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2022 (5) TMI 717 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - Time Limitation - HELD THAT - It is clear that for the extension of limitation under section 18 of the Limitation Act, insofar section 9 application of the appellant is concerned, there has to be a clear acknowledgment of debt within 3 years from 19.6.2006 and mere promise to pay at a much later date, on 21.10.2015 cannot extend limitation as required under section 18 of the Limitation Act. It is found that the Appellant was not part of the scheme of rehabilitation and therefore he is not entitled to claim exclusion of any period when its legal right of redressal was suspended - the appellant has not been able to establish the extension of limitation as required under Section 18 of the Limitation Act on the basis of valid acknowledgments provided by the corporate debtor to the operational debt, which is in default from June, 2006. The Adjudicating Authority did not commit any error in holding that section 9 application of Appellant was barred by limitation - appeal dismissed.
Issues Involved:
1. Rejection of Section 9 application under IBC. 2. Allegation of acknowledgment of debt and its impact on limitation. 3. Applicability of Limitation Act and Indian Contract Act provisions. 4. Validity of documents and claims of forgery. 5. Impact of Sick Industrial Companies Act (SICA) on limitation period. Detailed Analysis: 1. Rejection of Section 9 Application under IBC: The appellant, an operational creditor, filed an appeal against the order dated 27.1.2021 by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench) which rejected the Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant claimed the corporate debtor owed Rs. 39,00,631.50 for work performed, but the application was rejected on grounds of being barred by limitation. 2. Allegation of Acknowledgment of Debt and its Impact on Limitation: The appellant argued that the corporate debtor acknowledged the debt through various communications, including a letter dated 21.10.2015, which confirmed the debt and promised payment. The appellant cited precedents like State Bank of India vs. Kanahiya Lal and Anr. to argue that such acknowledgments and promises to pay extended the limitation period. 3. Applicability of Limitation Act and Indian Contract Act Provisions: The appellant contended that the provisions of the Limitation Act, 1963, and Section 25(3) of the Indian Contract Act, 1872, applied, claiming that the acknowledgment and promise to pay extended the limitation period. However, the respondent countered that the documents were forged and the acknowledgments were invalid. The tribunal noted that for extending limitation under Section 18 of the Limitation Act, there must be clear acknowledgment within three years from the date of default, which was not established in this case. 4. Validity of Documents and Claims of Forgery: The respondent argued that the documents presented by the appellant were forged and fabricated, highlighting discrepancies such as the use of outdated city names, signatures of employees who had left the company, and overwriting of dates. The tribunal found these arguments credible and noted that mere receipt of letters by a peon could not be considered valid acknowledgment of debt. 5. Impact of Sick Industrial Companies Act (SICA) on Limitation Period: The appellant claimed that the corporate debtor's status as a sick company under SICA suspended the limitation period. However, the tribunal referenced the judgment in Mazda Agencies vs. Hemant Plastics & Chemicals Ltd., stating that since the appellant was not part of the rehabilitation scheme, they could not claim exclusion of the period under SICA for computing the limitation. Conclusion: The tribunal concluded that the appellant failed to establish valid acknowledgment of debt that would extend the limitation period under Section 18 of the Limitation Act. Consequently, the Section 9 application was rightly held to be barred by limitation by the Adjudicating Authority. The appeal was dismissed with no order as to costs.
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