Adjudicating Authority Upholds Section 7 Application under Insolvency Code despite NPA, Acknowledgment Extends Limitation

The Adjudicating Authority admitted the Section 7 Application under the Insolvency and Bankruptcy Code, 2016 by the Financial Creditor against the Corporate Debtor, despite the NPA declaration in 2016. The Corporate Debtor's ongoing payments until September 2019 indicated acknowledgment of the debt, allowing the Application to proceed. The Tribunal upheld the decision, considering materials from the Rejoinder Affidavit as part of the pleadings. The Tribunal also clarified the acknowledgment of liability under Section 18, extending the limitation period due to acknowledgment demonstrated in this case, leading to the dismissal of the Appeal.

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Issues:
- Admissibility of Section 7 Application under the Insolvency and Bankruptcy Code, 2016 based on the timeline of NPA declaration and subsequent payments made by the Corporate Debtor.
- Consideration of materials in the Rejoinder Affidavit by the Adjudicating Authority.
- Interpretation of acknowledgment of liability under Section 18 of the Code in relation to the timeline for filing the Section 7 Application.

Analysis:
1. The appeal was filed against the Adjudicating Authority's Order admitting the Section 7 Application under the Insolvency and Bankruptcy Code, 2016 by the Financial Creditor. The Financial Creditor extended a term loan to the Corporate Debtor, classified as 'NPA' on 29.06.2016, leading to the Section 7 Application filed on 06.12.2019. The Corporate Debtor argued that the Application was time-barred due to the delay in filing after the NPA declaration. However, the Adjudicating Authority found that payments made by the Corporate Debtor until 02.09.2019 indicated ongoing acknowledgment of the debt, thus not barring the Application by time.

2. The Appellant challenged the Adjudicating Authority's reliance on the materials presented in the Rejoinder Affidavit, arguing that such information should not have been considered. The Tribunal disagreed, stating that the Rejoinder-Affidavit forms part of the pleadings submitted before the Adjudicating Authority. The Section 7 Application itself contained a Customer Account Ledger Report from 31.12.2010 to 04.11.2019, reflecting payments made by the Corporate Debtor until 02.09.2019. As these payments were duly recorded, the Adjudicating Authority's decision was upheld.

3. The Appellant raised the issue of acknowledgment of liability under Section 18 of the Code, citing a Supreme Court judgment regarding deficient pleading and acknowledgment. However, the Tribunal differentiated the present case from the cited judgment, emphasizing that the Rejoinder-Affidavit contained clear facts regarding acknowledgment, and the Section 7 Application detailed payments made by the Corporate Debtor. Referring to another Supreme Court judgment, the Tribunal clarified that if there is an acknowledgment within the meaning of Section 18, the limitation period is extended. As the present case demonstrated acknowledgment, the Application filed on 06.12.2019 was deemed timely, leading to the dismissal of the Appeal.

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