First it made a mistake and then tried to cover its tracks. But the National Company Law Appellate Tribunal (NCLAT) Principal Bench saw through it.
When IDBI Bank took its corporate debtor Saraju Flour Mills to insolvency court under Section 7 of the Insolvency and Bankruptcy Code (IBC) on October 18, 2019, it should have clearly mentioned the date of default — a crucial detail. It omitted to do so. Only after the NCLT passed an order, it filed a supplementary affidavit mentioning the default date as August 31, 2013, and the non-performing asset (NPA) declaration date as March 31, 2014. However, it “tried to change the date of default” to March 31, 2014.
The NCLAT observed that the bank did so to extend the three-year period of limitation to March 31, 2017. This was important to the bank because the debtor paid ₹2.75 lakh on March 29, 2017. The bank thought this would become the date of acknowledgement of debt and the start of the three-year limitation period — and, hence, its insolvency petition on October 18, 2019, would be within the limitation period.
NCLAT’s judicial member Rakesh Kumar Jain and technical member Alok Srivastava noted that IDBI Bank was wrong on both counts. First, it cannot change the date of default. Therefore, the payment of ₹2.75 lakh was after the limitation period. Second, the payment was not an acknowledgement of debt and hence cannot trigger a fresh three-year limitation period. A debt should be clearly acknowledged in writing — a payment is not an acknowledgement.
Unstamped arbitration agreement
The Supreme Court has held that an unstamped arbitration agreement is “non-existent” at the pre-referral stage.
A five-judge constitutional bench hearing NN Global Mercantile Pvt Ltd vs Indo Unique Flame has clarified that unstamped or insufficiently stamped arbitration agreements are invalid, though not null and void. It could still be validated through compliance with the Stamp Act. Until then, however, it would not be enforceable, it said.