Successful Appeal under Section 61 of Insolvency Code Revives Section 7 Application

The appeal under Section 61 of the Insolvency & Bankruptcy Code was successful as the Tribunal found the application filed within the limitation period, considering exclusion periods and subsequent defaults. The Adjudicating Authority's error in determining the date of default led to the impugned order being set aside. The Section 7 application was revived for further proceedings without costs imposed.

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Issues Involved:
1. Whether the application filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 was within the limitation period.
2. Whether the date of default was correctly determined by the Adjudicating Authority.

Summary:

Issue 1: Limitation Period

The appeal was filed under Section 61 of the Insolvency & Bankruptcy Code, 2016 against the order dated 23.05.2022, where the application was dismissed as barred by limitation. The Appellant argued that the application filed on 04.04.2022 was within the limitation period, considering the exclusion period from 15.03.2020 to 28.02.2022 as per the Supreme Court's order in Suo-moto Writ Petition No. 3 of 2020.

The Tribunal noted that the law of limitation is sacrosanct and requires legal remedy within three years from the date of default. It acknowledged that subsequent defaults provide fresh periods of limitation. The Appellant's application filed on 04.04.2022 was within the permissible period, considering the exclusion period and the additional 90 days granted from 01.03.2022.

Issue 2: Date of Default

The Appellant contended that the Adjudicating Authority wrongly interpreted the date of default as 09.05.2016, the date when the loan was disbursed. The Appellant argued that the first default occurred on 19.08.2018, when the instalment due on 19.07.2018 was not paid, and the entire loan became due on 28.03.2022 as per the Loan Recall Notice dated 25.03.2022.

The Tribunal observed that the Financial Creditor has the discretion to file an application under Section 7 of the Code upon any default, not necessarily the first default. The Tribunal found that the Adjudicating Authority erred by considering 09.05.2016 as the date of default and ignoring subsequent defaults. The correct dates of default were 19.08.2018 and 28.03.2022, both within the limitation period.

Conclusion:

The Tribunal held that the application was within the limitation period and the Adjudicating Authority erred in its judgment. The impugned order was set aside, and the Section 7 application was revived before the Adjudicating Authority for hearing and decision in accordance with the law. No costs were imposed.

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