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2020 (4) TMI 515 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT - In the present case, there is no acknowledge issued by Appellant/Corporate Debtor prior to expiry of 3 years or from the date of default. Therefore, the Application filed by the 1st Respondent before the Adjudicating Authority on 30.08.2018 is beyond the period of limitation. The Corporate Debtor is released from the rigor of Corporate Insolvency Resolution Process and action taken by IRP/RP and Committee of Creditor, if any, in view of the impugned order set aside - matter is remitted back to Adjudicating Authority to decide the fee and costs of Corporate Insolvency Resolution process payable to IRP/RP which shall be borne by the Bank of India - Appeal allowed.
Issues Involved:
1. Whether the Application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) by the Financial Creditor was time-barred. 2. Whether the acknowledgments and payments made by the Corporate Debtor and Guarantor extended the limitation period. 3. Whether the proceedings under SARFAESI and Debt Recovery Tribunal (DRT) affected the limitation period for filing the Application under IBC. Issue-wise Detailed Analysis: 1. Whether the Application filed under Section 7 of IBC by the Financial Creditor was time-barred: The Appellant contested that the Application filed by the Financial Creditor was time-barred. The Adjudicating Authority admitted the Application on 20th September 2019, with the date of default being 5th November 2014. The Financial Creditor argued that the Application filed on 30th August 2018 was within the limitation period due to acknowledgments and payments made by the Corporate Debtor and Guarantor. The Tribunal referenced the Supreme Court's judgment in "B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta & Associates" to determine the applicability of Article 137 of the Limitation Act, 1963, which provides a three-year limitation period for such Applications. The Tribunal concluded that the Application was filed beyond the three-year limitation period, thus barred by limitation. 2. Whether the acknowledgments and payments made by the Corporate Debtor and Guarantor extended the limitation period: The Respondent argued that the Corporate Debtor’s letters dated 28th April 2016 and 1st June 2016, and payments made by the Guarantor on 1st April 2017, extended the limitation period. The Tribunal examined these claims under Section 18 of the Limitation Act, 1963, which deals with the acknowledgment of debt. It was noted that the letter dated 28th April 2016 was issued "without prejudice," and the letter dated 1st June 2016 did not use this term. However, the Tribunal did not accept this as an acknowledgment for extending the limitation period. Similarly, the payments made by the Guarantor were not considered sufficient to extend the limitation period under Section 19 of the Limitation Act, as these payments were not acknowledged by the Corporate Debtor within the prescribed period. 3. Whether the proceedings under SARFAESI and DRT affected the limitation period for filing the Application under IBC: The Adjudicating Authority initially considered the SARFAESI proceedings initiated in 2014 and DRT proceedings started in 2017 as factors within the limitation period. However, the Tribunal clarified that proceedings under SARFAESI and DRT are independent and do not extend the limitation period for filing an Application under IBC due to the overriding effect of Section 238 of IBC. The Tribunal emphasized that the IBC is a complete code and proceedings under other laws cannot influence the limitation period for IBC Applications. Conclusion: The Tribunal allowed the Appeal, quashing the Adjudicating Authority's order dated 20th September 2019, and set aside the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Corporate Debtor was released from the rigor of CIRP, and the management was directed to be handed back to the Promoters/Directors of the Corporate Debtor. The matter was remitted back to the Adjudicating Authority to decide the fee and costs of CIRP payable to the Interim Resolution Professional (IRP), which was to be borne by the Bank of India.
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