Government-created financial institution can file section 7 insolvency claim; limitation objection failed on enforceability of debt
A government-created trust notified as a financial institution was found competent to maintain a section 7 application under the Insolvency and Bankruptcy Code, and the challenge to its locus and signatory authorisation was rejected. On limitation, the record did not show acknowledgements extending time, but the prior Debt Recovery Tribunal order was treated as supporting the enforceability of the debt for admission, so the limitation plea failed. The section 7 application was admitted, moratorium was ordered, and an interim resolution professional was appointed, commencing corporate insolvency resolution against the corporate debtor.
Issues: (i) Whether the applicant trust had locus and authority to maintain the application under section 7 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the application was barred by limitation.
Issue (i): Whether the applicant trust had locus and authority to maintain the application under section 7 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The applicant was held to be a trust constituted by the Central Government for acquisition of stressed assets of IDBI and notified as a financial institution. The challenge to its competence and to the authorisation of the signatory was rejected. The transfer of stressed assets to the applicant was treated as valid.
Conclusion: The issue was answered in favour of the applicant.
Issue (ii): Whether the application was barred by limitation.
Analysis: The record did not show acknowledgements extending limitation for the relevant period, and the debt would otherwise have been time-barred. However, the Debt Recovery Tribunal had already passed an order in favour of the applicant before admission of the insolvency case, and that order was treated as supporting the subsistence of the enforceable debt for admission under section 7.
Conclusion: The issue was answered in favour of the applicant and the plea of limitation failed.
Final Conclusion: The section 7 application was admitted, moratorium was ordered, and an interim resolution professional was appointed, thereby commencing corporate insolvency resolution against the corporate debtor.
Ratio Decidendi: A duly notified government-created asset-reconstruction trust can maintain a section 7 application as a financial institution, and admission may follow where debt and default are established and the enforceability of the claim is supported by the existing adjudicatory order notwithstanding the limitation objection.
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