2022 (9) TMI 1165 - AT - Insolvency and Bankruptcy

Appeal Dismissed: Acknowledgments of Debt Extend Limitation Period

Dinesh G Jaiswal, Ex-Director M/s J-Marks Exim (India) Pvt Ltd Versus Punjab National Bank, Asset Recovery Management Branch, J Marks Exim (India) Pvt Ltd

The appeal challenging the application filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code (IBC) on grounds of ... Initiation of CIRP - NCLT admitted the application - Corporate Debtor failed to make repayment of its dues - Financial Creditors - debt declared as Non-Performing assets - applicability of time limitation - Notice under SARFAESI Act also issued - whether debt was acknowledged by the Corporate Debtor or there was offer of OTS? - HELD THAT:- There is no dispute that the account of corporate debtor was declared NPA on 30.09.2013 . It is also not in dispute that balance sheet for the year 2014-15, 2015-16 showing acknowledgement was brought to the notice of the Adjudicating Authority. It is also not in dispute that on 16.4.2014 the corporate debtor had submitted balance cum security letter acknowledging the debt. The said balance sheet of 2014-2015 and 2015-16 were uploaded by the corporate debtor on the portal of MCA website. Thereafter on 23.02.2017 the corporate debtor vide its letter dated 23.02.2017 submitted proposal for settlement of dues. There is no reason to accept the plea of Learned Counsel for the appellant that the initiation of CIRP was barred by limitation. The question regarding acknowledgement has already been set at rest by three Judges Bench of Hon’ble Supreme Court in ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VERSUS BISHAL JAISWAL & ANR. [2021 (4) TMI 753 - SUPREME COURT]. Whatever points have been raised by the learned counsel for the appellant in the present case, is squarely covered by the Hon’ble Supreme Court in Bishal Jaiswal case. As per judgement of the Hon’ble Supreme Court in a proceeding under the IBC, provisions of Limitation Act is applicable though Section 238A was inserted in the IBC w.e.f. 6.6.2018. It has been clarified by the Hon’ble Supreme Court that it was clarificatory in nature and it was having retrospective effect. The application under Section 7 of the Code was filed by the Financial Creditor within the period of limitation. The appellant has never raised any dispute on the question of debt i.e. recoverable amount nor a dispute has been raised regarding endorsement in the balance sheet or offer of OTS. In such view of the matter there is no reason to interfere with the impugned order - Appeal dismissed. 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.