2022 (12) TMI 315 - AT - Insolvency and Bankruptcy

Maintainability of application preferred by the Financial Creditors under Section 7 of the Code - initiation of CIRP - application dismissed on the ground that it is barred by Limitation - HELD THAT - Keeping in view that there is no denial by the Counsel for the Respondent that the amount was reflected in the Balance Sheets coupled with the fact that the Appellant had filed the Balance Sheet for the Financial Year 2019 which reflects these amounts under unsecured loans, this Tribunal is of the considered view that the acknowledgement in the Balance Sheet squarely falls under acknowledgment of debt as provided for under Section 18 of the Limitation Act, 1963. The Hon ble Supreme Court in LAXMI PAT SURANA VERSUS UNION BANK OF INDIA ANR. 2021 (3) TMI 1179 - SUPREME COURT and in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. 2021 (8) TMI 315 - SUPREME COURT has held that if the debt is reflected in the Balance Sheet/ Financial Statements of the Corporate Debtor Company, it is to be construed as acknowledgment under Section 18 of the Limitation Act, 1963. In the instant case it is an admitted fact that the Appellants had disbursed the last tranche of the loan on 28.03.2017 and on 29.03.2017 respectively and have filed the Section 7 Application in the month of February, 2021. However, the Balance Sheet of the FY 2019-20 reflects these amounts - the Section 7 Application is not barred by Limitation and hence this Appeal is allowed.

Summary

Issues:
- Dismissal of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 as 'barred by Limitation'.

Detailed Analysis:

1. Background:
The Appellants, who are 'Financial Creditors,' filed an appeal against the Impugned Order dated 10.03.2021 by the Adjudicating Authority, which dismissed their application under Section 7 of the Insolvency and Bankruptcy Code, 2016, on the grounds of being 'barred by Limitation.'

2. Appellant's Submission:
The Appellants contended that loans were disbursed to the 'Corporate Debtor' Company, which defaulted on the terms of the Loan Agreement. Despite reminders and a recall notice, no repayment was made, leading to the Section 7 Application filed in February 2021.

3. Respondent's Defense:
The Respondent argued that the application was rightly dismissed as 'barred by Limitation,' emphasizing that ledger entries and TDS Certificates do not extend the period of Limitation in favor of the Appellant. They denied any default and highlighted the delay in issuing the recall notice.

4. Judicial Consideration:
The Adjudicating Authority relied on a judgment and dismissed the application, considering it 'barred by Limitation.' The Appellant argued that the acknowledgment of debt in the Balance Sheets should be considered. The Tribunal noted that the Balance Sheet for the Financial Year 2019 reflected the loan amounts, constituting an acknowledgment of debt under Section 18 of the Limitation Act, 1963.

5. Legal Precedents:
The Tribunal referred to judgments by the Hon'ble Supreme Court, emphasizing that debts reflected in the Balance Sheet of the 'Corporate Debtor' Company are deemed acknowledgments under the Limitation Act. The delay in filing the application was condonable under Section 5 of the Limitation Act, and the Balance Sheets constituted acknowledgments of liability, extending the Limitation period.

6. Decision:
The Tribunal held that the Section 7 Application was not 'barred by Limitation' as the Balance Sheet acknowledged the debt, setting aside the Impugned Order. It clarified that the decision was limited to the aspect of Limitation, allowing the Respondent to address other issues regarding the 'debt' and 'default' before the Adjudicating Authority.

In conclusion, the Tribunal allowed the appeal, emphasizing the acknowledgment of debt in the Balance Sheets and the extension of the Limitation period, highlighting the importance of legal precedents and the application of the Limitation Act in insolvency proceedings.