Case Note & Summary
The appeal was filed by M/s. Canara Bank (Appellant/Financial Creditor) against the order of the National Company Law Tribunal, Hyderabad Bench, which dismissed its application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of Corporate Insolvency Resolution Process (CIRP) against M/s. DAAJ Hotels & Resorts Private Limited (Respondent/Corporate Debtor). The Corporate Debtor had availed financial assistance from a consortium of banks, including the Appellant, for construction of a five-star hotel. The debt was declared as Non-Performing Asset (NPA) on 31.03.2015. The Appellant filed the Section 7 application on 30.09.2019. The Adjudicating Authority dismissed the application as time-barred, holding that the application was filed beyond the three-year limitation period from the date of default (NPA declaration). The Appellant contended that the date of default was 31.03.2016 (when the account was classified as NPA by RBI guidelines) and that acknowledgments of debt by the Corporate Debtor extended limitation. The NCLAT examined the issue of limitation and held that the date of NPA declaration (31.03.2015) is the relevant date of default for computing limitation under Article 137 of the Limitation Act, 1963. The letters of acknowledgment dated 31.03.2016 and 31.03.2017 extended limitation, but the application filed on 30.09.2019 was still beyond three years from the last acknowledgment. The NCLAT dismissed the appeal, affirming the order of the Adjudicating Authority.
Headnote
A) Insolvency and Bankruptcy Code - Limitation for Section 7 Application - Date of Default - NPA Declaration - The issue was whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed on 30.09.2019, was within limitation when the debt was declared NPA on 31.03.2015. The NCLAT held that the date of NPA declaration is the date of default for computing limitation under Article 137 of the Limitation Act, 1963, and the application filed beyond three years from that date is time-barred. (Paras 1-13) B) Insolvency and Bankruptcy Code - Limitation - Acknowledgment of Debt - Effect on Limitation - The Corporate Debtor's letters dated 31.03.2016 and 31.03.2017 were considered as acknowledgments of debt under Section 18 of the Limitation Act, 1963, extending limitation. However, the NCLAT found that the application was still filed beyond the extended period, as the last acknowledgment was on 31.03.2017 and the application was filed on 30.09.2019, which is beyond three years from that date. (Paras 14-20)
Issue of Consideration
Whether the application filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation, given that the debt was declared as Non-Performing Asset (NPA) on 31.03.2015 and the application was filed on 30.09.2019.
Final Decision
The appeal is dismissed. The order of the Adjudicating Authority (NCLT Hyderabad) dismissing the Section 7 application as time-barred is upheld.
Law Points
- Limitation period for filing Section 7 application under IBC
- 2016 is three years from date of default
- date of NPA declaration is relevant for computing limitation
- Article 137 of Limitation Act
- 1963 applies
- application filed beyond three years from NPA declaration is time-barred
