2021 (4) TMI 302 - AT - IBC

Appeal Dismissed: Debt Acknowledgments Extend Limitation Period Under IBC; Application Admitted, Tribunal Affirms.

The Appellate Tribunal dismissed the appeal, affirming the Adjudicating Authority's decision to admit the application under Section 7 of the IBC. The ... Limitation under the Limitation Act, 1963 - acknowledgement under Section 18 of the Limitation Act - application of the Limitation Act to IBC proceedings (Section 238A) - SARFAESI/DRT proceedings and computation of limitation - admission of an application under Section 7 of the IBCLimitation under the Limitation Act, 1963 - acknowledgement under Section 18 of the Limitation Act - SARFAESI/DRT proceedings and computation of limitation - admission of an application under Section 7 of the IBC - Whether the Section 7 application filed by the Financial Creditor on 06.01.2020 was barred by limitation - HELD THAT: - The Tribunal accepted the respondent bank's contention that documents on record (including OTS proposals, settlement requests and the balance-sheet entry showing admission of debt by the Board of Directors on 18.01.2017) constituted acknowledgements of liability which, under Section 18 of the Limitation Act, operate to commence a fresh period of limitation provided the acknowledgement is made before the expiry of the earlier period. The Tribunal applied the principle that the Limitation Act applies mutatis mutandis to proceedings under the IBC in view of Section 238A and relied on the Supreme Court's reasoning in Sesh Nath Singh that periods spent pursuing remedies such as SARFAESI and proceedings before the DRT can be relevant in computing limitation and that a court/tribunal may condone delay even in the absence of a formal application under Section 5 where sufficient cause is shown. In the factual matrix, the series of acknowledgments and settlement communications, together with the recorded admission in the 2014-15 financial statement filed/approved in January 2017, led the Tribunal to conclude that the Section 7 petition filed on 06.01.2020 could not be treated as time-barred. [Paras 7, 8]Application under Section 7 was not barred by limitation; appeal dismissed.Final Conclusion: The Tribunal upheld admission of the Section 7 petition, finding the Limitation Act (including Section 18 acknowledgements and the application of limitation principles to IBC proceedings) applicable and that the documents on record extended or restarted limitation; the appeal was dismissed with no order as to costs. Issues:1. Admittance of Application under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC) based on debt being time-barred.2. Consideration of Acknowledgments of debts by the Corporate Debtor and their impact on the period of limitation.3. Application of Section 5, 14, and 18 of the Limitation Act, 1963 to proceedings under the IBC.Issue 1: Admittance of Application under Section 7 of IBC based on debt being time-barred:The Appellant, a director of the Corporate Debtor, challenged the admission of the Application under Section 7 of IBC by the Adjudicating Authority, claiming the debt was time-barred. The Appellant argued that the debt became a Non-Performing Asset (NPA) in 2010, and the application was filed in 2020, exceeding the limitation period under the Limitation Act, 1963. However, the Adjudicating Authority, referring to previous judgments, held that the application was within limitation, considering SARFAESI Proceedings and demand notices issued by the Financial Creditor.Issue 2: Consideration of Acknowledgments of debts by the Corporate Debtor:The Respondent Bank relied on acknowledgments of debts by the Corporate Debtor, including OTS Proposals and settlement requests, to argue that these actions extended the period of limitation under Section 18 of the Limitation Act. The Bank presented various documents, such as balance sheets and filings with the Registrar of Companies, to demonstrate the acknowledgment of debts by the Corporate Debtor. The Court considered these acknowledgments in light of the Supreme Court's observations on acknowledgment of liabilities and its impact on the limitation period.Issue 3: Application of Section 5, 14, and 18 of the Limitation Act to IBC proceedings:The Court referenced the Supreme Court's observations on the applicability of Section 5, 14, and 18 of the Limitation Act to proceedings under the IBC. It noted that Section 238A of the IBC makes the provisions of the Limitation Act applicable to NCLT and NCLAT proceedings. Acknowledging the importance of acknowledgments of debts and the commencement of fresh limitation periods, the Court emphasized that the provisions of the Limitation Act should be applied mutatis mutandis to IBC proceedings. The Court concluded that the Application under Section 7 was not barred by limitation, considering the acknowledgments of debts and relevant provisions of the Limitation Act.In conclusion, the Appellate Tribunal dismissed the Appeal, finding no merit in the challenge raised by the Appellant regarding the time-barred debt. The Tribunal highlighted the significance of acknowledgments of debts and the application of the Limitation Act provisions to IBC proceedings in determining the admissibility of the Application under Section 7.