2021 (11) TMI 477 - AT - Insolvency and Bankruptcy

Tribunal extends limitation period, deems debt acknowledgment timely, directs Adjudicating Authority to proceed accordingly.

The Tribunal allowed the appeal, setting aside the Adjudicating Authority's order that dismissed the application as time-barred. The Tribunal found that ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The effect of Section 18 of the Limitation Act, 1963, is that an acknowledgement of liability in respect of a right made in writing and signed by the Debtor before expiration of the prescribed period for a Suit or Application would result in a fresh period of Limitation being computed from the time when acknowledgement was so signed. It is seen from the Ledger Account reproduced in para 7 read with Annexure-6, that an amount of ₹ 32,27,708/- was due and liable to be paid by the Respondent to the Appellant. It is relevant to note that the part payment was made on 23.05.2017, the email sent by the ‘Corporate Debtor’ is dated 10.05.2018 and the Application was filed in November, 2019 well within the Limitation period - It is significant to mention at this stage that on 23.02.2019, the Appellant issued a Demand Notice dated 25.02.2019 under Section 8 of the Code which was delivered to the ‘Corporate Debtor’ on 01.03.2019 but there was no Reply. The part payment made on 17.05.2017 read together with the Ledger Account given by the ‘Corporate Debtor’ on 10.05.2018 vide email and also the Ledger Account on Annexure A-6, we are of the considered view that the right to sue has accrued. Section 18 of the Limitation Act, 1963 posits that a fresh period of Limitation shall be computed from the date when the party against whom the right is claimed acknowledges its liability - the fresh period of Limitation is required to be computed from the date of acknowledgement of debt by the principal borrower and part payment made on 17.05.2017 read with the Ledger Account and the email dated 10.05.2018 evidences that the Application filed on 2019 is well within the period of Limitation. It is pertinent to mention that the ‘Corporate Debtor’ has not replied to the Demand Notice issued under Section 8 of the Code. Appeal allowed - decided in favor of appellant. Issues Involved1. Limitation Period for Filing the Application2. Acknowledgment of Debt3. Running Account Between Parties4. Locus Standi of Proprietorship Firm to Initiate CIRP5. Compliance with Section 8 of the Insolvency and Bankruptcy Code, 2016Issue-Wise Detailed Analysis1. Limitation Period for Filing the ApplicationThe primary issue was whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. The Adjudicating Authority dismissed the application, stating it was filed beyond the three-year limitation period from the date of default on the invoices, which ranged from 19.05.2015 to 09.12.2016. The Appellant argued that the limitation period should be calculated from 10.05.2018, the date of an email acknowledgment of debt from the Corporate Debtor, making the application timely.2. Acknowledgment of DebtThe Appellant contended that the email dated 10.05.2018 from the Corporate Debtor, which included a statement of account, constituted an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The Respondent countered that there was no express acknowledgment of debt, and the email could not be considered as such. The Tribunal found that the email and the part payment made on 17.05.2017 did indeed constitute an acknowledgment of debt, thereby extending the limitation period.3. Running Account Between PartiesThe Respondent argued that there was no running account between the parties, and the part payment made on 17.05.2017 should not be construed as payment towards the invoices. However, the Tribunal examined the ledger account and email communications, concluding that there were continuous transactions between the parties, establishing a running account.4. Locus Standi of Proprietorship Firm to Initiate CIRPThe Respondent questioned the locus standi of the Appellant, a proprietorship firm, to initiate Corporate Insolvency Resolution Process (CIRP). The Tribunal referred to Section 2(f) of the Insolvency and Bankruptcy Code, which explicitly allows proprietorship firms to initiate CIRP proceedings, thereby confirming the Appellant's locus standi.5. Compliance with Section 8 of the Insolvency and Bankruptcy Code, 2016The Appellant issued a Demand Notice under Section 8 of the Code on 25.02.2019, which the Corporate Debtor did not reply to. The Tribunal noted that the Respondent did not deny receiving the notice and failed to provide any reasons for not replying. This non-response was seen as an implicit acknowledgment of the debt.AssessmentThe Tribunal concluded that the part payment made on 17.05.2017, coupled with the email dated 10.05.2018, extended the limitation period, making the application filed in November 2019 timely. The Tribunal also noted the lack of response to the Section 8 notice as further evidence of the debt's acknowledgment. Consequently, the Tribunal allowed the appeal, setting aside the Adjudicating Authority's order and directing it to proceed in accordance with the law.