NCLAT set aside the Insolvency proceeding of Sarda Agro Oils by stating the reason that the claims were filed three years after declaring the account non-performing asset. This 3 judge- bench gave the ruling that, “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. This is very important to be considered for the purpose of calculating of limitation period of 3 years as prescribed by the Limitation Act 1963.
It will be impermissible to proceed with section 7 ie. Application filed by the financial creditor, in case the limitation period lapses. In the given case, it was observed by NCLAT that due to irregular payments bank had declared this account as NPA on 30th September 2015, whereas the section 7 application was filed on 31st December 2018. Appellate Authority ordered NCLT to close these proceedings and declare all activities by resolution professional in the given case to be “Illegal”.
"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. The bench gives emphasis to the relation of ‘date of Default’ to the ‘date of declaration of NPA’ to be the same in such cases.
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 the extension of the stipulated period.
Conclusion: It is important to check the Date of Default for filing section 7 Application, which could be the date of Declaration of Account as NPA. The limitation period of 3 years is counted from this date and hence, one must be careful not to lapse the given time period for filing the application.
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