Time-barred CIRP Plea rejected by NCLT in 2018 for default

Case Details: Vedika Credit Capital Ltd. v. Shriram Power and Steel (P.) Ltd. - [2023] 147 taxmann.com 384 (NCLAT- New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson, Dr. Alok Srivastava & Barun Mitra, Technical Member
  • Akhilesh, Mratyunjay Singh , Nimit Bhela, Advs. & Kapil Kachawa, CS for the Appellant. 
  • Sudhir Mehta, Pandey Neeraj Rai, Ms. Rachitta Rai & Shashank Gupta, Advs. for the Respondent.

Facts of the Case

In the present case, the financial creditor entered into a loan agreement with corporate debtor on 9-4-2011. Later, the financial creditor paid amount to the corporate debtor in three tranches till 19-2-2012.

Thereafter, notice demanding repayment of loan was issued by the financial creditor to the corporate debtor. A winding up petition was filed by financial creditor on 11-11-2014 before the High Court of Kolkata and the same was pending.

Subsequently, on 12-2-2018, section 7 application was filed by the financial creditor against the corporate debtor and the same was rejected by the adjudicating authority (NCLT).
The NCLT stated that materials brought on record by the financial creditor created a shadow of doubt on authenticity of loan agreement and the financial creditor failed to produce any document which proved that transaction of repayment took place within three years immediately preceding filing of section 7 application.

Then, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

The financial creditor contended that in view of filing of winding up petition, which was pending in Kolkata High Court, financial creditor was entitled to take benefit of section 14 of Limitation Act, 1963.

It was noted that there was neither averment in section 7 application nor was any material on record before NCLT to give benefit of section 14. Hence, without there being any pleading or material, no plea for extending benefit of section 14 of the Limitation Act can be entertained.

NCLAT Held

The NCLAT observed that since foundational fact for taking benefit of section 14 was not laid down by financial creditor, benefit of same could not be claimed. Also, since date of default disclosed in section 7 application was 12-9-2014, application under section 7 having been filed in year 2018, was clearly filed beyond three years from date when cause of action arose to financial creditor.

The NCLAT held that since there was no mention of loan in balance sheet of corporate debtor, doubt expressed by NCLT was not unfounded and, therefore, the NCLT did not commit any error in rejecting section 7 application filed by financial creditor. Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Order of NCLT (Kolkata) in CP(IB) No. 280/KB/2018, dated 8-10-2021 (para 17) affirmed.
  • Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd. [2021] 125 taxmann.com 357/166 SCL 507 (SC) (para 12)
  • Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. [2019] 101 taxmann.com 451/152 SCL 145 (SC) (para 16) distinguished.

List of Cases Referred to

• • Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P.) Ltd. [2020] 118 taxmann.com 323 (para 8)
  • Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd. [2021] 125 taxmann.com 357/166 SCL 507 (SC) (para 10)
  • Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. [2019] 101 taxmann.com 451/152 SCL 145 (SC) (para 16).