The National Company Law Appellate Tribunal (NCLAT) on Friday set aside the insolvency proceedings initiated against Telangana-based Sarda Agro Oils citing that claims were filed by the lender three years after declaring the account as a non-performing asset. The ruling comes nearly a year after the Hyderabad bench of the National Company Law Tribunal (NCLT) admitted a plea from Allahabad Bank for insolvency proceedings against the company.
In order, a three-member bench of the NCLAT said the date of default is computed from the date of declaration of account as a NPA (Non Performing Asset) and such date of default would not shift.
It will be “impermissible to proceed with Section 7 application,” filed by the bank which is after the limitation period of three years, the order said.
Under Section 7 of the Insolvency and Bankruptcy Code (IBC), a financial creditor can get insolvency proceedings initiated against the corporate debtor concerned.
The NCLAT’s ruling has come on a petition filed by Sarda Agro Oils’ Managing Director Jagdish Prasad Sarada challenging the NCLT order.
The appellate tribunal observed that the appellant’s account was declared as NPA on September 30, 2015 by the bank after irregular repayments. Then, it filed an application under Section 7 of the IBC initiate insolvency proceedings on December 31, 2018.
“We are of the firm view that the determining factor is the three years period from the date of default/ NPA,” the NCLAT bench, headed by Acting Chairperson Justice B L Bhat, said.
According to the NCLAT, the Supreme Court has also held that the limitation period for application under Section 7 of the IBC is three years as provided by the Limitation Act, 1963 and is extendable only by the application of Section 5 of Limitation Act, 1963 if any case for condonation of delay is made out. Section 5 pertains to extension of the stipulated period.
The appellate tribunal has directed the NCLT to close the Corporate Insolvency Resolution Process (CIRP) initiated against Sarda Agro Oils and set aside the appointment of resolution profession, declaring all consequential action taken by him as “illegal”.
“This appeal is allowed and we set aside the impugned order dated August 27, 2019 passed by the Adjudicating Authority (NCLT).
“Consequently, orders passed by the Adjudicating Authority appointing IRP/ RP, declaring moratorium, freezing of account etc. and all consequential action taken by IRP/ RP including advertisement publication etc. all such orders and actions are declared illegal and set aside,” the NCLAT said.
IRP and RP are Interim Resolution Professional and Resolution Professional, respectively.
Allahabad Bank had sanctioned a cash credit facility of Rs 20 crore, term loan of Rs 14 crore and Letter of Credit of Rs 65 crore by way of a common sanction letter on May 31, 2012. The bank had submitted to the NCLT that the company became irregular in repayment and consequently the account was declared NPA on September 30, 2015.
Source: Economic Times