ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED versus TULIP STAR HOTELS LIMITED & ORS.

ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED versus TULIP STAR HOTELS LIMITED & ORS.

An application under Section 7 of the IBC is governed by Article 137 of the Limitation Act (three years from date of default), but where there is a writing signed by the corporate debtor acknowledging a present subsisting liability before expiry of that period (including entries in financial statements/books of account that amount to such an acknowledgement), Section 18 of the Limitation Act restarts the limitation period. The corporate debtor in this case acknowledged liability by correspondence and in financial statements within the requisite period, so the Section 7 application filed on 03.04.2018 was within the extended limitation period; NCLAT erred in holding otherwise.

Parties
Appellant / Financial Creditor: Asset Reconstruction Company (India) Limited; Corporate Debtor: V. Hotels Limited; Shareholders / Respondents: Tulip Star Hotels Limited and Tulip Hotels Private Limited
Jurisdiction
India
Judgment Date
01 August 2022
Procedural Posture
Civil Appeal Under Section 62 of the Insolvency and Bankruptcy Code, 2016 / Final Judgment of the Supreme Court on Appeal From NCLAT Order Dated 11.12.2019
Outcome
Appeals allowed; impugned judgment and order of the NCLAT set aside
Legal Topics
Corporate Insolvency Resolution Process (cirp), Limitation Period for IBC Applications, Acknowledgement in Books of Account/financial Statements (section 18 Limitation Act), Section 7 IBC Procedures
Insolvency and Bankruptcy Limitation Company Law Corporate Insolvency Resolution Process (cirp) Limitation Period for IBC Applications Acknowledgement in Books of Account/financial Statements (section 18 Limitation Act) Section 7 IBC Procedures

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Parties

Asset Reconstruction Company (India) Limited

Appellant / Financial Creditor

V. Hotels Limited

Corporate Debtor

Tulip Star Hotels Limited and Tulip Hotels Private Limited

Shareholders / Respondents

Procedural Posture

Civil Appeal Under Section 62 of the Insolvency and Bankruptcy Code, 2016 / Final Judgment of the Supreme Court on Appeal From NCLAT Order Dated 11.12.2019

Legal Issues

  1. 1 Whether an application under Section 7 of the IBC was barred by limitation
  2. 2 Whether entries in the corporate debtor’s books of account/financial statements constitute an acknowledgement under Section 18 of the Limitation Act and thereby extend limitation
  3. 3 What period of limitation governs applications under the IBC before the NCLT/NCLAT

Ratio Decidendi

An application under Section 7 of the IBC is governed by Article 137 of the Limitation Act (three years from date of default), but where there is a writing signed by the corporate debtor acknowledging a present subsisting liability before expiry of that period (including entries in financial statements/books of account that amount to such an acknowledgement), Section 18 of the Limitation Act restarts the limitation period. The corporate debtor in this case acknowledged liability by correspondence and in financial statements within the requisite period, so the Section 7 application filed on 03.04.2018 was within the extended limitation period; NCLAT erred in holding otherwise.

Court Disposition

Appeals allowed; impugned judgment and order of the NCLAT set aside

Orders

  • Impugned judgment and order of the National Company Law Appellate Tribunal dated 11.12.2019 set aside
  • Appeals filed by Asset Reconstruction Company (India) Limited allowed