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TMI Blog2021 (11) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion letter dated 11 June 2018, which categorically allows the bank to file the present Application under section 7 of the Code. Whether the Application/Petition filed u/s 7 of the I B Code is barred by limitation? - HELD THAT:- In the instant case undisputedly, the account of the Corporate Debtor was classified Non-Performing Asset on 01 July 2015. The date of default, as mentioned in Section 7 petition, is 01 July 2015. On perusal of the statement of the account of Corporate Debtor, it appears that the amount of ₹ 5,99,760/- was credited in the account of Corporate Debtor on 30 December 2015. The Appellant claims that this payment was made by a completely unrelated party, i.e. 'Dynamic Extractors'. It is further stated that the said payment by 'Dynamic Extractors' was wrongfully made, and the Appellant returned it. The contention of the Appellant is unsupported by any evidence. The learned Adjudicating Authority has rightly admitted the Application filed under section 7 of the Insolvency and Bankruptcy Code 2016 - Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 623 of 2020 - - - Dated:- 10-11-2021 - [Justice Jarat Kumar Jain] Member ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , under Article 137 of the Limitation Act, 1963. Therefore, the Application was hopelessly time-barred. 3.3 The Appellant contends that the Adjudicating Authority has given the benefit of Section 19 of the Limitation Act based on the last payment made by the Corporate Debtor, i.e. on 30 December 2015. Therefore, the Adjudicating Authority has found that the Application is filed within the prescribed period of limitation. a. Appellant submits that the credit entry of 30 December 2015 for ₹ 5,99,760 is on account of payment by one' Dynamic Extractor'. It is contended that the said payment is neither made by the Appellant nor the Appellant's agent. b. A payment may extend the period of limitation as per Section19 of the Limitation Act. However, for Section 19 Limitation Act to apply, it is necessary to make the payment by the Appellant or the Appellant's agent. (Pg. 10) c. However, herein the payment is made by a completely unrelated party. Hence, the limitation period cannot extend u/S. 19 of Limitation Act since the conditions thereof are not fulfilled. d. Even the said payment by Dynamic Extractor was wrongfully made, and it was returned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, this issue is no longer res Integra, and the Hon'ble Supreme Court and this Hon'ble Tribunal have laid this controversy to rest by deciding that acknowledgement in a balance sheet will not extend the limitation period u/S 18 Limitation Act for IBC proceedings. c. The Hon'ble Supreme Court in BabulalVardhariGurjar versus Gurjar Aluminium Industries Pvt Ltd. 2020 SCC Online SC 547 Para 91-93 has held explicitly that Section 18 Limitation Act will not apply to IBC proceedings. d. Further, this Hon'ble Tribunal in V Padmakumar versus Stressed Assets Stabilisation Fund 2020 SCC Online NCLAT 417 Para 20-22 and BishalJaiswal versus Asset Reconstruction Company (India) Ltd. Company Appeal No. 385 of 2020 Judgment dated 22 December 2020 Para 13-14 has held that acknowledgement in balance sheets will not extend limitation period u/S. 18 of the Limitation Act for IBC proceedings. 3.5 Hence, the instant Appeal ought to be allowed since the Section 7 Application filed by the Respondent was time-barred. 3.6 We have heard the argument of the Learned Counsels for the parties and perused the record. Following issues arise for deciding this Appeal; a) Whether the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial creditor is dealt with under Section 7 of the Code. Section 7(2) provides that the financial creditor shall make an application in such form and manner and accompanied with such fee as may be prescribed. As per Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter, 'the 2016 Rules'), the financial creditor is required to make an application for initiating the corporate insolvency resolution process against the corporate debtor under Section 7 of the Code in Form 1, accompanied with documents and records required therein. Form 1 is in a tabular form and the financial creditor has to give particulars of the details sought. Further, the Form is required to be signed by the person authorised to act on behalf of the financial creditor . 10. The authorisation, in terms of the power of attorney, given by the Financial Creditor to Mr. Praveen Kumar Gupta who has filed the Application under Section 7 of the Code has been placed on record. Pursuant to the resolution passed by the board of directors of the Bank on 06.12.2008, the power of attorney was executed by the general managers in 2011. By way of the said power of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith power can claim to be the 'Authorized Representative' for the purpose of filing any application under section 7 or Section 9 or Section 10 of 'I B Code'. 12. The NCLAT was of the opinion that general authorisation given to an officer of the financial creditor by means of a power of attorney, would not disentitle such officer to act as the authorised representative of the financial creditor while filing an application under Section 7 of the Code, merely because the authorisation was granted through a power of attorney. Moreover, the NCLAT in Palogix Infrastructure (supra) has held that if the officer was authorised to sanction loans and had done so, the Application filed under Section 7 of the Code cannot be rejected on the ground that no separate specific authorisation letter has been issued by the financial creditor in favour of such officer. In such cases, the corporate debtor cannot take the plea that while the officer has power to sanction the loan, such officer has no power to recover the loan amount or to initiate corporate insolvency resolution process, in spite of default in repayment. We approve the view taken by the NCLAT in Palogix Infrastruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is mainly based on the premise that theAdjudicating Authority has wrongly considered the credit entry of 30 December 2015 for ₹ 5,99,760/- from the Corporate Debtor. They are considering this entry as the last payment received from the Corporate Debtor. The Appellant submits that the said payment was made by a completely unrelated party, 'Dynamic Extractor'. The said payment is neither made by the Appellant nor its agent. Therefore, based on the credit entry dated 30 December 2015 limitation period cannot be extended under Section 19 of the Limitation Act, 1963. Appellant returned even the said payment made by 'Dynamic Extractor'. 5.3 Section 19 of the Limitation Act is quoted below for ready reference: 19. Effect of payment on account of debt or of interest on legacy.-Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made: Provided that, save in the case of payment of interest made before the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the amount is due and payable to Respondent No.1, i.e. Central Bank of India, 5.7 These balance sheets are also signed by the Appellant. Hence, the Application under Section 7, which was filed on 22 October 2018, is well within limitation. Further, through various demand promissory notes, the Corporate Debtor has acknowledged the loan disbursed by Respondent No.1 and has promised to pay on demand (Ref pg:155 to 133). Acknowledgement is also evident from the board resolution passed by the Corporate Debtor from time to time (Ref Pg-171-176). 5.8 Hon'ble Supreme Court in a recent case; Dena Bank (now Bank of Baroda) Vs. After discussing most of the Hon'ble Supreme Court's judgments of the Hon'ble Supreme Court, C Shivkumar Reddy Anr., 2021 SCC Online SC 543, has explained the law laid down by the Hon'ble Supreme Court different cases and summarises the law in this regard. In this case, Hon'ble Supreme Court has held that; 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made 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 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead together and if so whether reading these two statements together these amount to an acknowledgement as contemplated under Section 18 of the Limitation Act, 1963, or Section 19 of 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 balance-sheets, 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 balancesheet, it must be duly passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the acknowledgement of liability must have been made in writing, but it does not prescribe that the writing should be in any particular kind of document. So, the fact that the writing 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 balancesheet, 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. Vizianag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be construed as admission that amounted to acknowledgement of the jural relationship and the existence of liability, since the balance sheet dated 16 August, 2017 did not acknowledge or admit any liability. Rather the Corporate Debtor had disputed and denied its liability. Similarly, the letter dated 23 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 01 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 27 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 agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n altogether a different matter if the petitioner Company approached this Court for winding-up of the opposite party No. 1, after obtaining 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, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition under Section 7 of the IBC. 136. On or about 05 March 2019, the Appellant Bank filed another application for permission to place on record additional documents including inter alia financial statements, Annual Report etc. of the period from 01 April 2016 to 31 March 2017, and again, from 01 April 2017 to 31 March 2018 and a letter dated 03 March 2017 proposing a One Time Settlement. This Application was also allowed on 06 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 authorising the creditor to realise its decretal dues, a fresh right accrues to the creditor to recover the amount of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.9 Further, In the case Rajendra Narottamdas Sheth and Another v Chandra Prakash Jain and Another 2021 SCC OnLine SC 843 Hon'ble Supreme Court has held that; 22. In the instant case, there is no dispute that the date of default is 30.09.2014 and the Application under Section 7 of the Code was filed on 25.04.2019. According to the Financial Creditor, Section 18 of the Limitation Act is applicable in view of the Corporate Debtor acknowledging its debt by way of letters, written in and after 2018, giving details of amount repaid, acknowledging the amount outstanding and requesting consideration of onetime settlement proposal. Sub-section (1) of Section 18 of the Limitation Act reads as under: 18. Effect of acknowledgement in writing. - (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 the time when the acknowledgement was so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation Act and such material has also been considered by the Adjudicating Authority before admitting the Application under Section 7 of the Code. The plea of Section 18 of the Limitation Act not having been raised by the Financial Creditor in the Application filed under Section 7 cannot come to the rescue of the Appellants in the facts of this case. It is clarified that the onus on the financial creditor, at the time of filing an application under Section 7, to prima facie demonstrate default with respect to a debt, which is not time-barred, is not sought to be diluted herein. In the present case, if the documents constituting acknowledgement of the debt beyond April, 2016 had not been brought on record by the Corporate Debtor, the Application would have been fit for dismissal on the ground of lack of any plea by the Financial Creditor before the Adjudicating Authority with respect to extension of the limitation period and Application of Section 18 of the Limitation Act. (emphasis supplied) 5.10 In the instant case undisputedly, the account of the Corporate Debtor was classified Non-Performing Asset on 01 July 2015. The date of default, as mentioned in Section 7 petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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