NCLAT Chennai held that the Limitation period for initiating the CIRP can be extended based on the acknowledgement of debt and issuance of recovery certificates.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Ajai Das Mehrotra (Technical Member) was hearing an appeal and ruled that the limitation period for initiating the Corporate Insolvency Resolution Process (CIRP) can be extended based on the acknowledgement of debt and issuance of recovery certificates, as per relevant provisions of the Limitation Act and legal precedents, including Supreme Court decisions. Consequently, the NCLAT found no error in the NCLT's decision regarding the limitation issue, thereby dismissing the appeal.
The Appellant, the Managing Director of M/s Dreamz Infra India Limited, challenged the validity of orders dated 15.02.2023 and 21.02.2023 passed by the National Company Law Tribunal, Bengaluru Bench. These orders admitted an application filed by M/s Dreamz Sneh Project Allottees Welfare Association under Section 7 of the Insolvency and Bankruptcy Code, 2016, appointing an Interim Resolution Professional.
The background involved a series of legal proceedings initiated by homebuyers against the corporate debtor, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Dreamz Sumadhur Project. Subsequently, on 19.08.2021, homebuyers of Dreamz Sneh Project filed a separate application under Section 7, admitted on 15.02.2023, triggering the present appeal.
The central argument revolved around the limitation period for filing the application under Section 7. Ms Choudhary contended that the application was time-barred, citing the cause of action arising in 2016. However, the respondent argued that the cause of action emerged from earlier tribunal orders, including the one dated 04.09.2020.
The Appellate Tribunal dismissed the appeal, affirming that the application fell within the limitation period. It referenced legal precedents, including a Supreme Court decision of Dena Bank (Now Bank of Baroda) v. C. Shiva Kumar Reddy and Another, REEDLAW 2021 SC 08512, to support the extension of the limitation period based on acknowledgement of debt and issuance of recovery certificates. Consequently, the Appellant Tribunal found no error in the impugned order and dismissed the appeal, closing all pending applications without costs.
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