2022 (5) TMI 349 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - NPA - existence of debt and dispute or not - date of default - application barred by time limitation or not - HELD THAT - The letter dated 02/12/2015 shows that the dues were classified as NPA on 30/09/2014 and the Section 7 Application was filed on 24/04/2018. Admittedly, there was communication and correspondence between the parties wherein several proposals for Restructuring an OTS were attempted. The Restructuring Proposals dated 08/10/2014, 09/10/2014 and 02/12/2014 are on record apart from the OTS Proposals made between the parties on 03/03/2018, 13/03/2018, 11/06/2018, 13/06/2018 and 07/11/2018 and thereafter - It is significant to mention that the Appellant does not deny this acknowledgment. It is only their case that as proposal for Restructuring was pending, such a letter of acknowledgement does not construe an acknowledgement in the legal sense. In the instant case, the issue raised regarding Limitation is not solely whether the communication initiated between the parties with a view to restructure the loan/OTS Proposals construes acknowledgement of debt , but whether the debt acknowledged vide letter dated 19/12/2015 and signed by the Appellants and further whether the amounts reflected in the Balance Sheets tantamounts to acknowledgement as defined under Section 18 of the Limitation Act, 1963. Having regard to the fact that the date of NPA is 30/09/2014, there is an acknowledgement of debt dated 19/12/2015 and the Financial Statements of the year ending 2016 evidence the loans taken by the Corporate Debtor , apart from the various Restructuring/OTS Proposals advanced between the parties, indicating the existence of a jural relationship between them, the ratio of the Hon ble Supreme Court in Dena Bank 2021 (8) TMI 315 - SUPREME COURT is squarely applicable to the facts of this case and hence we hold that the Application filed under Section 7 of the Code is well within the period of Limitation. Appeal dismissed.

Summary

Issues:
Challenge to Impugned Order dated 30/10/2019 admitting CIRP against Corporate Debtor. Whether Section 7 Application is barred by Limitation.

Analysis:

Issue 1: Challenge to Impugned Order
The appeal challenges the Impugned Order passed by the Adjudicating Authority admitting the Application filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor. The Financial Creditor contended that the Corporate Debtor defaulted on payments, leading to the NPA classification, and subsequently filed for CIRP. The Corporate Debtor argued that the Application was barred by Limitation due to the date of default being 30/09/2014, and the Section 7 Application filed on 24/04/2018. The Financial Creditor claimed that the Resolution Plan was approved and implemented, acknowledging the indebtedness of the Corporate Debtor.

Issue 2: Limitation of Section 7 Application
The main issue was whether the Section 7 Application filed by the Financial Creditor was barred by Limitation. The Financial Creditor argued that there was an acknowledgment of debt within three years of the default date, extending the Limitation period. The Financial Statements for the year ending 31/03/2016 reflected the amounts due to the Financial Creditor, constituting an acknowledgment of liability. The Supreme Court's rulings in various cases were cited to support the acknowledgment of debt within the statutory period, extending the Limitation period.

Conclusion:
The Tribunal held that the Application filed under Section 7 of the Code was within the period of Limitation based on the acknowledgment of debt, Financial Statements, and the jural relationship between the parties. The Resolution Plan had already been implemented, leading to the dismissal of the Appeal. The Tribunal's decision was in line with the Supreme Court's interpretations of acknowledgment under the Limitation Act, 1963, and the applicability of such acknowledgments to insolvency proceedings.