2020 (2) TMI 916 - AT - Insolvency and Bankruptcy

CIRP Process - time limitation - ex-parte/non-speaking order - HELD THAT - Admittedly, in this case, the account of the Appellant/Corporate Debtor was classified as NPA on 29th August, 2012 thereafter, demand notice under Section 13(2) of the SARFAESI Act, was issued on 03rd October, 2012. In view of the law laid down by Hon ble Supreme Court in case of JIGNESH SHAH ANOTHER VERSUS UNION OF INDIA ANOTHER 2019 (9) TMI 1121 - SUPREME COURT , it is clear that period of limitation will be computed from the date when the account of the Corporate Debtor was classified as NPA. Thus, the limitation available for initiation of CIRP under Section 7 or 9 of the I B Code was available up to 02nd October, 2015. Since the account of Corporate Debtor was classified as NPA on 29.08.2012 and after that three years period was available as the provision of Article 137 of Limitation Act and within that period on different dates, the Corporate Debtor submitted the OTS letter and acknowledged the liability, on different dates. The chart showing the acknowledgement is given in para 14 of this judgement. The OTS proposal/acknowledgement of debt was given regarding the subsisting liability of the Corporate Debtor - Given the provision of Section 18 of Limitation Act and law laid down by the Hon ble Supreme Court, on the acknowledgement of liability, afresh period of limitation started. Therefore, it is clear that the petition is not barred by limitation. In this case, it is clear that on the day of filing the petition U/S 7 of the Code, there was a subsisting liability on the corporate debtor, and due to the acknowledgement of debt in writing, though the account of the corporate debtor which was classified as NPA on 29th August, 2012, its validity got extended from time to time by acknowledgement of debt in writing and a fresh period of limitation started after the acknowledgement of debt as per provision of Sec 18 of the Limitation Act. During the argument, the Learned Counsel for the Appellant has assailed the impugned order only on the Limitation point. Based on the discussion, the petition filed by the Respondent Oriental Bank of Commerce is not barred by limitation - Appeal rejected.

Summary

Issues Involved:
1. Limitation Period
2. Ex-parte Order

Detailed Analysis:

Limitation Period:
The Appellant contended that the petition for initiation of Corporate Insolvency Resolution Process (CIRP) was time-barred under Article 137 of the Limitation Act, 1963. The account of the Corporate Debtor was declared Non-Performing Asset (NPA) on 29th August 2012, and the petition should have been filed within three years from this date. The Appellant relied on several Supreme Court judgments, including Vashdeo R. Bhojwani v. Abhyudaya Coop. Bank Ltd., Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., and B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, which held that the right to sue accrues when a default occurs and applications filed beyond three years from the date of default would be barred under Article 137 of the Limitation Act.

In response, the Respondent argued that various acknowledgements of liability by the Corporate Debtor extended the limitation period. The Respondent provided a detailed list of acknowledgements and part payments from 2013 to 2019, invoking Section 18 of the Limitation Act, which allows for the extension of the limitation period upon acknowledgment of debt. The Respondent cited several Supreme Court judgments, including J.C. Budhraja v. Chairman, Orissa Mining Corpn. Ltd., which clarified that an acknowledgment of liability in writing before the expiration of the prescribed period renews the limitation period.

The Tribunal examined the acknowledgements and concluded that the Corporate Debtor had indeed acknowledged the debt through various letters and One-Time Settlement (OTS) proposals, thereby extending the limitation period. The Tribunal held that the petition was not barred by limitation, as each acknowledgment created a fresh period of limitation from the date it was signed.

Ex-parte Order:
The Appellant also argued that the order was passed ex-parte, which was illegal and arbitrary. The Tribunal noted that the Adjudicating Authority had issued notices to the Corporate Debtor through various means, including publication in newspapers. Despite proper service of notice, there was no representation from the Corporate Debtor, leading the Adjudicating Authority to proceed ex-parte.

The Tribunal reviewed the order sheets and confirmed that multiple notices were issued, and the Corporate Debtor failed to appear or respond. Consequently, the Adjudicating Authority was justified in proceeding ex-parte.

Conclusion:
The Tribunal rejected the appeal, concluding that the petition was not barred by limitation due to the acknowledgements of debt by the Corporate Debtor, which extended the limitation period. The ex-parte order was also upheld as the Corporate Debtor failed to respond despite proper service of notice. The appeal was dismissed with no order as to costs.