2021 (6) TMI 415 - 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 - Time Limitation - HELD THAT - Section 3 of the Limitation Act, 1963 states that subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. In the present case, the Corporate Debtor has prima facie set up the Limitation as a defence in the present Application - From Part - IV of the Application, it is seen that the Financial Creditor has failed to state the Date of Default in the Application. Further, no pleadings as such has been made by the Financial Creditor as to how the present Application falls well within the period of limitation. The Respondent has mentioned the 'Date of Default', however has failed to come up with any pleading in support of the same, and the Hon'ble Apex Court, in the absence of any pleading or averment in regard to the Date of Default and the acknowledgments being made subsequent to it, has stated that the debt is barred by limitation. As to the facts of the present case, the Financial Creditor, has failed to mention the 'Date of Default' in Part - IV of the Application, let alone any averments being made in relation to the acknowledgment of debt - In order to arrive at a conclusion and in order to ascertain the 'debt' and 'default', the Adjudicating Authority has to come to the conclusion only based upon the documents which are filed by the parties. If the parties fail to file any documents, inspite of opportunity being granted, then the Tribunal is perforce required to arrive at a conclusion based on the documents available on record and cannot arrive at a conclusion on premises and suppositions. The debt as claimed by the Financial Creditor is time barred and the Financial Creditor has failed to place on record any shred of document recognized under the law to substantiate that the debt falls well within the period of limitation - this Adjudicating Authority, based on the documents filed by the Financial Creditor, comes to an irresistible conclusion that the debt on the part of the Respondent/Corporate Guarantor is time barred and as such the Application filed by the Financial Creditor is liable to be dismissed - Application dismissed.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Guarantor.
2. Determination of the Date of Default and its impact on the limitation period.
3. Applicability of various judicial precedents and legal principles concerning the limitation period.

Detailed Analysis:

1. Initiation of CIRP against the Corporate Guarantor:
The application was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC, 2016) by the Financial Creditor to initiate CIRP against the Corporate Debtor, who stood as a Corporate Guarantor for loans availed by the Principal Borrower. The Respondent argued that the same creditor cannot initiate proceedings against both the borrower and the guarantor for the same debt, citing the NCLAT decision in Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Ltd. However, the tribunal noted that subsequent decisions, including State Bank of India vs. Athena Energy Ventures Private Limited and Edelweiss Asset Reconstruction Company Ltd. vs. Sachet Infrastructure Ltd., have clarified that CIRP can be initiated simultaneously against multiple Corporate Guarantors or a Principal Borrower and Corporate Guarantor.

2. Determination of the Date of Default and its Impact on the Limitation Period:
The Financial Creditor failed to mention the 'Date of Default' in Part-IV of the application, which is crucial for determining whether the claim is barred by limitation. The tribunal referenced the Supreme Court's decision in Babulal Vardharji Gurjar vs. Veer Gurjar Aluminium Industries Pvt. Ltd., which emphasized that the period of limitation for an application under Section 7 of IBC is three years from the date when the right to apply accrues, i.e., the date of default. The tribunal found that the Financial Creditor did not provide any pleadings or evidence to show that the application was within the limitation period. The tribunal also noted that the Financial Creditor failed to place any document recognized under the law to substantiate that the debt falls within the limitation period after the NPA date of 31.12.2007.

3. Applicability of Various Judicial Precedents and Legal Principles Concerning the Limitation Period:
The tribunal examined several judicial precedents cited by the Respondent:
- In Gaurav Hargovindbhai Dave vs. ARCIL, the Supreme Court held that Article 137 applies to Section 7 applications under IBC, with a three-year limitation period.
- In A. Balakrishnan vs. Kotak Mahindra Bank & Anr., the NCLAT held that filing an O.A. or obtaining a Recovery Certificate does not extend the limitation period.
- In Bimalkumar Manubhai Savalia vs. Bank of India & Anr., the NCLAT held that SARFAESI and DRT proceedings do not extend the limitation period.
- In State Bank of India vs. Krishidhan Seeds Pvt. Ltd., the NCLAT held that OTS proposals do not extend the Date of Default.

The tribunal also referenced the Supreme Court's decision in Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal & Anr., which held that balance sheet entries could amount to acknowledgment of debt under Section 18 of the Limitation Act, 1963. However, the Financial Creditor did not provide any balance sheet entries of the Corporate Debtor to support their claim.

Conclusion:
Based on the documents and evidence provided, the tribunal concluded that the debt claimed by the Financial Creditor is time-barred. The Financial Creditor failed to substantiate that the debt falls within the limitation period. Consequently, the application filed by the Financial Creditor was dismissed as barred by limitation. No order as to costs.

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