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Insolvency and Bankruptcy Code, 2016: s. 7 – Initiation of corporate insolvency resolution process by financial creditor – Petition u/s. 7, if barred by limitation – On facts, appellant Bank sanctioned term loan and letter of credit cum buyer’s credit in favour of corporate debtor – However, in 2013 the corporate debtor defaulted in repayment of its dues to the bank and loan amount declared as non-performing asset-NPA –Issuance of notice to corporate debtor in 2014, to clear its dues – Pursuant thereto, in 2015 Bank filed application for recovery of the outstanding dues – In 2017, Debt Recovery tribunal passed a recovery order alongwith recovery certificate in favour of the Bank – Thereafter, in 2018, Bank filed petition u/s. 7 of the IBC – Within three months, Bank filed application to place on record additional documents, recovery order and recovery certificate which was allowed – Another application allowed to place on record letter of the corporate debtor proposing one time settlement, and financial statements of the corporate debtor – Thereafter, petition u/s. 7 admitted by the adjudicating authority-NCLT, however, the appellate authority-NCLAT set aside the said order, holding the application to be barred by limitation – On appeal, held: Application u/s. 7 not barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the corporate debtor as NPA – There was an acknowledgement of the debt by the corporate debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years –Recovery order by the DRT and the recovery certificate issued in favour of the Bank in 2017 gave a fresh cause of action to the Bank to initiate a petition u/s. 7 – Offer of one time settlement of a live claim made in 201, and the balance sheets and financial statements of the corporate debtorfor 2016-2017, constitute acknowledgement of liability which extended the limitation by three years – These documents were brought on record before any final decision was taken in the petition u/s. 7, thus, NCLT rightly admitted the application. s. 7 – Application u/s. 7 for initiation of Corporate insolvency resolution process (CIRP) – Limitation period of three years for filing application – Final judgment and decree of the Debt Recovery tribunal in favour of the financial creditor, as also issuance of recovery certificate – Held: Would give rise to a fresh cause of action to the Financial Creditor to initiate proceedings u/s. 7 for initiation of CIRP, within three years from the date of the final judgment and decree, and/or within three years from the date of issuance of the recovery certificate. s. 7 – Application under – Filing of additional documents – Permissibility of – Held: There is no bar in law to the amendment of pleadings, in a petition u/s. 7 or to the filing of additional documents, apart from those filed initially, along with the petition u/s. 7 of the IBC in Form-1 – In the absence of any express provision prohibiting or setting a time limit for filing of additional documents, it cannot be said that the Adjudicating Authority committed any illegality or error in permitting the Bank to file additional documents – When there is inordinate delay, the Adjudicating Authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order. s. 3(12)– ‘Default’ –Definition of – Held: Is “non-payment’ of a debt which has become due and payable whether in whole or any part and is not paid by the Corporate Debtor”. Object and scope of – Nature of construction – Held: IBC is a beneficial legislation for equal treatment of all creditors of the corporate debtor, as also the protection of the livelihoods of its employees/workers, by revival of the corporate debtor – It only segregates the interests of the corporate debtor from those of its promoters/persons in management – Relegation of creditors to the remedy of coercive litigation against the corporate debtors could be detrimental to the interests of the corporate debtor and its creditors alike – Thus, the provisions of the IBC and the Rules and Regulations framed thereunder to be construed liberally, in a purposive mannerto further the objects of enactment of the statute, and not to be given a narrow, pedantic interpretation which defeats the purposes of the Act. A Limitation Act, 1963: Art. 137 – Applicability of, to Insolvency and Bankruptcy Code – Held: There is no specific period of limitation prescribed in the Limitation Act, for an application under the IBC, before the Adjudicating Authority (NCLT), thus, is governed by Art. 137 of the Schedule wherein the period of limitation prescribed for such an application is three years from the date of accrual of the right to apply – Thus, the period of limitation for making an application u/ s. 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. s. 18 – Acknowledgment in writing – Effect of – Held: As per s. 18, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing a fresh period of limitation from the date on which the acknowledgement is signed – However, the acknowledgement must be made before the relevant period of limitation has expired – An offer of One Time Settlement of a live claim, made within the period of limitation, can be construed as an acknowledgment to attract s. 18 of the Act. Interpretation of statutes: Construction/interpretation of statutory provision – Held: Legislative intent of the statute is to be seen from the words used by the legislature itself – In case of doubt it is always safe to look into the object and purpose of the statute or the reason and spirit behind it – Each word, phrase or sentence has to be construed in the light of the general purpose of the Act itself. |
