NCLAT Delhi: Period Of Limitation For Filing An Appeal U/S 61 Of IBC Starts From Date Of The Rectification Order; Rectification Order Merges With The Original Order.
The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Anant Bijay Singh (Judicial Member) and Mr Ajai Das Mehrotra (Technical Member) has allowed an appeal and held that the rectification Order of National Company Law Tribunal (“NCLT”) merges with the Original Order and the period of Limitation for filing an appeal under Section 61...
The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Anant Bijay Singh (Judicial Member) and Mr Ajai Das Mehrotra (Technical Member) has allowed an appeal and held that the rectification Order of National Company Law Tribunal (“NCLT”) merges with the Original Order and the period of Limitation for filing an appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 (“IBC”) starts from the date of the rectification Order.
Background Facts
Tattva & Mittal Lifespaces Private Limited (“Respondent/ Corporate Guarantor'”) is a private limited company incorporated under the provisions of the Companies Act, 1956.
Mr. Ashok Tiwari (“Appellant”) had disbursed a loan of Rs.1.50 Crores to M/s. Tattva Properties LLP (“Principal Borrower”) for development of a Project known as Bombay XI located at Mumbai vide Loan Agreement dated 12.10.2020, which was executed by and between the Appellant, the Principal Borrower and the Respondent.
The Corporate Guarantor was signatory to the Loan Agreement and had given two cheques as security.
The Principal Borrower failed to pay the loan amount as per repayment Plan and the loan facility was to be extended with the interest of 24% per month.
Further, the Principal Borrower had to provide security in the form of Residential Flat to the Appellant in the said Project Bombay XI.
The Principal Borrower failed to repay the loan amount and failed to provide the Residential Flat as security, leading to event of acceleration in terms of Loan Agreement.
The Appellant deposited cheques given by the Principal Borrower as well as the Respondent but they were dishonoured by Bank Memo dated 19.01.2022.
The Appellant further issued a Notice to the Respondent to pay the amount in default of the Principal Borrower. The date of receipt of Notice is 31.01.2022.
Contentions of Appellant
The Appellant argued that the date of receipt of notice has to be considered as the date of invocation of the guarantee and the date of dishonour of the security cheques as the `date of default'.
The Appellant pointed out that the Appeal was filed on 12.05.2023, which is within the period of 30 days form the date of Order dated 21.03.2023, excluding the time taken for obtaining the certified copy of the Order.
The Appellant pointed out that the date of invocation of Guarantee and date of dishonour of the cheques is beyond the period covered by provisions of Section 10A of the IBC, 2016
Contentions of Respondents
The Respondent opposed the submissions of the Appellant and argued that there is no error in the Order of the Adjudicating Authority and the loan was to be originally repaid during the period 15.02.2021 to 15.03.2021 which is the period excluded by Section 10A of the IBC, 2016, for which Corporate Insolvency Resolution Process (“CIRP”) cannot be initiated.
The Respondent further argued that the Appeal is outside the period of Limitation under Section 61(2) of the IBC.
The Respondents have further pointed out that the Appellant cannot challenge the findings of the Adjudicating Authority as no appeal was filed against Order dated 17.01.2023.
NCLAT Verdict
NCLAT while allowing the appeal held that Respondent had undertaken to act as a Guarantor towards loan. The cheques which were issued was not encashed due to insufficient funds. NCLAT further observed that the Guarantee was invoked in January, 2022, which is the period not covered by provisions of Section 10A of the IBC.
NCLAT further stated that by its action of depositing the security cheques and issue of Notice dated 31.01.2022, the Appellant, is deemed to have invoked the Corporate Guarantee in the month of January, 2022, which is to be considered as the date of default, and which lies beyond the period prohibited under Section 10A of the IBC.
Further, following the Order of this Tribunal cited supra, the Appellant cannot be faulted with for seeking rectification of the Order dated 17.01.2023 before filing the Appeal before this Tribunal. Considering the above facts, we hold that Appeal under Section 61 of the IBC, 2016, filed before this Tribunal is within time and the rectification Order dated 21.03.2023 merges with the original Order dated 17.01.2023, and proceed ahead for determination of issued in the present Appeal.
Case Title: Ashok Tiwari vs Tattva & Mittal Lifespaces Private Limited
Case No.: COMPANY APPEAL (AT) (INSOLVENCY) NO. 729 of 2023
Counsel For Appellant: Mr. Prasannan S. Namboodiri, Advocate
Counsel For Respondent: Mr. Ravi Raghunath, Advocate.