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2022 (2) TMI 1129 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT - Period of Limitation following from date of NPA (30.06.2014) is 30.06.2019. The Petition has been filed on 07.05.2019 before the Adjudicating Authority. What has generally been considered , the date of default under Section 7 of the Code, particular, in case of Banks date of NPA is considered as Date of Default. As it is amply clear as per the RBI Circular, the Banks are required to declare the Date of NPA clearly and categorically without any ambiguity. In the present case of the Appellant, they were assigned the Debt from the Bank and the Bank has clearly defined the Date of NPA as 30.06.2014 and the date of assignment by ING Vyasya Bank Limited / Bank has been done on 19.09.2014. So clearly it is after the Date of NPA for amplifying. It is further mentioned that merger of ING Vyasya Bank Limited was made with Kotak Mahindra Bank from 01.04.2015 by the order of RBI - Section 7 of the Code is concerned with only two factors. There must be a debt and it must be due and payable in the law and there is a default . The Respondent is not refuting the Debt nor they are refusing that it was not due and payable in law except the Limitation issue and computation of default. It is amply clear that if Settlement offer or other way of acknowledgement of Debt has been done within the first period of limitation then Limitation gets extended again for the next three years - it is very much clear that the provisions of Limitation Act, 1963 which includes extension of limitation due to acknowledgment in writing, apply to the present case, the petition filed before the Adjudicating Authority is within the limitation period and both Debt and Defaults are not disputed and hence, provisions of Section 7 of the Code is applicable to the case and requires positive consideration towards its admission under the provision of the Code R/w the Limitation Act, 1963. The petition has been filed within the limitation period and hence Section 7 of the Code petition can be initiation against the Corporate Debtor - Appeal allowed.
Issues Involved:
1. Limitation period for filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Acknowledgment of debt and its impact on the limitation period. 3. Validity of the settlement proposals marked as 'without prejudice' as acknowledgments of debt. 4. Computation of limitation period considering the period during which the Corporate Debtor was before the Board for Industrial and Financial Reconstruction (BIFR). Issue-wise Detailed Analysis: 1. Limitation Period for Filing an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016: The appeal was filed by the Appellant under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the impugned order dated 13.08.2021 passed by the Adjudicating Authority, National Company Law Tribunal (NCLT), Mumbai Bench. The Appellant argued that the Corporate Debtor (CD) defaulted on the loan, which was declared a Non-Performing Asset (NPA) on 30.06.2014. The Appellant contended that the application filed on 07.05.2019 was within the limitation period due to acknowledgments of debt by the CD. 2. Acknowledgment of Debt and Its Impact on the Limitation Period: The Appellant cited several judgments to support the argument that acknowledgments of debt reset the limitation period. These included: - State Bank of India vs. Kaushuv Ray & Anr.: The Appellant relied on correspondences and balance sheets to show that the application under Section 7 was within the limitation period. - Laxmi Surana vs. Union Bank of India & Ors.: The Supreme Court affirmed that a fresh period of limitation is computed from the date of acknowledgment of debt. - Bank of India vs. Multi ARC Coating and Straps Limited: The acknowledgment of debt through letters extended the limitation period. 3. Validity of the Settlement Proposals Marked as 'Without Prejudice' as Acknowledgments of Debt: The Appellant argued that the settlement proposals, despite being marked 'without prejudice,' constituted acknowledgments of liability. Citing the judgments of ITC Limited vs. Blue Coast Hotels Limited and CG Power & Industrial Solutions Limited vs. Gactel Turnkey Products Limited, the Appellant contended that these acknowledgments extended the limitation period. 4. Computation of Limitation Period Considering the Period During Which the Corporate Debtor Was Before BIFR: The Appellant argued that the period during which the CD was before the BIFR (from 15.07.2014 to 01.12.2016) should be excluded from the computation of the limitation period. The Respondent countered that the automatic suspension under Section 22(5) of the Sick Industrial Companies (Special Provisions) Act (SICA) did not apply to insolvency proceedings. The Respondent also argued that the debt was barred by limitation, as the NPA was declared on 30.06.2014, and the application was filed beyond the three-year limitation period. Adjudicating Authority's Observations: The Adjudicating Authority dismissed the petition, noting that the Financial Creditor did not plead the extension or exclusion of time to compute the period of limitation in the petition. The Authority emphasized that the plea of limitation must be specifically pleaded. Appellate Tribunal's Analysis: The Appellate Tribunal observed that the issue of limitation was critical. It noted that the period of limitation from the date of NPA (30.06.2014) was 30.06.2019, and the petition was filed on 07.05.2019. The Tribunal referred to Section 18 of the Limitation Act, 1963, which states that an acknowledgment of liability in writing resets the limitation period. The Tribunal also cited the judgment of Dena Bank (Now Bank of Baroda) vs. C. Shivakumar Reddy to support the application of Section 18 of the Limitation Act to proceedings under the Insolvency and Bankruptcy Code. Conclusion: The Tribunal concluded that the provisions of the Limitation Act, 1963, including the extension of limitation due to acknowledgment in writing, applied to the present case. The petition filed before the Adjudicating Authority was within the limitation period. The Tribunal allowed the appeal, set aside the impugned order dated 13.08.2021, and directed the Adjudicating Authority to initiate the Corporate Insolvency Resolution Process (CIRP) proceedings. The parties were given the option to settle the matter in the intervening period.
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