Case Note & Summary
The case involves an appeal by Mr. Bhagawant Narayan Naik against the rejection of his claim by the Resolution Professional (RP) of Sovereign Industries Limited (Corporate Debtor) in the Corporate Insolvency Resolution Process (CIRP). The Appellant had filed a claim as a financial creditor based on a loan advanced to the Corporate Debtor. The RP rejected the claim on the ground that it was barred by limitation. The Appellant then filed an application under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) before the National Company Law Tribunal (NCLT), which dismissed the application, upholding the RP's decision. Aggrieved, the Appellant appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT examined the issue of limitation and found that the Corporate Debtor had acknowledged the debt in its balance sheets for the financial years 2015-16 and 2016-17, which extended the limitation period under Section 18 of the Limitation Act, 1963. The claim was filed within three years from the date of the last acknowledgment. The NCLAT held that the claim was not barred by limitation and set aside the NCLT order, directing the RP to admit the claim and treat the Appellant as a financial creditor. The appeal was allowed with no order as to costs.
Headnote
A) Insolvency and Bankruptcy Code - Limitation for Filing Claims - Section 7, Section 60(5) IBC, 2016 - Article 137 Limitation Act, 1963 - The Appellant filed a claim in the CIRP of the Corporate Debtor which was rejected by the RP as time-barred. The NCLT dismissed the application under Section 60(5) IBC. On appeal, the NCLAT held that the claim was not barred by limitation as the debt was acknowledged by the Corporate Debtor in its balance sheets and the claim was filed within three years from the date of default. The NCLAT set aside the order of the NCLT and directed the RP to admit the claim. (Paras 1-13) B) Insolvency and Bankruptcy Code - Rejection of Claim by RP - Section 60(5) IBC, 2016 - The RP rejected the claim of the Appellant on the ground of limitation. The NCLAT held that the RP's decision was erroneous as the debt was acknowledged in the balance sheets of the Corporate Debtor, which extended the limitation period. The NCLAT directed the RP to admit the claim and treat the Appellant as a financial creditor. (Paras 14-20)
Issue of Consideration
Whether the claim filed by the Appellant was barred by limitation and whether the RP's rejection of the claim was justified.
Final Decision
Appeal allowed. The order of NCLT is set aside. The RP is directed to admit the claim of the Appellant and treat him as a financial creditor. No order as to costs.
Law Points
- Limitation for filing claims in CIRP
- Section 7 application limitation
- Article 137 of Limitation Act
- 1963
- Rejection of claim by RP
- Right to approach Adjudicating Authority under Section 60(5) IBC
