NCLAT rules Section 95 application filed within limitation period despite COVID-19 extensions and balance sheet acknowledgment

The NCLAT dismissed appeals challenging a Section 95 application's timeliness. The court held that limitation period should be calculated from the balance sheet signing date (01.09.2017) rather than the Section 13(2) notice date (26.05.2016), as the balance sheet constituted acknowledgment of liability under Section 18. The three-year limitation period ending 31.08.2020 fell during COVID-19 protection period, extending deadline to 01.03.2022 plus 90 days. The application filed on 02.12.2021 was therefore within limitation. The appellants' reliance on distinguishable precedent was rejected.

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Issues Involved:

1. Whether the application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation.
2. Whether the notice issued under Section 13(2) of the SARFAESI Act can be considered as a notice invoking the personal guarantee.
3. Whether the acknowledgment in the balance sheet extends the period of limitation.

Issue-wise Detailed Analysis:

1. Limitation Period for Application under Section 95:
The appellants contested that the application filed under Section 95 was barred by limitation, arguing that the default date was 24.07.2016, and the application filed on 02.12.2021 exceeded the three-year limitation period under Article 137 of the Limitation Act, 1963. The Tribunal, however, concluded that the limitation period commenced on 05.07.2021, following a notice issued on 21.06.2021, and thus the application was within the limitation period. The Tribunal's decision was upheld, noting that the acknowledgment in the balance sheet signed on 01.09.2017 extended the limitation period, and the application filed on 02.12.2021 was within the period protected by the Supreme Court's order during the COVID-19 pandemic.

2. Notice under Section 13(2) of the SARFAESI Act:
The appellants argued that the notice under Section 13(2) issued on 26.05.2016 should be considered as invoking the personal guarantee, thereby starting the limitation period from that date. However, they later contradicted this stance, arguing that such a notice could not equate to invoking the guarantee for filing an application under Section 95. The Tribunal found this argument inconsistent, noting that the appellants initially admitted the notice as invoking the guarantee. The Tribunal determined that the notice issued on 26.05.2016 did serve as invoking the guarantee, and the subsequent acknowledgment in the balance sheet reset the limitation period.

3. Acknowledgment in the Balance Sheet:
The Tribunal considered the balance sheet signed by the appellants on 01.09.2017 as an acknowledgment of debt, which under Section 18 of the Limitation Act, 1963, extends the limitation period. The Supreme Court's judgment in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr. was cited, affirming that an acknowledgment of liability in a financial statement resets the limitation period. Thus, the limitation period, starting from the acknowledgment date, was validly extended, and the application filed on 02.12.2021 was deemed timely.

In conclusion, the Tribunal dismissed the appeals, affirming that the application under Section 95 was filed within the limitation period, and the notice under Section 13(2) effectively invoked the personal guarantee. The acknowledgment in the balance sheet further extended the limitation period, rendering the application timely. The appeals were dismissed with no costs.

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