2023 (9) TMI 874 - AT - Insolvency and Bankruptcy

Appeal allowed, NCLT order set aside, Section 7 Application revived for fresh hearing.

JUMBO CHEMICAL & ALLIED INDUSTRIES PVT LTD Versus ARJUN INDUSTRIES LIMITED

JUMBO CHEMICAL & ALLIED INDUSTRIES PVT LTD Versus ARJUN INDUSTRIES LIMITED - TMI Issues Involved:1. Whether the Section 7 Application filed by the Appellant was barred by time.2. Whether the balance sheets of the Corporate Debtor contain an acknowledgment of debt within the meaning of Section 18 of the Limitation Act, 1963.3. Whether the principle of res judicata applies based on the previous judgments of the Delhi High Court regarding the balance sheets.Summary:Issue 1: Barred by TimeThe Appellant, a Financial Creditor, filed an appeal against the Order dated 06.06.2022 by the National Company Law Tribunal (NCLT), New Delhi, which dismissed the Section 7 Application as barred by time. The NCLT held that the limitation period of three years had expired before the Settlement Agreement dated 27.08.2019, and there was no acknowledgment of debt after 14.01.2011. The Adjudicating Authority dismissed the Section 7 Application without issuing notice to the Corporate Debtor.Issue 2: Acknowledgment of Debt in Balance SheetsThe Appellant argued that continuous acknowledgment of debt in the balance sheets from 1998-99 to 2020-21 extended the limitation period under Section 18 of the Limitation Act. The Respondent contended that the notes to the accounts in the balance sheets disputed the liability, thus not extending the limitation period. The Tribunal examined the balance sheets and notes to accounts, concluding that the acknowledgment of debt in the balance sheets was sufficient to extend the limitation period. The Tribunal referred to the Supreme Court's judgment in Asset Reconstruction Company India Limited Vs. Vishal Jaiswal & Anr., which held that balance sheets could be considered for acknowledgment of debt under Section 18 of the Limitation Act.Issue 3: Principle of Res JudicataThe Respondent argued that the balance sheets had been considered by the Delhi High Court in the winding-up petition, and thus the issue should not be revisited. The Tribunal noted that the Delhi High Court's observations were limited to the context of the winding-up petition and did not address the acknowledgment of debt under Section 18 of the Limitation Act. Therefore, the principle of res judicata did not apply.Conclusion:The Tribunal concluded that the Adjudicating Authority erred in dismissing the Section 7 Application as barred by time. The continuous acknowledgment of debt in the balance sheets extended the limitation period under Section 18 of the Limitation Act. The Tribunal allowed the appeal, set aside the NCLT's order, and revived the Section 7 Application for fresh hearing and decision in accordance with the law. The Corporate Debtor was granted three weeks to file its reply to the Section 7 Application.