Appeal Dismissed: Acknowledgments of Debt Extend Limitation Period

The appeal challenging the application filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code (IBC) on grounds of limitation was dismissed. The Adjudicating Authority found that the acknowledgments of debt by the Corporate Debtor extended the limitation period, allowing the application to be considered timely. The Tribunal upheld the order admitting the application and initiating the Corporate Insolvency Resolution Process (CIRP), emphasizing that the acknowledgments of debt within the prescribed period validated the application.

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Issues Involved:
1. Limitation Period under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Acknowledgment of Debt and its Impact on Limitation Period.
3. Validity of the Application Filed by the Financial Creditor.

Detailed Analysis:

1. Limitation Period under Section 7 of the Insolvency and Bankruptcy Code, 2016:

The primary issue raised by the appellant was that the application filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code (IBC) was barred by limitation. The appellant argued that the default date was 30.09.2013, when the account was declared as Non-Performing Asset (NPA), and the application was filed on 10.06.2019, beyond the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963. The appellant contended that the application should have been filed within three years from the date of default, i.e., by September 2016.

2. Acknowledgment of Debt and its Impact on Limitation Period:

The Financial Creditor countered this argument by presenting evidence of acknowledgment of debt by the Corporate Debtor, which extended the limitation period. The Financial Creditor provided documents showing that the Corporate Debtor acknowledged the debt in its balance sheets for the financial years 2014-15 and 2015-16, which were submitted to the Ministry of Corporate Affairs. Additionally, the Corporate Debtor made offers for One Time Settlement (OTS) on 23.02.2017 and 15.09.2018, which were also considered as acknowledgments of debt. The Financial Creditor argued that these acknowledgments extended the limitation period under Section 18 of the Limitation Act, 1963.

3. Validity of the Application Filed by the Financial Creditor:

The Adjudicating Authority, after considering the facts and submissions, concluded that the application was not barred by limitation. It held that the acknowledgment of debt in the balance sheets and the offers for OTS extended the limitation period. The Authority relied on various judgments, including those of the Hon'ble Supreme Court, which held that an entry in the balance sheet could amount to an acknowledgment of liability, thereby extending the limitation period. The Authority also referred to the judgment in Bishal Jaiswal, where the Supreme Court clarified that the acknowledgment of debt in the balance sheet extends the limitation period.

The Adjudicating Authority noted that the Corporate Debtor had not raised any dispute regarding the debt amount or the acknowledgments. It found that the Financial Creditor had established that the debt was acknowledged within the limitation period, and the application was filed within the extended period of limitation.

Conclusion:

The appeal was dismissed, and the order of the Adjudicating Authority admitting the application under Section 7 of the IBC and initiating the Corporate Insolvency Resolution Process (CIRP) was upheld. The Tribunal concluded that the application was filed within the limitation period, considering the acknowledgments of debt by the Corporate Debtor. The interim order passed earlier was vacated, and the CIRP was allowed to proceed.

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