2022 (3) TMI 820 - 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 - post-dated cheque bounced - HELD THAT - The applicant first time recalled the entire loan amount vide Loan Recall Notice dated 06.05.2015 and also initiated Arbitration Proceeding against the Corporate Debtor resulting in Arbitral Award dated 26.02.2016. Therefore, the date of default committed by Corporate Debtor would be the date of loan recall notice i.e. 06.05.2015. The applicant in order to justify the point of limitation in its Part-IV has submitted that the debt is duly acknowledged by the corporate debtor in terms of Section 18 of the Limitation Act and further since the corporate debtor has continued the non-payment of further EMIs then the default is continuing in terms of Section 22 of the Limitation Act. The applicant also submitted that since the last cheque for installment was bounced on 17.01.2018, a fresh cause of action shall be started from 17.01.2018. In the present matter in hand, there is nothing on the record that there was any acknowledgement in writing given by the respondent quo the admission of debt and promise to make the said payment. Therefore, the benefit of Section 18 of Limitation Act cannot be extended to applicant because of the reason that the cheque which has been presented was postdated cheque and were kept by the applicant long back, perhaps at the time of sanctioning of the loan. It is clear that the in the present matter the date of default for filing of petition under Section 7 of the Code would be the date of recalling of entire loan amount i.e. 06.05.2015, The applicant also initiated Arbitral Proceeding for recovery of its loan amount and the Arbitral Award was passed on 26.02.2016. The present application has been filed in the year 2021 that is much later than 3 years from the date default committed by the Corporate Debtor. Additionally, it is seen from the Record of Default filed before Information Utility that the applicant itself has mentioned the date of default as 30.09.2015, which also makes the present application time barred - The post-dated cheque bounced could not be treated as acknowledgment and would not enhance the period of limitation, which had already started running from 06.05.2015. Accordingly, the limitation has to be counted from 06.05.2015. Moreover, the arbitral award was passed on 26.02.2016. Even if the period of limitation is to be counted from that day, it is time barred as the present petition was filed on 16.01.2021. Therefore, the present application is hopelessly time barred. The present application is hereby rejected being barred by limitation.

Summary

Issues:
- Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.
- Default in loan repayment by the respondent company.
- Appointment of Interim Resolution Professional.
- Justification of limitation period for filing the application.

Analysis:
1. Application under Section 7 of the Insolvency and Bankruptcy Code: The applicant, a Non-Banking Financial Company, filed an application seeking initiation of Corporate Insolvency Resolution Process against the respondent company for defaulting on a loan amount. The applicant provided all necessary documents and complied with the requirements of the Code, including proposing an Interim Resolution Professional.

2. Default in loan repayment: The applicant detailed the loan agreement, default in payments by the corporate debtor, and subsequent actions taken, such as recalling the loan amount and initiating Arbitration Proceedings. The respondent company was proceeded ex-parte, and the date of default was determined as the date of the loan recall notice.

3. Appointment of Interim Resolution Professional: The applicant proposed the name of an Interim Resolution Professional as required by Section 7(3)(b) of the Code. The proposed professional accepted the appointment, made necessary declarations, and fulfilled all requirements, satisfying the provisions of the Code.

4. Justification of limitation period: The applicant argued for the continuation of default under the Limitation Act, citing acknowledgment of debt and bounced cheques. However, the Tribunal rejected the application as time-barred, emphasizing that the date of default for filing the petition under Section 7 was the loan recall date. The Tribunal highlighted that the absence of a written acknowledgment and the post-dated cheques did not extend the limitation period, ultimately leading to the rejection of the application.

In conclusion, the Tribunal rejected the application for Corporate Insolvency Resolution Process as it was deemed time-barred, emphasizing the importance of the date of default in loan repayment and dismissing arguments related to acknowledgment and bounced cheques.