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TMI Blog2021 (1) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... a five member Bench of this Appellate Tribunal in "V. Padmakumar Vs. Stressed Assets Stabilization Fund (SASF) & Anr.", in Company Appeal (AT) (Insolvency) No. 57 of 2020, requires reconsideration. The issue formulated by the three member Referral Bench, as noticed in the order of reference, is as follows:- "Hon'ble Supreme Court and various Hon'ble High Courts have consistently held that an entry made in the Company's Balance Sheet amounts to an acknowledgement of debt under Section 18 of the Limitation Act, 1963, in view of the settled law, V. Padmakumar's Case requires reconsideration." 2. For better grasping of the issue confronting this five member Bench, reference to the facts of the Company Appeal (AT) (Insolvency) No. 385 of 2020 is inevitable notwithstanding the fact that we have deferred the hearing of the appeal and confined our consideration only to competence of reference. 3. Corporate Debtor (Corporate Power Ltd.), which had availed loan from the Consortium Lenders for setting up a coal-based power plant at Chandwa in Jharkhand defaulted in repaying the dues leading to recalling of the loan facility by Financial Creditor - State Bank of India and the Consortium L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of Section 18 of Limitation Act, 1963. The majority view in V. Padmakumar's Case is just contrary to settled law. II. In V. Padmakumar's Case minority view is in the line of settled law that Balance Sheet of the Company, be treated as acknowledgement of debt for the purpose of Section 18 of the Limitation Act, 1963. In the majority Judgment no reasons have been assigned for disagreement with this view. III. In support of majority Judgment in V. Padmakumar's Case none of the precedent cited before us. IV. In V. Padmakumar's Case, it is discussed that the Balance Sheet of the Company is prepared pursuant to Section 92 of Companies Act, 2013 and filing of Balance Sheet/ Annual Return being mandatory under Section 92(4) of the Companies Act, 2013, failing of which attracts penal action under Section 92(5) and (6) of the Act. In our humble opinion Balance Sheet is not Annual Return but is a Financial Statement. Financial Statement is defined under Section 2(40) of the Companies Act, 2013. V. In V. Padmakumar's Case it is held that the Balance Sheet is required to be prepared under the obligation casted under Section 92 of the Companies Act, 2013. Therefore, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to refer the matter before it to a Bench of three learned Judges setting out the reasons why it could not agree with the earlier judgment. If, then, the Bench of three learned Judges also comes to the conclusion that the earlier judgment of the Bench of three learned Judges is incorrect, reference to a Bench of five learned Judges would be justified. Reference was also made to "Chandra Prakash & Ors Vs. State of Uttar Pradesh & Anr.", (2002)4 SCC 234, wherein Hon'ble Apex Court, while referring to an earlier judgment rendered in Raghubir Singh's Case holding that a pronouncement of law by a Division Bench of Hon'ble Apex Court is binding on a Division Bench of the same or smaller number of Judges, observed that the judgments of Supreme Court not only decide the rights of the parties and resolve disputes between them but also declare law operating as a binding principle in future cases which promotes certainty and consistency in judicial decisions. It was further held that it is only if the Bench of two learned Judges concludes that an earlier judgment of three learned Judges is 'so very incorrect that in no circumstances can it be followed', the proper course would be to refer th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w is in doubt, needs correction or reconsideration then by way of exception (and not as a rule) and for reasons it may proceed to hear the case and examine the correctness of the previous decision in question dispensing with the need of a specific reference or the order of Chief Justice constituting the Bench and such listing. Such was the situation in Raghubir Singh & Ors. and Hansoli Devi & Ors.(supra). 13. So far as the present case is concerned, there is no reference made by any Bench of any strength at any time for hearing by a larger Bench and doubting the correctness of the Constitution Bench decision in the case of Sardar Syedna Taher Saifuddin Saheb's case (supra). The order dated 18.3.1994 by two-Judge Bench cannot be construed as an Order of Reference. At no point of time the Chief Justice of India has directed the matter to be placed for hearing before a Constitution Bench or a Bench of seven-Judges. 14. In the facts and circumstances of this case, we are satisfied that the matter should be placed for hearing before a Constitution Bench (of five Judges) and not before a larger Bench of seven Judges. It is only if the Constitution Bench doubts the correctness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence is made to "Supreme Court Advocates on Record Association Vs. Union of India", reported in (2016)5 SCC 1 in this regard. It is further submitted that the Reference Order has created uncertainty as it failed to notice that the law laid down in 'V. Padmakumar' has been followed and applied by this Appellate Tribunal in subsequent judgments. It is submitted that the decision in 'V. Padmakumar' itself was a result of reference to a Larger Bench to resolve conflicting decisions of Coordinate Benches. Therefore, question of another reference to decide the same question of law cannot arise. It is further submitted that the law laid down in 'V. Padmakumar' is the subject of consideration before Hon'ble Apex Court in as many as five Civil Appeals and it is not open for this Appellate Tribunal to reconsider the same. Lastly, it is submitted that the judgments relied upon in the Reference Order do not deal with voluntary acknowledgement and none of these judgments are in the realm of I&B Code. It is submitted that in "Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminum Industries Ltd. & Anr., Civil Appeal No. 6347 of 2019", the Hon'ble Apex Court held that Section 18 of the Limitation Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan was duly secured. The account of Corporate Debtor was classified as NPA on 29th May, 2002. IDBI Bank initiated recovery proceedings by filing OA No. 289 of 2003, later renumber as OA No.413 of 2007. It was decreed on 19th June, 2009 leading to issuance of Recovery Certification on 31st August, 2009 which was reflected in the Balance Sheet dated 31st March, 2012. The Appellant, basing its plea on the aforestated facts, raised the contention that the application filed under Section 7 of I&B Code in the year 2019 was barred by limitation. This Appellate Tribunal noticing the judgments delivered by Hon'ble Apex Court in "Jignesh Shah and another vs. Union of India and another - (2019) 10 SCC 750", "Gaurav Hargovindbhai Dave vs. Asset Reconstructions Company (India) Limited and another - (2019) 10 SCC 572", "Vashdeo R. Bhojwani vs. Abhyudaya Co-operative Bank Limited and another - (2019) 9 SCC 158", and decision of this Appellate Tribunal in "V. Hotels Limited Vs. Asset Reconstruction Company (India) Limited- Company Appeal (AT) (Insolvency) No. 525 of 2019", decided on 11th December, 2019, was of the view that for the purpose of computing the period of limitation for applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Annual Return of the 'Corporate Debtor' amounts to acknowledgement under Section 18 of the Limitation Act, 1963 then in such case, it is to be held that no limitation would be applicable because every year, it is mandatory for the 'Corporate Debtor' to file Balance Sheet/ Annual Return, which is not the law." 11. Having heard learned counsel for the parties on the limited issue of competence of reference made by the three Member Bench and after fathoming through the relevant material on record, we find that the Referral Bench failed to take note of the fact that the five Member Bench Judgment rendered in 'V. Padmakumar's Case' with a majority of 4:1 was delivered to remove uncertainty arising out of the conflicting verdicts of Benches of co-equal strength in 'V. Hotel's Case' and 'M/s Ugro Capital Ltd.'s Case'. In view of this factual position, it was inappropriate on the part of the Referral Bench to doubt the correctness of the five Member Bench Judgment, which admittedly has not been appealed against and occupies the field till date. This is besides the fact that the five Member Bench has taken note of the authoritative pronouncements of the Hon'ble Apex Court relevant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtend 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 proceedings. Para's 21 and 28 of the aforesaid judgment dealing with the issue of limitation have been extracted in the five Member Bench judgment rendered by this Appellate Tribunal in 'V. Padmakumar's Case'. The five Member Bench also took note of the Judgment delivered by the Hon'ble Apex Court in "Gaurav Hargovindbhai Dave vs. Asset Reconstructions Company (India) Limited & Another - (2019) 10 SCC 572", wherein the Hon'ble Apex Court noted that the default having taken place and account having been declared NPA on 21st July, 2011, application filed under Section 7 of I&B Code in 2017 being clearly beyond three years under Article 137 of Limitation Act was time barred. The five Member Bench also took note of the judgment rendered by Hon'ble Apex Court in "Vashdeo R. Bhojwani vs. Abhyudaya Co-operative Bank Limited & Another - (2019) 9 SCC 158", which laid down that since Limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledgment, even after the completion of the period of limitation i.e. December, 2011 cannot be relied upon. Further, in absence of any record of acknowledgment, the Appellant cannot derive any advantage of Section 18 of the Limitation Act. For the said reason, we hold that the application under Section 7 is barred by limitation, the accounts of the 'Corporate Debtor' having declared NPA on 1st December, 2008." Thus, it was on the basis of the authoritative pronouncements and binding precedents of the Hon'ble Apex Court that the five Member Bench of this Appellate Tribunal arrived at the conclusion that for purpose of computing the period of limitation under Section 7, the date of default is NPA. 13. In "Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminum Industries Ltd. & Anr.", Civil Appeal No. 6347 of 2019, the Hon'ble Apex Court observed that Section 18 of the Limitation Act, 1963 would have no application to proceedings under I&B Code. Therefore, the issue raised as regards acknowledgement of liability by reflection in the Balance Sheet/ Annual Return would be irrelevant. 14. Thus, it is manifest that the findings arrived at by the five Member Bench were based on considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation within which the winding up proceeding is to be filed by somehow keeping the debt alive for the purpose of the winding up proceedings. In para 28, the Hon'ble Apex Court clearly laid down that for filing of a winding up petition under Section 433(e) of the Companies Act, 1956, trigger point for purpose of limitation would be the date of default in payment of the debt in any of the three situations mentioned in Section 434. The Judgment of Hon'ble Apex Court in 'Gaurav Hargovindbhai Dave' (supra) also brings it to fore that the remedy in the form of a Section 7 application under I&B Code is an independent proceeding and Article 137 of Limitation Act governs the same. Their Lordships took note of the report of the Insolvency Law Committee, while holding that the date of classification of account of Corporate Debtor as NPA was the starting point for limitation, that the intent of the Code could not have been to give new lease of life to debts which are already time barred. As regards the issue raised whether reflection of a debt in the Balance Sheet/ Annual Return of a Corporate Debtor would amount to acknowledgement under Section 18 of the Limitation Act, suffice it to say th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court in matters involving the issue. 15. We are therefore of the considered view that the order of reference which, in letter and spirit, is more akin to a judgment of an Appellate Court appreciating the findings and judgment in 'V. Padmakumar's Case' is incompetent and deserves to be rejected. 16. This brings us to consider the most painful aspect of the misadventure undertaken by the Referral Bench in making the reference which we have found to be incompetent. Judicial indiscipline creates uncertainty and impairs public faith in Rule of Law. Crossing the red line by disregarding the binding precedent results in making the legal proposition uncertain. Such misadventure creates uncertainty as regards settled position of law. What constitutes the judicial discipline has aptly been dwelt upon in the judgments rendered by Hon'ble Apex Court noticed herein below: I. In "Central Board of Dawoodi Bohra Community & Anr. Vs. State of Maharashtra & Anr.", reported in (2005) 2 SCC 673, it was held that a decision delivered by a Bench of Larger strength is binding on any subsequent Bench of lesser or co-equal strength. It cannot disagree or dissent from the view of law taken by the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a procedure known to law. A subordinate court is bound by the enunciation of law made by the superior courts. A Coordinate Bench of a Court cannot pronounce judgment contrary to declaration of law made by another Bench. It can only refer it to a larger Bench if it disagrees with the earlier pronouncement. ....... " V. Hon'ble Apex Court in another case reported in (2005) 2 SCC 59, excerpts from para 16 whereof are reproduced, observed:- "..... These being judgments of coordinate benches were binding on the Tribunal. Judicial discipline required that the Tribunal follow those judgments. If the Tribunal felt that those judgments were not correct, it should have referred the case to a larger bench." 17. Following of the judicial precedent of a Bench of equal strength and of a Larger Bench as in the instant case, is a matter of judicial discipline. The Referral Bench, where such reference is competent, can make a reference for matter being placed before a Larger Bench for reconsideration in the circumstances indicated in the aforesaid judgments after recording its opinion. It is not open to the Referral Bench to appreciate the judgment rendered by the earlier Bench as if sittin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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