2017 (12) TMI 1242 - AT - Insolvency and Bankruptcy

Corporate insolvency process - application barred by limitation - Held that - For initiation of Corporate Insolvency Resolution Process , the right to apply accrues under Section 7 or Section 9 or Section 10 only with effect from 1st December, 2016 when I&B Code has come into force, therefore, the right to apply under Section 7 or Section 9 or Section 10 in all present cases having accrued after 1st December 2016, such applications cannot be rejected on the ground that the application is barred by limitation.

Summary

Issues:
- Appeal against order admitting application under Section 7 of the Insolvency and Bankruptcy Code.
- Barred by limitation plea.
- Continuous cause of action and interest accrual.
- Application rejection based on limitation grounds.

Analysis:
1. The Corporate Debtor appealed against an order admitting an application under Section 7 of the Insolvency and Bankruptcy Code. The appeal was based on the plea that the application was barred by limitation. The Appellate Tribunal referred to a previous decision and highlighted that the Limitation Act, 1963 does not apply to the initiation of the Corporate Insolvency Resolution Process. The Tribunal emphasized the importance of considering delay and laches in determining the acceptance of an application filed after a long delay. It was noted that if there is a delay of more than three years from the cause of action, the Applicant must explain the delay to the Adjudicating Authority.

2. The Respondent argued that the amount was to be repaid within a specified period with interest accruing monthly in case of default, indicating a continuous cause of action with no laches on their part. The Appellate Tribunal reiterated that even if the Limitation Act applied, applications under Sections 7, 9, or 10 could not be rejected solely on the basis of being filed beyond three years. The Tribunal clarified that the right to apply for Corporate Insolvency Resolution Process accrues from the enforcement of the Insolvency and Bankruptcy Code in December 2016, thus applications post that date cannot be rejected on limitation grounds.

3. Considering the legal position and the precedent set by the Appellate Tribunal, the impugned order admitting the application under Section 7 of the Code was upheld. The appeal was dismissed due to the lack of merit in challenging the order. The Tribunal concluded that no costs would be awarded in the circumstances of the case.