Section 7 IBC Application Not Time-Barred When Last Payment Date Falls Within Three-Year Limitation Window — NCLAT Delhi

Case Overview

Case Name: Atharva Auto Logistics Pvt. Ltd. Vs Intec Capital Ltd. & Anr. (NCLAT Delhi)
Appeal Number: Company Appeal (AT) (Insolvency) No. 303 of 2022
Date of Order: 24/03/2022
Forum: National Company Law Appellate Tribunal, Delhi

Background and Context

The National Company Law Appellate Tribunal, Delhi, in Company Appeal (AT) (Insolvency) No. 303 of 2022, adjudicated a challenge brought by Atharva Auto Logistics Pvt. Ltd. against an order dated 18.02.2022 passed by NCLT, Court-5, Mumbai Bench in CP No. 1258/MB/I&B/2020. The NCLT had admitted a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by Intec Capital Ltd., the Financial Creditor, against the Corporate Debtor.

The central question before the Appellate Tribunal was straightforward yet consequential: whether the Section 7 application filed on 28.08.2020 was barred by the limitation period, given that Part-IV of the application specifically recorded 25.08.2017 as the date of default.

Arguments Advanced by the Appellant

Atharva Auto Logistics Pvt. Ltd. raised a pointed limitation objection before NCLAT. The Appellant's submissions can be summarised as follows:

  • Part-IV of the Section 7 application under the Insolvency and Bankruptcy Code, 2016 explicitly recorded the date of default as 25.08.2017.
  • Since the application was filed on 28.08.2020, it fell beyond the prescribed three-year limitation period when computed from the stated date of default.
  • The Adjudicating Authority had taken note of the relevant facts on record but had, according to the Appellant, failed to adequately address the legal consequence flowing from the date of default mentioned in Part-IV.
  • In support of the limitation argument, the Appellant placed reliance on the Supreme Court's ruling in Babulal Vardharji Gurjar Vs Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr., (2020) 15 SCC 1, contending that the date of default for the purposes of computing limitation must be determined from the pleadings contained in the Section 7 application itself.

The Financial Creditor's Position and Evidence on Record

Intec Capital Ltd., the Financial Creditor, had placed documentary evidence before the Adjudicating Authority as part of the Section 7 application. This included:

  • The record of default maintained by the Information Utility, NESL
  • The statement of account reflecting the repayment history of the Corporate Debtor

These documents collectively disclosed that the Corporate Debtor — Atharva Auto Logistics Pvt. Ltd. — had made its last repayment of Rs. 2 lakh on 31.07.2018. This factual position had been expressly noted by the Adjudicating Authority at paragraph 6 of its order, where it observed:

"The Petitioner has also filed record of default by the information utility (NESL). The statement of account produced by the Petitioner shows that the last repayment of Rs. 2 Lakhs was made by the Corporate Debtor on 31.07.2018."

NCLAT's Analysis and Findings

On the Question of Limitation

NCLAT examined both the submissions of the parties and the record placed before it. The Appellate Tribunal arrived at the following key findings:

1. Last Payment Date as the Trigger for Limitation

The Tribunal held that once it stood established that the Corporate Debtor's last payment was made on 31.07.2018, the Section 7 application filed on 28.08.2020 was clearly within three years from the date of that payment. The limitation period, properly computed, ran from 31.07.2018 — not from 25.08.2017, the date stated in Part-IV of the application.

2. Documents Forming Part of the Application