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2023 (9) TMI 1259 - AT - Insolvency and BankruptcyAdmissibility of Section 7 application - Application is within the period of Limitation or not - extension of OTS proposals - acknowledgement of Debt as defined under Section 18 of the Limitation Act, 1961 - HELD THAT - Section 22 (1) SICA makes it clear that there is a bar for realisation of a right referred to in this Section against the Corporate Debtor when once an enquiry under Section 16 SICA is pending against it or any scheme referred to under Section 17 thereof, is being considered or an Appeal under Section 25 is pending, an exception being with the consent of the Board or that of the Appellate authority. The Hon ble Apex Court in the matter of Sabarmathi Gas Limited Vs. Shah Alloys Ltd. reported in 2023 (1) TMI 195 - SUPREME COURT referred to a three judge Bench Judgment in the matter of KSL INDUSTRIES LTD. VERSUS ARIHANT THREADS LTD. 2014 (12) TMI 1023 - SUPREME COURT in which the issue whether a Recovery Application under the RDDB Act, 1963 would lie or be proceeded with against a sick company in view of the bar contained in Section 22 (1) of SICA, was addressed to. The facts are distinguishable as in Invent Assets 2021 (11) TMI 731 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH, NEW DELHI , there was no acknowledgment of liability under Section 18 of the Limitation Act, 1963 and further the dismissal of the BIFR reference was also dated beyond 3 years from the date of default. The other Judgments relied upon by the Appellant in support of his case that this period spent before the BIFR / AIFR cannot be excluded in the facts of the attendant case, cannot be accepted for the reason that the ratio in Sabarmathi Gas Limited Vs. Shah Alloys Ltd. under the IBC Code, 2016 is squarely applicable to the case on hand. OTS proposals being conditional cannot be taken into consideration? - extension of period of limitation as they were given beyond three years from the date of default - HELD THAT - The question of applicability of Section 8 of the Limitation Act, 1963 under IBC, 2016 is to be examined on the touch stone of the ratio laid down by the Hon ble Apex Court in the matter of DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. 2021 (8) TMI 315 - SUPREME COURT wherein it was held that issuance of a Recovery Certificate in favour of a Financial Creditor would rise to a fresh cause of action to initiate proceedings under Section 7 of the Code. Whether subsequent to the issuance of the Debt Recovery Certificate on 19/11/2009, there was any acknowledgement which falls within the scope and ambit of Section 18 of the Limitation Act, 1961, by the Corporate Debtor within 3 years of 19/11/2009? - HELD THAT - It is seen from the record that several letters of OTS Proposals even prior to 19/11/2009, were exchanged between the Corporate Debtor Company and the Financial Creditor on 04/11/2008, 22/11/2008, 17/12/2008, 25/12/2008, 26/12/2008 and 27/12/2008 - From the letter, it is clear that there is a clear acknowledgement of the Debt together with the terms of payment. Even on 16/02/2010 an amount of Rs. 37,50,000/- was remitted to the bank in pursuance of the OTS settlement proposal. Only those OTS letters are being reproduced here where there is a promise to pay and there is also a reference to a part payment made. The next letter dated 15/11/2012 refers in paragraph 2, the earlier OTS letters dated 27/06/2007, 31/08/2007, 02/01/2008 and 19/03/2008, thereby establishing that even prior to the issuance of Debt Recovery Certificate there were several attempts made to discharge the loan, thereby acknowledging the Debt - The letter dated 27/10/2017 addressed by the Corporate Debtor shows the part payments of Rs. 20 lakhs made vide cheque dated 30/10/2017 and the said letter refers to OTS proposals and approvals from 21/09/2012 onwards. A letter dated 17/02/2018 (PG. 473) evidences the continued discussions with the bank and acknowledgment of payment to be made vis a vis the OTS proposals. The entire correspondence and the OTS proposals between the parties from 2008 to 2022, i.e. even after the filing of the Section 7 Application, the contention of the Appellant that there was no acknowledgement of debt within 3 years of the date of the Debt Recovery Certificate pales into insignificance. The period from 21/04/2013 to 02/07/2017 is also covered in this correspondence. Whether the Appellant / Party-in-Person that a conditional promise to pay and part payments made do not fall within the ambit of definition of acknowledgement of Debt as defined under Section 18 of the Limitation Act, 1961? - HELD THAT - In the instant case, there is a continuous promise to pay in the OTS proposals made by the Corporate Debtor Company and this communication clearly evidences a jural relationship between the Corporate Debtor and the Financial Creditor - This Tribunal is of the considered and earnest view that an OTS proposal with a promise to pay and part payments being made thereafter, positively construes an acknowledgment of Debt as defined under Section 18 of the Limitation Act, 1963. The admitted OTS Proposals between the Corporate Debtor Company and the Financial Creditor substantiate that a reasonable inference can be made regarding the subsisting liability. Appeal dismissed.
Issues Involved:
1. Limitation period for filing the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Acknowledgment of debt under Section 18 of the Limitation Act, 1963. 3. Exclusion of time under Section 22(1) of the SICA Act, 1985. Summary: Limitation Period: The primary issue is whether the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, is barred by limitation. The appellant argued that the application dated 19/08/2019 is barred by limitation since the default occurred on 01/04/1997, and no acknowledgments were made within the three-year limitation period. The appellant cited various judgments, including the Hon'ble Supreme Court's decision in 'Kotak Mahindra Bank Vs. A. Balakrishna,' which reiterated that the right to sue accrues when a default occurs and if the default occurred over three years prior to the filing of the application, it would be barred under Article 137 of the Limitation Act. Acknowledgment of Debt: The appellant contended that the letters of acknowledgment cannot be considered under Section 18 of the Limitation Act, 1963, as they were not concluded contracts. The appellant relied on judgments such as 'SBI Vs. Krishidhan Seeds Pvt. Ltd.' and 'Bank of India Vs. Bimalkumar Manubhai Savalia & Ors.' to support the argument that acknowledgments must be made before the expiration of the prescribed period of limitation. The appellant also argued that part payments and conditional offers do not constitute acknowledgment of debt. Exclusion of Time: The appellant argued that the period during which the proceedings were pending before BIFR and AIFR under the SICA Act, 1985, should not be excluded for computing the limitation period. The appellant relied on judgments such as 'Invent Assets Securitisation and Reconstruction Pvt. Ltd. Vs. M/s. Girnar Fibres Ltd.' to support this argument. Respondent's Submissions: The respondent argued that the default occurred on 01/04/1997, and the revised date of default before BIFR was 01/03/2000. The respondent submitted that the Corporate Debtor was declared a sick industry by BIFR on 27/12/2004, and there were continuous acknowledgments of debt through One Time Settlement (OTS) proposals and part payments. The respondent argued that the period during which the proceedings were pending before BIFR and AIFR should be excluded for computing the limitation period. Assessment: The tribunal examined whether the period during which the Financial Creditor's right to proceed against the Corporate Debtor remained suspended by virtue of Section 22(1) of the SICA Act, 1985, can be excluded. The tribunal referred to the Hon'ble Supreme Court's judgment in 'Sabarmathi Gas Limited Vs. Shah Alloys Ltd.' and concluded that the period during which the remedy for enforcement remained stayed should be excluded. Conclusion: The tribunal held that the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, is within the limitation period, considering the exclusion of time during which the proceedings were pending before BIFR and AIFR. The tribunal also held that the continuous OTS proposals and part payments constituted acknowledgment of debt under Section 18 of the Limitation Act, 1963. The appeal was dismissed, and all connected pending interlocutory applications were closed.
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