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2021 (11) TMI 731 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - applicability of time limitation - HELD THAT - It is seen from the record that three years form the date of NPA i.e. 28.02.2005, as per Article 137 of the Limitation Act, 1963, expires on 28.02.2005. The BIFR reference was abated as the Corporate Debtor did not modify the pending reference therefore the deemed date of abatement of reference relates back to 13.08.2015. Section 22(5) of SICA, 1968 is not attracted to the present case since the period of limitation i.e. 3 years had already expired before the BIFR reference was made by the Corporate Debtor. Any reference before the BFIR is abated, if secured creditors have taken measures under Section 13(4) of the SARFAESI Act, 2002 as provided for under Section 41 of the SARFAESI Act, 2002. The period between 25.04.2006 when the Corporate Debtor was declared sick by BIFR under SICA and 04.05.2016 when the reference was dismissed cannot be excluded form computing the limitation period - The argument of the Learned Counsel that 05.05.2016 should be taken as the first accrual of the cause of action is unsustainable, as the period of limitation i.e. 3 years had already expired before the BIFR reference was made by the Corporate Debtor. The documentary evidence on record does not establish any acknowledgment of liability made in writing, signed by the party against whom the property or right is claimed and hence Section 18 of the Limitation Act, 1963 cannot be made applicable to the facts of the instant case. In the instant case, it is clear that the right to sue accrued when the default occurred way back on 28.02.2002. The material on record does not evidence any acknowledgment of liability under Section 18 of the Limitation Act, 1963 to extend the limitation period. The dismissal of the BIFR reference, relied upon by the Learned Counsel for the Appellant, is also dated 04.05.2016 which is beyond three years form the date of default. The Application under Section 7 was filed on 04.06.2019 for an amount which even according to the Appellant, fell due on 14.02.2008 and cannot revive a debt which is no longer due as it is time barred. The Ld. Adjudicating Authority has rightly dismissed the Application filed under Section 7 of the Code, as barred by limitation - the Appeal is dismissed.
Issues Involved:
1. Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, is barred by limitation. 2. Applicability of Section 18 of the Limitation Act, 1963, and Section 25(3) of the Indian Contract Act, 1872. 3. Validity of the exclusion period under Section 22(5) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). Issue-wise Detailed Analysis: 1. Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, is barred by limitation: The main point for consideration was whether the application preferred by the appellant under Section 7 of the Code is barred by limitation. The Corporate Debtor's account was declared as NPA on 28.02.2002 by SBI. The appellant argued that the application was within three years of the first accrual of cause of action on 05.05.2016, subsequent to the dismissal of the BIFR reference on 04.05.2016. However, the Tribunal observed that the three-year limitation period expired on 28.02.2005, and the application filed on 01.10.2018 was beyond this period. The Tribunal held that the right to sue accrued when the default occurred on 28.02.2002, and no acknowledgment of liability under Section 18 of the Limitation Act, 1963, was evidenced to extend the limitation period. Therefore, the application was barred by limitation. 2. Applicability of Section 18 of the Limitation Act, 1963, and Section 25(3) of the Indian Contract Act, 1872: The appellant contended that the acknowledgment of debt in the balance sheets for 2015-2016 and 2016-2017 extended the limitation period. However, the Tribunal noted that the acknowledgment must be in writing and signed by the party against whom the property or right is claimed. The balance sheets provided were unsigned and incomplete, and thus, Section 18 of the Limitation Act was not applicable. Additionally, Section 25(3) of the Indian Contract Act, 1872, requires a written and signed promise to pay a debt barred by limitation. The Tribunal found that the documents provided did not meet these requirements, and the judgments cited by the appellant did not apply to the facts of the case. 3. Validity of the exclusion period under Section 22(5) of SICA: The appellant argued that the period between 25.04.2006 (when the Corporate Debtor was declared sick by BIFR) and 04.05.2016 (when the reference was dismissed) should be excluded for calculating the limitation period. However, the Tribunal held that Section 22(5) of SICA was not applicable because the three-year limitation period had already expired before the BIFR reference was made. Furthermore, the BIFR reference was abated on 03.10.2012 when the secured creditors took measures under Section 13(4) of the SARFAESI Act, 2002. Therefore, the period between 25.04.2006 and 04.05.2016 could not be excluded for computing the limitation period. Conclusion: The Tribunal concluded that the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation. The Tribunal upheld the order of the Adjudicating Authority dismissing the application and dismissed the appeal. The Tribunal also noted that the Insolvency and Bankruptcy Code is not a recovery proceeding, and the application was rightly dismissed as barred by limitation.
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