2022 (11) TMI 1153 - AT - Insolvency and Bankruptcy

Tribunal revives Company Petition, remands for fresh consideration on limitation and interest claims.

The Tribunal allowed the appeal, setting aside the order dated 24.05.2022. The Company Petition was revived and remanded to the Adjudicating Authority for ... Initiation of CIRP - Financial Creditor - time limitation - application filed within three years from the demand notice or not - HELD THAT:- From the notice dated 19.05.2016, 06.06.2016 and 12.09.2016 the application is not within three years. There being no details or explanation in application filed under Section 7, Part IV or Part V to indicate that how the application is filed within time, it was incumbent upon the Adjudicating Authority to examine the question whether the application under Section 7 is within limitation or not. The mere fact that Corporate Debtor did not appear or filed any objection, was not relevant for consideration of question of limitation by the Adjudicating Authority. The submission which has now been advanced before us in this Appeal by learned counsel for Respondent is that Applicant is entitled for benefit of Section 5 and Section 14 of the Limitation Act for coming to the conclusion that application is not barred by time - the Adjudicating Authority was obliged to consider the question of limitation of the application under Section 7 filed by the Financial Creditor and without adverting to the said issue application ought not have been admitted. Insofar as submission of learned counsel for the Appellant that application under Section 7 having been filed for recovery of additional interest ought not have been entertained. In view of the fact that matter is being sent back to the Adjudicating Authority for considering the question of limitation, the above submission of the Appellant may also be considered by the Adjudicating Authority - one opportunity be also provided to the Appellant/Corporate Debtor to file a reply to Section 7 application. Appeal is allowed. Issues Involved:1. Whether the application under Section 7 of the I&B Code was barred by limitation.2. Whether the application under Section 7 was filed for recovery of additional interest and its implications.Issue-wise Detailed Analysis:1. Limitation of Application under Section 7:The Appellant, a Suspended Director of the Corporate Debtor, challenged the order admitting the Section 7 application filed by the Financial Creditor on the ground that it was barred by time. The Appellant argued that the application was filed beyond the three-year limitation period prescribed under Article 137 of the Limitation Act. The default began in September 2012, and the notices issued in 2016 did not extend the limitation period. The Adjudicating Authority admitted the application without considering whether it was within the limitation period.The Respondent (Financial Creditor) countered that the date of NPA classification was irrelevant for limitation computation. The three-year period should be computed from the date of default. The Financial Creditor also argued that the period during which other legal remedies were pursued should be excluded from the limitation period. Additionally, the Corporate Debtor's One Time Settlement proposal on 11.11.2016 acknowledged the liability, thus extending the limitation period under Section 18 of the Limitation Act.The Tribunal noted that Section 3 of the Limitation Act mandates the dismissal of any suit, appeal, or application filed beyond the prescribed period. The Adjudicating Authority should have examined the limitation issue even if the Corporate Debtor did not appear. The application under Section 7 was filed on 31.12.2019, beyond three years from the notices issued in 2016. The Tribunal emphasized that the Adjudicating Authority must scrutinize the facts to determine if the application was within the limitation period, considering Sections 5 and 14 of the Limitation Act.2. Recovery of Additional Interest:The Appellant contended that the Section 7 application was filed solely for the recovery of additional interest, which should not be entertained. The Tribunal decided that this issue should also be considered by the Adjudicating Authority upon remand. The Corporate Debtor was given two weeks to file a reply to the Section 7 application.Conclusion:The Tribunal allowed the appeal, setting aside the order dated 24.05.2022. The Company Petition was revived and remanded to the Adjudicating Authority for fresh consideration, including the limitation issue and the claim for additional interest. The Adjudicating Authority was directed to provide an opportunity for the Corporate Debtor to file a reply and decide the application based on the materials available on record.