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TMI Blog2020 (2) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... rt showing the acknowledgement is given in para 14 of this judgement. The OTS proposal/acknowledgement of debt was given regarding the subsisting liability of the Corporate Debtor - Given the provision of Section 18 of Limitation Act and law laid down by the Hon ble Supreme Court, on the acknowledgement of liability, afresh period of limitation started. Therefore, it is clear that the petition is not barred by limitation. In this case, it is clear that on the day of filing the petition U/S 7 of the Code, there was a subsisting liability on the corporate debtor, and due to the acknowledgement of debt in writing, though the account of the corporate debtor which was classified as NPA on 29th August, 2012, its validity got extended from time to time by acknowledgement of debt in writing and a fresh period of limitation started after the acknowledgement of debt as per provision of Sec 18 of the Limitation Act. During the argument, the Learned Counsel for the Appellant has assailed the impugned order only on the Limitation point. Based on the discussion, the petition filed by the Respondent Oriental Bank of Commerce is not barred by limitation - Appeal rejected. - Company Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012. Regarding the ex-parte order, it is stated by the Respondent financial creditor, that there was proper service on the Corporate Debtor, by the publication of notice in two newspapers. Copy of the order sheet of the Adjudicating Authority dated 17th June 2019, 02nd July 2019, 06th August 2019 and 04th September 2019 is annexed with the Reply by the respondent. On perusal of the order sheet dated 17th June 2019,it appears that the Adjudicating Authority has noted that No one appears for the Financial Creditor, however, issue notice to the Corporate Debtor. Notice is returnable on 02nd July 2019. 4. Again, on 02nd July 2019 Adjudicating Authority had noted that Learned Counsel for the Financial Creditor appeared. Affidavit of dispatch of notice is filed without track report. Financial Creditor to produce Track report. Notice is received by Corporate Debtor. Matter to appear on 06th August 2019 .It is also noted by the Adjudicating Authority on dated 06th August 2019 that: Learned Counsel for the Financial Creditor is present. Notice served to the Corporate Debtor. But there is no representation for the Corporate Debtor. Petitioner to take notice by way of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as follows: (SCC p. 664) 42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. Learned Counsel for the Corporate Debtor placed reliance on thecase of Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572: 2019 SCC OnLine SC 1239 at page 574. In this case, Hon ble Supreme Court has held that: 6. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being an application which is filed under Section 7, would fall only within the residuary Article 137 . As rightly pointed out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an amount that may be due even though it is time-barred, for otherwise, it would be unnecessary for Section 60 to contain the word actually together with the later words, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits . (Quoted verbatim) Coming to the next argument that, in any case, Section 238-A, being clarificatory of the law and being procedural in nature, must be held to be retrospective , it is necessary to refer to a few judgments of this Court. In M.P. Steel Corpn. vs. CCE [M.P. Steel Corpn. vs. CCE, (2015) 7 SCC 58: (2015) 3 SCC (Civ) 510], this Court held: (SCC pp. 97-101, paras 54-60) 54. It is settled law that periods of limitation are procedural in nature and would ordinarily be applied retrospectively. This, however, is subject to a rider . In New India Insurance Co. Ltd. Vs. Shanti Misra (1975) 2 SCC 840], this Court held: (SCC p. 844, para 5)--- 56. Even though by and large the law of limitation has been held to be a procedural law, there are exceptions to this principle. Generally the law of limitation which is in vogue on the date of the commencement of the action gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the respondents and it will have to be held that there was no enforceable claim in the year 1995, when the present petition was instituted. --------------- 21. The aforesaid judgments correctly hold that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy of a winding-up proceeding. In law, when time begins to run, it can only be extended in the manner provided in the Limitation Act. For example, an acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period, but a suit for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding-up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding-up proceeding. 10. Thus in the case mentioned above, the Hon ble Supreme Court has held that for an application U/S 7 or 9 of Insolvency and Bankruptcy Code 2016, Art 137 of the Limitation Act will be applicable. But the said period of limitation can only be extended in the manner provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of their liability and had also submitted three post-dated cheques of ₹ 5.00 Crores each to show their bonafide. SA is at pages 247-259. Para 5.5 is at page 251 22.09.2016 By this letter, CD requested Allahabad Bank to freeze the e-auction process and that in the meanwhile, they are trying to start repayment by the sale of the property to the active buyer. 310 04.03.2018 By this letter, CD offered the payment of ₹ 13.51 Crores towards a full and final settlement of their liability. Note: In this letter, the CD has stated that they had offered OTS of ₹ 12.50 Crores on 25.01.2018. 117-119 15.10.2018 The Bank had filed OA No.823/2018 in DRT, Jabalpur for recovery of ₹ 28,64,67,561/- which is pending adjudication. 320-352 30.10.2019 By this letter, CD offered the payment of ₹ 22.00 Crores towards a full and final settlement of their liability. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making an application. 12. Learned Counsel for the Respondent has further relied on the case-law of Hon ble Supreme Court in case of J.C. Budhraja vs. Chairman, Orissa Mining Corpn. Ltd., (2008) 2 SCC 444: (2008) 1 SCC (Civ) 582 on page 456 has held that: 20. Section 18 of the Limitation Act, 1963 deals with the effect of acknowledgement in writing. Sub-section (1) thereof provides that where, before the expiration of the prescribed period for a suit or application in respect of any right, an acknowledgment of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. The explanation to the section provides that an acknowledgment may be sufficient though it omits to specify the exact nature of the right or avers that the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the right. Interpreting Section 19 of the Limitation Act, 1908 (corresponding to Section 18 of the Limitation Act, 1963) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission need not be in regard to any precise amount nor by expressed words. If a defendant writes to the plaintiff requesting him to send his claim for verification and payment, it amounts to an acknowledgement. But if the defendant merely says, without admitting liability, it would like to examine the claim or the accounts; it may not amount to acknowledgement. In other words, a writing, to be treated as an acknowledgement of liability should consciously admit his liability to pay or admit his intention to pay the debt. Let us illustrate. If a creditor sends a demand notice demanding payment of ₹ 1 lakh due under a promissory note executed by the debtor and the debtor sends a reply stating that he would pay the amount due, without mentioning the amount, it will still be an acknowledgment of liability. If a writing is relied on as an acknowledgment for extending the period of limitation in respect of the amount or right claimed in the suit, the acknowledgment should necessarily be in respect of the subject-matter of the suit. If a person executes a work and issues a demand letter making a claim for the amount due as per the final bill and the defendant agrees to verify the bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the right. Interpreting Section 19 of Limitation Act, 1908 (corresponding to Section 18 of 1963) this Court in Shapoor Freedom Mazda Vs. Durga Prasad Chamaria (AIR 1961 SC 1238) held that ...... acknowledgement as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgement of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgement must, however, indicate the existence of a jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the time for payment has not yet come, or is accompanied by a refusal to pay or is coupled with a claim to a set-off, or is addressed to a person other than the person entitled to the property or right. The new Act of 1963, contains in Section 18 substantially similar provisions. 9. It is clear that the statement on which the plea of acknowledgment is founded must relate to a subsisting liability as the section requires that it must be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay, for, an acknowledgment does not create a new right of action but merely extends the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence of jural relationship between the parties, such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not be in express terms and can be inferred by implication from the nature of the admission and the surrounding circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to different amounts claimed by the appellant-company in a statement of claim previously sent by it to the corporation, some of which are refuted by the writer, while the others are accepted. The penultimate paragraph, which is said to contain the admission, reads as follows: After all the above adjustments, the position will be as per statement attached. Interest has been provided on some balances and on others it has not been provided. We request you to confirm the balance of ₹ 1,07,477,13.11, so that we may proceed with the calculation of interest and settle your claim once and for all immediately. Kindly acknowledge this letter and favour us with an immediate reply. The letter speaks in the last sentence of a copy of it to be sent to Lala Purushottam Dasji Singhania for information . The copy of the letter, as is clear from the other evidence as also the words for information was not sent for approval and was obviously not intended to be subject to such approval by Purushottam Singhania. The statement enclosed with the letter is headed Account of M/s Lakshmiratan Cotton Mills Co. Ltd. and first sets out the balance of ₹ 1,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date when the OTS/letter of acknowledgement was signed. 17. Since the account of Corporate Debtor was classified as NPA on 29.08.2012 and after that three years period was available as the provision of Article 137 of Limitation Act and within that period on different dates, the Corporate Debtor submitted the OTS letter and acknowledged the liability, on different dates. The chart showing the acknowledgement is given in para 14 of this judgement. The OTS proposal/acknowledgement of debt was given regarding the subsisting liability of the Corporate Debtor. Given the provision of Section 18 of Limitation Act and law laid down by the Hon ble Supreme Court, on the acknowledgement of liability, afresh period of limitation started. Therefore, it is clear that the petition is not barred by limitation. 18. In this case, it is clear that on the day of filing the petition U/S 7 of the Code, there was a subsisting liability on the corporate debtor, and due to the acknowledgement of debt in writing, though the account of the corporate debtor which was classified as NPA on 29th August, 2012, its validity got extended from time to time by acknowledgement of debt in writing and a fre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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