2020 (10) TMI 964 - Tri - Insolvency and Bankruptcy

Petition Rejected for Late Filing, Doesn't Affect Other Rights.

The Tribunal rejected the petition due to it being filed beyond the limitation period stipulated by the Supreme Court's ruling in Babulal Vardharji ... Limitation under the Insolvency and Bankruptcy Code - Date of default criterion for initiation of CIRP - Acknowledgement of debt in balance sheets and section 18 of the Limitation Act - Binding effect of Supreme Court precedent on limitation (Babulal Vardharji Gurjar)Limitation under the Insolvency and Bankruptcy Code - Acknowledgement of debt in balance sheets and section 18 of the Limitation Act - Date of default criterion for initiation of CIRP - Binding effect of Supreme Court precedent on limitation (Babulal Vardharji Gurjar) - Whether the section 7 petition is barred by limitation despite alleged acknowledgements of liability in the corporate debtor's balance sheets. - HELD THAT: - The Tribunal examined the date of default pleaded (21.09.2013) and the reliance placed by the Financial Creditor on entries in the corporate debtor's balance sheets for the years ending 31.03.2013 to 31.03.2018 as constituting acknowledgements that would extend limitation under section 18 of the Limitation Act. The Tribunal applied the binding law laid down by the Hon'ble Supreme Court in Babulal Vardharji Gurjar, which addressed the same contention and upheld the date-of-default approach to limitation under the Code, holding that continuous entries in balance sheets do not revive the right to initiate CIRP where the petition is otherwise time barred. In light of that precedent, and noting the parallel facts of this case, the Tribunal found the section 7 application fails the test of limitation and the authorities relied upon by the Financial Creditor could not be taken to displace the Supreme Court's decision. [Paras 8, 9]The section 7 petition is barred by limitation and is rejected; the dismissal does not express any opinion on merits and the petitioner's remedies before other forums remain unimpaired.Final Conclusion: The Tribunal, following the Supreme Court's decision in Babulal Vardharji Gurjar, holds that the section 7 petition is time barred despite alleged acknowledgements in balance sheets and rejects the petition while preserving the petitioner's rights before other fora. Issues Involved:1. Jurisdiction of the Tribunal.2. Default in payment by the Corporate Debtor.3. Validity of the Financial Creditor's claim.4. Limitation period for filing the petition.5. Suppression of material facts by the Financial Creditor.6. Applicability of Section 18 of the Limitation Act, 1963.Issue-wise Detailed Analysis:1. Jurisdiction of the Tribunal:The Tribunal established its jurisdiction to hear the petition as the Corporate Debtor is registered in Maharashtra, falling under the purview of the Mumbai Bench of the National Company Law Tribunal (NCLT).2. Default in Payment by the Corporate Debtor:The Financial Creditor claimed that the Corporate Debtor failed to repay a loan amounting to Rs. 1,97,96,082 as of 21.09.2013. The Corporate Debtor contested this claim, asserting that the amount was repaid and questioned the Financial Creditor’s credentials and the source of funds.3. Validity of the Financial Creditor's Claim:The Corporate Debtor denied the Financial Creditor's averments and highlighted that the matter was already under dispute in a civil suit (Suit No. 225/2013) before the Second Joint Civil Judge (Senior Division), Amravati. The Financial Creditor's application for attachment before judgment was dismissed, and the appeal was also dismissed by the Bombay High Court. The Corporate Debtor argued that the Financial Creditor suppressed these material facts from the Tribunal.4. Limitation Period for Filing the Petition:The Tribunal examined whether the petition was filed within the prescribed limitation period. The Financial Creditor argued that acknowledgments of liability in the Corporate Debtor’s balance sheets extended the limitation period under Section 18 of the Limitation Act, 1963. However, the Tribunal referred to the Supreme Court’s judgment in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Pvt Ltd, which clarified that the date of default is crucial for determining the limitation period. Since the default date was 21.09.2013, the petition filed in 2018 was beyond the three-year limitation period.5. Suppression of Material Facts by the Financial Creditor:The Corporate Debtor accused the Financial Creditor of suppressing the facts regarding the civil suit and the High Court’s dismissal of the appeal. The Tribunal noted this but focused primarily on the limitation aspect.6. Applicability of Section 18 of the Limitation Act, 1963:The Financial Creditor relied on acknowledgments in the Corporate Debtor’s balance sheets to argue for an extension of the limitation period. The Tribunal, however, followed the Supreme Court’s ruling in Babulal Vardharji Gurjar, which held that such acknowledgments do not extend the limitation period for initiating Corporate Insolvency Resolution Process (CIRP) under the Insolvency & Bankruptcy Code (IBC).Decision:The Tribunal concluded that the petition failed the test of limitation as per the Supreme Court’s judgment in Babulal Vardharji Gurjar. Consequently, the application was rejected. The Tribunal clarified that this decision should not prejudice the petitioner’s rights in any other judicial forum. The Court Officer was directed to communicate the order to the parties as per Section 7(5)(b) of the IBC.