Application under Insolvency and Bankruptcy Code barred by limitation; Corporate Debtor released from CIRP

The application under Section 7 of the Insolvency and Bankruptcy Code was found to be barred by limitation as per the judgment. The acknowledgment of debt did not extend the limitation period, and the application was deemed to be filed for executing a decree rather than for insolvency resolution or liquidation. The impugned order was set aside, releasing the Corporate Debtor from the Corporate Insolvency Resolution Process. All actions taken were declared illegal, and the matter was remitted to the NCLT for determining the fee and cost of the process to be borne by the Bank of India Limited.

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Issues Involved:
1. Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation.
2. Whether the acknowledgment of debt by the Corporate Debtor extended the limitation period under Section 18 of the Limitation Act, 1963.
3. Whether the application under Section 7 was filed for the purpose of executing a decree rather than for insolvency resolution or liquidation.

Detailed Analysis:

1. Limitation Period for Application under Section 7 of I&B Code:
The Appellant, Director of the Corporate Debtor, challenged the application under Section 7 of the I&B Code on the grounds of being barred by limitation. The Corporate Debtor defaulted on 11th June 2015, and the debt was classified as NPA on 29th September 2015. The application was filed beyond the three-year limitation period prescribed under the Limitation Act, 1963. The Tribunal referred to the Supreme Court's judgment in "Jignesh Shah and Another v. Union of India and Another," emphasizing that the I&B Code does not provide a new lease of life to time-barred debts.

2. Acknowledgment of Debt and Section 18 of the Limitation Act, 1963:
The Respondent-Bank argued that the application was saved by Section 18 of the Limitation Act, 1963, due to the acknowledgment of liability by the Corporate Debtor. However, the Tribunal found no evidence of such acknowledgment within three years from the date of default or the date when the account was declared NPA. The Tribunal clarified that mere applications for restructuring debt or payment of interest do not amount to an acknowledgment of debt under Section 18. The Balance Sheet for the year 2015-2016, filed after 31st March 2016, was also not considered a valid acknowledgment.

3. Purpose of Filing the Application under Section 7:
The Tribunal observed that the application under Section 7 was filed for executing the decree passed by the Debts Recovery Tribunal rather than for insolvency resolution or liquidation. This action was deemed to be covered by Section 65 of the I&B Code, which pertains to fraudulent or malicious initiation of proceedings.

Conclusion:
The Tribunal concluded that the application under Section 7 of the I&B Code was barred by limitation. The impugned order dated 20th September 2019, passed by the National Company Law Tribunal, Mumbai Bench, was set aside. The Corporate Debtor was released from the Corporate Insolvency Resolution Process, and all actions taken by the Interim Resolution Professional and Committee of Creditors were declared illegal and set aside. The Resolution Professional was directed to hand over the records and assets of the Corporate Debtor to its Director. The matter was remitted to the NCLT, Mumbai Bench, to decide the fee and cost of the Corporate Insolvency Resolution Process, to be borne by the Bank of India Limited. The appeal was allowed with no costs.

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