Appellate Tribunal remands case for fresh decision, parties to appear for de novo hearing

The Appellate Tribunal set aside the order, remanding the matter back to the Adjudicating Authority for a fresh decision. Both parties are required to appear before the Adjudicating Authority on 28.04.2023 for a de novo hearing, ensuring adherence to principles of natural justice within twelve weeks.

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Issues Involved:
1. Calculation of Limitation Period
2. Acknowledgment of Debt and its Impact on Limitation
3. Liability of the Guarantor
4. Changed Circumstances and Fraud Allegations

Summary:

1. Calculation of Limitation Period:
The Appellant argued that the application under Section 7 was dismissed solely on the ground of limitation without considering other relevant facts, such as the One Time Settlement (OTS) proposal. The Adjudicating Authority erred in calculating the limitation period, taking the date of default as 31.05.2012 and ignoring various OTS proposals by the Principal Borrower before the acceptance of the OTS.

2. Acknowledgment of Debt and its Impact on Limitation:
The Appellant contended that the Principal Borrower and the Respondent had executed a revival letter on 01.06.2016, which should be considered as an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The Appellant cited several Supreme Court judgments supporting that an acknowledgment of debt before the expiration of the limitation period extends the limitation period by three years. The Appellate Tribunal noted multiple OTS proposals and part payments by the Corporate Debtor, which extended the limitation period.

3. Liability of the Guarantor:
The Appellant emphasized that the liability of the Guarantor (Respondent) is co-extensive with that of the Principal Borrower under Section 128 of the Indian Contract Act, 1872. The Respondent had acknowledged the liability in its financial statements, and the OTS proposals by the Principal Borrower should be deemed acknowledgments by the Respondent.

4. Changed Circumstances and Fraud Allegations:
The Respondent initially supported the admission of the application but later modified its stance due to alleged negligence and fraud by the Interim Resolution Professional (IRP)/Liquidator. The Respondent requested the case be remanded back to the Adjudicating Authority for a fresh opportunity to file a detailed reply. The Appellate Tribunal noted that these submissions did not stand on merit and advised the Respondent to seek suitable remedies before an appropriate legal forum.

Conclusion:
The Appellate Tribunal set aside the impugned order dated 06.01.2021, remanding the matter back to the Adjudicating Authority (NCLT, Chennai) for a fresh decision on merits. Both parties are required to appear before the Adjudicating Authority on 28.04.2023. The Adjudicating Authority is directed to decide the petition de novo, providing an adequate opportunity for hearing and adhering to the principles of natural justice, preferably within twelve weeks.

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