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2021 (4) TMI 253 - AT - IBCMaintainability of petition - initiation of CIRP - default committed by the Respondent of the Financial Debt which became Non- Performing Assets - winding up petition was filed within time or not - Appellant is Financial Creditor/Assignee - HELD THAT - Considering the description of the Assignor and Assignee in the assignment agreement, we do not find any defect in the Application filed by the Appellant under Section 7 of IBC describing itself similarly. Appellant is Assignee of Financial Creditor and thus Financial Creditor. There is no substance in this contention raised by the Respondent. Time Limitation - HELD THAT - It is clear from Section 434 of the Companies Act that the Legislature did not intend to treat the claims of Applicants whose Winding-up Petitions were pending to be hit by Limitation and thus made Provisions for transfer of the claims - Hon ble Supreme Court of India in the matter of B.K. Educational Services 2018 (10) TMI 777 - SUPREME COURT referred to Report of the Insolvency Law Committee of March, 2018. Said Report, recorded that debts in Winding up Proceedings cannot be time barred . In the present matter, the Learned Counsel for Appellant instead of requesting Hon ble High Court to transfer the winding-up proceedings, (which were in Limitation) to the Adjudicating Authority withdrew the Petition - considering the facts, and provisions and interest of justice, and also the intent of the High Court Order dated 19th August, 2019, the same can be read as an Order which permitted, in effect the lis to be transferred for decision and adjudication to the Adjudicating Authority. This is clear from Paragraph 1 2 of the Order, read with wording in third paragraph which recorded that Permission as prayed for is granted . The third paragraph kept alive factual and legal contentions raised in the petition and also directed that withdrawal of this petition shall not come in the way of Petitioner . However, in the present matter, it is not necessary for us to resort to even this, in order to do justice. The Adjudicating Authority referred to the Judgments being relied on by the Learned Counsel for the Respondents to find that the period of Limitation under Article 137 of the Limitation Act is three years from date of default - The Adjudicating Authority relied on Judgment dated 18th December, 2019 of this Tribunal in the matter of C Shiva Kumar Reddy Vs. Dena Bank and Anr. 2020 (2) TMI 699 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI to hold that balance-sheet of the Corporate Debtor could not be relied on and calculated three years from the date of NPA and after making reference to Article 137 of the Limitation Act, 1963 it is held that the Application was time-barred. Balance-Sheets-Acknowledgment - HELD THAT - There are various Judgements passed by various Hon ble High Courts including High Court of Delhi which have dealt with the Balance Sheet/Annual Returns of Companies and where entries in the same have been treated as acknowledgement of debt and even accepted the same for the purpose of Section 18 of the Limitation Act, 1963. Going through the Judgements of Hon ble High Courts of Delhi and other High courts, what appears is that it is well settled position of law that Annual Returns/Audited Balance Sheets can be referred to and relied on to see if contents therein amount to acknowledgement or not. The discussion of the Judgements summarises that even after referring to the Annual Reports/ Balance Sheets, there are instances where the contents are not relied on to conclude that there is acknowledgement of debt. This is clear from Para 11 of the Judgement in the matter of In re. Padam Tea Company Ltd. 1973 (6) TMI 70 - CALCUTTA HIGH COURT . Thus, Annual Returns/Audited Balance Sheets, one-time settlement proposals, proposals to restructure loans, by whatever names called, cannot be simply ignored as debarred from consideration and in every given matter, it would be a question of applying the facts to the law and vice versa, to see whether or not the specific contents, spell out an acknowledgement under the Limitation Act - It is clear that Insolvency and Bankruptcy Code is a special law. Section 238 A of IBC states that the provisions of the Limitation Act shall, as far as may apply to the proceedings or Appeals before the Adjudicating Authority and this Tribunal as the case may be. Article 137 of the Limitation Act applies to the applications filed under Section 7 and 9 of IBC has already been held by the Hon ble Supreme Court. IBC has not excluded Application of Section 4 to 24 while determining Period of Limitation and Section 29 (2) appears to be applicable. This being so, Section 18 and 19 of Limitation Act must be said to be applicable. Claim of Appellant is not time-barred - HELD THAT - The Respondent has not shown that while preparing the balance-sheets the directors in their reports recorded denial or any reservation with regard to the debts shown by the Chartered Accountant to claim that they were time-barred. If the debt became NPA on 30th November, 2013 and there are acknowledgments in the balance-sheets of 2014-15 to 2016-17 the Application filed under Section 7 of IBC on 15th December, 2017 cannot be said to be time-barred. This is apart from admitted payment by cheque in April of 2015 though it is argued that it was part of proposal of One Time Settlement which never materialized - Section 7 application was dismissed on ground of limitation. It is not the case that the application was not complete or defective otherwise. The same is required to be admitted. The Application under Section 7 of IBC as filed by the Appellant is within Limitation - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Application under Section 7 of IBC dismissed by Adjudicating Authority as time-barred. 2. Parallel proceedings: Winding up petition and Section 7 IBC application. 3. Financial Creditor status of the Appellant. 4. Applicability of Limitation Act to IBC proceedings. 5. Acknowledgment of debt in Balance Sheets. Detailed Analysis: 1. Application under Section 7 of IBC dismissed by Adjudicating Authority as time-barred: The Adjudicating Authority dismissed the Appellant's application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) as time-barred, referencing the default date of 30th November 2013 and the application filing date of 15th December 2017, exceeding the three-year limitation period under Article 137 of the Limitation Act. 2. Parallel proceedings: Winding up petition and Section 7 IBC application: The Appellant filed a winding-up petition on 7th April 2015 before the High Court of Gujarat, which was within the limitation period. The winding-up petition was withdrawn on 19th August 2019 with liberty to pursue the Section 7 IBC application. The Appellant argued that the application under Section 7 was within the limitation period, considering the winding-up petition was filed in time and the debts were acknowledged in the Balance Sheets for the years 2014-15, 2015-16, and 2016-17. 3. Financial Creditor status of the Appellant: The Respondent contested the Appellant's status as a Financial Creditor, arguing that the debt was assigned to "Phoenix Trust Fy-14-9," and the application was filed by "Phoenix ARC Pvt. Ltd." as Trustee. The Tribunal found no defect in the application, confirming that the Appellant, acting as Trustee, was a Financial Creditor. 4. Applicability of Limitation Act to IBC proceedings: The Tribunal referred to the Supreme Court's judgment in "Forech India Ltd vs. Edelwiesis Assets Reconstruction Company Ltd." and other cases, affirming that the Limitation Act applies to IBC proceedings. The Tribunal noted that the legislative intent was not to treat claims in pending winding-up petitions as time-barred, allowing for their transfer to NCLT under IBC provisions. 5. Acknowledgment of debt in Balance Sheets: The Tribunal examined the Balance Sheets for the years 2014-15, 2015-16, and 2016-17, which acknowledged the debt. It referenced various judgments, including "Mahabir Cold Storage vs. CIT," which held that entries in Balance Sheets could amount to acknowledgment of debt under Section 18 of the Limitation Act. The Tribunal concluded that the application under Section 7 was within the limitation period, considering these acknowledgments. Conclusion: The Tribunal allowed the appeal, setting aside the Adjudicating Authority's order and holding the Section 7 application within the limitation period. The Tribunal directed the Adjudicating Authority to admit the application and proceed as per IBC provisions. The parties were instructed to appear before the Adjudicating Authority on 16th April 2021.
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