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2023 (4) TMI 446 - AT - Insolvency and BankruptcyCIRP - Period of limitation - application under Section 7 has been dismissed only on the ground of the limitation without considering the other relevant facts including One time settlement (OTS) proposal of the Respondent - what is the date of default and from what date law of limitation would start? - whether acknowledgment of debt should be considered from the date of OTS proposal submitted by the Respondent herein or from the date of acceptance of OTS proposal or from the date of cancellation of the sanctioned OTS proposal? HELD THAT - There is no dispute that the default occurred on 31.05.2012 in respect of term loan facilities and in respect of working capital facilities on part of the Principal Borrower default occurred on 09.03.2012. This Appellate Tribunal has noticed from the submissions of the Appellant as well as from the Respondent along with documents made available that revival letter dated 01.06.2012 was executed by the Principal Borrower and the Respondent herein. It is also observed that various OTS proposal was furnished by the Principal Borrower w.e.f 13.03.2014 till 18.05.2016 and the liability being admitted by the Principal Borrower and hence the deemed acceptance by the Guarantor/ Respondent herein in terms of provision of Section 128 of the Indian Contract Act, 1872. In catena of the Judgments, it has been held that an application under I B Code, 2016 would not be barred by limitation if there was acknowledgment of debt before expiry of the period of limitation of three years and in such case the period of limitation would get extended by the further period of three years. This Appellate Tribunal notes that there are various acknowledgements of liability by the Corporate Debtor from time to time, total 13 OTS letters from the Respondent to the Appellant within the meaning by Section 18 of the Limitation Act, and there are also part payments by the Corporate Debtor, therefore, the period of limitation is extended in the light of Section 19 of the Limitation Act. By the OTS described in letters mentioned above, the Principal Borrower i.e. M/s Victory Electricals Ltd. had offered the payment of varying amounts to the Appellant herein for full and final settlement of their liability and thereby admitted the Jural Relationship of Debtor-Creditor or between them and the Bank/ Appellant herein. This Appellate Tribunal does not find any discussions by the Adjudicating Authority on these dates of OTS proposal of the Principal Borrowers in the finding/ decisions proceeding in the impugned order by the Adjudicating Authority and the reason for the same are also not available in the impugned order. In fact, the impugned order takes into account only on 06.10.2016 when the Principal Borrower gave its OTS proposal to the Appellant which was accepted by the Appellant herein issuing the sanction letter of Rs. 69.50 Crores - It is also established fact that the in terms of the Section 128 of the Indian Contract Act, 1872 the liability of the Respondent was always co-extensive with debt of Principal Borrower and therefore the acknowledgment of debt by various OTS proposals, were also deemed acknowledgements by the Respondent herein of the liability as guarantors on behalf of the Principal Borrowers. This Appellate Tribunal has no option, but to set aside the impugned order dated 06.01.2021 which is in contravention of I B Code, 2016 and the Limitation Act, 1963. The matter is remanded back to the Adjudicating Authority (NCLT, Chennai) and both the parties are required to appear before the Adjudicating Authority on 28.04.2023. This Tribunal, relevantly points out that it is not expressing its opinion on the merits or demerits of the case, and hence, remits back the case to the Adjudicating Authority (Tribunal), with directions to look into all factual and legal aspects and decide the Petition Denovo, on merits, by providing, an adequate opportunity of Hearing, to the respective Parties, and also, by adhering to the Principles of Natural Justice - Matter remitted back.
Issues Involved:
1. Calculation of Limitation Period 2. Acknowledgment of Debt and its Impact on Limitation 3. Liability of the Guarantor 4. Changed Circumstances and Fraud Allegations Summary: 1. Calculation of Limitation Period: The Appellant argued that the application under Section 7 was dismissed solely on the ground of limitation without considering other relevant facts, such as the One Time Settlement (OTS) proposal. The Adjudicating Authority erred in calculating the limitation period, taking the date of default as 31.05.2012 and ignoring various OTS proposals by the Principal Borrower before the acceptance of the OTS. 2. Acknowledgment of Debt and its Impact on Limitation: The Appellant contended that the Principal Borrower and the Respondent had executed a revival letter on 01.06.2016, which should be considered as an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The Appellant cited several Supreme Court judgments supporting that an acknowledgment of debt before the expiration of the limitation period extends the limitation period by three years. The Appellate Tribunal noted multiple OTS proposals and part payments by the Corporate Debtor, which extended the limitation period. 3. Liability of the Guarantor: The Appellant emphasized that the liability of the Guarantor (Respondent) is co-extensive with that of the Principal Borrower under Section 128 of the Indian Contract Act, 1872. The Respondent had acknowledged the liability in its financial statements, and the OTS proposals by the Principal Borrower should be deemed acknowledgments by the Respondent. 4. Changed Circumstances and Fraud Allegations: The Respondent initially supported the admission of the application but later modified its stance due to alleged negligence and fraud by the Interim Resolution Professional (IRP)/Liquidator. The Respondent requested the case be remanded back to the Adjudicating Authority for a fresh opportunity to file a detailed reply. The Appellate Tribunal noted that these submissions did not stand on merit and advised the Respondent to seek suitable remedies before an appropriate legal forum. Conclusion: The Appellate Tribunal set aside the impugned order dated 06.01.2021, remanding the matter back to the Adjudicating Authority (NCLT, Chennai) for a fresh decision on merits. Both parties are required to appear before the Adjudicating Authority on 28.04.2023. The Adjudicating Authority is directed to decide the petition de novo, providing an adequate opportunity for hearing and adhering to the principles of natural justice, preferably within twelve weeks.
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