2021 (6) TMI 393 - Tri - Insolvency and Bankruptcy

Tribunal Upholds Rejection of Claim: Importance of Compliance and Limitation Act in Insolvency

Kuntal R. Amin, Co-owner of Rasu Kumaki Versus B. Parameshwara Udpa, IRP of Easun Reyrolle Limited

The Tribunal upheld the rejection of the claim under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, emphasizing compliance with statutory ... Enforcement of a claim - time barred debt or not - applicability of Moratorium on such enforcement - HELD THAT:- The Applicant has not placed on record any document after 08.07.2014, in order to show that the claim of the Applicant falls within the period of Limitation. It is seen that the CIRP in relation to the Corporate Debtor was initiated on 05.05.2020 and the claim of the Applicant relates to the year 2014. By taking into consideration the provisions of Section 238-A of IBC, 2016 the debt is hopelessly barred by limitation as rightly pointed out by Learned Counsel for Respondent and also Learned Counsel for Applicant has not placed on record any document to show that he has obtained any acknowledgment after the year 2014 - It seems that the Applicant has been indolent after the year 2014 and has not pursued the alleged arrears of rent, if any, which is payable by the Corporate Debtor by diligently prosecuting the Corporate Debtor before any forum. It is also relevant to refer to the decision of the Hon'ble Supreme Court of India, in the matter of B.K. Educational Services Private Limited Vs. Parag Gupta And Associates [2018 (10) TMI 777 - SUPREME COURT] wherein it has held that Limitation Act is applicable since the inception of the Code while posing itself with a query as to whether the Limitation Act, 1963 will apply to Applications that are made under Section 7 and or Section 9 of the Code on and from its commencement on 01.12.2016 to 06.06.2018 (date of amendment of insertion of Section 238-A coming into effect). The applicability of the Limitation Act, 1963 during the Period of moratorium and the computation of the period of Limitation, specified for any Suit or Application by or against the Corporate Debtor, is required no doubt to be excluded and which exclusion points out that as compared to ordinary laws, IBC, 2016 is a separate Code by itself and being of recent origin (2016) is still in its nascent stage and evolving what with several amendments effected by the Legislature within 4 years and 3 months of its existence in the Statue Books - The Applicant, in the present case, would not be in a position to approach the Civil Court by way of a suit for recovery of money, as the claim amount admittedly falls beyond the prescribed period of limitation and thereby by filing the present Application under Section 60(5) of IBC, 2016, cannot seek to enforce a claim, which is time barred as per the provisions of the Limitation Act, 1963 on the date of initiation of the CIRP itself. The Application as filed by the Applicant is liable to be dismissed. Issues:Application for setting aside the rejection of claim under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.Analysis:1. The Applicant sought to set aside the rejection of the Respondent dated 19.08.2020 and direct acceptance of the claim. The Applicant claimed rent arrears from the Corporate Debtor, supported by lease deed and acknowledgment of damages. The total amount claimed was &8377; 1,41,92,756.2. The Respondent contended that the lease deed was unregistered, making the claim inadmissible as per Section 17(b) of the Registration Act, 1908. Additionally, the Respondent argued that claims from March 2013 to July 2014 were time-barred due to lack of communication during that period.3. The Respondent rejected the claim citing various reasons, including discrepancies in the submitted documents and lack of evidence supporting the damages claimed. The rejection was based on non-compliance with procedural requirements and absence of proper documentation.4. The Tribunal analyzed the sequence of events and documents submitted by the Applicant. It noted the absence of documents post-2014 to establish the claim within the limitation period. The Tribunal highlighted the importance of adherence to the Limitation Act in insolvency proceedings.5. Referring to the Supreme Court decision in B.K. Educational Services case, the Tribunal emphasized the applicability of the Limitation Act to insolvency applications. It underscored the need to prevent time-barred debts from being revived under the Insolvency and Bankruptcy Code.6. Ultimately, the Tribunal upheld the rejection of the claim, stating that the Applicant could not enforce a time-barred claim under the provisions of the Limitation Act, 1963. The Application to set aside the rejection was dismissed, emphasizing the importance of complying with statutory limitations in insolvency proceedings.