Successive Acknowledgments Extend Limitation: NCLT allows ₹63.85 Crore CIRP Application, Holds Section 10A Inapplicable [Read Order]

The National Company Law Tribunal, Chandigarh Bench has admitted the application for insolvency under Section 7 of the IBC filed by the financial creditor Canara Bank against the corporate debtor as it found that the acknowledgment of the debt by the corporate debtor in successive written forms as well as the proposal for the One Time Settlement were valid extensions of the limitation period.

The NCLT also found that the application of Section 10A of the IBC, 2016, was not applicable in the present case.

The Bench comprising Mr. Khetrabasi Biswal (Judicial Member) and Mr. Kaushalendra Kumar Singh (Technical Member) of the National Company Law Tribunal observed that the financial creditor has established the default of Rs 63.85 crores, as the loan account was declared a Non-Performing Asset as on 31/03/2015, which was recorded as the date of default.

The main contention of the corporate debtor was the maintainability of the petition on the plea of limitation. The corporate debtor argued that the application filed in November 2022 was not within the time period under Article 137 of the Limitation Act.

Further, the corporate debtor argued that the subsequent action of recovery or settlement could not revive the time-barred debt. The corporate debtor also raised the plea of Section 10A of the IBC.

However, the Tribunal rejected the contentions of the corporate debtor. It considered the chronological sequence of the communication. The corporate debtor made written acknowledgments of the liability from 2016 to 2021.

Further, the corporate debtor proposed OTS proposals admitting the outstanding dues. The corporate debtor acknowledged the liability within the subsisting period of limitation.

Therefore, the corporate debtor’s liability was covered under the time period under Section 18 of the Limitation Act. Therefore, the petition was within the time period.

Hence it raised the plea of Section 10A of the IBC. However, the corporate debtor’s liability was on the date of default, i.e., 31.03.2015. Thus,the COVID-period bar was not applicable.

Accordingly, the application was admitted, moratorium under Section 14 was declared, and Mr. Mohit Chawla was appointed as Interim Resolution Professional to conduct the CIRP.

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