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2021 (8) TMI 315 - SC - Insolvency and BankruptcyPeriod of limitation for filing of Application for initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - time limitation - petition was filed beyond a period of 3 years from the date of declaration of the loan account of the Corporate Debtor as NPA - subsequent acknowledgement by Corporate Debtor of liability to the Appellant Bank, within a period of three years prior to the date of filing of the Petition under Section 7 of the IBC, by making a proposal for a One Time Settlement, or by acknowledging the debt in its statutory Balance Sheets and Books of Accounts - fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the IBC - bar in law to the amendment of pleadings. HELD THAT - Section 18 of the Limitation Act speaks of an Acknowledgment in writing of liability, signed by the party against whom such property or right is claimed. Even if the writing containing the acknowledgment is undated, evidence might be given of the time when it was signed. The explanation clarifies that an acknowledgment may be sufficient even though it is accompanied by refusal to pay, deliver, perform or permit to enjoy or is coupled with claim to set off, or is addressed to a person other than a person entitled to the property or right. Signed is to be construed to mean signed personally or by an authorised agent. In the instant case, ₹ 111 lakhs had been paid towards outstanding interest on 28th March, 2014 and the offer of One Time Settlement was within three years thereafter. In any case, NCLAT overlooked the fact that a Certificate of Recovery has been issued in favour of Appellant Bank on 25th May 2017. The Corporate Debtor did not pay dues in terms of the Certificate of Recovery. The Certificate of Recovery in itself gives a fresh cause of action to the Appellant Bank to institute a petition under Section 7 of IBC. The petition under Section 7 IBC was well within three years from 28th March 2014. A final judgment and order/decree is binding on the judgment debtor. Once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of Recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate - Appellant Bank was thus entitled to initiate proceedings under Section 7 of the IBC within three years from the date of issuance of the Recovery Certificate. The Petition of the Appellant Bank, would not be barred by limitation at least till 24th May, 2020. While it is true that default in payment of a debt triggers the right to initiate the Corporate Resolution Process, and a Petition under Section 7 or 9 of the IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238A of the IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a Petition in the NCLT is condonable under Section 5 of the Limitation Act unlike delay in filing a suit - Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. Thus, an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. Bar in law to the amendment of pleadings in an application under Section 7 of the IBC - HELD THAT - There is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in Form-1. In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that the Adjudicating Authority committed any illegality or error in permitting the Appellant Bank to file additional documents. Needless however, to mention that depending on the facts and circumstances of the case, when there is inordinate delay, the Adjudicating Authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order. The decision of the Adjudicating Authority to entertain and/or to allow the request of the Appellant Bank for the filing of additional documents with supporting pleadings, and to consider such documents and pleadings did not call for interference in appeal. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) was barred by limitation. 2. Whether a final judgment and decree of the Debt Recovery Tribunal (DRT) or the issuance of a Certificate of Recovery would give rise to a fresh cause of action. 3. Whether there is any bar to the amendment of pleadings or the filing of additional documents in a petition under Section 7 of the IBC. Issue-wise Detailed Analysis: 1. Bar of Limitation: The primary issue was whether the petition under Section 7 of the IBC was barred by limitation, given that it was filed beyond three years from the date of the declaration of the loan account as a Non-Performing Asset (NPA). The court examined whether subsequent acknowledgments of debt by the Corporate Debtor, such as proposals for One Time Settlement (OTS) and entries in statutory balance sheets, could extend the limitation period. The court noted that under Section 18 of the Limitation Act, an acknowledgment of liability in writing, signed by the debtor, extends the limitation period by three years from the date of acknowledgment. The Corporate Debtor had acknowledged its debt through various documents, including a letter dated 5th January 2015, proposals for OTS, and entries in its financial statements for the years 2016-2017 and 2017-2018. These acknowledgments were within three years prior to the filing of the petition under Section 7 of the IBC, thus extending the limitation period. 2. Fresh Cause of Action: The court addressed whether a final judgment and decree of the DRT or the issuance of a Certificate of Recovery could give rise to a fresh cause of action for initiating proceedings under Section 7 of the IBC. It was held that a final judgment and decree or a Recovery Certificate constitutes a fresh cause of action. The Appellant Bank obtained a final judgment and decree dated 27th March 2017 and a Recovery Certificate dated 25th May 2017. The petition under Section 7 of the IBC was filed within three years from these dates, thus falling within the limitation period. 3. Amendment of Pleadings and Filing of Additional Documents: The court examined whether there was any bar to amending pleadings or filing additional documents in a petition under Section 7 of the IBC. It concluded that there is no such bar in law. The court emphasized that the provisions of the IBC should be construed liberally to further the objectives of the statute. The Adjudicating Authority (NCLT) had allowed the Appellant Bank to file additional documents, including the final judgment and decree and the Recovery Certificate, which were relevant to the case. The court held that the decision of the Adjudicating Authority to permit the filing of additional documents did not call for interference. Conclusion: The court concluded that the petition under Section 7 of the IBC was not barred by limitation due to the acknowledgments of debt and the fresh cause of action arising from the final judgment and decree and the Recovery Certificate. The court also upheld the permissibility of amending pleadings and filing additional documents in such petitions. The appeal was allowed, and the impugned judgment and order of the NCLAT were set aside.
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