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 ... CIRP process - time limitation - acknowledgement of debt - Applicant has initiated proceedings before District Magistrate and The Debts Recovery Tribunal within the period of limitation or not - HELD THAT:- It is seen from the record that the date of default has been mentioned as 13.09.2013, which stood revived with the OTS proposal dated 01.08.2016 filed vide I.A. 1155/2016 before the DRT Pune, well within the three year period. Subsequently, another settlement proposal dated 07.03.2018 was accepted by the Bank on 27.03.2018, wherein a timeline was provided for the payment of the balance amount - the OTS proposal dated 01.08.2016 filed vide I.A. 1155/2016 falls within the ambit of ‘acknowledgement of debt’ as defined under Section 18 of the Limitation Act, 1963, which is further fructified by the admitted OTS dated 27.03.2018 again within three years of the previous proposal where the ‘debt’ is acknowledged to be ‘due and payable’. The ratio of the Hon’ble Supreme Court in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. [2021 (8) TMI 315 - SUPREME COURT] is squarely applicable to the facts of this case as there is a jural relationship between the ‘Corporate Debtor’ and the Respondent Bank and there is an ‘acknowledgement of debt’ vide the OTS dated 27.03.2018, which falls within the ambit of Section 18 of the Limitation Act, 1963. This Tribunal is of the considered view that the OTS proposal dated 01.08.2016 and the subsequent one on 27.03.2018 falls within the definition of the ambit of ‘acknowledgement of debt’ as envisaged under Section 18 of the Limitation Act, 1963 - Appeal 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.