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2022 (3) TMI 117 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - time limitation - whether Section 7 application, filed by the Respondent No. 1 purporting to be financial creditor, is not maintainable since he is not an investor but a partner of the corporate debtor? - HELD THAT - It is clear that the mention of Without Prejudice in the two letters dated 3.7.2018 and 11.8.2018 do not imply denial/rebuttal of the debt. The admission of the debt which is explicitly contained in the letter dated 11.8.2018 is quite clear, wherein the corporate debtor has not only admitted the debt, but has also undertaken to pay the amount as decided by DRT-III in its judgment dated 29.4.2016 - the Adjudicating Authority has correctly considered the relevant documents and judgments presented for the purpose of extending limitation and inferred that the Section 7 application submitted by ARCIL is within limitation for the purposes of the IBC. It is admitted fact that Bank of Baroda is a financial creditor and by a valid and legal deed of assignment Bank of Baroda assigns the debt to ARCIL. Hence, ARCIL is without doubt a financial creditor which is entitled to submit an application under section 7 of the IBC for relief - the Adjudicating Authority has committed no error in passing the Impugned Order. There are no reason to interfere with the Impugned Order - appeal dismissed.
Issues Involved:
1. Whether the appeal is time-barred. 2. Whether the Section 7 application filed by the Respondent No. 1 is maintainable. 3. Whether the letters marked "Without Prejudice" can be used to extend the limitation period. 4. Whether ARCIL is a financial creditor or an investor. Detailed Analysis: 1. Whether the appeal is time-barred: The Appellant argued that the appeal is time-barred, citing letters dated 3.7.2018 and 11.8.2018, which were marked "Without Prejudice" and thus cannot be relied upon for extending the limitation period under Section 18 of the Limitation Act. The Appellant referred to various judgments, including BK Educational Services Private Limited vs. Parag Gupta and Associates and Jignesh Shah and Anr. vs. Union of India and Anr., to support the claim that the Limitation Act applies to IBC applications. The Respondent countered that the debt was acknowledged in the balance sheets for FY 2011-12 and FY 2012-13, extending the limitation period. Additionally, the DRT's judgment on 29.4.2016 provided a fresh cause of action, further extending the limitation period. 2. Whether the Section 7 application filed by the Respondent No. 1 is maintainable: The Appellant contended that the Section 7 application is not maintainable because ARCIL is a partner, not an investor. The Respondent argued that ARCIL, having stepped into the shoes of the Bank of Baroda via a deed of assignment, is a financial creditor. The Tribunal agreed with the Respondent, stating that ARCIL is a financial creditor as defined under Section 5 of the IBC, which includes persons to whom a financial debt has been legally assigned. 3. Whether the letters marked "Without Prejudice" can be used to extend the limitation period: The Appellant argued that communications marked "Without Prejudice" cannot be used as evidence under Section 23 of the Evidence Act. The Respondent cited the judgment in ITC Limited vs. Blue Coast Hotels Limited and Ors., arguing that the term "Without Prejudice" does not negate the acknowledgment of debt. The Tribunal found that the letters dated 3.7.2018 and 11.8.2018, despite being marked "Without Prejudice," contained explicit admissions of debt and thus could be used to extend the limitation period. 4. Whether ARCIL is a financial creditor or an investor: The Tribunal noted that ARCIL is an assignee of the debt via a deed of assignment dated 13.3.2013 executed by the Bank of Baroda. As such, ARCIL steps into the shoes of the Bank of Baroda as a financial creditor under Section 5 of the IBC. The Tribunal concluded that ARCIL is a financial creditor entitled to file a Section 7 application. Conclusion: The Tribunal concluded that the Section 7 application filed by ARCIL was within the limitation period, considering the acknowledgments in the balance sheets and the DRT's judgment. The Tribunal also confirmed that ARCIL is a financial creditor. Consequently, the appeal was dismissed, and the impugned order was upheld. There was no order as to costs.
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