JM Cotton Ginning and Pressing Company Pvt. Ltd. vs Khandesh Builders Pvt. Ltd.

29.02.2024: This appeal is directed against the order dated 20.10.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) by which an application bearing CP (IB) No. 77/MB/2023 filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) has been dismissed on the ground of limitation.

In brief, case set up by the Appellant is that an Inter Corporate Loan agreement was executed between the parties on 31.03.2010 for an amount of Rs. 7,81,55,726/- which was repayable by 31.03.2011 alongwith interest. The Appellant has claimed that the Corporate Debtor acknowledged the amount of loan of Rs. 7,81,55,726/- through various letters. The Adjudicating Authority counted the limitation of three years, in terms of Article 137 of the Limitation Act, 1963 (in short ‘Act’) from 31.03.2011 which expired on 31.03.2014 whereas the first letter produced by the Appellant for the purpose of acknowledgement was dated 24.03.2013. The Adjudicating Authority has observed that if the limitation is to be counted, in terms of the Section 18 of the Act from 24.03.2013 it would again come to an end on 24.03.2016 whereas the second letter of acknowledgement is dated 03.06.2016 which is beyond the period of three years. The Adjudicating Authority has also dismissed the application on the ground that the Appellant has though been granted time to place on record the financial statements from 2010-11 to 2020-2021 but the same was not produced, therefore, there was no material before the Adjudicating Authority to hold even from the financial statements that there was acknowledgement of debt and the application filed under Section 7 in January, 2023 would fall within the period of three years. The Appellant has filed the present appeal alongwith an application i.e. I.A. No. 5875 of 2023 for placing on record the additional documents. With this application, the Appellant has sought to place on record the financial statements starting from the year 2011-12 to 2022-23. During the course of hearing, Counsel for the Appellant has submitted that in all the financial statements (balance sheet) starting from the year 2011-12 to 2022-23 the amount in question has been shown as the long term borrowings which is a sufficient proof of acknowledgement of debt on the part of the Corporate Debtor. We have also perused the aforesaid financial statements and found that the amount in question has been so recorded as long term borrowings.

Faced with this argument, Counsel for the Respondent has submitted that the Appellant, despite availing opportunity, failed to produce the said financial statement on record, therefore, there is no error in the order of the Adjudicating Authority in dismissing the application in the absence of any cogent proof. She has also submitted that even if the financial statements have now been produced on record, the same is required to be looked into with an opportunity to the Respondent to contest the same.

In reply to this argument, Counsel for the Appellant has argued that the appeal is continuation of the original proceedings and the Appellant can place on record the documents which can prove that there is an acknowledgement of debt on the part of the Corporate Debtor.

We have heard Counsel for the parties and perused the record with their able assistance.

Since, the application filed under Section 7 of the Code by the Appellant has been dismissed only on the ground of limitation that too on the ground that the Appellant has failed to produce on record the financial statements showing long term borrowings of the amount in question, therefore, it would be just and expedient if the impugned order is set aside and the matter is remanded back to the Adjudicating Authority to consider the financial statements now produce in appeal before this Court and to take a decision as to whether on the basis of the financial statements, the application filed under Section 7 is within the limitation or not.

With these observations, the present appeal is hereby allowed, the impugned order is set aside and the matter is remanded back to the Adjudicating Authority to decide the issue of limitation once again after taking into consideration the financial statements now on record. The parties are directed to appear before the Adjudicating Authority on 11^th March, 2024. It is needless to mention that the Respondent shall still have the opportunity to contradict the financial statements placed on record by the Appellant in accordance with law.