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TMI Blog2023 (4) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... oposal was furnished by the Principal Borrower w.e.f 13.03.2014 till 18.05.2016 and the liability being admitted by the Principal Borrower and hence the deemed acceptance by the Guarantor/ Respondent herein in terms of provision of Section 128 of the Indian Contract Act, 1872. In catena of the Judgments, it has been held that an application under I B Code, 2016 would not be barred by limitation if there was acknowledgment of debt before expiry of the period of limitation of three years and in such case the period of limitation would get extended by the further period of three years. This Appellate Tribunal notes that there are various acknowledgements of liability by the Corporate Debtor from time to time, total 13 OTS letters from the Respondent to the Appellant within the meaning by Section 18 of the Limitation Act, and there are also part payments by the Corporate Debtor, therefore, the period of limitation is extended in the light of Section 19 of the Limitation Act. By the OTS described in letters mentioned above, the Principal Borrower i.e. M/s Victory Electricals Ltd. had offered the payment of varying amounts to the Appellant herein for full and final settlement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, Division Bench-I, Chennai), whereby, the Adjudicating Authority dismissed the Petition filed under the Insolvency Bankruptcy Code, 2016 (in short I B Code, 2016). 2. Counsel for the Appellant submitted that the application under Section 7 has been dismissed only on the ground of the limitation without considering the other relevant facts including One time settlement (in short OTS ) proposal of the Respondent . 3. The Appellant also submitted that the Respondent itself had no objection to admission of the Application under Section 7 of the I B Code, 2016 and initiation of the Corporate Insolvency Resolution Process as the Respondent was inclined for Resolution of the company under I B Code, 2016. 4. The Counsel for the Appellant stated that the Adjudicating Authority erred in calculating the limitation period. 5. Aggrieved by the impugned order dated 06.01.2021, the present appeal has been filed before this Appellate Tribunal . 6. Heard the Counsel for the Parties and perused the records made available including cited judgments of the Hon ble Supreme Court of India (and earlier orders of this Appellate Tribunal ). 7. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the Appellant stated that since both principal borrower and Respondent herein failed to pay the amount of credit facilities, the Appellant issued notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to the Principal Borrower on 28.06.2013 and the other obligors which was not denied by the Principal Borrower or the Respondent herein. 11. The Counsel for the Appellant stated that the Principal Borrower furnished an OTS proposal on 13.03.2014 for Rs. 50 Crores, which was not accepted by the Appellant being a lower offer. Subsequently, the Principal Borrower gave several OTS proposals, modified OTS proposals and each such OTS proposal tantamounted to fresh acknowledgment of debt in terms of Section 18 of Limitation Act, 1963 and further this liability of the Respondent was always coextensive with the Principal Borrower in terms of Section 128 of Indian Contract Act, 1872 and therefore a deemed acknowledgement of liability by the Guarantor/ Respondent herein. 12. The Counsel for the Appellant mentioned that a suit for recovery was filed by the Appellant before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 application. The Counsel for the Appellant further stated that in the teeth of the admission reply of the Respondent herein, the Adjudicating Authority should have accepted the application of the Appellant filed under Section 7 of the I B Code, 2016, however, the Adjudicating Authority dismissed wrongly his application vide impugned order dated 06.01.2021 only on ground of limitation. 17. The Counsel for the Appellant emphasised that the Adjudicating Authority has committed grave error in reckoning the limitation period taking date of default as 31.05.2012 and erroneously recording OTS letter dated 06.10.2016 as acknowledgment of debt and ignoring various OTS proposals of the Principal Borrower prior to acceptance of the OTS . 18. The Counsel for the Respondent admitted that the Respondent herein along with three Ex- Directors had extended the guarantee on behalf of the Principal Borrower M/s Victory Electrical Ltd. 19. The Counsel for the Respondent stated that the Appellant filed an Application under Section 7 of the I B Code, 2016 on 27.08.2019 against the Respondent herein, prior to which the moratorium was declared in Corporate Insolvenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Professional / Liquidator and the Appellant herein and the same are pending before the Hon ble High Court of Telangana. 23. Counsel for the Respondent submitted that in case of A.V. Papayya Sastry vs. Govt. of AP [(2007) 4 SCC 221] the Hon ble Supreme Court of India held that Fraud-Vitiates all judicial acts whether in rem or in personal-Judgment, decree or order obtained by fraud has to be treated as non est and nullity . 24. The Counsel for the Respondent emphasised that in view of the changed circumstances, the Respondent modified its instance now denying, no objection to admission of the Application filed under Section 7 of the Appellant before the Adjudicating Authority agreed earlier. 25. The Counsel for the Respondent submitted that this Appellate Tribunal had also held in Bank of India Chennai vs. Coastal Oil Gas Infrastructure Pvt. Ltd. [(2020) SCC OnLine NCLAT 1095] dated 21.09.2020, where it had remanded case back to the Adjudicating Authority to entertain the Application under Section 7 after issuing notice and examining all other aspects under Section 7 of the I B Code, 2016. 26. The Counsel for the Respondent stated that in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , not only for the amount of the bill, but also for any interest and charges which may have become due on it. (emphasis supplied) Section 18 of the Limitation Act, 1963 deals with the effect of acknowledgement in writing. Subsection (1) thereof provides that where, before the expiration of the prescribed period for a suit or application in respect of any right, an acknowledgement of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgement was signed. 28. This Appellate Tribunal has gone through all the submissions made by the Counsel for the Parties as well as the impugned order dated 06.01.2021. The Adjudicating Authority has also taken cognizance of various judgments of this Appellate Tribunal held in the matters of :- ➢ Laxmi Pat Surana vs. Union of India, [(2021) SCC OnLine SC 267] (Judgment dated 26.03.2021) ➢ Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal, [(2021) SCC OnLine SC 321) (Judgment dated 15.04.2021) ➢ Manesh Agarwal vs. Bank of India Anr. [Company Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the Respondent herein or from the date of acceptance of OTS proposal or from the date of cancellation of the sanctioned OTS proposal. 32. There is no dispute that the default occurred on 31.05.2012 in respect of term loan facilities and in respect of working capital facilities on part of the Principal Borrower default occurred on 09.03.2012. This Appellate Tribunal has noticed from the submissions of the Appellant as well as from the Respondent along with documents made available that revival letter dated 01.06.2012 was executed by the Principal Borrower and the Respondent herein. It is also observed that various OTS proposal was furnished by the Principal Borrower w.e.f 13.03.2014 till 18.05.2016 and the liability being admitted by the Principal Borrower and hence the deemed acceptance by the Guarantor/ Respondent herein in terms of provision of Section 128 of the Indian Contract Act, 1872. 33. This Appellate Tribunal also takes into consideration that the Respondent herein acknowledged the liability vis- -vis guarantee furnished for the loans of the Principal Borrower in its financial statement for the year ending 31.03.2015. Similarly, the OTS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant, time, therefore, begins to run on 21.07.2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr Banerjee s reliance on para 11 of B.K. Educational Services (P) Ltd. [B.K. Educational Services (P) Ltd. vs. Parag Gupta and Associates, (2019) 11 SCC 633], suffice it to say that the Report of the Insolvency Law Committee [Ed.: Report of the Insolvency Law Committee (March 2018), Ministry of Corporate Affairs, Government of India] itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred. (emphasis supplied) (c). In case of Jignesh Shah vs. Union of India, (2019) 10 SCC 750 (2020) 1 SCC (Civ) 48: 2019 SCC OnLine SC 1254 at page 764, the Hon ble Supreme Court of India held that: 8. To my mind, there is a fallacy in this argument because the test that is required to be applied for purposes of ascertaining whether the debt is in existence at a particular point of time is the simple question as to whether it would have been permissible to institute a normal recovery proceeding before a civil court in respect of that debt at that point o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility 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 of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not 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. 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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 the intention to admit such jural relationship. Such an intention need not be in express terms and can 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 . (emphasis supplied) 36. In above cited judgments, the Hon ble Supreme Court of India has held that for an Application under Section 7 or 9 of I B Code 2016 and Artticle 137 of the Limitation Act, 1963 will be applicable and this period of limitation can only be extended in the manner provided in the Limitation Act. For example, an acknowledgement of liability under Section 18 of the Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order is therefore wrong on this account itself. It is also established fact that the in terms of the Section 128 of the Indian Contract Act, 1872 the liability of the Respondent was always co-extensive with debt of Principal Borrower and therefore the acknowledgment of debt by various OTS proposals, as discussed earlier, were also deemed acknowledgements by the Respondent herein of the liability as guarantors on behalf of the Principal Borrowers. 40. This Appellate Tribunal also takes into account the submissions made by the Respondent herein before the Adjudicating Authority whereby they have filed the counter and submitted as under :- Although, now the Respondent herein has taken a plea regarding changed circumstances of failure on part of the IRP/Liquidator in realising the dues and actionable claims of the Principal Borrowers and therefore has taken the stand that he is entitled to change his stand and further taken plea that it was fraud on part of the Interim Resolution Professional / Liquidator in connivance with the Appellant herein which absorb him of any liability. Without going in detail examination of their submissions, prima-facie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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