2022 (4) TMI 942 - AT - Insolvency and Bankruptcy

Appellate Tribunal extends limitation period for Insolvency Application under Section 7

The Appellate Tribunal found that the Section 7 Application under the Insolvency & Bankruptcy Code, 2016 was not barred by limitation as the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - ddebt due and payable or not - time limitation - HELD THAT:- Having regard to the letter dated 18.11.2015 which acknowledges the debt amount due and payable to the tune of ₹ 20,58,29,912/-; the cheques dated 23.02.2017 issued by the Corporate Debtor to the Appellant herein for an amount of ₹ 16 crores which has been dishonoured; the acknowledgement of debt in the Reply issued by the Corporate Debtor dated 18.03.2017 which establishes the jural relationship between the parties as envisaged by the Hon’ble Supreme Court in the Case of Dena Bank (Now Bank of Baroda) Vs. C. Shivakumar Reddy & Anr. [2021 (8) TMI 315 - SUPREME COURT] and specifically the acknowledgment in the Balance Sheets in the Impugned Order which extends the limitation by three years, this Tribunal is of the earnest view that the Respondent has clearly acknowledged the ‘Debt’ due and payable to the Appellant and even proposed settlement of the accounts. Thus, the Application filed on 10.06.2020 is within three years of the last date of acknowledgment and hence is not barred by Limitation. Appeal allowed. Issues Involved:1. Whether the Section 7 Application under the Insolvency & Bankruptcy Code, 2016, was barred by limitation.2. Whether the acknowledgments of debt by the Corporate Debtor extended the period of limitation under Section 18 of the Limitation Act, 1963.Issue-Wise Detailed Analysis:1. Whether the Section 7 Application under the Insolvency & Bankruptcy Code, 2016, was barred by limitation:The Adjudicating Authority dismissed the Section 7 Application filed under the Insolvency & Bankruptcy Code, 2016, on the ground that it was barred by limitation. The Financial Creditor, M/s PEC Ltd, had financed the Corporate Debtor for procurement of iron ore lumps and sized ore under an Associateship Agreement dated 23.09.2008, which was later extended and modified. The Financial Creditor contended that the Corporate Debtor had acknowledged its liability to repay the amount on several occasions from 2013 to 2017. However, the Adjudicating Authority held that these acknowledgments were made beyond the three-year limitation period from the last agreement executed on 30.06.2013.2. Whether the acknowledgments of debt by the Corporate Debtor extended the period of limitation under Section 18 of the Limitation Act, 1963:The Appellate Tribunal examined whether the acknowledgments of debt by the Corporate Debtor extended the limitation period under Section 18 of the Limitation Act, 1963. The Financial Creditor provided evidence of various acknowledgments, including emails, letters, and dishonored cheques, which the Corporate Debtor had issued. The Appellate Tribunal referred to the Supreme Court judgments in Asset Reconstruction Company (India) Ltd V. Bishal Jaiswal and Dena Bank (now Bank of Baroda) Vs. C. Shivakumar Reddy and Another, which held that acknowledgments in balance sheets and other documents could extend the limitation period.The Tribunal noted that the Corporate Debtor had acknowledged the debt in a letter dated 18.11.2015, which extended the limitation period to 18.11.2018. Additionally, the dishonored cheques issued in January and February 2017 and the reply to the legal notice dated 18.03.2017 further acknowledged the debt. The Tribunal emphasized that the balance sheets reflecting the amounts due also constituted acknowledgments under Section 18 of the Limitation Act, 1963.The Tribunal concluded that the Section 7 Application filed on 10.06.2020 was within the extended limitation period and was not barred by limitation. Consequently, the Tribunal allowed the appeal, set aside the Impugned Order dated 10.11.2020, and remitted the matter to the Adjudicating Authority to proceed in accordance with the law.Conclusion:The Appellate Tribunal determined that the Section 7 Application was not barred by limitation due to multiple acknowledgments of debt by the Corporate Debtor, which extended the limitation period under Section 18 of the Limitation Act, 1963. The appeal was allowed, and the matter was remitted to the Adjudicating Authority for further proceedings.