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2022 (8) TMI 880 - 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 - time limitation - HELD THAT - In the instant case as can be seen from the dates the decree passed by the DRT is on 22.10.2016 and the Section 7 Application was filed within three years on 17.12.2019. Keeping in view the ratio of the Hon ble Apex Court in Dena Bank (now Bank of Baroda) 2021 (8) TMI 315 - SUPREME COURT the contention of the Learned Sr. Counsel for the Appellant that a decree is not a Financial Debt as per Section 5(8) of the Code is untenable. The question here is not whether a decree is a Financial Debt . The issue here is whether a Recovery Certificate/decree can extend the period of Limitation which has already been answered by the Hon ble Apex Court in Dena Bank (now Bank of Baroda) . The Hon ble Apex Court in Laxmi Pat Surana Vs. Union Bank of India Anr. 2021 (3) TMI 1179 - SUPREME COURT has held that Section 7 comes into play when the Corporate Debtor commits default. Section 7 consciously used the expression Default not the date of notifying the loan amount of the Corporate Person as NPA. Further the expression Default has been defined under Section 3(12) to mean non-payment of debt when whole or not part or instalment of the amount of debt has become due and payable and is not paid by the Debtor or the Corporate Debtor as the case may be . Therefore it is clear that what has to be seen is essentially not the date of NPA but actually the date of default . Hence the contention of the Learned Sr. Counsel for the Appellant that the date of NPA being 31.03.2013. The date of default ought to have been construed as 30.06.2013 (90 days later) and therefore Application is barred by Limitation is unsustainable. Having regard to the ratio of the Hon ble Apex Court in Asset Reconstruction Company India Ltd. Vs. Tulip Star Hotels Ltd. and Ors. 2022 (8) TMI 70 - SUPREME COURT wherein it has been stated that acknowledgement in Balance Sheets further extends the period of Limitation and has observed an application under Section 7 of the IBC would not be barred by limitation on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years in which case the period of limitation would get extended by a further period of three years. In the fourth CoC Meeting the CoC Members resolved to go ahead with the Liquidation Process. The RP filed the Status Report stating that on 29.12.2020 a Liquidation Application was filed before the Adjudicating Authority but has not yet come on board for hearing. Needless to add the Adjudicating Authority shall proceed in accordance with law. This Tribunal is of the earnest view that the Section 7 Application filed by the Respondent/ Financial creditor is well within the period of Limitation and hence this Appeal fails and is accordingly dismissed.
Issues Involved:
1. Whether the Section 7 Application filed by the Financial Creditor is within the period of Limitation. 2. Whether the decree passed by the DRT and the Recovery Certificate issued can extend the period of Limitation. 3. Whether the decree qualifies as 'Financial Debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. 4. Whether the acknowledgement of debt in Balance Sheets extends the period of Limitation under Section 18 of the Limitation Act, 1963. Issue-Wise Detailed Analysis: 1. Whether the Section 7 Application filed by the Financial Creditor is within the period of Limitation: The Adjudicating Authority held that the Section 7 Application was within the period of Limitation. The account of the Corporate Debtor was declared as Non-Performing Asset (NPA) on 31.03.2013. The Financial Creditor filed an original application under Section 19 of the Recovery of Debts Due to Banks and Financial Institution Act, 1993, and the Debt Recovery Tribunal (DRT), Jabalpur, decreed the application on 22.10.2016. The Section 7 Application was filed on 17.10.2019, within three years from the date of the decree, thus not barred by Limitation. 2. Whether the decree passed by the DRT and the Recovery Certificate issued can extend the period of Limitation: The Supreme Court in 'Dena Bank (now Bank of Baroda) Vs. C. Shivkumar Reddy & Anr.' held that a decree or Recovery Certificate gives a fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the Code. The judgment and Recovery Certificate issued by the DRT on 22.10.2016 extended the period of Limitation, making the Section 7 Application filed on 17.10.2019 within the prescribed period. 3. Whether the decree qualifies as 'Financial Debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016: The issue was whether a decree is a 'Financial Debt' under Section 5(8) of the Code. The Supreme Court clarified that a final judgment, order, or decree for payment of money, if not satisfied, falls within the ambit of 'financial debt,' enabling the creditor to initiate proceedings under Section 7 of the Code. Therefore, the decree and Recovery Certificate issued by the DRT can be considered as 'Financial Debt.' 4. Whether the acknowledgement of debt in Balance Sheets extends the period of Limitation under Section 18 of the Limitation Act, 1963: The Financial Creditor argued that the entries in Balance Sheets amount to 'acknowledgement of debt.' The Corporate Debtor acknowledged the debt in its Balance Sheets for the financial years ending on 31.03.2012, 31.03.2013, and 31.03.2015. The Supreme Court in 'Asset Reconstruction Company (India) Limited Vs. Bishal Jaiswal & Anr.' held that such acknowledgements in Balance Sheets extend the period of Limitation under Section 18 of the Limitation Act, 1963. Hence, the debt acknowledgements in the Balance Sheets further extended the period of Limitation. Conclusion: The Tribunal concluded that the Section 7 Application filed by the Financial Creditor was within the period of Limitation. The decree and Recovery Certificate issued by the DRT extended the period of Limitation, and the acknowledgements of debt in the Balance Sheets further extended the Limitation period. Consequently, the appeal was dismissed, and the Section 7 Application was deemed maintainable.
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