Limitation Is Refreshed Each Year When Corporate Debtor Admits Debt In Its Financial Statements: NCLT Kolkata Initiates CIRP Against GIT Textiles

The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rohit Kapoor (Judicial Member) and Shri Harish Chander Suri (Technical Member), while adjudicating an application filed in UCO Bank v GIT Textiles Manufacturing Limited, has initiated Corporate Insolvency Resolution Process ("CIRP") against GIT Textiles Manufacturing Ltd. for a default that had occurred in 2012 and has held that limitation refreshed each subsequent year when the Corporate Debtor acknowledged the financial debt in its Financial Statements. Background facts UCO Bank ("Financial Creditor") had sanctioned credit facilities to the tune of Rs. 20,41,00,000/- to GIT Textiles Manufacturing Limited ("Corporate Debtor") vide a sanction letter dated 16.06.2008 and thereafter, the Credit Facilities were renewed at several occasions. The Corporate Debtor failed to repay the Financial Creditor and its account was declared NPA on 30.09.2012. On 04.04.2019, the Financial Creditor had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") seeking initiation of CIRP against the Corporate Debtor for a default of Rs. 54,33,52,844.37/-. Contentions Of The Corporate Debtor The Corporate Debtor argued that the Financial Creditor had resorted to forum shopping as the latter had also filed proceedings before Debt Recovery Tribunal for the same cause. It was further contended that the petition was barred by limitation as the alleged default and NPA classification had occurred on 30.09.2012, whereas the petition was filed in the month of April 2019. The limitation period had already lapsed on 30.09.2015. Decision Of The NCLT Bench The Bench observed that the balance sheets of the Corporate Debtor from the year 2012 to 2019 depicted multiple acknowledgments of debt owed to the Financial Creditor by the Corporate Debtor. The Bench placed reliance on the Supreme Court judgment in Laxmi Pat Surana v Union Bank of India & Anr., wherein it was held that: "Section 18 of the Limitation Act, 1963 gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code ensues. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 of the Code." Also in the Supreme Court judgment in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, it was held that: "…in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date." Further, in Khan Bahadur Shapoor Freedom Mazda v. Durga Prasad, (1962) 1 SCR 140, the Supreme Court had held: "…Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement." Based on these judgments, the Bench held that due to the specific admissions of debt by the Corporate Debtor, Section 18 of the Limitation Act, 1963 was applicable and it resulted in fresh computation of limitation period of three years from the date of acknowledgment in each balance sheet. "Since the last of such acknowledgments was made on 31.03.2019, the limitation period would last up till 31.03.2022. Thus, the present petition was held to be well within limitation." The Bench held that there was a debt and a default and accordingly, CIRP was initiated against the Corporate Debtor and Mr. Sunil Kumar Agarwal has been appointed as the Interim Resolution Professional. Case Title: UCO Bank v GIT Textiles Manufacturing Limited, C.P (IB) No. 600/KB/2019 For Financial Creditor: Mr. Rahul Auddy, Mr. Shaunak...

Limitation Is Refreshed Each Year When Corporate Debtor Admits Debt In Its Financial Statements: NCLT Kolkata Initiates CIRP Against GIT Textiles

Pallavi Mishra

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Pallavi Mishra

Limitation Is Refreshed Each Year When Corporate Debtor Admits Debt In Its Financial Statements: NCLT Kolkata Initiates CIRP Against GIT Textiles

Pallavi Mishra

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Pallavi Mishra

This is a premium content
Available exclusively to
Our subscribers