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TMI Blog2021 (8) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 authoriz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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. - CIVIL APPEAL NO. 1650 OF 2020 - - - Dated:- 4-8-2021 - INDIRA BANERJEE And V. RAMASUBRAMANIAN, JJ. For the Appellant : Mr. Rajesh Kumar Gautam, AOR Mr. Anant Gautam, Adv. Mr. Nipun Sharma, Adv. Mr. Madhur Tewatia, Adv. For the Respondent : Mr. Goutham Shivshankar, AOR JUDGMENT Indira Banerjee, J. This Appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) is against a judgment and final order dated 18th December 2019 passed by the National Company Law Appellate Tribunal (NCLAT), allowing Company Appeal (AT) (Insolvency) No.407 of 2019, filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal (in short, DRT) Bangalore for recovery of its outstanding dues of ₹ 52,12,49,438.60 as on 22nd December 2014. 9. By a letter dated 5th January 2015, the Corporate Debtor replied to the said notice dated 22nd December 2014, inter alia, requesting once again, that the loan be restructured. Mr. Dhruv Mehta, Senior Advocate, appearing on behalf of the Appellant Bank submitted that the Corporate Debtor had accepted its liability to the Appellant Bank, by its aforesaid letter dated 5th January 2015. 10. On or about 3rd March 2017, while proceedings were pending in the DRT, the Corporate Debtor gave a proposal for one time settlement of the Term Loan Account, upon payment of ₹ 5.50 crores. The proposal was, however, not accepted by the Appellant Bank. 11. On 27th March 2017, the Debt Recovery Tribunal, Bengaluru passed a final judgment and order/decree against the Corporate Debtor in the said O.A. No.16/2015, for recovery of ₹ 52,12,49,438.60 with future interest at the rate of 16.55% per annum, from the date of filing the application till the date of realization. 12. On 25th May 2017, the Debt Recovery Tribunal issued a Recovery Certificate No. 2060/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company Petition accordingly. 19. On or about 5th March 2019, the Appellant Bank filed another application under Rule 11 of the NCLT Rules, being I.A. No.131 of 2019 in CP(IB) No.244/BB/2018, before the Adjudicating Authority for permission to place on record additional documents, including the letter dated 03.03.2017 of the Corporate Debtor to the Appellant Bank proposing a One Time Settlement, the Annual Report of the Corporate Debtor for the years 2016-2017, the Financial Statement of the Corporate Debtor for the period from 1st April 2016 to 31st March 2017 and the Financial Statement of the Corporate Debtor, for the period from 1st April 2017 to 31st March 2018. By an order dated 6.03.2019 in I.A. No.131 of 2019, the Appellant Bank was permitted to file the documents in the Registry. 20. By an order dated 21st March 2019 the Adjudicating Authority admitted the Petition under Section 7 of the IBC, being CP (IB) No.244/BB/2018, and appointed an Interim Resolution Professional. The objection of the bar of limitation, raised on behalf of the Corporate Debtor was considered at length, but rejected by the Adjudicating Authority (NCLT). 21. On 6th April 2019, the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with the Petition under Section 7 of the IBC in Form-1. 27. Mr. Mehta appearing on behalf of the Appellant Bank submitted that the Adjudicating Authority had passed its order dated 21st March 2019, admitting the Petition of the Appellant Bank under Section 7 of the IBC, after taking into consideration the documents filed by the Appellant Bank along with its interim applications being I.A. No. 27 of 2019 and I.A. No.131 of 2019, and arriving at the finding that the Petition filed by the Appellant Bank under Section 7 of the IBC was not barred by limitation. 28. Mr. Mehta submitted that NCLAT has allowed the appeal of the Respondent No.1, set aside the order of the Adjudicating Authority, and dismissed the Petition of the Appellant Bank under Section 7 of IBC, recording a finding that there was nothing on record that suggested that the Corporate Debtor had acknowledged its debt to the Appellant Bank. The Appellate Authority has ignored the documents filed by the Appellant Bank along with I.A. No.131 of 2019, which had duly been allowed by the Adjudicating authority. 29. Mr. Mehta pointed out that, the NCLAT cited the judgments of this Court in Jignesh Shah and Anr. v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that on 27th March 2017 the DRT, Bengaluru had passed a final judgment and order/decree for an amount of ₹ 52,12,49,438.60 in favour of the Appellant Bank in O.A. No.16/2015 along with future interest at 16.55% per annum with monthly rests, from the date of application till the date of realisation, and had issued a Recovery Certificate No.2060 of 2017, dated 25th May 2017 for realisation of the said amount from the Corporate Debtor and the Respondent No.1. The Appellant Bank filed the Petition under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process well within 3 years from the aforesaid dates. 33. Mr. Mehta also submitted that the Corporate Debtor had in its financial statements for the period from 1st April 2016 to 31st March 2017 and the period from 1st April 2017 to 31st March 2018, admitted that the Corporate Debtor had defaulted in repayment of its loan to the Appellant Bank. The financial statements of the Corporate Debtor, for the period from 1st April 2017 to 31st March 2018 reflect dues of ₹ 67 crores to the Appellant Bank along with interest as on 31st March 2018, but excluding penal interest. 34. Mr. Mehta argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to acknowledgement of debt. There is nothing on record to suggest that the Corporate Debtor or its authorized representative by its signature has accepted or acknowledged the debt within three years from the date of default or from the date when the account was declared NPA, i.e. on 31st December 2013. The Balance Sheet of the Corporate Debtor for the year 2016-2017 filed after 31st March 2017 cannot be termed to be a document of acknowledgment in terms of section 18 of the Limitation Act. 39. According to Mr. Shivshankar, the NCLAT was entirely right in coming to the factual conclusion that the Petition of the Appellant Bank under Section 7 of the IBC was barred by limitation. Mr. Shivshankar argued that NCLT arrived at this conclusion on the basis of facts and materials on record and it cannot be said that the conclusion is perverse or otherwise warrants intervention of this Court in a Second Appeal, restricted to questions of law under Section 62 of the IBC. 40. Mr. Shivshankar argued that this appeal has been filed on the basis of documents that were brought on record before the Adjudicating Authority (NCLT) at a belated stage, in a manner contrary to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank, to file a gist of the case as also a copy of the order passed by the Karnataka High Court, in a Writ Petition filed by the Corporate Debtor, whereby the execution of the judgment and/or order/decree of the DRT in O.A. 16 of 2015 had been stayed. 47. Mr. Shivshankar submitted that, taking advantage of the limited liberty granted to the Appellant Bank by the Adjudicating Authority to file a gist of the case and some orders/judgments, the Appellant Bank in abuse of the process of the Tribunal, filed I.A. No. 131 of 2019, introducing a whole new set of documents and setting up an entirely new case for extension of limitation, on the ground of alleged acknowledgement of debt. 48. Mr. Shivshankar argued that I.A. No.131 of 2019 was supported by an affidavit. The documents listed above were introduced for the first time. Even at this stage all the documents were not filed. Some of the documents were never filed in the NCLT and were first brought on record in the reply filed before NCLAT. 49. Mr. Shivshankar submitted that on 6th March 2019 the NCLT passed an order, permitting learned counsel for the Appellant Bank to file a set of documents in the Registry, after serving co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of law involved in the case, there must be first a foundation laid in the pleadings, and the question should emerge from the sustainable findings of fact, arrived at by Courts of facts, as reiterated by this Court in Nazir Mohamad v. J. Kamala (supra), rendered in the context of a second appeal under Section 100 of the Civil Procedure Code. 55. Mr. Shivshankar next cited the judgment of this Court in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Private Limited (2020) 15 SCC 1: 2020 SCC Online SC 647 , where this Court speaking through Maheshwari J., held: 35. Apart from the above and even if it be assumed that the principles relating to acknowledgment as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said provision and principles come in operation in the present case nor do they enure to the benefit of Respondent 2 for the fundamental reason that in the application made before NCLT, Respondent 2 specifically stated the date of default as 8-7-2011 being the date of NPA . It remains indisputable that neither has any other date of defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 57. Relying on Babulal Vardharji Gurjar (supra) Mr. Shivshankar argued that subsequent improvement in pleadings, at the fag-end of the NCLT proceedings, ought not to have been countenanced. Mr. Shivshankar further argued that, in any case, a proper construction of the documents relied upon by the Appellant Bank would show that they do not amount to acknowledgment under Section 18 of the Limitation Act, which requires that any acknowledgment must be made before the expiration of the period of limitation for a suit or application . 58. Mr. Shivshankar cited a Full Bench judgment of Allahabad High Court in Munshi Lal v. Hira Lal Anr. ILR 1947 All 11: AIR 1947 All 74(FB) , where the High Court held:- Now, it is clear that a document said to constitute an acknowledgment has to be construed in the context in which it is given and that, where its language is not clear in itself, the context may be examined to see what it is to which the words refer. That is not to say that any equivocation in an acknowledgment can be cured by ascertaining what the probable intention of the acknowledgor was. That is quite a different thing. But, where, after examining in the light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah (supra) where this Court observed:- 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. 65. Mr. Shivshankar concluded his arguments with the submission that the Petition under Section 7 of the IBC was not based on the Recovery Certificate issued by the DRT or the judgment and order of the DRT. Therefore, there could be no question of reckoning limitation from the date of failure to make payment in terms of the Recovery Certificate. 66. The IBC is an Act to consolidate and amend the laws relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in clause (n) of sub-section (1) of Section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; (8) corporate debtor means a corporate person who owes a debt to any person; .. (10) creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; (11) debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; (12) default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not 5[paid] by the debtor or the corporate debtor, as the case may be; 4. Application of this Part.-(1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees: Provided that the Central Government may, by notification, specify the minimum amount of defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other person on behalf of the financial creditor, as may be notified by the Central Government, may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6-A) of Section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less: Provided also that where an application for initiating the corporate insolvency resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). (7) The Adjudicating Authority shall communicate- (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be. 8. Insolvency resolution by operational creditor.-(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute, if any, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted within the period referred to in the second proviso, such resolution process shall be completed within a period of ninety days from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019. 12-A. Withdrawal of application admitted under Section 7, 9 or 10.- The Adjudicating Authority may allow the withdrawal of application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified. 13. Declaration of moratorium and public announcement.-(1) The Adjudicating Authority, after admission of the application under Section 7 or Section 9 or Section 10, shall, by an order- (a) declare a moratorium for the purposes referred to in Section 14; (b) cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under Section 15; and (c) appoint an interim resolution professional in the manner as laid down in Section 16. (2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified. (3) The provisions of sub-section (1) shall not apply to- (a) such transactions, agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;] (b) a surety in a contract of guarantee to a corporate debtor.] (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: 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. 15. Public announcement of corporate insolvency resolution process. -(1) The public announcement of the corporate insolvency resolution process under the order referred to in Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of the resolution professional under Section 22. 17. Management of affairs of corporate debtor by interim resolution professional.-(1) From the date of appointment of the interim resolution professional,- (a) the management of the affairs of the corporate debtor shall vest in the interim resolution professional; (b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional; (c) the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution professional; (d) the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional. 18. Duties of interim resolution professional.-(1) The interim resolution professional shall perform the following duties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. 21. Committee of creditors.-(1) The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. (2) The committee of creditors shall comprise all financial creditors of the corporate debtor: Provided that a financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6-A) or subsection (5) of Section 24, if it is a related party of the corporate debtor, shall not have any right of representation, participation or voting in a meeting of the committee of creditors: Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proving the resolution plan under sub-section (1) of Section 31 or appointing a liquidator under Section 34 is passed by the Adjudicating Authority. (2) The resolution professional shall exercise powers and perform duties as are vested or conferred on the interim resolution professional under this Chapter. (3) In case of any appointment of a resolution professional under sub-sections (4) of Section 22, the interim resolution professional shall provide all the information, documents and records pertaining to the corporate debtor in his possession and knowledge to the resolution professional. 25. Duties of resolution professional.-(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely- (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esents is correctly recorded by the interim resolution professional or resolution professional, as the case may be. Explanation.-For the purposes of this section, the electronic means shall be such as may be specified.] 27. Replacement of resolution professional by committee of creditors.-(1) Where, at any time during the corporate insolvency resolution process, the committee of creditors is of the opinion that a resolution professional appointed under Section 22 is required to be replaced, it may replace him with another resolution professional in the manner provided under this section. (2) The committee of creditors may, at a meeting, by a vote of sixty-six per cent. of voting shares, resolve to replace the resolution professional appointed under Section 22 with another resolution professional, subject to a written consent from the proposed resolution professional in the specified form. (3) The committee of creditors shall forward the name of the insolvency professional proposed by them to the Adjudicating Authority. (4) The Adjudicating Authority shall forward the name of the proposed resolution professional to the Board for its confirmation and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 61 or Section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. Explanation.-For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate debtor, any time after its constitution under sub-section (1) of Section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. (3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (5) Subject to Section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) PART V PARTICULARS OF FINANCIAL DEBT [DOCUMENTS, RECORDS AND EVIDENCE OF DEFAULT] 1 PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS ESTIMATED VALUE AS PER THE CREDITOR. ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES (IF THE CORPORATE DEBTOR IS A COMPANY) 2 PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON THE DEFAULT, IF ANY (ATTACH A COPY OF THE ORDER) 3 RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY (ATTACH A COPY OF SUCH RECORD) 4 DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER OF ADMINISTRATION, OR COURT DECREE (AS MAY BE APPLICABLE), UNDER THE INDIAN SUCCESSION ACT, 1925 (10 OF 1925) (ATTACH A COPY) 5 THE LATEST AND COMPLETE COPY OF THE FINANCIAL CONTRACT REFLECTING ALL AMENDMENTS AND WAIVERS TO DATE (ATTACH A COPY) 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under subsection (2) of Section 7 is complete and there is no disciplinary proceeding pending against the proposed resolution professional, it may by order admit such application. As per Section 7(5)(b), if the Adjudicating Authority is satisfied that default has not occurred or the application under sub-Section (2) of Section 7 is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application, provided that the Adjudicating Authority shall, before rejecting the application under subsection (b) of Section 5, give notice to the applicant, to rectify the defects in his application, within 7 days of receipt of such notice from the Adjudicating Authority. 77. The Corporate Insolvency Resolution Process commences on the date of admission of the application under sub-section (5) of Section 7 of the IBC. Section 7(7) casts an obligation on the Adjudicating Authority to communicate an order under clause (a) of sub-section (5) of Section 7 to the financial creditor and the corporate debtor and to communicate an order under clause (b) of sub-section (5) of Section 7 to the financial creditor within seven day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. *** Control of a company is not divine right.-When a firm defaults on its debt, control of the company should shift to the creditors. In the absence of swift and decisive mechanisms for achieving this, management teams and shareholders retain control after default. Bankruptcy law must address this. Objectives 81. In Innoventive Industries Ltd vs. ICICI Bank (supra) this Court noted the objectives set by the Bankruptcy Law Reforms Committee in recommending the IBC, The Committee set the following as objectives desired from implementing a new Code to resolve insolvency and bankruptcy: (1) Low time to resolution. (2) Low loss in recovery. (3) Higher levels of debt financing across a wide variety of debt instruments. Principles driving the design The Committee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negotiations at the start. IV. The Code will ensure a collective process. (9) The law must ensure that all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution. V. The Code will respect the rights of all creditors equally. (10) The law must be impartial to the type of creditor in counting their weight in the vote on the final solution in resolving insolvency. VI. The Code must ensure that, when the negotiations fail to establish viability, the outcome of bankruptcy must be binding. (11) The law must order the liquidation of an enterprise which has been found unviable. This outcome of the negotiations should be protected against all appeals other than for very exceptional cases. VII. The Code must ensure clarity of priority, and that the rights of all stakeholders are upheld in resolving bankruptcy. (12) The law must clearly lay out the priority o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends. 84. IBC has overriding effect over other laws. Section 238 of the IBC provides that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law, for the time being in force, or any other instrument, having effect by virtue of such law. 85. Unlike coercive recovery litigation, the Corporate Insolvency Resolution Process under the IBC is not adversarial to the interests of the Corporate Debtor, as observed by this Court in Swiss Ribbons Private Limited v. Union of India (supra). 86. On the other hand, the IBC is a beneficial legislation for equal treatme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. On a careful reading of the provisions of the IBC and in particular the provisions of Section 7(2) to (5) of the IBC read with the 2016 Adjudicating Authority Rules there is no bar to the filing of documents at any time until a final order either admitting or dismissing the application has been passed. 92. The time stipulation of fourteen days in Section 7(4) to ascertain the existence of a default is apparently directory not mandatory. The proviso inserted by amendment with effect from 28th December, 2019 provides that if the Adjudicating Authority has not ascertained the default and passed an order under sub-section (5) of Section 7 of the IBC within the aforesaid time, it shall record its reasons in writing for the same. No other penalty is stipulated. 93. Furthermore, the proviso to Section 7(5)(b) of the IBC obliges the Adjudicating Authority to give notice to an applicant, to rectify the defect in its application within seven days of receipt of such notice from the Adjudicating Authority, before rejecting its application under Clause (b) of sub-section (5) of Section 7 of the IBC. When the Adjudicating Authority calls upon the applicant to cure some defects that defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, states that the liquidator may also sell the corporate debtor as a going concern.] A reasonable and balanced construction of this statute would therefore lead to the result that, where a resolution plan is upheld by the appellate authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. This is not to say that the NCLT and NCLAT will be tardy in decision-making. This is only to say that in the event of the NCLT, or the NCLAT, or this Court taking time to decide an application beyond the period of 270 days, the time taken in legal proceedings to decide the matter cannot possibly be excluded, as otherwise a good resolution plan may have to be shelved, resulting in corporate death, and the consequent displacement of employees and workers. 87. Coming to the facts of the present case, let us first examine the resolution plan presented by Numetal. Numetal was incorporated in Mauritius on 13-10-2017, expressly for the purpose of submission of a resolution plan qua the corporate debtor i.e. ESIL. Two other com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject matter of the legislation and the object which the Legislature has in view. The Courts would not give an interpretation to those words which would frustrate the purposes of making the Limitation Act applicable to proceedings in the NCLT/NCLAT as far as may be . xxx xxx xxx 94. The use of words as far as may be , occurring in Section 238A of the IBC tones down the rigour of the words shall in the aforesaid Section which is normally considered as mandatory. The expression as far as may be is indicative of the fact that all or any of the provisions of the Limitation Act may not apply to proceedings before the Adjudicating Authority (NCLT) or the Appellate authority (NCLAT) if they are patently inconsistent with some provisions of the IBC. At the same time, the words as far as may be cannot be construed as a total exclusion of the requirements of the basic principles of Section 14 of the Limitation Act, but permits a wider, more liberal, contextual and purposive interpretation by necessary modification, which is in harmony with the principles of the said Section. 100. There is no specific period of limitation prescribed in the Limitation Act, 1963, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..Section 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constitutes a continuing wrong. In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury. It is only in regard to acts which can be properly characterised as continuing wrongs that Section 23 can be invoked. ..... 106. There can be no dispute with the proposition of law laid down in Babulal Vardharji Gurjar (supra) that limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 112. It is not necessary for this Court to examine the relevance of all the documents filed by the Appellant Bank pursuant to its interim applications being I.A. No.27 of 2019 and I.A. No.131 of 2019. Suffice it to mention that the documents enclosed with the applications being I.A. No.27 of 2019 and I.A. No.131 of 2019 and the pleadings in the supporting affidavits, made out a case for computation of limitation afresh from the dates of the relevant documents. It would also be pertinent to note that the reasons for the execution of the documents are irrelevant. It is not the case of the Respondents, that any of those documents were extracted through coercion. 113. As per Section 18 of Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing a fresh period of limitation from the date on which the acknowledgement is signed. Such acknowledgement need not be accompanied by a promise to pay expressly or even by implication. However, the acknowledgement must be made before the relevant period of limitation has expir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is really no substantial difference between the parties as to the true legal position in this matter. 118. It is well settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act. In Asset Reconstruction Company (India) Limited v. Bishal Jaiswall and Anr. (supra) authored by Nariman, J. this Court quoted with approval the judgments, inter alia, of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff , AIR 1962 Cal 115 [ Bengal Silk Mills ] and in Re Pandem Tea C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Limitation Act, 1908. In my opinion, both these statements have to be read together. The balance-sheet is meant to be presented and passed by the shareholders and is generally accompanied by the Directors' report to the shareholders. Therefore in understanding the balance-sheets and in explaining the statements in the balancesheets, the balance-sheets together with the Directors' report must be taken together to find out the true meaning and purport of the statements. Counsel appearing for petitioning creditor contended that under the statute the balance-sheet was a separate document and as such if there was unequivocal acknowledgement on the balance-sheet the statement of the Directors' report should not be taken into consideration. It is true the balance-sheet is a statutory document and perhaps is a separate document but the balance-sheet not confirmed or passed by the shareholders cannot be accepted as correct. Therefore, in order to validate the balance-sheet, it must be duly passed by the shareholders at the appropriate meeting and in order to do so it must be accompanied by a report, if any, made by the Directors. Therefore, even though the balance-sheet ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting is contained in a balance-sheet is immaterial. In the second place, it is true that section 131 of the Companies Act, 1913 (section 210 of the Companies Act, 1956) makes it compulsory that an annual balance sheet should be prepared and placed before the Company by the Directors, and section 132 (section 211 of the Companies Act, 1956) requires that the balance-sheet should contain a summary, inter alia, of the current liabilities of the company. But, as pointed out by Bachawat J. in Bengal Silk Mills v. Ismail Golam Hossain Ariff, AIR 1962 Cal 115 although there was statutory compulsion to prepare the annual balance-sheet, there was no compulsion to make any particular admission, and a document is not taken out of the purview of section 18 of the Indian Limitation Act, 1963 (section 19 of the Indian Limitation Act, 1908) merely on the ground that it is prepared under compulsion of law or in discharge of statutory duty. Reference may also be made to the decisions in Raja of Vizianagram v. Vizianagram Mining Co. Ltd., AIR 1952 Mad 136, Jones v. Bellgrove Properties Ltd., (1949) 1 All ER 498; and Lahore Enamelling and Stamping Co. v. A.K. Bhalla, AIR 1958 Punj 341, in which stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 2017 did not acknowledge or admit any liability. Rather the Corporate Debtor had disputed and denied its liability. Similarly, the letter dated 23rd April, 2019 was also found not be an acknowledgment or admission of liability. On the other hand, the language of the letter made it absolutely clear that the liability had in fact been denied. 125. Significantly, in Reliance Asset Reconstruction (supra), the loan had been sanctioned by Vijaya Bank in May 1986. The loan amount was declared NPA on 1st April 1993, an original application moved under the Debt Recovery Act was compromised in 2001 and the DRT had issued a Recovery Certificate in May 2003. Vijaya Bank assigned its Reliance Asset Reconstruction in May 2011 after which amended Recovery Certificate was issued in December 2012. The petition under Section 7 of the IBC was, however filed on 27th July 2018. 126. The finding of the NCLAT that there was nothing on record to suggest that the Corporate Debtor acknowledged the debt within three years and agreed to pay debt is not sustainable in law, in view of the Statement of Accounts/Balance sheets/Financial Statements for the years 2016-2017 and 2017-2018 and the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a decree from the Calcutta High Court in Suit No.1073 of 1987, and the decree remaining unsatisfied, as provided in clause (b) of sub-section (1) of Section 434. 130. In effect, this Court speaking through Nariman J., approved the proposition that an application under Section 7 or 9 of the IBC may be time barred, even though some other recovery proceedings might have been instituted earlier, well within the period of limitation, in respect of the same debt. However, it would have been a different matter, if the applicant had approached the Adjudicating Authority after obtaining a final order and/or decree in the recovery proceedings, if the decree remained unsatisfied. This Court held that a decree and/or final adjudication would give rise to a fresh period of limitation for initiation of the Corporate Insolvency Resolution Process. 131. It is true that the finding of Patna High Court in Ferro Alloys Corporation Limited v. Rajhans Steel Limited (supra) was rendered in the context of Section 434(1)(b) of the Companies Act 1956, which provided that a company would be deemed to be unable to pay its debts if execution or other process issued on a decree or order of any Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal documents including inter alia financial statements, Annual Report etc. of the period from 1st April 2016 to 31st March 2017, and again, from 1st April 2017 to 31st March 2018 and a letter dated 3rd March 2017 proposing a One Time Settlement. This application was also allowed on 6th March 2021. The Adjudicating Authority, took into consideration the new documents and admitted the petition under Section 7 of the IBC. 137. Even assuming that documents were brought on record at a later stage, as argued by Mr. Shivshankar, the Adjudicating Authority was not precluded from considering the same. The documents were brought on record before any final decision was taken in the Petition under Section 7 of IBC. 138. 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. 139. The Appellant Bank was thus entitled to initiate procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the Certificate of Recovery, if the dues of the Corporate Debtor to the Financial Debtor, under the judgment and/or decree and/or in terms of the Certificate of Recovery, or any part thereof remained unpaid. 144. 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 Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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