NCLAT dismisses appeal, upholds Section 7 application admission despite limitation challenge by corporate debtor

NCLAT Principal Bench dismissed appeal challenging admission of Section 7 application under IBC. Corporate debtor argued application was time-barred as default occurred on 31.03.2015 when account became NPA, but Section 7 application was filed on 01.11.2021. NCLAT held Letter of Acceptance dated 24.04.2019 constituted fresh agreement acknowledging debt, creating new limitation period. Since application was filed within three years of 24.04.2019, it was within prescribed limitation. Adjudicating Authority correctly admitted the application as debt and default were established and limitation objection lacked merit.

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Issues involved:
The issues involved in the judgment are the admission of a Section 7 application by the Adjudicating Authority, the objection raised by the Suspended Director of the Corporate Debtor regarding the application being barred by time, and the consideration of fresh period of limitation based on certain documents.

Admission of Section 7 Application:
The Appellate Tribunal heard arguments from both parties regarding the admission of the Section 7 application filed by the Financial Creditor. The brief facts of the case included the extension of financial facilities to the Corporate Debtor by a Bank, the declaration of the account as NPA, the recall notice issued by the Bank, and the assignment of debt to the Financial Creditor. The Adjudicating Authority admitted the Section 7 application on finding debt and default. The Suspended Director, being aggrieved by this admission, filed the appeal.

Objection on Ground of Limitation:
The Suspended Director contended that the application filed by the Financial Creditor was barred by time. The date of default was mentioned as 31.03.2015, and the application was filed on 01.11.2021, which the Director argued was beyond three years. The Financial Creditor, on the other hand, argued that the application was well within time, citing a letter of acceptance dated 24.04.2019, which acknowledged the debt and entered into a fresh agreement. The Adjudicating Authority also considered Consent Terms dated 26.09.2022 and observed that a fresh period of limitation would start from that date.

Consideration of Fresh Period of Limitation:
The Adjudicating Authority noted the Consent Terms and the Letter of Acceptance in the impugned order. While the Consent Terms were found irrelevant for the present application filed in 2021, the Letter of Acceptance dated 24.04.2019 was deemed significant for the limitation issue. The Letter of Acceptance, signed by all parties, acknowledged the debt and constituted a fresh agreement between the parties. Citing a Supreme Court judgment, the Tribunal concluded that a fresh period of limitation would start from 24.04.2019, making the application filed on 01.11.2021 well within time. The debt and default were acknowledged, and the objection on the ground of limitation was deemed meritless.

In conclusion, the Appellate Tribunal dismissed the appeal, affirming that the application filed by the Financial Creditor was not barred by time. The debt and default were proven, and the Adjudicating Authority did not err in admitting the Section 7 application. The Tribunal found no merit in the appeal and upheld the decision of the lower authority.

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