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2022 (4) TMI 882 - 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 - barred by time limitation or not - HELD THAT - Admittedly the date of default is 30.06.2014 and the letter informing the Corporate Debtor about the accounts having become NPA is 13.11.2014. In the instant case it is not disputed by the Appellant that First OTS letter offered by the Corporate Debtor was dated 06.06.2018 though it is the case of the Respondent that the OTS proposal is 01.08.2018. Be that as it may the First OTS proposal is beyond the period of three years and, therefore, it does not aid the case of the Appellant that this OTS is an acknowledgement of debt as provided for under Section 18 of the Limitation Act, 1963 as it is long after the expiry of the prescribed period of three years of limitation - While the OTS Proposals establish an existence of jural relationship between the Bank and the Corporate Debtor, the facts remains that First letter of the OTS proposal was made in June, 2018, whereas the prescribed period of three years have already lapsed in June, 2017. The Balance Sheet for the Year ending 31.03.2017 which is within three years from the date of NPA i.e. 13.09.2014 shows that there is an amount of ₹ 366953917.45 depicted under secured term loan vis a vis a sanction limit of ₹ 3383 lakhs. The amount in default is shown to be ₹ 3692 lakhs. Expression of default has been defined in Section 3(12) of the Code meaning non-payment of Debt when a whole or part or any part or instalment of the amount of debit has become due and payable and is not paid by the Debtor or the Corporate Debtor, as the case may be. Section 18 of the Limitation Act, 1963 comes into play every time when the principal borrower/Corporate Debtor, as the case may be, acknowledged their liability to pay the debt, however, such acknowledgement must be before the expiration of the prescribed period of limitation, which in the instant case is within three years period. This Tribunal is of the considered view that the Appellant having exercised their legal right to file an IA before this Tribunal to bring on record the Balance Sheet for the financial year ending 2016-17, instead of filing the same before the Adjudicating Authority, it cannot be said to be nonest specially in the light of the fact that the question of limitation per se has been argued/pleaded by the Appellant herein before the Adjudicating Authority in terms of acknowledgement of debt under Section 18 of the Limitation Act, 1963 vide OTS proposals. This Tribunal holds that Debt has been duly acknowledged in the Balance Sheet for the Year 2016-17 which is also duly prepared and authenticated by the Auditors Report amounting to Admission of Liability and, therefore, satisfies the requirements of liability for a valid acknowledgement under Section 18 of the Limitation Act, 1963. The matter is remitted back to the Adjudicating Authority to decide the admission of the Application in accordance with Law as expeditious as possible - Appeal allowed.
Issues Involved:
1. Date of Default and NPA Declaration 2. Acknowledgement of Debt and Limitation Period 3. One-Time Settlement (OTS) Proposals 4. Balance Sheet as Acknowledgement of Debt 5. Filing of Additional Documents and Amendment of Pleadings Detailed Analysis: 1. Date of Default and NPA Declaration: The date of default was identified as 30.06.2014, and the account of the Corporate Debtor was declared as Non-Performing Asset (NPA) on 13.11.2014. The Adjudicating Authority noted that there was no acknowledgment of debt after the accounts were declared as NPA. 2. Acknowledgement of Debt and Limitation Period: The Adjudicating Authority dismissed the application under Section 7 of the Insolvency & Bankruptcy Code, 2016, on the grounds that it was barred by limitation. The key observation was that the One-Time Settlement (OTS) proposal dated 01.08.2018 was long after the expiry of the prescribed period of limitation. The Tribunal applied the ratio of multiple judgments, including BK Educational Services, Gaurav Hargovindbhai Dave, and others, concluding that the petition was barred by limitation. 3. One-Time Settlement (OTS) Proposals: The Appellant argued that the Corporate Debtor acknowledged its liability through OTS proposals and part payments, which should extend the limitation period. The Respondent countered that these acknowledgments were made after the period of limitation had expired and thus could not be considered for extending the limitation period. The Tribunal noted that the first OTS proposal dated 06.06.2018 was beyond the three-year limitation period and thus could not be considered an acknowledgment of debt under Section 18 of the Limitation Act, 1963. 4. Balance Sheet as Acknowledgement of Debt: The Appellant contended that the Corporate Debtor acknowledged its liability in the Balance Sheet for the year ending 31.03.2017, which should extend the limitation period. The Tribunal examined the Balance Sheet and noted that the acknowledgment of debt was made within the three-year period from the date of NPA. The Tribunal referred to the Supreme Court judgment in Asset Reconstruction Company (India) Ltd Vs Bishal Jaiswal, which held that entries in the Balance Sheet could constitute an acknowledgment of liability, thereby extending the limitation period. 5. Filing of Additional Documents and Amendment of Pleadings: The Respondent argued that the Balance Sheet for the Financial Year 2016-17 was not filed before the Adjudicating Authority and thus should not be considered at the appellate stage. The Tribunal, however, noted that there is no bar in law to the amendment of pleadings or filing additional documents before the Adjudicating Authority, as observed by the Supreme Court in Dena Bank Vs. C. Shivakumar Reddy. The Tribunal allowed the Appellant to file the Balance Sheet as additional documents, considering the legal right to do so. Conclusion: The Tribunal concluded that the debt had been duly acknowledged in the Balance Sheet for the year 2016-17, satisfying the requirements for a valid acknowledgment under Section 18 of the Limitation Act, 1963. Consequently, the appeal was allowed, and the impugned order was set aside. The matter was remitted back to the Adjudicating Authority to decide the admission of the application in accordance with the law as expeditiously as possible.
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