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2021 (4) TMI 50 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - Financial creditors - NPA - existing debt and dispute or not - time limitation - HELD THAT - The Learned Counsel for the Respondent points out Paragraph 19 of that Reply filed by the Corporate Debtor where clearly the Corporate Debtor accepted that principal amount due and in default reflecting in their accounts was 41.67 Crores. It is stated that this is admittedly more than 1 lakh. It is stated that the debt due has been accepted. Time Limitation - HELD THAT - Considering the Judgment of the Hon ble Supreme Court of India in SESH NATH SINGH ANR. VERSUS BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. 2021 (3) TMI 1183 - SUPREME COURT we have no difficulty to state that Section 18 of the Limitation Act is applicable to proceedings under IBC and that if there is acknowledgment of debt in the balance-sheets or the OTS Proposal the period of limitation would get extended if the acknowledgment is made before the period of limitation expires. Considering the findings recorded by the Adjudicating Authority based on balance-sheets and even keeping in view the admitted dates when OTS Proposals were made by the Corporate Debtor it is not found that Appellant is able to demonstrate that the Adjudicating Authority committed any error when the Adjudicating Authority concluded that the debt was not time-barred and admitted the Application. Appeal dismissed.
Issues:
- Application filed under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC) beyond the period of limitation. - Whether debt acknowledged in balance sheets extends the period of limitation under Section 18 of the Limitation Act, 1963. Issue 1: Application filed under Section 7 of IBC beyond the period of limitation: The appeal was filed by the Appellant, the Erstwhile Director of the Corporate Debtor, against the Adjudicating Authority's decision to admit an application filed by Syndicate Bank (now amalgamated with Canara Bank) under Section 7 of the IBC. The Financial Creditor claimed a total debt of &8377; 61,47,52,521.59 against the Corporate Debtor. The Appellant argued that the application was filed more than three years after the date of Non-Performing Asset (NPA), which should have rendered it time-barred under Article 137 of the Limitation Act, 1963. The Appellant relied on judgments such as "B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates" and "Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (I) Ltd" to support the contention that a Section 7 application beyond three years of NPA without a Section 5 application under the Limitation Act should be time-barred. Issue 2: Debt acknowledged in balance sheets extending the period of limitation under Section 18 of the Limitation Act, 1963: The Respondent argued that the Corporate Debtor acknowledged the debt in its balance sheets and OTS Proposals, which the Adjudicating Authority considered. The Respondent contended that such acknowledgments can extend the limitation period under Section 18 of the Limitation Act, 1963. The Adjudicating Authority observed that there was an acknowledgment of debt in the balance sheet of the Corporate Debtor, satisfying the requirements of Section 18. The Authority further noted that the debt due and payable to the Financial Creditor remained unsatisfied, dismissing the limitation defense raised by the Corporate Debtor. The Respondent highlighted that various judgments support the acknowledgment of debt in balance sheets for the extension of limitation. The Tribunal referred to the judgment in "Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-Operative bank Ltd and Anr." passed by the Supreme Court, emphasizing that Section 18 of the Limitation Act applies to IBC proceedings. It was noted that acknowledgments in balance sheets or OTS Proposals can extend the limitation period if made before the period expires. The Tribunal cited precedents like "Mahabir Cold Storage Vs. Commissioner of Income Tax" and "A.V. Murthy Vs. B.S. Nagabasavanna" where entries in books of accounts/balance sheets were considered as acknowledgments of debt. Ultimately, the Tribunal found no error in the Adjudicating Authority's decision to admit the application, concluding that the debt was not time-barred. The appeal was dismissed, upholding the decision to initiate Corporate Insolvency Resolution Process against the Corporate Debtor.
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