2020 (9) TMI 1265 - Tri - Insolvency and Bankruptcy

Tribunal rejects time-barred insolvency application under Section 7

The Tribunal rejected the Financial Creditor's application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor as ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time Limitation - acknowledgement of the debt in the balance sheets of the corporate debtor - HELD THAT:- It is not in dispute that in this case the loan account was declared to be an NPA on 10.04.2014. This proceeding was filed on 19.09.2018. So it appears that it was filed beyond the period of three years from the date on which the right to apply was accrued to the Bank. Having noted so, we have to consider whether the period of Limitation said to be extended because the corporate debtor's balance sheets show that the debt is still to be payable. In case of 'V. Padmakumar' [2020 (3) TMI 1244 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], Hon. NCLAT dealt with this aspect and held that If the argument is accepted that the Balance Sheet / Annual Return of the 'Corporate Debtor' amounts to acknowledgement under Section 18 of the Limitation Act, 1963 then in such case, it is to be held that no limitation would be applicable because every year, it is mandatory for the 'Corporate Debtor' to file Balance Sheet/ Annual Return, which is not the law.' Thus, the acknowledgement of the debt in the balance sheets of the corporate debtor does not help the financial creditors to maintain this time barred application. OTS Proposal submitted by the Corporate Debtor - HELD THAT:- Admittedly it was submitted to the bank on 18/9/2017 i.e., beyond a period of three years from the date of default. Hence it does not bring the claim of the financial creditor within limitation. In view of the above facts, it is not felt necessary to enter into resolving the controversy whether the OTS proposal given by the corporate debtor without prejudice to its rights to contest the claim can be said to be acknowledgement of the debt or not? In this case also the debt of default is 10.06.2014 (i.e., the date of NPA). This application under Section 7 IBC is filed on 19.09.2018. Hence it is filed beyond the period of Limitation. Application dismissed. Issues:1. Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by the Financial Creditor against the Corporate Debtor is time-barred.Analysis:1. The Financial Creditor, State Bank of India, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Krishidhan Seeds Pvt. Ltd., for defaulting on a financial debt of Rs.1,89,41,55,485. The Corporate Debtor contended that the application was time-barred as the alleged default date was 10.06.2014, and the application was filed on 19.09.2018. The Financial Creditor argued that actions taken, such as sending notices and filing recovery proceedings, extended the limitation period. The Corporate Debtor's balance sheets and an OTS Proposal were also cited as acknowledgments of the debt, extending the limitation period. The Financial Creditor maintained that the application was not time-barred based on these actions.2. The Learned Sr. Counsel for the Corporate Debtor argued that the application was indeed time-barred, citing the date of default and the provisions of the Law of Limitation. They contended that the balance sheets and the OTS Proposal did not constitute valid acknowledgments of the debt under the Law of Limitation. The Counsel relied on legal precedents and judgments to support their argument that the application should be considered time-barred and therefore not maintainable.3. The Tribunal considered the evidence and arguments presented by both parties. It noted that the loan account was declared an NPA on 10.04.2014, and the application was filed on 19.09.2018, beyond the three-year limitation period. The Tribunal referenced a judgment by the Hon. NCLAT in the 'V. Padmakumar' case, which clarified that balance sheets of the Corporate Debtor do not constitute acknowledgments of debt under the Law of Limitation. Therefore, the acknowledgment of debt in the balance sheets did not assist the Financial Creditor in maintaining the time-barred application.4. The Tribunal also addressed the OTS Proposal submitted by the Corporate Debtor, noting that it was presented beyond the three-year period from the date of default. The Tribunal concluded that the OTS Proposal did not bring the claim within the limitation period. Referring to legal precedents, including the judgment in the case of Babulal Gurjar v/s Veer Gurjar Aluminum Industries Pvt. Ltd, the Tribunal emphasized that insolvency proceedings cannot be initiated based on time-barred debts. Consequently, the Tribunal rejected the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, as it was filed beyond the period of limitation.5. In light of the above analysis and considerations, the Tribunal rejected the application, thereby disposing of the proceedings related to the time-barred application under Section 7 of the Insolvency and Bankruptcy Code, 2016.