Tribunal Rejects Bank's Insolvency Application, Cites Expired Limitation Period Under Section 7 of IBC 2016

The Tribunal set aside the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by the Bank, as it was determined to be beyond the three-year limitation period from the date of default. The Tribunal clarified that the limitation period begins from the date of default, not the date of NPA. Attempts by the Bank to extend the limitation period through part payments and an OTS offer were rejected, as they occurred after the expiration of the original limitation period. The appeal by the Suspended Director of the Corporate Debtor was allowed.

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Issues Involved:
1. Limitation Period for Filing Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Date of Default and its Impact on Limitation.
3. Acknowledgment of Debt and Extension of Limitation Period.

Summary:

1. Limitation Period for Filing Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The appeal was filed by the Suspended Director of the Corporate Debtor against the order dated 26.08.2022, which admitted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by IDBI Bank Limited. The Corporate Debtor contested the application on the ground that it was filed beyond the three-year limitation period from the date of default.

2. Date of Default and its Impact on Limitation:
The Adjudicating Authority allowed the Bank to file a supplementary affidavit to specify the date of default, which was initially missing in the application. The Bank mentioned 31.08.2013 as the date of default and 31.03.2014 as the date of NPA. The Bank attempted to use the date of NPA to extend the limitation period, but the Tribunal held that the date of default triggers the limitation period, not the date of NPA. The Tribunal cited the Supreme Court's rulings in several cases, including Babulal Vardharji Gurjar and Jignesh Shah, which confirmed that the period of limitation starts from the date of default.

3. Acknowledgment of Debt and Extension of Limitation Period:
The Bank argued that the limitation period was extended due to part payments and an OTS (One Time Settlement) offer. However, the Tribunal noted that for an acknowledgment to extend the limitation period under Section 18 of the Limitation Act, it must occur within the original limitation period. The Tribunal referred to the Supreme Court's decision in Shanti Conductors Pvt. Ltd., which clarified that any acknowledgment must be in writing and signed by the debtor. Since the payments and OTS occurred after the limitation period had expired, they could not extend the limitation period.

Conclusion:
The Tribunal concluded that the application under Section 7 of the Code was filed beyond the limitation period. The impugned order admitting the application was set aside, and the appeal was allowed. The IRP was advised to seek any other remedy available to him for the costs incurred.

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