2020 (4) TMI 153 - Tri - Insolvency and Bankruptcy

Acknowledgment of debt extends limitation period in CIRP petition, leading to admission and initiation of proceedings.

The IB Petition seeking initiation of CIRP against the Corporate Debtor was initially considered time-barred due to being filed more than three years from ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Time limitation - HELD THAT:- In the present matter, the Petitioner Bank in its written submission has made effort to impress upon us that even . the date of default is 30-6-2012, but since the memorandum of deposit of title deeds were executed on 30-10-2010 and further extension of equitable mortgage date is 15-10-2011 then as per the counsel, the limitation period would be twelve (12) years as per article 62 of the Limitation Act and would be applicable from the date of default, i.e. 30-6-2012. Hence, the present petition is filed well within the limitation. The date of default in the present matter is 30-6-2012 being the date of NPA the limitation would commence from such date and as per the Article 137 of the Limitation Act which prescribe only three (3) years of time while the present LB. Petition was filed on 15-9-2017 before this Bench. Hence, it is clearly time-barred by the limitation. The present Petition is liable to be rejected based on time-barred claimed/debts. Issues Involved:1. Whether the present Insolvency and Bankruptcy (IB) Petition is filed within the prescribed limitation period.2. Whether the triggering of Corporate Insolvency Resolution Process (CIRP) is appropriate given the pending proceedings/litigation.3. Whether the debt is acknowledged by the Corporate Debtor extending the limitation period.Issue-wise Detailed Analysis:1. Whether the present Insolvency and Bankruptcy (IB) Petition is filed within the prescribed limitation period:The main legal issue arises for consideration is whether the present IB Petition is filed within the prescribed limitation period. The petition is filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking initiation of CIRP against the Corporate Debtor. The date of default is 30-6-2012 when the account of the Respondent/Corporate-Debtor was classified as a 'Non-Performing Asset' (NPA). The petition was filed on 15-9-2017, more than five years from the date of default.The Petitioner Bank contended that the limitation period would be twelve (12) years under Article 62 of the Limitation Act, starting from the date of default, i.e., 30-6-2012. However, the Hon'ble Supreme Court in B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates, Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd., and Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., clarified that only Article 137 of the Limitation Act applies to applications under section 7 of the IBC, which prescribes a limitation period of three (3) years from the date of default. Therefore, the present IB Petition is time-barred.2. Whether the triggering of Corporate Insolvency Resolution Process (CIRP) is appropriate given the pending proceedings/litigation:The Respondent/Corporate-Debtor opposed the filing of the present IB Petition on the grounds that similar petitions were filed before the Hon'ble High Court of Gujarat for winding up of the Respondent Company and an appeal is pending before the Hon'ble Debts Recovery Appellate Tribunal (DRAT). The Respondent argued that triggering CIRP would not be appropriate due to these pending proceedings.However, the tribunal noted that the legal position has been settled by the Hon'ble Supreme Court, and the pendency of other proceedings does not bar the initiation of CIRP if the petition is otherwise maintainable. The tribunal examined the merits of the petition and found that the main issue was the limitation period, which has already been addressed.3. Whether the debt is acknowledged by the Corporate Debtor extending the limitation period:The Petitioner Bank argued that the debt was acknowledged by the Corporate Debtor through various documents, including the supplementary agreement for re-schedulement of term loans and the OTS proposal offered by the Corporate Debtor. The Corporate Debtor's affidavit dated 21-11-2017, acknowledging the debt and offering an OTS proposal, was considered a clear acknowledgment of debt, extending the limitation period.The tribunal noted that the Corporate Debtor's acknowledgment of debt and the pending legal proceedings indicated a continuing acknowledgment of the debt. Therefore, the limitation period was extended, making the petition filed on 15-9-2017 within the extended limitation period.Conclusion:The tribunal concluded that the present IB Petition was filed within the extended limitation period due to the acknowledgment of debt by the Corporate Debtor. The petition was complete in all respects and not time-barred. Therefore, the petition filed under section 7 of the IBC, 2016, was admitted, and the CIRP was initiated against the Corporate Debtor. The petition was disposed of accordingly.