2023 (1) TMI 299 - AT - Insolvency and Bankruptcy

Appellate Tribunal Upholds Dismissal of Insolvency Application

The Appellate Tribunal upheld the dismissal of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016 by the National Company Law ... Initiation of CIRP - Extended period of limitation - It is submitted that in view of the filing of the winding up petition which was pending in the Kolkata High Court, Appellant was entitled to take benefit of Section 14 of the Limitation Act, 1963 - HELD THAT:- Part-V of the Section 7 Application pertaining to Particulars of Financial Debt (Documents, Records and Evidence of Default), there are no mention of any material or any document on basis of which benefit of Section 14 of the limitation can be claimed. In Section 7 Application, the filing of winding up petition was in fact concealed. Law is well settled that for taking benefit of extension of limitation under the limitation act, 1963 there has to be relevant materials brought on record to extend the benefit of Section 14 of the limitation Act, 1963. The Hon’ble Supreme Court in the matter of BABULAL VARDHARJI GURJAR VERSUS VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR. [2020 (8) TMI 345 - SUPREME COURT] laid down that question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. The benefit of Section 14 was extended because prima facie it was proved that proceedings under SARFAESI Act were without jurisdiction. Present is not a case where it is even contended that winding up petition filed by the Appellant before the Kolkata High Court were without jurisdiction proceeding or were terminated by the defect of a like nature. The proceedings benefit of which is sought to be claimed, it has to be proved that proceedings are prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature is unable to entertain it. Present is not a case where winding up petition filed in the Kolkata High Court was suffering from any defect of jurisdiction or other cause of a like nature. The foundational fact for taking benefit of Section 14 of the Limitation Act being not laid down by the Financial Creditor, no benefit under Section 14 can be claimed by the Appellant - the Adjudicating Authority did not commit any error in rejecting section 7 application filed by the Appellant. Appeal dismissed. Issues Involved:1. Validity of the dismissal of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016 (IBC).2. Applicability of the Limitation Act, 1963, specifically Section 14, to the case.3. Authenticity of the loan agreement claimed by the Financial Creditor.4. Timeliness and validity of the demand notice issued by the Financial Creditor.5. Genuineness of the loan transaction.Issue-wise Detailed Analysis:1. Validity of the dismissal of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016 (IBC):The Financial Creditor filed an appeal against the dismissal of their Section 7 Application by the National Company Law Tribunal (NCLT), Kolkata Bench. The NCLT dismissed the application on the grounds that the Financial Creditor failed to prove the authenticity of the loan agreement and that the application was barred by limitation. The Appellate Tribunal upheld the NCLT's decision, stating that the Financial Creditor did not provide sufficient evidence to prove the loan agreement's authenticity and that the application was indeed barred by time.2. Applicability of the Limitation Act, 1963, specifically Section 14, to the case:The Financial Creditor argued that the application was not barred by time, citing the pending winding-up petition in the Kolkata High Court and seeking the benefit of Section 14 of the Limitation Act, 1963. The Appellate Tribunal noted that for the benefit of Section 14 to apply, relevant facts and evidence must be pleaded and adduced. The Financial Creditor failed to mention the winding-up petition in the Section 7 Application and did not provide any material to support the extension of the limitation period. The Tribunal referenced the Supreme Court's judgment in 'Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd.' to emphasize that the question of limitation is a mixed question of law and facts, requiring specific pleadings and evidence.3. Authenticity of the loan agreement claimed by the Financial Creditor:The Corporate Debtor contested the authenticity of the loan agreement, claiming it was fabricated. The NCLT observed that the loan agreement did not bear the Corporate Debtor's name or rubber stamp and that the balance sheets of the Corporate Debtor did not disclose any such loan. The Appellate Tribunal agreed with the NCLT's doubts about the loan agreement's authenticity, noting that the Financial Creditor failed to produce documents showing regular transactions of repayment within three years preceding the filing of the Section 7 Application.4. Timeliness and validity of the demand notice issued by the Financial Creditor:The Financial Creditor issued a demand notice on 28th November 2017, which the Corporate Debtor claimed was the first notice received. The Appellate Tribunal noted that the demand notice was issued more than three years after the date of default (12.09.2014), as per the Financial Creditor's own admission. This delay further supported the conclusion that the Section 7 Application was barred by time.5. Genuineness of the loan transaction:The Corporate Debtor argued that the loan transaction was not genuine, pointing out that the balance sheets from 2012-13 and the years preceding the acquisition by the Rungta Group did not mention the loan. The Appellate Tribunal found that the Financial Creditor did not demand interest payments and that the only notice received by the Corporate Debtor was dated 28th November 2017, which was after the three-year limitation period. The Tribunal concluded that the doubts expressed by the NCLT about the genuineness of the transaction were not unfounded.In conclusion, the Appellate Tribunal upheld the NCLT's decision to dismiss the Section 7 Application, finding no merit in the appeal. The application was barred by time, and the Financial Creditor failed to prove the authenticity and genuineness of the loan transaction.