tulip star hotels: the Supreme Court rules in favor of ARCIL in the bankruptcy case of Tulip Star Hotels
The appeals tribunal had accepted the hotel operator’s claim that the CRA had filed its case against the company under the Insolvency and Bankruptcy Code (IBC) after the three-year statute of limitations on from the date of declaration of the asset as non-performing. But the Supreme Court, in its order of August 1, noted the extensions requested by
Hotels to pay arrears and ruled that entries of claims in a company’s books and balance sheet could be treated as an admission of liability and taken into account when setting the limitation period.
The account of Tulip Star Hotels, which together with the affiliate
owns V Hotels in the Juhu district of Mumbai, was declared delinquent on December 1, 2008. , who had led a consortium of lenders to the company, assigned its claims to the asset reconstruction company on December 31 of the same year.
In February 2011, within the three-year statute of limitations to file a formal claim, the company admitted its debt and default and requested an extension of the deadline for refunding dues. He applied for another extension of Rs 239 crore in April 2013, and later paid Rs 17.50 crore, according to the CRA. The company recognized the liability in its financial statements from 2008-09 to 2016-17.
The CRA contacted the National Company Law Tribunal (NCLT) in April 2018 as part of the IBC. The hotel group argued that the case under the Insolvency and Bankruptcy Act 2016 was filed long after the account was declared an NPA.
The Mumbai bench of the NCLT, rejecting the company’s argument, admitted it for the corporate insolvency resolution process. While the company successfully challenged the NCLT’s decision before the NCLAT, the Supreme Court has now overturned the appeals tribunal’s decision.
“In our opinion, an application under section 7 of the IBC would not be barred on the ground that it was filed beyond a period of three years from the date of the declaration of the account of loan from the debtor company as NPA, if there was an acknowledgment of debt by the debtor company before the expiry of the three-year limitation period, in which case the limitation period would be extended by a further three-year period ”, observed a panel of judges Indira Banerjee and JK Maheshwari in its 56-page order.
In this case, the corporate debtor’s account was declared NPA in December 2008. The debtor, well under three years old, admitted liability and offered a settlement. This was followed by several requests for extension of the payment deadline and revised regulations. The BAC s.7(2) request was filed on April 3, 2018, well before the statute of limitations extended, the court observed.