The National Company Law Appellate Tribunal on Tuesday set aside an NCLT order that rejected an appeal by Reliance Asset Reconstruction Company Ltd (RARCL) to initiate insolvency proceeding against Narendra Plastics.
The NCLAT also directed the NCLT to initiate the insolvency proceedings against the company.
A three-member NCLAT bench headed by Chairperson Justice Ashok Bhushan set aside the order passed by the Mumbai bench of the National Company Law Tribunal (NCLT) which on August 13, 2021, rejected RARCL’s plea to initiate insolvency proceedings.
The NCLT had said the RARCL’s plea was barred under limitations as it was filed beyond the prescribed limit of three years after default.
The tribunal had said the RARCL had filed a petition under section 7 of the Insolvency & Bankruptcy Code on May 8, 2019, while Narendra Plastics’ account was declared as NPA on June 30, 2014, which was prima facie filed after more than five years.
This was challenged by RARCL, which is registered as a securitization and reconstruction company, before the appellate tribunal contending that it was within the limitation period.
As per the Limitation Act, which is also applicable on the Insolvency & Bankruptcy Code (IBC) cases, any insolvency plea filed over defaults occurred over three years prior to the date of filing of the application are barred under article 137 of the act.
It had contended that acknowledging its outstanding liabilities the debtor had submitted a settlement proposal on March 2, 2017 and another revised proposal on March 8, 2018, June 26, 2018 and December 4, 2018. RARCL had rejected all settlement proposals on February 12, 2019.
RARCL contended that such settlement proposals are construed as a fresh acknowledgement of liability.
Consenting with it, the NCLAT said, “If Settlement offer or other way of acknowledgement of Debt has been done within the first period of limitation then Limitation gets extended again for the next three years”.
“In view of the law laid down and facts and circumstances… , the petition has been filed within the limitation period and hence Section 7 of the Code petition can be initiation against the Corporate Debtor,” said NCLAT.
It further said both debt and defaults are not disputed and hence provisions of Section 7 of the Code to initiate insolvency proceedings is applicable.
“The appeal deserves to be allowed and is accordingly allowed. We set aside the impugned order dated 13.08.2021 of the Adjudicating Authority (NCLT). The Adjudicating Authority is directed to initiate the CIRP proceedings,” said the appellate tribunal.
However, it also added that parties are also free to settle the matter.
The loan was initially granted by ING Vyasya Bank, which had assigned the debt to RARCL through an agreement dated September 2014.
