2019 (9) TMI 1387 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - applicability of time limitation - HELD THAT - As per the particulars of Financial Debt provided in Part-IV of the Application and Para -11 of the rejoinder submitted by the Applicant Corporation Bank Account of the Respondent No. 1 was classified as non-performing asset on 23.05.2014 as per the prudential norms of the Reserve Bank of India. Further the Applicant Corporation Bank has filed the present application on 05.02.2019. Hence the facts which are material in respect of the Limitation for maintainability of the application need to be considered first. The date of default as averred by the Petitioner in the Part-IV of the application is 23.05.2014 - That the Petitioner has placed two Letters dated 08.09.2015 showing Acknowledgement of Debt/ Liability by the Borrowers made by the Respondent. Even if one takes into account the abovementioned acknowledgement letters the limitation gets extended till 07.09.2018 only. However the Petition in the instant case by the Financial Creditor is filed only on 05.02.2019. Further the Respondent Company has raised a specific objection in its reply regarding maintainability of the application on the ground of limitation. The Petitioner has failed to rebut the objection even in its rejoinder. This Bench is of the view that the Petition has not been filed within the Limitation period - the petition fails on the ground of limitation. Petition dismissed.

Summary

Issues:
1. Initiation of Corporate Insolvency process under Section 7 of Insolvency and Bankruptcy Code, 2016.
2. Existence of financial debt and default by the Corporate Debtor.
3. Objections raised by the Respondent regarding the maintainability of the application on grounds of limitation.
4. Application of the Limitation Act, 1963 to insolvency proceedings.

Issue 1: Initiation of Corporate Insolvency Process
The Petitioner, Corporation Bank, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency process against the Corporate Debtor, M/S SJN Energy Infrastructure Pvt. Ltd. The Petition was supported by various documents establishing the financial debt owed by the Corporate Debtor to the Petitioner.

Issue 2: Existence of Financial Debt and Default
The Petitioner detailed the financial facilities provided to the Corporate Debtor, totaling &8377; 31,63,29,782.20, as of 31.12.2018. The Petitioner submitted documents such as Agreement regarding Term Loan, Guarantee Agreement, Mortgage Deed, and others to prove the existence of the financial debt. The Respondent Company had also acknowledged the debt in certain letters.

Issue 3: Objections Raised by Respondent
The Respondent raised objections to the maintainability of the application, citing pending proceedings before the Debt Recovery Tribunal and disputing the authority of the Petitioner's representative to file the application. The Respondent also argued that the application was time-barred and not maintainable due to the lapse of the limitation period.

Issue 4: Application of Limitation Act
The Tribunal considered the application of the Limitation Act, 1963, to the insolvency proceedings as per Section 238A of the Insolvency and Bankruptcy Code, 2016. Referring to a Supreme Court judgment, the Tribunal emphasized that the right to sue accrues when a default occurs, and applications filed beyond the limitation period may be barred under the Act.

In the judgment, the Tribunal found that the Petition was filed after the limitation period, as the default occurred in 2014, and the application was submitted in 2019. Despite acknowledgment letters extending the limitation till 2018, the Petition was still considered time-barred. Consequently, the Petition was rejected on the grounds of limitation. The Tribunal clarified that the rejection did not prejudice the Petitioner's rights to pursue the claim through other forums.