2024 (10) TMI 510 - AT - IBC

Time limitation of section 95 application - whether the application filed under Section 95, at the instance of Respondent No. 1, is within the period of limitation if it is to be counted from the date when the notice under Section 13(2) was issued on 26.05.2016 and or on the basis of the acknowledgement in the balance sheet which was signed by both the appellants on 01.09.2017? - HELD THAT - The appellant has wrongly relied upon the decision of Amanjyot Singh 2023 (1) TMI 253 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI and has changed his stand so conveniently during the course of final arguments which he had otherwise taken at the time when stay was granted because at that time it was the case of the appellant that the notice dt. 26.05.2016 is for invoking the personal guarantee. The facts in the case of Amanjyot Singh are that the Corporate Debtor M/s Gulati Retail India Ltd. had obtained financial facilities from Punjab and Sind Bank and ICICI Bank Ltd. Amanjyot Singh was one of the personal guarantors of the financial facilities extended by Punjab and Sind Bank. The Punjab and Sind Bank issued a notice under Section 13 (2) of the Act on 04.10.2023 to both the corporate debtor and the guarantors. By the said notice, they were called upon jointly and severally to make the payment and discharge their liability with interest with effect from 01.10.2023. Amanjyot Singh, being the guarantor, himself filed an application under Section 94 of the code to initiate the CIRP. If the notice dated 26.05.2016 is treated to be the notice invoking the personal guarantee, whether the petition having been filed on 02.12.2021 is still within the period of limitation? - HELD THAT - Section 18 provides for acknowledgement in writing and the balance sheet indicating the liability is the acknowledgement in writing - It is also pertinent to mention that the balance sheet has been signed by the both the appellants herein and it has been held by the Hon ble Supreme Court in the case of Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal Anr. 2021 (4) TMI 753 - SUPREME COURT that the admission of liability in the financial statement i.e. balance sheet indicates the debt from the date when it is signed. Since the balance sheet was signed on 01.09.2017, therefore, counting the limitation from 26.05.2016 to 01.09.2017, the period of three years would again start running from 01.09.2017 and shall come to an end on 31.08.2020. This date i.e. 31.08.2020 happens to fall during the period of covid 2019 for which the Hon ble Supreme Court has passed an order in Suo Motu 3/2020 order in 2022 (1) TMI 385 - SC ORDER that if the limitation expires during this period then it shall continue to run till 01.03.2022 and an additional period of 90 days shall also be available in particular circumstances. Since the period of limitation to file petition under Section 95 by Respondent No. 1 was expiring during the period protected by Hon ble supreme Court, therefore, it cannot be said that this application which has eventually been filed on 02.12.2021 was beyond the period of limitation. There is hardly any merit in the present appeals and hence, both the aforesaid appeals are hereby dismissed.

Summary

Issues Involved:

1. Whether the application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation.
2. Whether the notice issued under Section 13(2) of the SARFAESI Act can be considered as a notice invoking the personal guarantee.
3. Whether the acknowledgment in the balance sheet extends the period of limitation.

Issue-wise Detailed Analysis:

1. Limitation Period for Application under Section 95:
The appellants contested that the application filed under Section 95 was barred by limitation, arguing that the default date was 24.07.2016, and the application filed on 02.12.2021 exceeded the three-year limitation period under Article 137 of the Limitation Act, 1963. The Tribunal, however, concluded that the limitation period commenced on 05.07.2021, following a notice issued on 21.06.2021, and thus the application was within the limitation period. The Tribunal's decision was upheld, noting that the acknowledgment in the balance sheet signed on 01.09.2017 extended the limitation period, and the application filed on 02.12.2021 was within the period protected by the Supreme Court's order during the COVID-19 pandemic.

2. Notice under Section 13(2) of the SARFAESI Act:
The appellants argued that the notice under Section 13(2) issued on 26.05.2016 should be considered as invoking the personal guarantee, thereby starting the limitation period from that date. However, they later contradicted this stance, arguing that such a notice could not equate to invoking the guarantee for filing an application under Section 95. The Tribunal found this argument inconsistent, noting that the appellants initially admitted the notice as invoking the guarantee. The Tribunal determined that the notice issued on 26.05.2016 did serve as invoking the guarantee, and the subsequent acknowledgment in the balance sheet reset the limitation period.

3. Acknowledgment in the Balance Sheet:
The Tribunal considered the balance sheet signed by the appellants on 01.09.2017 as an acknowledgment of debt, which under Section 18 of the Limitation Act, 1963, extends the limitation period. The Supreme Court's judgment in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr. was cited, affirming that an acknowledgment of liability in a financial statement resets the limitation period. Thus, the limitation period, starting from the acknowledgment date, was validly extended, and the application filed on 02.12.2021 was deemed timely.

In conclusion, the Tribunal dismissed the appeals, affirming that the application under Section 95 was filed within the limitation period, and the notice under Section 13(2) effectively invoked the personal guarantee. The acknowledgment in the balance sheet further extended the limitation period, rendering the application timely. The appeals were dismissed with no costs.