2022 (7) TMI 525 - AT - Insolvency and Bankruptcy

Tribunal Upholds NCLT Decision on Section 7 Application, Extends Limitation Period

The Tribunal dismissed the appeal, upholding the decision of the National Company Law Tribunal (NCLT), Mumbai, to admit the Section 7 Application filed by ... Limitation period under Limitation Act applicable to IBC proceedings - acknowledgement of debt under Section 18 of the Limitation Act - effect of One Time Settlement (OTS) as acknowledgment extending limitation - date of default versus date of NPA in proceedings under Section 7 of the IBC - admissibility of additional documents at the appellate stageLimitation period under Limitation Act applicable to IBC proceedings - acknowledgement of debt under Section 18 of the Limitation Act - effect of One Time Settlement (OTS) as acknowledgment extending limitation - date of default versus date of NPA in proceedings under Section 7 of the IBC - Whether the Section 7 application was barred by limitation or was revived/extended by acknowledgements and OTS thereby rendering the application maintainable. - HELD THAT: - The Tribunal applied the law as expounded by the Supreme Court in Laxmi Pat Surana and Dena Bank (now Bank of Baroda) to hold that proceedings under the Code are subject to the Limitation Act and that Section 18 operates to extend limitation where there is an acknowledgement in writing of liability before expiry of the prescribed period. The Tribunal found that the Corporate Debtor filed an OTS proposal (I.A.1155/2016 dated 01.08.2016) within three years and a subsequent OTS accepted by the Bank on 27.03.2018, which amounted to an acknowledgement of debt within the meaning of Section 18. The admitted OTS and related conduct thus revived/extended the limitation period and the application under Section 7 was not time-barred. The Tribunal expressly relied on the ratio that the expression 'default' (and not merely the NPA notification date) governs triggering of Section 7, and that acknowledgements or OTS proposals made within the limitation period bring Section 18 into play, producing a fresh period of limitation. [Paras 7, 8, 9, 12, 14]The Section 7 application was not barred by limitation because the OTS/proposals and related acknowledgements operated under Section 18 to extend/revive the limitation period; the Adjudicating Authority's admission was upheld.Admissibility of additional documents at the appellate stage - Whether the additional documents filed in I.A. No. 455 of 2021 should be taken on record at the appellate stage. - HELD THAT: - The Tribunal examined the nature of the additional documents and found the centerpiece-the OTS terms-is not disputed and is directly relevant to the limitation issue. Other documents (including the I.A. before DRT) were public or consequential to the OTS. The Tribunal concluded that admitting the OTS and related public documents would not cause prejudice and are material to decide the limitation question; accordingly they may be taken on record. [Paras 2, 11]I.A. No. 455 of 2021 permitted to take on record the OTS and relevant public documents; no prejudice would be caused by their admission.Final Conclusion: Applying the Supreme Court precedents, the Tribunal held that the OTS and related acknowledgements fell within Section 18 of the Limitation Act and revived the limitation; the Adjudicating Authority rightly admitted the Section 7 application. The appeal is dismissed. Issues Involved:1. Limitation Period for Filing Section 7 Application.2. Admissibility of Additional Documents.3. Acknowledgment of Debt under Section 18 of the Limitation Act, 1963.4. Impact of One Time Settlement (OTS) Proposals on Limitation Period.Detailed Analysis:1. Limitation Period for Filing Section 7 Application:The primary issue was whether the Section 7 Application filed by the Bank of Baroda was within the limitation period. The Appellant argued that the date of default was 01.07.2013, and the Non-Performing Asset (NPA) date was 22.09.2013, making the application filed on 11.07.2019 barred by limitation. The Tribunal referred to the Supreme Court judgments in 'Laxmi Pat Surana v. Union Bank of India & Anr.' and 'Dena Bank (now Bank of Baroda) v. C. Shivkumar Reddy and Anr.', which clarified that the limitation period could be extended by an acknowledgment of debt under Section 18 of the Limitation Act, 1963.2. Admissibility of Additional Documents:The Respondent Bank sought to introduce additional documents, which the Appellant opposed. The Tribunal decided to take these documents on record, noting that they included the One Time Settlement (OTS) proposal and other relevant communications, which were crucial for determining the acknowledgment of debt. The Tribunal found no substantial reason to exclude these documents as they were pertinent to the case.3. Acknowledgment of Debt under Section 18 of the Limitation Act, 1963:The Tribunal examined whether the OTS proposals constituted an acknowledgment of debt that would extend the limitation period. It was noted that the OTS proposal dated 01.08.2016 and the subsequent proposal on 27.03.2018 fell within the ambit of Section 18, thereby extending the limitation period. The Tribunal cited the Supreme Court's judgment in 'Dena Bank (now Bank of Baroda) v. C. Shivkumar Reddy and Anr.' to support this view, emphasizing that acknowledgment of debt must occur before the expiration of the original limitation period.4. Impact of One Time Settlement (OTS) Proposals on Limitation Period:The Tribunal found that the OTS proposals made by the Corporate Debtor, specifically the ones dated 01.08.2016 and 27.03.2018, constituted valid acknowledgments of debt under Section 18 of the Limitation Act. These acknowledgments effectively reset the limitation period, making the Section 7 Application filed by the Bank of Baroda timely and within the extended limitation period.Conclusion:The Tribunal dismissed the appeal, upholding the decision of the National Company Law Tribunal (NCLT), Mumbai, to admit the Section 7 Application filed by the Bank of Baroda. It concluded that the acknowledgments of debt through the OTS proposals extended the limitation period, making the application timely. The additional documents were admitted as they were relevant to the case and did not prejudice the Appellant. The Tribunal relied on the Supreme Court's interpretations of the Limitation Act and the Insolvency and Bankruptcy Code to reach its decision.