CIRP Plea u/s 7 wasn’t Time-barred when Limitation was Extended by OTS Proposal Submitted by CD: HC

Case Details: M.Seshavatharam v. National Company Law Tribunal-I - [2023] 150 taxmann.com 289 (HC-Telangana)

Judiciary and Counsel Details

• • Ujjal Bhuyan, CJ. & Mrs Surepalli Nanda, J.
  • L. Ravichander, learned Senior Counsel & Mayur Mundra for the Petitioner.
  • K. Raghavendra Rao & P. Vajra Lakshmi Subba Rao for the Respondent.

Facts of the Case

In the instant case, a question was placed before the High Court regarding whether the Corporate Insolvency Resolution Process (CIRP) plea u/s 7 was time-barred, considering that the limitation period got extended due to balance confirmations and an OTS proposal submitted by the Corporate Debtor within the limitation period.

The corporate debtor’s bank account was declared as NPA on May 31, 2011. Later, Respondent No. 2 issued a demand notice to the Corporate Debtor under Section 13(2) of the SARFAESI Act on 22.06.2011, followed by a possession notice dated 15.09.2021.

While the proceedings under the SARFAESI Act were going on, a proposal for rescheduling the loan account was mooted by the parties on 19.03.2012. As a result, the corporate debtor also provided balance confirmations on 04.07.2013.

Thereafter, the corporate debtor submitted a proposal via e-mail communications dated 22.12.2015 and 23.12.2015, expressing its readiness and willingness to settle outstanding dues at Rs.16.00 crores. A meeting was held between the corporate debtor and the financial creditor on 08.01.2016.

Further communications between the parties, and Respondent No.2 agreed to settle its dues under the One Time Settlement (OTS) proposal, as indicated in a letter dated 22.04.2016.

Subsequently, an application u/s 7 of IBC was filed for the initiation of the CIRP before the NCLT in the year 2018, to be precise on 29.10.2018, which was later admitted and a moratorium was declared.

High Court Held

The High Court observed that it cannot be said that the application u/s 7 of IBC was barred by limitation.

The High Court held that the CIRP plea u/s 7 was not time-barred since it was filed within the limitation period, considering the extension provided by the balance confirmations/OTS executed/submitted by corporate debtor within the limitation period/extended limitation period.