2023 (12) TMI 1018 - AT - Insolvency and Bankruptcy

Maintainability of section 7 application - application filed by the Appellant was clearly beyond three years and time barred or not - HELD THAT - There is no doubt that date of default has been mentioned as 31.03.2015 on which date the account of Corporate Debtor was declared as NPA, however, the Letter of Acceptance dated 24.04.2019 has also been pleaded in Part IV - Adjudicating Authority in the impugned order has noticed the DRT Consent Terms dated 26.09.2022 and observed that fresh period of limitation shall start, hence the objection on the ground of limitation have no merit. In so far as Consent Terms dated 26.09.2022 and fresh period of limitation thereafter, they have no relevance in the present application which was filed in the year 2021. However, the later part of the order where Letter of Acceptance dated 24.04.2019 has been noted is relevant for the purpose of limitation - The Letter of Acceptance is in the nature of agreement which is signed by all parties and amounts to fresh agreement between the parties. This fresh agreement acknowledges the debt of Rs.106,97,76,398.83/- along with interest. The Letter of Acceptance further provides that the Obligors shall jointly and/or severally to pay Rs.43,89,46,000/- along with interest towards the settlement of assigned debt due. The Letter of Acceptance which is an agreement between the parties shall give a fresh period of limitation after 24.04.2019, which is within three years of 01.11.2021, date on which Section 7 application was filed. There shall be fresh period of limitation from 24.04.2019 and the application filed by the Appellant within three years from the said date was well within time. The Adjudicating Authority in Para 13 has also noticed the Letter of Acceptance dated 24.04.2019 for holding that objection on ground of limitation does not have any merit. The application filed by the Financial Creditor was not barred by time and the debt and default being proved, the Adjudicating Authority did not commit any error in admitting Section 7 application. There is no merit in the Appeal - appeal dismissed.

Summary

Issues involved:
The issues involved in the judgment are the admission of a Section 7 application by the Adjudicating Authority, the objection raised by the Suspended Director of the Corporate Debtor regarding the application being barred by time, and the consideration of fresh period of limitation based on certain documents.

Admission of Section 7 Application:
The Appellate Tribunal heard arguments from both parties regarding the admission of the Section 7 application filed by the Financial Creditor. The brief facts of the case included the extension of financial facilities to the Corporate Debtor by a Bank, the declaration of the account as NPA, the recall notice issued by the Bank, and the assignment of debt to the Financial Creditor. The Adjudicating Authority admitted the Section 7 application on finding debt and default. The Suspended Director, being aggrieved by this admission, filed the appeal.

Objection on Ground of Limitation:
The Suspended Director contended that the application filed by the Financial Creditor was barred by time. The date of default was mentioned as 31.03.2015, and the application was filed on 01.11.2021, which the Director argued was beyond three years. The Financial Creditor, on the other hand, argued that the application was well within time, citing a letter of acceptance dated 24.04.2019, which acknowledged the debt and entered into a fresh agreement. The Adjudicating Authority also considered Consent Terms dated 26.09.2022 and observed that a fresh period of limitation would start from that date.

Consideration of Fresh Period of Limitation:
The Adjudicating Authority noted the Consent Terms and the Letter of Acceptance in the impugned order. While the Consent Terms were found irrelevant for the present application filed in 2021, the Letter of Acceptance dated 24.04.2019 was deemed significant for the limitation issue. The Letter of Acceptance, signed by all parties, acknowledged the debt and constituted a fresh agreement between the parties. Citing a Supreme Court judgment, the Tribunal concluded that a fresh period of limitation would start from 24.04.2019, making the application filed on 01.11.2021 well within time. The debt and default were acknowledged, and the objection on the ground of limitation was deemed meritless.

In conclusion, the Appellate Tribunal dismissed the appeal, affirming that the application filed by the Financial Creditor was not barred by time. The debt and default were proven, and the Adjudicating Authority did not err in admitting the Section 7 application. The Tribunal found no merit in the appeal and upheld the decision of the lower authority.