2021 (5) TMI 873 - AT - Insolvency and Bankruptcy

Appeal dismissed, debt acknowledgment valid within limitation period under Insolvency and Bankruptcy Code

Mrs. Manasi Indrajit Wadkar Suspended Director of Krishna Knitwear Technology Limited Versus Union Bank of India (Formerly Andhra Bank), Krishna Knitwear Technology Limited

The Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to admit the application under Section 7 of the Insolvency and ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditor - time limitation - existence of debt and dispute or not - HELD THAT:- The Application under Section 7 (Annexure A-2 Page 77) is stated to have been filed before the Adjudicating Authority on 21st May, 2018. It appears that effort at restructuring did not give desired result and the NPA was declared with back date of 29th June, 2012. Thus there are documents on record even subsequent to 29th June, 2012 like Second Amendatory Agreement dated 13th March, 2014. The Application under Section 7 shows Demand Notices being issued under SARFAESI Act on 31st January, 2015 and 19th June, 2016. It appears that O.A. 150/2016 was also filed before the DRT - The reply which was sent in response to the SARFAESI Notice is within three years of date of NPA dated 29th June, 2012. Then there is document filed with the Reply at Page 177 which is letter from Corporate Debtor to the Andhra Bank dated 05th April, 2016 where there is reference to the OTS Proposal and that the Corporate Debtor proposed to pay the outstanding and due balances as on date of NPA, excluding reversal of interest, penal interest, other charges etc., if any. The Learned Counsel for the Appellant has argued that before the Adjudicating Authority there was only balance sheet of 2016-17 and not the balance sheet of 2017-18 or the balance sheet of 2015-16. These are technical grounds raised. The authenticity of such balance sheets has not been questioned and for technical reasons, we do not think it to be in the interest of justice to ignore such documents. There are no financial debt due and in default was time barred or that Adjudicating Authority committed any error when the Application under Section 7 was admitted - appeal dismissed. Issues Involved:1. Whether the debt due and default were within the limitation period.2. Whether the Corporate Debtor acknowledged the debt within the prescribed period under Section 18 of the Limitation Act.3. Whether the balance sheets and other documents relied upon by the Respondent Bank were sufficient to establish acknowledgment of debt.4. Whether the application under Section 7 of the Insolvency and Bankruptcy Code (IBC) was rightly admitted by the Adjudicating Authority.Issue-Wise Detailed Analysis:1. Limitation Period:The core issue was whether the debt due and default were within the limitation period. The Appellant argued that the account was declared NPA on 29th June 2012, and no acknowledgment of debt was made within three years as required under Section 18 of the Limitation Act, thus making the claim time-barred. The Respondent Bank countered this by presenting various documents, including restructuring agreements and trust agreements executed post-29th June 2012, and argued that the debt was within limitation.2. Acknowledgment of Debt:The Respondent Bank presented letters dated 23rd March 2015 and 5th April 2016 from the Corporate Debtor, which were considered acknowledgments under Section 18 of the Limitation Act. The Tribunal noted that these documents were within three years of the NPA date and thus supported the claim that the debt acknowledgment was within the limitation period.3. Balance Sheets and Other Documents:The Respondent Bank relied on balance sheets of 2015-16 and 2017-18, which were signed by the directors of the Corporate Debtor, to establish acknowledgment of debt. The Tribunal acknowledged these documents and referenced judgments from the Hon'ble Supreme Court, which allowed reliance on balance sheets for acknowledgment of debt. The Appellant's argument that only the balance sheet of 2016-17 was filed before the Adjudicating Authority was considered a technical ground and was dismissed.4. Admission of Section 7 Application:The Tribunal found that the application under Section 7 of the IBC was rightly admitted by the Adjudicating Authority. The Tribunal referenced the Hon'ble Supreme Court's judgment in 'Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-operative Bank Ltd and Anr.', which clarified the applicability of Sections 18 and 19 of the Limitation Act to proceedings under the IBC. The Tribunal concluded that the financial debt was not time-barred and upheld the Adjudicating Authority's decision to admit the application.Conclusion:The Tribunal dismissed the appeal, finding no substance in the Appellant's arguments. The application under Section 7 of the IBC was within the limitation period, and the debt acknowledgment by the Corporate Debtor was valid. The Adjudicating Authority's decision to admit the application was upheld, and no orders as to costs were made.