2023 (3) TMI 71 - AT - Insolvency and Bankruptcy

Admitted application - existence of any stay order or not - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Non-performing Assets (NPA) - time limitation - order for liquidation of corporate Debtor - HELD THAT - The NPA of the corporate debtor loan account was declared on 6.8.2012. Thereafter while it is noted that the corporate debtor filed a civil suit before the Hon ble High Court of Calcutta that suit is yet to be decided and therefore in the present no illegality attaches to the declaration of NPA as the stay order granted by Hon ble High Court of Calcutta vide order dated 15.10.2020 2021 (3) TMI 126 - CALCUTTA HIGH COURT was vacated by the Hon ble Supreme Court by its judgment in SLP Civil No. 1168/2021 2021 (4) TMI 753 - SUPREME COURT . Thus it is clear that there is no stay order operative on the order of NCLT dated 19.8.2019 whereby the application under section 7 was admitted. The State Bank of India declared the loan account of the corporate debtor as NPA on 6.8.2012 and quite clearly the declaration of NPA has not been declared as illegal or incorrect. Therefore the limitation for section 7 application starts from 6.8.2012. As per Article 137 of the Limitation Act 1963 the period of limitation prescribed for an application under section 7 of IBC is three years. Therefore the limitation of section 7 application would be valid upto 5.8.2015. Before the expiry of the limitation period the balance sheet for FY 2014-15 filed by the corporate debtor (attached at pp.86-100 of the appeal paperbook Vol.I) mentions the amount of long-term borrowings as Rs.33, 49, 92, 064/- and the balance sheet very clearly mentions in Textual Information 23 that the company has defaulted in repayment of dues to the Bank - It is noted that while this limitation period was running another acknowledgment was made by corporate debtor in its balance sheet for the FY 2015-16 wherein again the long-term borrowings for the year ended 31.3.2016 has been shown as Rs.33, 49, 92, 064/-. Further since no caveat by way of any textual information is shown by the corporate debtor in its appeal with the balance-sheet (attached at pp.101-114 of the appeal paperbook vol.II) the limitation would again get extended from the last date of the balance sheet i.e. 31.3.2016 for another three years which would make it upto 31.3.2019. It is observed from the section 9 application that it was filed on 8.8.2018 which is within the limitation period which extends upto 31.3.2019. It is clear that the application under section 7 is within the prescribed limitation period - The loan account of corporate debtor declared by State Bank of India as NPA on 6.8.2012 the date of default and the balance-sheets for the financial years 2014-15 and 2015-16 provide an unequivocal and clear extension of limitation of the debt by virtue of section 18 of the Limitation Act 1963. Such a limitation is validly extended through acknowledgment of liability of the said debt upto 31.3.2019 and the section 7 application which was filed on 8.8.2018 is clearly within limitation. The admission order passed by the Adjudicating Authority admitting the section 7 application is correct - the Impugned Order-I does not need to be interfered with. Further in view the fact that the Impugned Order-I has been held to be correct the order of liquidation i.e. Impugned order-II also is held to be correct and therefore there are no reason to interfere with it. Appeal dismissed.

Summary

Issues Involved:
1. Whether the application under section 7 of the Insolvency and Bankruptcy Code (IBC) was time-barred.
2. Whether the balance sheets for the financial years 2014-15, 2015-16, and 2016-17 provided an extension of limitation under Section 18 of the Limitation Act, 1963.
3. Whether the declaration of the corporate debtor's account as a Non-Performing Asset (NPA) was legally valid.
4. Whether the initiation of Corporate Insolvency Resolution Process (CIRP) and subsequent liquidation of the corporate debtor was justified.

Detailed Analysis:

1. Whether the application under section 7 of the Insolvency and Bankruptcy Code (IBC) was time-barred:
The appellant argued that the application under section 7 of IBC was time-barred as it was filed after six years from the date of default, i.e., 6.8.2012, when the account was classified as NPA. The appellant contended that the limitation period should not be extended due to the disputed nature of the debt, as mentioned in the balance sheets.

2. Whether the balance sheets for the financial years 2014-15, 2015-16, and 2016-17 provided an extension of limitation under Section 18 of the Limitation Act, 1963:
The appellant claimed that the debt was disputed and the acknowledgment in the balance sheets was not unequivocal. The respondent argued that the balance sheets showed clear acknowledgment of the debt, thus extending the limitation period. The Tribunal examined the balance sheets and noted that the acknowledgment of debt was unequivocal, extending the limitation period under Section 18 of the Limitation Act.

3. Whether the declaration of the corporate debtor's account as a Non-Performing Asset (NPA) was legally valid:
The appellant challenged the legality of the NPA declaration and filed a civil suit for the same. The Tribunal noted that the NPA declaration was not disputed for almost two years and was considered valid. The civil suit challenging the NPA declaration was still pending, and the Tribunal held that the mere existence of a dispute did not negate the legality of the NPA declaration.

4. Whether the initiation of Corporate Insolvency Resolution Process (CIRP) and subsequent liquidation of the corporate debtor was justified:
The Tribunal held that the section 7 application was filed within the extended limitation period, and the acknowledgment of debt in the balance sheets was valid. Consequently, the initiation of CIRP and the order for liquidation were justified. The Tribunal upheld the Impugned Orders I and II, stating that they did not need interference.

Conclusion:
The Tribunal concluded that the section 7 application was within the limitation period due to the valid acknowledgment of debt in the balance sheets. The declaration of the corporate debtor's account as NPA was considered legally valid. The initiation of CIRP and the subsequent liquidation order were justified. The appeal was dismissed with no order as to costs.