Overview:
Claims otherwise time barred get ‘revived’ by CIRP. While a time-barred claim may restrict the remedy, it does not negate the underlying right associated with the remedy. Hence, can be filed in the CIRP and should be recognised.
This has been held by the National Company Law Tribunal, Mumbai (“Hon’ble Tribunal”) in Gokul Anilkumar Aggarwal & Anr. Vs. Shailesh Bhalchandra Desai & Anr. [I.A. No. 3272 of 2023 in C.P. No. (IB) 115 of 2021; decided on 24.04.2024]
Technical Details:
1) The Suspended Director of the Corporate Debtor, which was undergoing CIRP, filed the present Application seeking rejection of claim filed by Respondent No. 2 as the Financial Creditor of the Corporate Debtor on the grounds of limitation.
2) Taking note of the submissions made by the parties, the Hon’ble Tribunal observed the following:
(a) The law of limitation serves to restrict the remedy available but does not nullify the underlying right. Thus, a valid claim submitted by a Financial Creditor cannot be dismissed solely on the basis of limitation; instead, it must be assessed based on its merits.
(b) The Corporate Debtor’s acknowledgment of debt through proposals for One Time Settlement (OTS) constitutes an acknowledgment of liability. Additionally, the OTS letters, signed by the Suspended Director himself, cannot be disregarded when evaluating the validity of the proof of claim submitted by the Financial Creditors.
(c) A suspended director of the Corporate Debtor, who also served as a personal guarantor to Respondent No. 2 in this case, lacks the standing to contest claims filed by Financial Creditors.
JC Key Takeaways:
1) The Order achieves a delicate equilibrium between creditors’ rights and procedural integrity.
2) It upholds the significance of evaluating the merits and validity of time-barred claims while respecting established limitations law.
3) The Order clarifies the standing of a suspended director in contesting claims lodged by Financial Creditors.
4) Furthermore, it underscores that a corporate debtor cannot evade accountability, especially if they have acknowledged their liability through One Time Settlement (OTS) proposals.
For further details, please see:
Gokul Anilkumar Aggarwal & Anr. Vs. Shailesh Bhalchandra Desai & Anr.
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