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2020 (8) TMI 535 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of loan - main plea taken on behalf of the Appellant is that inasmuch as the Recovery Certificate was issued based on the Compromise Terms and the said Recovery Certificate became final and binding upon the Respondent - Effect of an Acknowledgment in writing as per Section 18 of the Limitation Act, 1963 - HELD THAT - Any sum which is due and payable by a Corporate Debtor to the Bank (Financial Creditor) is a Financial Debt as per Section 5 (8) (a) of the Code. With a view to sustain an Application under Section 7 of the I BC, 2016 an Applicant is to establish an Existence of Debt , which is due from the Corporate Debtor . A dispute is to be a bona fide, reasonable/genuine one, of course, based on tangible materials. The Debt is not due, if it is not payable in law or on facts. A Corporate Debtor has an option to point out that the Default had not occurred (inclusive of a disputed claim and the same is not due. An Adjudicating Authority is to ascertain whether the record is complete or otherwise, whether there is a Debt and Default was committed by the Corporate Debtor . It is an established fact that existence of an Undisputed Debt is a condition precedent for commencement of Corporate Insolvency Resolution Process. Effect of an Acknowledgment in writing as per Section 18 of the Limitation Act, 1963 - HELD THAT - It cannot be gain said that Acknowledgment of Liability is to be in writing, signed by a person against whom the property or right is claimed and the same must be within the period of Limitation. Suffice it for this Tribunal to relevantly point out that to bring an acknowledgment within the meaning of Section 18 of the Limitation Act, 1963, it ought to be an unqualified one which gives a fresh cause of action - As per Article 62 of the Limitation Act, 1963, a suit to enforce the mortgage is to be filed within Twelve years from the date when money fell due, unless the limitation period is extended in terms of any provision of the Limitation Act. It is to be borne in mind Article 137 of the Limitation Act, 1963 not only applies to the Civil Procedure Code but also to the Special Acts. As a matter of fact, Article 137 constitutes a Residuary Article pertaining to Applications . As such it can be safely and securely be said that Article 137 will apply to the Civil Procedure Code or in respect of any other special statute. What Article 113 of the Limitation Act, 1963 relates to suit, the Article 137 of the Limitation Act, pertains to Application . Appeal dismissed without costs.
Issues Involved:
1. Rejection of Section 7 Application by NCLT. 2. Debt acknowledgment and settlement terms. 3. Limitation period for initiating CIRP. 4. Jurisdiction and applicability of IBC over other legal proceedings. 5. Bona fide disputes and genuine debt. Issue-wise Analysis: 1. Rejection of Section 7 Application by NCLT: The appellant, a financial creditor, filed an appeal against the NCLT Bengaluru Bench's order dated 20.08.2019, which rejected the Section 7 application. The NCLT noted that the provisions of the Insolvency and Bankruptcy Code (IBC) cannot be invoked merely for recovery of outstanding amounts but for initiating Corporate Insolvency Resolution Process (CIRP) for justified reasons. The Supreme Court's judgments in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. and Transmission Corporation of A.P. Ltd. v. Equipment Conductors and Cables Ltd. were cited, emphasizing that IBC is not a substitute for a recovery forum and the existence of undisputed debt is essential for initiating CIRP. 2. Debt Acknowledgment and Settlement Terms: The appellant argued that the respondent, a corporate debtor, had approached Vijaya Bank in 1986 for credit facilities, which were sanctioned. The respondent mortgaged properties to secure the credit facilities but failed to repay, leading to the account being declared a Non-Performing Asset (NPA) on 01.04.1993. The bank filed an application before the Debt Recovery Tribunal (DRT) for recovery, resulting in a recovery certificate. The appellant contended that the respondent acknowledged the debt and agreed to settle it, but defaulted on the settlement terms. The recovery certificate issued based on compromise terms became final and binding. 3. Limitation Period for Initiating CIRP: The appellant filed the application under Section 7 of IBC on 27.07.2018, claiming entitlement to recover the decretal amount. The respondent argued that the application was time-barred as the loan was declared NPA on 01.04.1993. The Supreme Court's decisions in B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates and Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. were cited, establishing that the limitation period for filing applications under Sections 7 and 9 of IBC is three years from the date of default. Since the default occurred more than three years before the application, it was barred by limitation. 4. Jurisdiction and Applicability of IBC Over Other Legal Proceedings: The appellant contended that the pendency of proceedings in any court does not bar initiation of CIRP under Section 238 of IBC. The respondent argued that the application was an attempt to recover a loan pending before the DRT, substituting the NCLT for recovery purposes, which was not the intention of IBC. The NCLT noted that it has powers equivalent to the DRT for matters under Section 60(4) of IBC and must consider the entire matter before passing orders. 5. Bona Fide Disputes and Genuine Debt: The NCLT emphasized that for initiating CIRP, the existence of an undisputed debt is a condition precedent. The appellant failed to provide any acknowledgment in writing by the respondent or its authorized signatory acknowledging the liability. The IBC is not a substitute for debt enforcement procedures, and the NCLT does not adjudicate money claims. The application was found to be barred by limitation, and the appeal was dismissed without costs, allowing the appellant to seek appropriate remedies before a competent forum. Conclusion: The appeal was dismissed as the application under Section 7 of IBC was barred by limitation, with the NCLT emphasizing the need for undisputed debt and the non-substitutive nature of IBC for debt recovery. The appellant was allowed to pursue remedies before a competent forum if desired.
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