2021 (5) TMI 412 - Tri - Insolvency and Bankruptcy

Claim Dismissed: Rent Arrears Application Failed to Meet Limitation Period

The Tribunal dismissed the Applicant's claim seeking to set aside the rejection by the Respondent under Section 60(5) of the Insolvency and Bankruptcy ... Application of the law of limitation to claims preferred before the IRP/RP during CIRP - time barred claims cannot be revived by filing claim in CIRP - inadmissibility of claims founded on unregistered instruments affecting immovable property - challenge to rejection of claim by IRP under Section 60(5) of the IBC - role of IRP in admitting or rejecting claims under the CIRP process and Regulation 9AApplication of the law of limitation to claims preferred before the IRP/RP during CIRP - time barred claims cannot be revived by filing claim in CIRP - Whether the claim for arrears of rent (relating to period from November 2013) was barred by limitation and therefore inadmissible in the CIRP. - HELD THAT: - The Tribunal examined the claim documents and noted that no acknowledgement or document was placed on record after 21.09.2016 to bring the claim within the period of limitation. Having regard to the Supreme Court's view in B.K. Educational Services and the Insolvency Law Committee's report, the Limitation Act, 1963 applies to proceedings under the Code and to claims preferred before the IRP/RP. A claim which is time barred on the date of initiation of CIRP cannot be revived by filing a claim in the CIRP. Applying these principles to the materials, the Tribunal found the asserted arrears (from 2013) to be hopelessly barred by limitation and that the applicant had not shown any entitlement to extend or revive the limitation period by means of acknowledgment or other admissible material. [Paras 11, 13, 14, 15, 16]The claim was time barred and therefore inadmissible in the CIRP.Inadmissibility of claims founded on unregistered instruments affecting immovable property - role of IRP in admitting or rejecting claims under the CIRP process and Regulation 9A - challenge to rejection of claim by IRP under Section 60(5) of the IBC - Whether the IRP's rejection of the applicant's claim (on grounds including unregistered lease, delay in submission, lack of supporting documents and demand evidence) warranted interference under Section 60(5). - HELD THAT: - The IRP had rejected the claim citing multiple deficiencies: delay in submission of Form F, the lease deed of 03.01.2011 being unstamped and unregistered, absence of documentary evidence of demand or satisfaction of claim, and lack of bank statements or adjudicatory orders as required by Regulation 9A(2)(iii). The Tribunal, after considering the materials and the absence of any post 2016 acknowledgment or supporting adjudicatory material, concluded that the IRP's rejection did not call for interference. While the unregistered lease was noted as a deficiency, the determinative ground was the bar of limitation and the insufficiency of supporting evidence to establish a subsisting, enforceable claim within the CIRP timeframe. [Paras 9, 10, 11, 16, 17]The IRP's rejection of the claim was upheld and the challenge under Section 60(5) is dismissed.Final Conclusion: The Tribunal held that the applicant's claim for rent arrears (relating to 2013-2019) was time barred and inadequately supported; the IRP rightly rejected the claim under the CIRP process and the application under Section 60(5) is dismissed without cost. Issues:Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking to set aside the rejection of the claim by the Respondent.Detailed Analysis:1. Claim for Rent Arrears:- Applicant claimed rent arrears from the Corporate Debtor for a period of 62 months, totaling to Rs. 98,01,683/-, with an additional interest of Rs. 56,15,000/-.- Applicant submitted that the Corporate Debtor failed to pay rent from November 2013 to January 2019, despite commitments to clear the dues.- The Respondent rejected the claim citing that the lease deed was unregistered, making the claim inadmissible as per Section 17(b) of the Registration Act, 1908.2. Limitation Period:- Respondent argued that the claim from November 2013 was time-barred as there was no communication from the Applicant after 21.09.2016, and the CIRP against the Corporate Debtor was initiated on 05.05.2020.- The Tribunal noted that the claim fell within the period of limitation, and the Applicant failed to provide any document to show acknowledgment or pursuit of the arrears after 2016.3. Applicability of Limitation Act:- The Tribunal referred to the decision of the Supreme Court in B.K. Educational Services case, highlighting the applicability of the Limitation Act to claims made under the IBC, 2016.- Emphasized that the Code aims to prevent the revival of time-barred debts and claims, and the Limitation Act applies from the inception of the IBC, 2016.4. Dismissal of Application:- The Tribunal dismissed the Applicant's claim, stating that the rejection by the Respondent was justified and did not require interference.- Due to the claim being time-barred and beyond the limitation period, the Applicant could not enforce the claim under Section 60(5) of the IBC, 2016.- The Application against the rejection of the claim was dismissed without any costs incurred by either party.In conclusion, the Tribunal upheld the rejection of the claim by the Respondent due to the claim being time-barred and falling outside the limitation period, emphasizing the importance of adhering to the provisions of the Limitation Act in insolvency proceedings.