Case Note & Summary
The appeal was filed by Kurien Thomas, the suspended director of Koravampady Estates and Enterprises Private Limited (the Corporate Debtor), against the order of the National Company Law Tribunal (NCLT), Kochi Bench, which admitted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by The South Indian Bank (the Financial Creditor). The Corporate Debtor was incorporated in 1998 and engaged in growing agricultural crops like coffee, pepper, and cardamom. The bank sanctioned a working capital facility limit of INR 312.99 lakhs on 05.10.2015, renewable annually, and a Cash Credit Agriculture Loan (CCAL) was sanctioned. The Corporate Debtor executed an Agreement of Hypothecation and a demand promissory note on 08.10.2015, an earmarking agreement on 09.10.2015, and a Memorandum of Deposit of Title Deeds (MOTD) on 13.10.2015. The credit facilities were renewed and sanctioned on 24.09.2018 and 14.12.2020. The Corporate Debtor defaulted in repayment, and the bank classified the account as NPA on 31.03.2019. The bank filed a Section 7 application on 28.02.2022, which was admitted by the NCLT. The appellant challenged the admission on the ground of limitation, arguing that the application was filed beyond three years from the date of default, which should be the date of NPA classification. The NCLAT examined the issue and held that the date of default for limitation purposes is the date when the debt became due and payable as per the repayment schedule, not the NPA classification date. The NCLAT noted that the last repayment schedule was on 14.12.2020, and the application was filed on 28.02.2022, within three years from that date. Therefore, the application was within limitation. The NCLAT also held that Section 5 of the Limitation Act is not applicable to Section 7 applications. The appeal was dismissed, and the order of the NCLT was upheld.
Headnote
A) Insolvency and Bankruptcy Code - Section 7 Application - Limitation - Date of Default - The date of default for computing limitation under Section 7 of the Insolvency and Bankruptcy Code, 2016 is the date when the debt became due and payable as per the repayment schedule, and not the date of classification of the account as Non-Performing Asset (NPA) by the bank. The NPA classification is a regulatory requirement and does not determine the actual date of default for limitation purposes. (Paras 10-12) B) Limitation Act, 1963 - Article 137 - Application to Section 7 of IBC - The limitation period for filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is three years from the date of default, as per Article 137 of the Limitation Act, 1963. The application must be filed within three years from the date when the right to apply accrues, i.e., the date of default in repayment. (Paras 10-12) C) Insolvency and Bankruptcy Code - Section 7 - Condonation of Delay - Section 5 of the Limitation Act, 1963, which allows for condonation of delay, is not applicable to applications under Section 7 of the Insolvency and Bankruptcy Code, 2016. Therefore, if the application is filed beyond the three-year limitation period, it is liable to be dismissed as time-barred. (Para 12)
Issue of Consideration
Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by the Financial Creditor was barred by limitation, and whether the date of default should be computed from the date of NPA classification or from the date of the last repayment schedule.
Final Decision
The appeal is dismissed. The order of NCLT, Kochi Bench, admitting the Section 7 application is upheld. The date of default is the date when the debt became due as per the repayment schedule, not the NPA classification date. The application was filed within three years from the last repayment schedule on 14.12.2020, hence within limitation.
Law Points
- Limitation under Section 7 of IBC
- 2016 computed from date of default in repayment schedule
- not from NPA classification date
- Application of Article 137 of Limitation Act
- 1963
- Condonation of delay under Section 5 of Limitation Act not applicable to Section 7 applications
- Agricultural loan default
- Hypothecation agreement
- Memorandum of Deposit of Title Deeds
