₹40,000 Payment Revives Limitation Period, NCLAT Upholds Insolvency Petition

₹40,000 Payment Revives Limitation Period, NCLAT Upholds Insolvency Petition

Introduction

The National Company Law Appellate Tribunal (NCLAT) has held that a payment of ₹40,000 effectively revived the limitation period and validated the claim raised by the operational creditors under the Insolvency and Bankruptcy Code (IBC).

Factual Background

The operational creditors had filed an application under Section 9 of the IBC against the corporate debtor. The corporate debtor challenged the application, arguing that the claim was time-barred.

Procedural Background

The NCLT admitted the insolvency petition, and the corporate debtor appealed against the order before the NCLAT.

Issues

1. Limitation: Whether the payment of ₹40,000 revived the limitation period and validated the claim raised by the operational creditors.

Contentions of the Parties

Operational Creditors: The payment of ₹40,000 was an acknowledgment of debt and revived the limitation period.

Corporate Debtor: The claim was time-barred, and the payment did not validate the claim.

Reasoning and Analysis

The NCLAT endorsed the reasoning of the Ahmedabad NCLT, holding that the payment of ₹40,000 effectively revived the limitation period and validated the claim raised by the operational creditors. The Tribunal found that the operational creditor’s application was within limitation and that the NCLT rightly admitted the insolvency petition.

Decision

The NCLAT bench comprising Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan and Naresh Salecha (Technical Member) dismissed the appeal, upholding the NCLT's order admitting the insolvency petition.

Implications

The judgment clarifies the effect of part payments on the limitation period under the IBC.