2021 (9) TMI 930 - AT - Insolvency and Bankruptcy

Debt not time-barred due to acknowledgments, SBI authorized to initiate insolvency proceedings. Appeal dismissed.

Chand Prakash Mehra Versus Praveen Bansal Interim Resolution Professional of Silverton Spinners Limited, State Bank of India

The Tribunal upheld the Adjudicating Authority's decision that the debt was not time-barred, as acknowledgments reset the limitation period. It affirmed ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - NPA - debt was within time limitation or not - appellant claims that the said debt is time-barred and that State Bank of India could not have initiated proceedings under Section 7 of IBC - HELD THAT:- Section 7 of IBC provides that Financial Creditor either by itself or jointly with other Financial Creditors or any other person on behalf of Financial Creditor as may be notified by the Central Bank may file an Application for initiating Corporate Insolvency Resolution Process against a Corporate Debtor before the Adjudicating Authority when a default has occurred. Considering this, even if the State Bank of India was part of the consortium or there are documents executed between the parties, or there are circulars of RBI as to how Banks should try to help the defaulting debtors with CDR Packages and how date of NPA should be calculated, still in IBC for Section 7 of IBC, the material factor is that the State Bank of India is a Financial Creditor whose debt is outstanding and it was in default on the part of the Corporate Debtor and thus the State Bank of India has a right to move Application under Section 7 of IBC. The personal documents between the parties cannot take away such statutory right of the Bank to initiate proceedings. If the Lead Bank for any reason does not take steps or fails to take steps, the other Banks in the consortium cannot be left high and dry without any remedy, as Limitation Act does not differentiate on such count. It is clear that if that account of the Corporate Debtor with the State Bank of India became NPA on 15.01.2013 there is firstly acknowledgement in Letter dated 21st May, 2015 and then there is another acknowledgment vide letter dated 15.06.2016 as referred above. As such, Section 7 of IBC Application filed on 05th March, 2018 must be said to be within limitation - It is clear from Clause (a) of the Explanation of Section 18 of the Limitation Act that even if an acknowledgment is made to person other than a person entitled to the property or right, still it shall fall in the definition of Explanation below the Section 18 of the Limitation Act. The Adjudicating Authority rightly found the Application to be within limitation and has rightly admitted the Application filed by the State Bank of India - Appeal dismissed. Issues Involved:1. Whether the debt was barred by limitation.2. Whether the State Bank of India (SBI) had the authority to initiate proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC).3. Applicability of Section 18 of the Limitation Act, 1963.Issue-wise Detailed Analysis:1. Whether the debt was barred by limitation:The Corporate Debtor argued that the debt was time-barred, claiming the original amounts became Non-Performing Assets (NPA) on 15.01.2013, and the CDR Package failed in August 2015. However, the Adjudicating Authority found that the debt was within limitation based on acknowledgments in the correspondence and balance sheets of the Corporate Debtor. The Appellate Tribunal confirmed this finding, noting acknowledgments of debt in letters dated 21st May 2015 and 15th June 2016, which reset the limitation period. The Application under Section 7 of IBC filed on 5th March 2018 was thus within the limitation period as per Section 18 of the Limitation Act, 1963.2. Whether the State Bank of India (SBI) had the authority to initiate proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC):The Appellant contended that only the Lead Banker, Canara Bank, could initiate recovery or restructuring proceedings based on the Inter Se Agreement. However, the Tribunal emphasized Section 238 of IBC, which overrides any inconsistent provisions in other laws or instruments. Section 7 of IBC allows any Financial Creditor to initiate the Corporate Insolvency Resolution Process (CIRP) when a default occurs. The Tribunal held that SBI, as a Financial Creditor, had the statutory right to file the application under Section 7 of IBC, irrespective of the Inter Se Agreement or RBI guidelines.3. Applicability of Section 18 of the Limitation Act, 1963:The Tribunal referred to Section 18 of the Limitation Act, which provides that an acknowledgment of liability in writing before the expiration of the prescribed period resets the limitation period. The Tribunal cited recent Supreme Court judgments clarifying the applicability of Section 18 to IBC proceedings. The Corporate Debtor's letters to the banks acknowledging the debt on 21st May 2015 and 15th June 2016 were sufficient to reset the limitation period, making the application filed by SBI timely.Conclusion:The Tribunal dismissed the appeal, confirming the Adjudicating Authority's decision that the application was within the limitation period and that SBI had the right to initiate proceedings under Section 7 of IBC. The interim order preventing the constitution of the Committee of Creditors was lifted, and the period from 29th November 2019 to the date of the judgment was excluded for the purpose of Section 12 of IBC.