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2020 (10) TMI 591 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt - existence of debt and dispute or not - time limitation. On the matter of 'default' not being a continuing wrong - HELD THAT - This exposition of law in regard to section 23 of the Limitation Act, 1963, has no applicability in so far as the case of the Corporate Debtor is concerned, inter alia for the reason that there is acknowledgement of liability. On the matter of Balance confirmation and acknowledgement of liability in the Balance Sheet - HELD THAT - An acknowledgement of liability in the balance sheet of the company constitutes an acknowledgment of liability within the meaning of section 18 of the Limitation Act, 1963, with attendant consequences. In the present case, there is acknowledgement in the balance sheet of the corporate debtor as at 31.03.2015 and 31.03.2016, and therefore, a fresh period of limitation began to run from that date - the date of signatures of the directors be construed as the date of effective acknowledgement of the state of indebtedness of the company. On the matter of Settlement Offers made - HELD THAT - In view of the fact that the Corporate Debtor in its financial statements for the F.Y. 2014-15 and F.Y. 2015-16 filed with the Ministry of Corporate Affairs acknowledges the liability towards the Financial Creditor; and also in its letter dated 23.02.2017 submitted a proposal for one time settlement of dues of the Financial Creditor, IDBI Bank Limited and Bank of India, which was also revised on 15.09.2018 - the petition filed by the Financial Creditor is within limitation. This Petition reveals that there is a debt as defined in section 3(11) of IBC; there is a default within the meaning of section 3(12) of IBC. Therefore, the Petition made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. Petition admitted - moratorium declared.
Issues Involved:
1. Jurisdiction and Admissibility of the Petition 2. Limitation and Applicability of the Limitation Act 3. Acknowledgment of Debt and Balance Confirmation 4. Settlement Offers and Their Legal Effect 5. Default and Initiation of Corporate Insolvency Resolution Process (CIRP) Issue-wise Detailed Analysis: 1. Jurisdiction and Admissibility of the Petition: The petition was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) by Punjab National Bank (Financial Creditor) against J-Marks Exim (India) Private Limited (Corporate Debtor). The Corporate Debtor is a private company incorporated under the Companies Act, 1956, and registered in Mumbai, Maharashtra. Therefore, the Mumbai Bench of the National Company Law Tribunal (NCLT) has jurisdiction to adjudicate this matter. 2. Limitation and Applicability of the Limitation Act: The Corporate Debtor argued that the petition is barred by the law of limitation as the cause of action arose on 30.09.2013, the date on which it was declared a Non-Performing Asset (NPA). The petition was filed on 10.06.2019, beyond the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963. The Corporate Debtor relied on the judgments of the Hon'ble Supreme Court in B. K. Education Services Private Limited v. Parag Gupta and Associates, Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Limited & Anr, Jignesh Shah & Anr v. Union of India & Anr, and Sagar Sharma & Anr v. Phoenix Arc Pvt. Ltd. & Anr, which clarified that the Limitation Act applies to applications under the IBC and that the right to sue accrues when a default occurs. 3. Acknowledgment of Debt and Balance Confirmation: The Financial Creditor argued that the Corporate Debtor acknowledged its liability through balance and security confirmation letters dated 16.04.2014 and in its financial statements for FY 2014-15 and FY 2015-16. The Hon'ble High Courts of Andhra Pradesh, Delhi, and Kerala have held that an acknowledgment of liability in the balance sheet constitutes an acknowledgment within the meaning of Section 18 of the Limitation Act, 1963, thereby extending the limitation period. The Tribunal held that the date of signatures of the directors on the balance sheet should be construed as the date of effective acknowledgment of the state of indebtedness. 4. Settlement Offers and Their Legal Effect: The Financial Creditor submitted that the Corporate Debtor made offers for one-time settlement (OTS) of dues on 23.02.2017 and 15.09.2018, which constitutes an acknowledgment of liability. The Hon'ble Supreme Court in ITC Limited v. Blue Coast Hotels Ltd. & Ors. held that an OTS offer, even if made "without prejudice," constitutes an acknowledgment of liability. The Tribunal rejected the Corporate Debtor's reliance on Shibcharan Das v. Firm Gulabchand Chhotey Lal, holding it inapplicable in view of the Supreme Court's judgment in ITC Limited. 5. Default and Initiation of Corporate Insolvency Resolution Process (CIRP): The Tribunal found that there is a debt as defined in Section 3(11) of IBC and a default within the meaning of Section 3(12) of IBC. The petition was complete in all respects and showed that the Corporate Debtor is in default of a debt due and payable, which is more than the minimum amount stipulated under Section 4(1) of IBC. Therefore, the default stands established, and the Tribunal admitted the petition, ordering the initiation of CIRP against the Corporate Debtor. Order: The Tribunal admitted the petition and ordered the initiation of CIRP against the Corporate Debtor. A moratorium under Section 14 of IBC was declared, and Mr. Mukesh Verma was appointed as the Interim Resolution Professional (IRP). The Financial Creditor was directed to deposit ?3,00,000 with the IRP for expenses related to public notice and inviting claims. The IRP was instructed to submit periodical reports to the Tribunal, and the Registry was directed to communicate the order to all relevant parties and authorities.
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