovery Tribunal and the other for purposes of I B Code based on OTS proposal, more so when in application filed before the Adjudicating Authority in prescribed format date of default has unambiguously been reflected as 10th June, 2014. The application having been filed before the Adjudicating Authority beyond three years of occurrence of default is hopelessly time barred and it is not permissible for Appellant to take recourse to Section 18 of the Limitation Act for triggering Corporate Insolvency Resolution Process under Section 7 of the I B Code against the Corporate Debtor - Appeal dismissed.

Summary

Issues:
1. Appeal against rejection of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on limitation.
2. Interpretation of acknowledgment of liability through a revival letter and its impact on limitation period.
3. Applicability of provisions of the Limitation Act, 1963 to proceedings under the Insolvency and Bankruptcy Code.
4. Determination of the starting point for calculating the limitation period for filing under Section 7 of the Insolvency and Bankruptcy Code.

Analysis:
1. The Appellant, 'State Bank of India,' filed an appeal challenging the rejection of its application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by the Adjudicating Authority due to being time-barred. The Appellant argued that there was an acknowledgment of liability by the Corporate Debtor in the form of a revival letter, extending the limitation period. The Appellant contended that the acknowledgment should have been considered, and the application was within the prescribed three-year period. Reference was made to Section 238A of the Insolvency and Bankruptcy Code and relevant case law to support the argument.

2. The Tribunal noted that the application was dismissed by the Adjudicating Authority as time-barred, as it was filed more than four years after the default occurred. It was established that the date of default was 10th June 2014, and the application was filed on 19th September 2018. The Tribunal emphasized that the limitation period starts from the date of default and cannot be extended or shifted once a default occurs. The acknowledgment in the One Time Settlement proposal by the Corporate Debtor did not alter the date of default, and the application was deemed time-barred based on the unambiguous date of default provided in the application.

3. The Tribunal clarified that the provisions of the Limitation Act, 1963 were applicable to proceedings under the Insolvency and Bankruptcy Code from the beginning. It was reiterated that applications under Sections 7 and 9 of the Code are governed by Article 137 of the Limitation Act, which prescribes a three-year limitation period from the date of default. The Tribunal cited relevant case law to support this interpretation, emphasizing that the limitation period can only be extended by condonation of delay under Section 5 of the Limitation Act.

4. Considering the facts of the case, the Tribunal concluded that the application was time-barred as it was filed beyond three years from the date of default. The Tribunal rejected the appeal, stating that the Appellant could not rely on the acknowledgment in the One Time Settlement proposal to extend the limitation period. The appeal was dismissed, and no costs were awarded.

This detailed analysis of the judgment highlights the key issues addressed by the Appellate Tribunal regarding the rejection of the application under the Insolvency and Bankruptcy Code based on limitation and the interpretation of acknowledgment of liability in relation to the limitation period.