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TMI Blog2020 (10) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... The application filed by the financial creditor under Section 7 of the Insolvency Bankruptcy Code, 2016 for initiating corporate insolvency resolution process against the corporate debtor, Shree Ram Saw Mill Private Limited, is hereby admitted - Moratorium declared. - CP (IB) No. 978/KB/2019 - - - Dated:- 16-3-2020 - M. B. Gosavi, Member (J) And Virendra Kumar Gupta, Member (T) For the Appellant : Ramesh Ch. Prusti, Mahuya Ghosh For the Respondent : Naseeb Khanjoy and Mahim Sasmal, Advocates ORDER Virendra Kumar Gupta, Member (T) 1. This application under Section 7 of IBC, 2016 has been filed by the Financial Creditor namely Indian Overseas Bank to initiate Corporate Insolvency Resolution Process ( CIRP ) against Corporate Debtor namely Shree Ram Saw Mill Private Limited as Corporate Debtor has committed default in payment of outstanding debt. The amount claimed to be in default is ₹ 66,43,73,975.00 including unapplied interest. 2. The facts, in brief, are that the Financial Creditor granted loan to the Corporate Debtor firstly on 30th July 2002. Subsequently, limits were increased. However, on 24th September 2014 the account became NPA and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application gets extended accordingly. In view of the matter, we hold that the debt is not barred by limitation. We further consider it pertinent to reproduce our relevant findings in the case of Asset Reconstruction Co. (I) Ltd. Vs. Raigarh Properties Pvt. Ltd., in CP(IB) No. 432/KB/2019, Order dated 27.02.2020, as under: 9. As regards the nature of acknowledgment, this Bench had dealt with the same in a few decisions on earlier occasions, hence, we consider it pertinent to reproduce the findings given therein as under: ......As regard to the contention that it is time barred, both sides have cited decisions wherein opposite views have been expressed in respect of suit for recovery. Hence, in our considered view, this aspect has to be looked into in the context of IBC 2016. Further, the decision of the Hon'ble NCLAT cited by the Corporate Debtor is not applicable as in that case, the issue was not whether Form C issued by Corporate Debtor amount to acknowledgement of liability or not but the issue was whether issuance of Form C amounted to settlement of dispute/claim. Hence, this decision does not come to the rescue of the Corporate Debtor. We are further of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of debt under Section 18 of Limitation Act, 1963. It has been claimed so far the reason that the said e-mail was addressed to Baba Gora Transport and not to the Financial Creditor. On perusal of the records, it is noted that the said e-mail is, in fact, has been addressed to mail ID i.e. [email protected] which is not of the Financial Creditor but statement of account of Financial Creditor has been attached. To express our view about the validity of such e-mail is an acknowledgement of that we consider it necessary to reproduce Section 18 of the Limitation Act, 1963 as under: Section 18(1): Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from time when the acknowledgement was so signed. Section 18(2):-- Where the writing containing the acknowledgement is undated, oral evidence may be given of the time when it was signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht Further, in case of Trinetra Electronics Ltd. vs. McNally Bharat Engineering Co. Ltd. In CP (IB) No. 1506/KB/2018 Order dated 16.10.2019, Tribunal held as under: 5. We have considered submissions made by both sides and have also perused the materials on record. The question for our consideration arises is that (i) whether debt is barred by limitation or not; (ii) whether the letters dated 29/1/2018 and 30/7/2018 constitute acknowledgement as per provision of Sec. 18 of the Limitation Act, 1963. It is not in dispute that these letters have been written by the corporate debtor regarding confirmation of outstanding balance of ICD as on 31/12/2017 and 30/6/2018 as per the books of account of Financial Creditor. The confirmation of outstanding balance is to be given to the statutory auditors of the corporate debtor. This exercise cannot be considered in a light manner because reliance on the accuracy of the books of account and financial statement is based upon such standard auditing practice. In the letter dated 29/1/2018 it has been clearly mentioned that such confirmation was in respect of amounts payable in respect ICD as on 31/12/2017 which by itself establishes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is re-produced as under:- The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be. 9. Before looking into the ambit and scope of this section, it is stated that this provision was incorporated in Insolvency Bankruptcy Code, 2016 with the object that stale claims cannot be made alive through the mechanism of Insolvency Bankruptcy Code, 2016. This is also so because Insolvency Bankruptcy Code, 2016 is not a recovery mechanism rather a comprehensive code for insolvency resolution old and stale claims cannot be considered as a source or detecting of signs impending insolvency at an early stage. Hence, for this reason also the necessity was felt to make provision of Limitation Act, 1963 applicable to Insolvency Bankruptcy Code, 2016. It has been settled judicially that Sec. 238A is applicable since the implication of Insolvency Bankruptcy Code, 2016. It is evident that Sec. 238A the word as far as may be have been used which means that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract Act, 1872 and, therefore, if such promise is made after expiry of original limitation period also, the limitation period gets extended as condition of acknowledgement before expiration exists only under Sec. 18 of the Limitation Act, 1963. 21. From the perusal of the above judicial decisions, it may be noted that the explanation (a) of Sec. 18 of Limitation Act, 1963 is wide in scope and has to be interpreted in the background of the current commercial environment and in accordance with the nature of proceedings of Insolvency Bankruptcy Code, 2016 . Thus, from the perusal of the above decisions, it is apparently clear that such letters constitute acknowledgement in terms of provisions of Explanation A to Section 18 of the Limitation Act, 1963. 10. As far as reliance placed by the corporate debtor on the decision of the Hon'ble NCLAT in the case of Dena Bank vs. Kavveri Telecom Infrastructure Ltd. is concerned, we find that in that case there is a clear finding that there was nothing on record to suggest that the corporate debtor had acknowledged the debt within 3 years and agreed to pay the debt, whereas in the present case, restructuring of the debt has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent decision, the case relied on by the corporate debtor is not binding on us. 12. Although we have already held that such kinds of letters constitute an acknowledgement of debt. However, considering the general importance of the issue and its recurring nature, we consider it pertinent to reproduce the findings of the Hon'ble Supreme Court in the case of J.C. Budhraja v. Chairman, Orissa Mining Corpn. Ltd., (2008) 2 SCC 444 : (2008) 1 SCC (Civ) 582 in page 456, as under: 20. Section 18 of the Limitation Act, 1963 deals with 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 acknowledgement 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 acknowledgement was also signed. The explanation to the section provides that an acknowledgement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly indicates the existence of jural relationship between the parties such as that of a debtor and a creditor and there is also an admission of the liability of o debt, hence, based on the parameters as set out by the Hon'ble Supreme Court in the aforesaid decision, there remains no iota of doubt that such letter constitutes an acknowledgement. This decision has not been considered by the Hon'ble NCLAT in the aforesaid decision relied on by the corporate debtor, hence, for this reason also, we most humbly submit that the decision of Hon'ble NCLAT relied on by the corporate debtor would not render any assistance to its cause. 14. A plea was also taken that such letter was without prejudice , hence, no significance could be attached thereto. In this regard, we find that this aspect was considered by the Hon'ble Supreme Court in the case of ITC Limited vs. Blue Coasts Hotel [Civil Appeal Nos. 2928-2930 of 2018]- The relevant findings in paragraph 35 of the said decision are reproduced as under: Letter of Undertaking Without Prejudice 35. Much was. sought to be made of the words without prejudice in the letter containing the undertaking that if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an express/explicit statement to pay. Thus, a promise to pay has element of acknowledgement and in addition to that, there must be an express confession to pay. Thus, considering this legal position as applicable to these letters, in our considered view, it is not merely an acknowledgement of debt but it also constitutes a promise to pay. It is also not in dispute that for the purpose of applicability of provisions of section 25(3) of Indian Contract Act, 1872, no condition of it being made within limitation period exists. Hence, for this reason also, the application filed under section 7 cannot be said to be barred by limitation. 16. We are further of the view that explanation (a) to section 18 of Limitation Act is very wide in its scope as such, hence, an acknowledgement is to be construed in that spirit only. Further, no strait jacket formula or format can be prescribed. There have been instances where Sale Deeds, Mortgage Deeds or Gifts Deed have been construed as acknowledgement of debt/liability within the meaning of provisions of section 18 of Limitation Act, 1963. It is also noteworthy that provisions of section 238A further relax the rigours of explanation (a) as pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government in consultation with any financial sector regulator. (vii) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process. (viii) Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. (ix) Necessary public announcement as per Section 15 of the IBC, 2016 may be made. (x) Mr. Kanchan Dutta, IP Registration No. IBBI/IPA-001/IP-P002/2017-2018/10391, Chatterjee International Centre, 17th Floor, Flat No. 13A, 33A, J.N. Road, Kolkata -700 071 is appointed as interim resolution professional for ascertaining the particulars of creditors and convening a Committee of Creditors for evolving a resolution plan. (xi) The Financial Creditor to pay a sum of ₹ 3,00,000/-(Rupees Three Lacs only) to IRP as advance fees as per Regulation 33(3) of IBBI (Insolvency Resolution Process fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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