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2023 (9) TMI 821 - SC - Insolvency and BankruptcyAdmission of application u/s 7 of the IBC after condoning the delay - time limitation - whether Respondent No.2 (SBI) would be entitled to the benefit of Section 18 of the Limitation Act and whether Section 5 of the Limitation Act thereof would also be applicable? - HELD THAT - Section 3(1) of the Limitation Act creates bar for the institution of any suit, appeal, or application made after the prescribed period of limitation to be dismissed, even though limitation has not been set up as a defence - Section 5 of the Limitation Act provides for an extension for the prescribed period in certain cases where sufficient cause for not preferring the appeal or where the application could not be made within the prescribed time. Coming to the benefit available under Section 18 of the Limitation Act, the following sequence of events and the law thereon would be relevant. The State Bank of India declared the Corporate Debtor as an NPA on 28.06.2013. Therefore, the limitation period would be three years from the last date of the financial year previous to the declaration of NPA, which would be 31.03.2013, and would run up to 31.03.2016. If there were no further intervening circumstances or developments relating to acknowledgment, the contention raised by the appellant that the petition under Section 7 of IBC having been filed much beyond 31.03.2016, in 2020 to be specific on 22.01.2020, the petition would be clearly barred by limitation. Whether the debt acknowledged in the balance sheet of the financial year would end on 31st March, 2015 and whether the three OTS proposals would give a fresh life of limitation of three years from each of the respective dates? - HELD THAT - The documents relating to acknowledgement claiming benefit of Section 18 were introduced at appellate stage, and such documents being balance sheets and settlement offers. It was held that the same could be accepted even at the appellate stage and a settlement offer akin to an OTS proposal would be an acknowledgment of debt for the purpose of Section 18 of Limitation Act. The only caveat was that such acknowledgments should be before the expiry of limitation prescribed under law - A balance sheet acknowledging debt is also a document relevant for calculating the limitation. This has already been held in case of Asset reconstruction Company India Ltd. 2021 (4) TMI 753 - SUPREME COURT . Another argument raised by the counsel for the appellant was with respect to the genuineness of the OTS proposals giving several reasons to discard the same. All the said reasons will be tested in the proceedings before the Adjudicating Authority as and when raised by the Corporate Debtor or any other party having locus to raise such plea. Presently in this appeal the said issue cannot be taken up for two reasons firstly, the Adjudicating Authority as well as NCLAT have accepted the explanation of Respondent No.2 for the delay caused in filing the Section 7 IBC petition to be satisfactory and have condoned the same. Secondly, in view of the first and second OTS proposals by the Corporate Debtor being not questioned by the suspended Directors, there is no reason to disbelieve or to cast any doubt on the said documents at the instance of the appellant. There are no merit in the appeal. The same is accordingly dismissed.
Issues Involved:
1. Whether the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) was time-barred. 2. Whether Respondent No. 2 (State Bank of India) was entitled to the benefit of Section 18 of the Limitation Act. 3. Admissibility of additional documents submitted by Respondent No. 2 at the appellate stage. 4. The rights of the appellant as an unsecured creditor versus the rights of Respondent No. 2 as a secured creditor. Summary: Issue 1: Time-Barred Petition The appellant argued that the petition under Section 7 of the IBC was time-barred as it was filed beyond the three-year limitation period from the date the Corporate Debtor was declared a Non-Performing Asset (NPA) on 28.06.2013. The appellant contended that the limitation period expired on 31.03.2016, and the petition filed on 22.01.2020 was thus barred by limitation. Issue 2: Benefit of Section 18 of the Limitation Act The Supreme Court examined whether Respondent No. 2 was entitled to the benefit of Section 18 of the Limitation Act, which allows for a fresh period of limitation upon acknowledgment of debt. The Court noted that the Corporate Debtor had acknowledged the debt in its balance sheet for the financial year ending 31.03.2015, and had made several One-Time Settlement (OTS) proposals on 16.03.2017, 01.01.2018, and 16.05.2019. These acknowledgments extended the limitation period, making the petition filed on 22.01.2020 within the permissible time frame. Issue 3: Admissibility of Additional Documents The appellant challenged the admissibility of additional documents submitted by Respondent No. 2 at the appellate stage. The Supreme Court referred to its previous judgment in Dena Bank (supra), which allowed for the introduction of additional documents at the appellate stage, provided they are relevant and made before the expiry of the limitation period. The Court found that the additional documents, including balance sheets and OTS proposals, were admissible and relevant for calculating the limitation period. Issue 4: Rights of Unsecured vs. Secured Creditors The appellant, an unsecured creditor, argued against the petition filed by Respondent No. 2, a secured creditor. The Court held that Respondent No. 2, being a secured creditor with a larger claim, had the right to initiate insolvency proceedings under the IBC. The Court emphasized that the acknowledgments of debt by the Corporate Debtor extended the limitation period, and the petition was validly filed within this extended period. Conclusion: The Supreme Court dismissed the appeal, holding that the petition under Section 7 of the IBC was not time-barred due to the valid acknowledgments of debt by the Corporate Debtor, which extended the limitation period under Section 18 of the Limitation Act. The additional documents submitted by Respondent No. 2 were deemed admissible, and the rights of the secured creditor were upheld. The applications filed by Ruby Mills Ltd. were disposed of, allowing them to pursue their remedies before the appropriate forum.
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