2021 (1) TMI 270 - Tri - Insolvency and Bankruptcy

Dismissal of CIRP Application under Section 7: Importance of Meeting Limitation Criteria

The application seeking initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016 was dismissed ... 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 - HELD THAT:- In the part-IV of the application, it is mentioned that the date of default is 06.08.2012 i.e. the date of the NPA and it is mentioned that total days of default are 640 days calculated from 31.03.2018. We also notice that the application was filed on 26.02.2020 - Also, the agreement for restructuring of credit facility was executed on 29.04.2014 between the Corporate Debtor and the Financial Creditors bank. Therefore, the contention of the applicant is that although the NPA was declared on 06.08.2012, the Corporate Debtor within the period of three years had acknowledged the debt and restructuring of credit facility was arrived between the Corporate Debtor and the Financial Creditor within the period of three years. The heading of the document is status of plant and repayment of loans and from the plain reading of the averment made in this document, it is noticed that there is no clear cut acknowledgment as it was in the settlement agreement dated 29.04.2014 - when we consider the letter dated 24.03.2017 upon which the applicant has placed reliance, we are of the considered view that this letter would not be treated as acknowledgement of debt under Section 18 of the Limitation Act. Admittedly the date of default is the date of NPA - If we accept the contention of the Ld. Counsel for the applicant that within a period of three years from the date of NPA, the loan was restructured by the restructuring settlement agreement dated 29.04.2014 then, the limitation shall run from 29.04.2014 but we are unable to accept the contention of the applicant, that again during the period of three years vide letter dated 24.03.2017, there was acknowledgement of debt. In our considered view, that letter was regarding the status of the plant and not an acknowledgement of debt as it was earlier done by settlement agreement dated 29.04.2014, which is at page 475 of the application. Thus, the present application is barred by limitation - application dismissed. Issues:- Application filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.- Default in repayment of dues by the Corporate Debtor to the Financial Creditor.- Consideration of documents and submissions to determine the timeliness of the application.- Analysis of acknowledgments of debt and restructuring agreements in relation to the Limitation Act.- Refusal of the prayer to issue notice based on the limitation period.Analysis:1. The application was filed seeking initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016, due to the Corporate Debtor's inability to repay its financial debt to the Financial Creditor.2. The Financial Creditor provided credit facilities to the Corporate Debtor, which were subsequently renewed and secured by various securities. Despite repeated attempts to regularize the account, the Corporate Debtor failed to meet its payment obligations, leading to the account being classified as a Non-Performing Asset (NPA).3. The application included details of agreements for restructuring credit facilities and acknowledgments of debt by the Corporate Debtor. The timeline of events, including the date of default, restructuring agreements, and acknowledgments, was crucial in determining the timeliness of the application.4. The Tribunal considered the provisions of Section 18 of the Limitation Act regarding acknowledgments of debt in writing. It analyzed the documents provided by the applicant, focusing on whether the acknowledgments met the legal criteria for extending the limitation period for initiating proceedings.5. Referring to a relevant legal precedent, the Tribunal emphasized that the date of default, in this case, the NPA declaration, marked the starting point for calculating the limitation period. The Tribunal scrutinized the restructuring agreements and acknowledgments to ascertain if they constituted valid acknowledgments of debt within the statutory timeframe.6. After careful consideration, the Tribunal concluded that the applicant's submissions did not meet the criteria for extending the limitation period. Therefore, the application was deemed barred by limitation, leading to the dismissal of the prayer to issue notice upon the Corporate Debtor.7. The judgment highlights the significance of adherence to statutory timelines and legal requirements in insolvency proceedings, emphasizing the need for clear and unambiguous acknowledgments of debt to validate claims within the limitation period.