2021 (6) TMI 117 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - issuance of TDS certificate - Time Limitation - HELD THAT - The issuance of TDS certificate does not amount to an acknowledgement of debt by the Corporate Debtor. The amount shown in the ledger account of the applicant cannot be treated as acknowledgement of debt. Since, the applicant in its part-IV of the application has admitted that the last payment was made on 28.03.2017 and he also received a part payment on 28.04.2017 whereas the present application has been filed on 04.02.2021, that is after a period of three years when the right to apply accrues in view of Article 137 of the Limitation Act. The present Application stands Dismissed as barred by limitation.

Summary

Issues:
- Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process
- Claim of inability to liquidate financial debt by Corporate Debtor
- Unsecured loans advanced by Financial Creditors to Corporate Debtor
- Failure of Corporate Debtor to repay principal and interest amount
- Consideration of TDS deduction as admission of debt
- Reflection of debt in ledger account as acknowledgment of debt
- Application barred by limitation under Article 137 of the Limitation Act

Analysis:

1. The petition was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process due to the Corporate Debtor's inability to liquidate its financial debt. The Financial Creditors, Private Limited Companies, had provided unsecured loans to the Corporate Debtor for its working capital requirements related to printing and publishing business.

2. The Financial Creditors claimed that despite several reminders, the Corporate Debtor failed to repay the principal and interest amount due, totaling to &8377; 2,03,55,358. The Financial Creditors argued that the deduction of TDS by the Corporate Debtor constituted an acknowledgment of debt. However, the Tribunal referred to legal precedents to establish that TDS deduction does not amount to an admission of liability.

3. The Financial Creditors also contended that the amount reflected in their ledger account should be considered an acknowledgment of debt. Nevertheless, the Tribunal cited a decision by the Hon'ble NCLAT, stating that the filing of Balance Sheet/Annual Return by the Corporate Debtor does not constitute an acknowledgment under the Limitation Act. As the last payment was made in 2017, and the application was filed in 2021, exceeding the limitation period under Article 137, the Tribunal held the application to be time-barred.

4. The Tribunal dismissed the application, ruling it as barred by limitation. Despite the Financial Creditors' arguments regarding TDS deduction and ledger account entries, the Tribunal's analysis of legal precedents and the limitation period led to the decision against the initiation of Corporate Insolvency Resolution Process in this case.