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TMI Blog2022 (8) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) of Section 7 of the IBC within the aforesaid time, it shall record its reasons in writing for not doing so. No other penalty is stipulated. Furthermore, the proviso to Section 7(5)(b) of the IBC requires 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 defect has to be rectified within seven days. However, in the absence of any prescribed penalty in the IBC for inability to cure the defects in an application within seven days from the date of receipt of notice, in an appropriate case, the Adjudicating Authority may accept the cured application, even after expiry of seven days, for the ends of justice. There is no specific period of limitation prescribed in the Limitation Act, 1963, for an application under the IBC, before the Adjudicating Authority (NCLT). An application for which no period of limitation is provided anywhere else in the Schedule to the Limitation Act, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awala , AOR JUDGMENT Indira Banerjee , J. These appeals under Section 62 of the Insolvency and Bankruptcy Code 2016 (IBC) filed by the Financial Creditor, Asset Reconstruction Company (India) Limited are against a common judgment and final order dated 11th December 2019 passed by the National Company Law Appellate Tribunal (NCLAT), allowing Company Appeal (AT)(Insolvency) No.525 of 2019 and Company Appeal(AT) (Insolvency) No.627 of 2019 and holding that the Corporate Insolvency Resolution Process (CIRP) initiated by the Appellant against the Corporate Debtor, V. Hotels Ltd. was barred by limitation. 2. The Respondent No.1, Tulip Star Hotels Limited and the Respondent No.2 Tulip Hotels Private Limited are the shareholders of the Corporate Debtor, V. Hotels Limited. The Respondent Nos. 1 and 2 each hold 50% share in the Corporate Debtor. Mr. Ajit B. Kerkar is the Managing Director of the Respondent No.1, Tulip Star Hotel Limited, Chairman of the Respondent No.2, Tulip Hotels Private Limited and also the Chairman of the Corporate Debtor. 3. On or about 8th March 2002, a loan agreement was executed by and between a consortium of banks consisting of Bank of India, Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning from 15th October 2011. 9. On or about 10th February 2011, the Corporate Debtor submitted a revised proposal offering to pay interest on its outstanding dues to the Appellant at the rate of 22% per annum with monthly rests with effect from 1st July 2010. The Corporate Debtor also offered to pay Rs.10,00,00,000/- to the Appellant immediately upon acceptance of the revised proposal. 10. The Corporate Debtor also agreed to pay the settlement amount of Rs.150,75,83,970/- being the aggregate assigned debt as on 30th June 2010 along with interest at the rate of 22% per annum compounded at monthly rests from 1st July 2010 till 30th September 2011. 11. On or about 28th February 2011 the parties entered into a Settlement Agreement, the key terms whereof were as follows:- (i) The Corporate Debtor agreed to pay the settlement amount of Rs.150,75,83,970/- (Rupees One Hundred Fifty Crores Seventy-Five Lakhs Eighty-three Thousand Nine Hundred and Seventy Only) being the Aggregate amount in default as on 30th June 2010 along with the accrued interest at the rate of 22% per annum to be compounded at monthly rests from 1st July 2010 till 30th September 2011. (ii) Rs. 10,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs.239,88,27,673/- as on 31st March 2013. The Corporate Debtor offered to make an interim payment of Rs.91,00,00,000/- (Indian Rupees Ninety One Crores Only) by 31st August 2013 and the balance outstanding amounts by 30th September 2013. 18. On 19th April 2013, the Corporate Debtor paid Rs.17,50,00,000/- to the Appellant, towards part repayment of the aggregate assigned debt. On 29th May 2013, the Appellant again accepted the request of the Corporate Debtor for extension of time. 19. Ultimately, on 17th June 2013, the Appellant revoked the settlement and in terms of the default obligations under the Settlement Agreement, the rate of interest under the Deed of Variation was revised to 22%. By its letter dated 1st July 2013, the Corporate Debtor acknowledged its obligation to repay the aggregate assigned debt inclusive of interest. 20. On 10th July 2013, the Appellant sent the Corporate Debtor a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) in order to enforce security interests against the Corporate Debtor. On 14th October 2013, the Appellant, through its authorized off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor under Section 7(2) of the IBC. 29. The shareholders of the Corporate Debtor, that is, the Respondent No.1, Tulip Star Hotels Limited and the Respondent No.2, Tulip Hotels Private Limited, filed an appeal being Company Appeal (AT) (Insolvency) No.627 of 2019 in the NCLAT against the order dated 31st May of the Adjudicating Authority, admitting the application of the Appellant under Section 7(5)(a) of the IBC. 30. Both the appeals have been allowed by the common judgment of the Appellate Tribunal (NCLAT) dated 11th December 2019, impugned in these appeals. 31. On behalf of the Corporate Debtor, it has been argued: (i) There is no debt due and payable from the Corporate Debtor to the Appellant. The amounts advanced by the Consortium to the Corporate Debtor have been repaid. (ii) In the statutory notice issued by the Appellant to the Corporate Debtor under Section 13(2) of the SARFAESI Act, the Appellant had claimed that principal amount of Rs.90.35 Crores was due from the Corporate Debtor to the Appellant. (iii) The Corporate Debtor has paid the Appellant much more than the Principal amount claimed by the Appellant, as per the table set out below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Bank, Nariman Point, Mumbai 2,40,00,000 14-Jul-17 68353 Axis Bank, Nariman Point, Mumbai 2,40,00,000 21-Jul-17 68437 Axis Bank, Nariman Point, Mumbai 2,40,00,000 C. Total Amount Deposited with DRT 39,04,30,672 TOTAL PAYMENT (A+B+C) 1,06,54,30,672 (iv) Even though the principal amount had been paid in the full, in the Application under Section 7 of the IBC, the Appellant claimed that principal amount of Rs.35,43,72,852/- and Rs.149,91,24,581/- towards interest. (v) There is no amount outstanding towards principal, and there is a long standing dispute in respect of the amount of interest payable by the Corporate Debtor to the Appellant. (vi) In the Application under Section 7 of the IBC, the Appellant has claimed a principal amount of Rs.35,43,72,852/- and interest of Rs.149,91,24,581/- on the basis of the settlement agreement dated 28.02.2011 which was later revoked by the Appellant on 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. And Another (supra) 26. The Adjudicating Authority having failed to appreciate the aforesaid fact, the impugned order dated 1st May, 2019 rejecting the objections of the Corporate Debtor and the impugned order dated 31st May, 2019 passed by the Adjudicating Authority admitting the application under Section 7 are set aside. V. Hotels Limited - ( Corporate Debtor ) is released from all the rigours of law and is allowed to function independently through its Board of Directors from immediate effect. The Interim Resolution Professional / Resolution Professional will submit its fees and costs of Corporate Insolvency Resolution Process before the Adjudicating Authority who will determine the same and amount as is payable is to be paid by Asset Reconstruction Company (India) Ltd. who moved application under Section 7 which was not maintainable. The Interim Resolution Professional will hand over the management, assets and records to the Board of Directors. Both the appeals are allowed. No costs. 33. Citing Asset Reconstruction Company (India) Limited. v. Bishal Jaiswal and Anr ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrated in the Written Notes of submissions of the Corporate Debtor reproduced hereinbelow: (i) Financial Statement for 2014-15 (Pages 6-18 of IA 125766) wherein: (a) At page 8 of IA 125776, it is stated that indebtness is to be read with Note No.5 in the notes of Accounts. (b) At page 15-16 of IA, in the Notes of Accounts, the Respondent No.3 has clearly stated that pursuant to the Orders of this Court, the parties entered into a Settlement which was unilaterally revoked by the Appellant on 17.06.2013 and thus the Respondent No.3 had been legally advised that the interest for the loans cannot be 22% as stated in the revoked settlement but 12.85% and that the rate of interest will be subject to the decision of the DRT, Mumbai. (ii) Financial Statement for 2015-2016 (Pages 19-30 of IA 125766), wherein similar disputes are raised in the notes (at page 21, 29-30 of IA). (iii) Financial Statement for 2016-17 (pages 31-42 of IA 125766) where a similar statement is made as stated above in the Notes to the Financial Statement for 2015-16 (at page 33, 41-42 of IA). 36. Counsel argued that a perusal of the above Statements from 2014-2015 to 2016-2017 shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest. 39. As held by this Court in Innoventive Industries Ltd. v. ICICI Bank and Anr (2018) 1 SCC 407., the Adjudicating Authority, considering an application under Section 7 of the IBC, is only required to see if there is the existence of a debt and default. Any dispute with regard to the quantum of debt is immaterial. The relevant part of the judgment of this Court in Innoventive Industries Ltd. (supra) is set out hereinbelow:- 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing-i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as acknowledgement of liability in respect of debt payable to a financial creditor. 44. Under the scheme of the IBC, the Insolvency Resolution Process begins, when a default takes place, in the sense that a debt becomes due and is not paid. Some of the relevant provisions of the IBC, are set out hereinbelow for convenience:- 3 Definitions..-In this Code, unless the context otherwise requires,- ... (6) claim means- (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; (7) corporate person means a company as defined in clause (20) of Section 2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 6. Persons who may initiate corporate insolvency resolution process.-Where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner as provided under this Chapter. 7. Initiation of corporate insolvency resolution process by financial creditor.-(1) A financial creditor either by itself or jointly with other financial creditors, or any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3): Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the same.] (5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) 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 clause (b) of sub-section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 immediately after the appointment of the interim resolution professional. 14. Moratorium.-(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ... 16. Appointment and tenure of interim resolution professional.-(1) The Adjudicating Authority shall appoint an interim resolution professional on the insolvency commencement date. (2) Where the application for corporate insolvency resolution process is made by a financial creditor or the corporate debtor, as the case may be, the resolution professional, as proposed respectively in the application under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor for determining the financial position of the corporate debtor, including information relating to- (i) business operations for the previous two years; (ii) financial and operational payments for the previous two years; (iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under Sections 13 and 15; (c) constitute a committee of creditors; (d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors; (e) file information collected with the information utility, if necessary; and (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including- (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst meeting of the committee of creditors shall be held within seven days of the constitution of the committee of creditors. (2) The committee of creditors, may, in the first meeting, by a majority vote of not less than sixty-six per cent of the voting share of the financial creditors, either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional. (3) Where the committee of creditors resolves under sub-section (2)- (a) to continue the interim resolution professional as resolution professional subject to a written consent from the interim resolution professional in the specified form, it shall communicate its decision to the interim resolution professional, the corporate debtor and the Adjudicating Authority; or (b) to replace the interim resolution professional, it shall file an application before the Adjudicating Authority for the appointment of the proposed resolution professional along with a written consent from the proposed resolution professional in the specified form. (4) The Adjudicating Authority shall forward the name of the resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aise interim finances subject to the approval of the committee of creditors under Section 28; *** 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. *** 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors approved by not less than sixty-six per cent of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). Explanation.-For the purposes of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the 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 Adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48. Statutory Form 1 under Rule 4(1) of the 2016 Adjudicating Authority Rules comprises Parts I to V, of which Part I pertains to particulars of the Applicant, Part II pertains to particulars of the Corporate Debtor and Part III pertains to particulars of the proposed Interim Resolution Professional. Parts IV and V which require particulars of Financial Debt with Documents, Records and Evidence of default, is extracted hereinbelow:- PART IV PARTICULARS OF FINANCIAL DEBT 1 TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT 2 AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (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 REGIST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the financial creditor within fourteen days of the receipt of the application under Section 7. As per the proviso to Section 7(4) of the IBC, inserted by amendment, by Act 26 of 2019, if the Adjudicating Authority has not ascertained the existence of default and passed an order, within the stipulated period of time of fourteen days, it shall record its reasons for not doing so in writing. The application does not lapse for non-compliance of the time schedule. Nor is the Adjudicating Authority obliged to dismiss the application. On the other hand, the application cannot be dismissed, without compliance with the requisites of the Proviso to Section 7(5) of the IBC. 52. Section 7(5)(a) provides that when the Adjudicating Authority is satisfied that a default has occurred, and the application 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 agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its 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. 57. 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. 58. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 defect has to be rectified within seven days. However, in the absence of any prescribed penalty in the IBC for inability to cure the defects in an application within seven days from the date of receipt of notice, in an appropriate case, the Adjudicating Authority may accept the cured application, even after expiry of seven days, for the ends of justice. 65. The Insolvency Committee of the Ministry of Corporate Affairs, Government of India, in a report published in March 2018, stated that the intent of the IBC could not have been to give a new lease of life to debts which were already time barred. Thereafter Section 238A was incorporated in the IBC by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (Act 26 of 2018), with effect from 6th June 2018. 66. Section 238A of the IBC provides as follows:- 238A. The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. In Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. (2019) 10 SCC 572 authored by Nariman, J. this Court held:- 6. ...The present case being an application which is filed under Section 7, would fall only within the residuary Article 137. 70. In B. K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633, this Court speaking through Nariman, J. held:- 42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 71. In Jignesh Shah v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they failed to do. 73. In Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd. (2020) 15 SCC 1, relied upon by the Respondents, this Court, speaking through Dinesh Maheshwari, J., reiterated that the period of limitation for an application seeking initiation of CIRP under Section 7 of the IBC, was governed by Article 137 of the Limitation Act, 1963 and was, therefore, three years from the date when the right to apply accrued, i.e., the date when default occurred. In Babulal Vardharji Gurjar (supra), this Court observed and 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 default been stated in the applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y bars recourse to the particular remedy of initiation of CIRP under the Code. Equally, the other submissions made on behalf of the respondents about any stringent application of the law of limitation which was introduced to the Code only after filing of the application by Respondent 2; or about the so-called prejudice likely to be caused to other banks and financial institutions are also of no substance, particularly in the light of the principles laid down and consistently followed by this Court right from the decision in B.K. Educational Services (2019) 11 SCC 633. These contentions have only been noted to be rejected. Needless to add that when the application made by Respondent 2 for CIRP is barred by limitation, no proceedings undertaken therein after the order of admission could be of any effect. All such proceedings remain non est and could only be annulled. 74. In Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd. Ors. (2019) 9 SCC 158 this Court rejected the contention that the default was a continuing wrong and Section 23 of the Limitation Act 1963 would apply, relying upon Balkrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan 1959 Supp (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is raised and decided and not observations made in the facts of any particular case. To quote V. Sudhish Pai in Constitutional Supremacy-A Revisit , Judicial utterances/pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to explain not define. Judges interpret statutes, their words are not to be interpreted as statutes. The aforesaid passage was extracted and incorporated as part of the judgment of this Court in Sesh Nath Singh (supra). 80. Babulal Vardharji Gurjar (supra) is not an authority for the proposition that the Books of Accounts of a Corporate Debtor could not be treated as acknowledgement of liability to a Financial Creditor. Nor does the judgment lay down the proposition that any affidavits or documents filed during the pendency of the proceedings cannot be taken into consideration. 81. In Sesh Nath Singh (supra) this Court held that the IBC does not exclude the application of Section 14 or 18 or any other provision of the Limitation Act. There is, therefore, no reason to suppose that Sections 14 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 expired. 84. In Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others AIR 1961 SC 1236, this Court held:- 6. It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company who makes and signs it intends to make those admissions. The admissions do not cease to be acknowledgements of liability merely on the ground that they were made in discharge of a statutory duty. I notice that in the Nagpur case the balancesheet had been signed by a director and had not been passed either by the Board of Directors or by the company at its annual general meeting and it seems that the actual decision may be distinguished on the ground that the balance-sheet was not made or signed by a duly authorized agent of the company. *** 11. To come under section 19 an acknowledgement of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance-sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgement in respect of a specialty debt under section 5 of the Civil Procedure Act, 1833 (3 and 4 Will - 4c. 42), see Re : Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., [1928] Ch. 836 . 87. In Re Pandem Tea Co. Ltd. (supra), Sabyasachi Mukharji J. held:- Now the question is whether the statements, which are contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question must, however, relate to a present subsisting liability and indicate the existence of a jural relationship between the parties such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not, however, be in express terms and could be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course did not mean that where a statement was made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. In order to find out the intention of the document by which acknowledgement was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole. 88. In South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana (supra), the Delhi High Court observed:- 46. Shri Rameshwar Dial argued that statements in the balance-sheet of a company cannot amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Rameshwar Dial. 89. In Hegde Golay Limited v. State Bank of India (supra) the Karnataka High Court held: 43. The acknowledgement of liability contained in the balancesheet of a company furnishes a fresh starting point of limitation. It is not necessary, as the law stands in India, that the acknowledgement should be addressed and communicated to the creditor. 90. In Reliance Asset Reconstruction Co. Ltd. v. Hotel Poonja International Pvt. Ltd. 2021 SCC Online SC 289, the Appellant had relied on two documents in the Paper Book, that is, (i) the Balance Sheet of the Corporate Debtor dated 16th August, 2017 and (ii) a letter dated 23rd April, 2019 issued by the Corporate Debtor to contend that the proceedings under Section 7 of the IBC were not barred by limitation, as limitation would start running afresh for a period of three years from the respective dates of those documents in acknowledgment of liability. 91. This Court, however, did not accept the balance sheet dated 16th August, 2017 and the letter dated 23rd April, 2019 in the special facts and circumstances of the case where it could not be ascertained if the documents had been signed before the expi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent duly authorised in that behalf. Explanation 1 to the section then provides that an acknowledgment would be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment has not yet come, or is accompanied by a refusal to pay or is coupled with a claim to a set-off, or is addressed to a person other than the person entitled to the property or right. The new Act of 1963, contains in Section 18 substantially similar provisions. 9. It is clear that the statement on which the plea of acknowledgment is founded must relate to a subsisting liability as the section requires that it must be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay, for, an acknowledgment does not create a new right of action but merely extends the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence of jural relationship between the parties, such as, for instance, that of a debtor and a creditor and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India (supra), this Court relied upon a judgment of the Patna High Court in Ferro Alloys Corporation Limited v. Rajhans Steel Limited (1999) SCC Online Pat 1196, and held in effect 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 be 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. 96. In Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy and Another (2021) 10 SCC 330, this Court held:- 138. While it is true that default in payment of a debt triggers the right to initiate the corporate resolution process, and a petition under Section 7 or 9 IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. In our considered view, 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. 97. To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. 98. In this case, the amount of the Corporate Debtor was declared NPA on 1st December 2008. By a letter dated 7th February, 2011, written well within thre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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