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TMI Blog2023 (9) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... Judgment in the matter of KSL INDUSTRIES LTD. VERSUS ARIHANT THREADS LTD. [ 2014 (12) TMI 1023 - SUPREME COURT ] in which the issue whether a Recovery Application under the RDDB Act, 1963 would lie or be proceeded with against a sick company in view of the bar contained in Section 22 (1) of SICA, was addressed to. The facts are distinguishable as in Invent Assets [ 2021 (11) TMI 731 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH, NEW DELHI] , there was no acknowledgment of liability under Section 18 of the Limitation Act, 1963 and further the dismissal of the BIFR reference was also dated beyond 3 years from the date of default. The other Judgments relied upon by the Appellant in support of his case that this period spent before the BIFR / AIFR cannot be excluded in the facts of the attendant case, cannot be accepted for the reason that the ratio in Sabarmathi Gas Limited Vs. Shah Alloys Ltd. under the IBC Code, 2016 is squarely applicable to the case on hand. OTS proposals being conditional cannot be taken into consideration? - extension of period of limitation as they were given beyond three years from the date of default - HELD THAT:- The question of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered in this correspondence. Whether the Appellant / Party-in-Person that a conditional promise to pay and part payments made do not fall within the ambit of definition of acknowledgement of Debt as defined under Section 18 of the Limitation Act, 1961? - HELD THAT:- In the instant case, there is a continuous promise to pay in the OTS proposals made by the Corporate Debtor Company and this communication clearly evidences a jural relationship between the Corporate Debtor and the Financial Creditor - This Tribunal is of the considered and earnest view that an OTS proposal with a promise to pay and part payments being made thereafter, positively construes an acknowledgment of Debt as defined under Section 18 of the Limitation Act, 1963. The admitted OTS Proposals between the Corporate Debtor Company and the Financial Creditor substantiate that a reasonable inference can be made regarding the subsisting liability. Appeal dismissed. - [Justice M. Venugopal] Member (Judicial) And [Shreesha Merla] Member (Technical) For the Appellant : Mr. D. Srinivasa Rao, Party-in-Person For the Respondents : Mr. T. Ravichandran, Advocate, For R1 Mr. A.G. Sathyanarayan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only entitled to initiate CIRP within 3 years of issuing the Recovery Certificate which is dated 19/11/2009, whereas the Section 7 Application was filed after a lapse of 10 years of issuance of the Recovery Certificate by DRT in DRC No. 116, which is dated 20/11/2009. It is argued that the Adjudicating Authority has erroneously ignored the fact of issuance of Notice, dated 29/08/2006, under Section 13 (2) of the SARFAESI Act, 2002, by the Financial Creditor to the Corporate Debtor in which second date of becoming the NPA was reiterated. Therefore, the Limitation is to be calculated from 30/08/2009. In support of his argument, the Party-in-Person placed reliance on the Judgment of this Tribunal dated 05/01/2023 in the matter of Amanjyot Singh Vs. Navneet Kumar Jain (RP) in Company Appeal (AT) (Ins) No. 961/2022, in which it is held that The learned Counsel for the Appellant may be right in his submission that by virtue of notice issued under Section 13, sub-section (2) dated 04.10.2013, the Appellant was also asked to make the payment of dues, but the undisputed fact is that apart from notice dated 04.10.2013, no steps have been taken by the Bank to recover any dues from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expiry of the prescribed period of Limitation that is from 01/04/2000, the Application is barred by limitation. The suspended Director, Mr. D. Srinivasa Rao, placed reliance on the Judgment of the Hon ble Supreme Court in the matter of SBI Vs. Krishidhan Seeds Pvt. Ltd. reported in 2023 1 SCC 209 in which matter the Hon ble Supreme Court held that Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgement, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgement of the debt, from time to time, for institution of the proceedings under Section 7 IBC and also referred to the decision of the Hon ble Supreme Court in the matter of Bank of India Vs. Bimalkumar Manubhai Savalia Ors. , dated 05/03/2020 in Civil Appeal No. 2988/2020 in which the Hon ble Apex Court held that The Impugned judgment/order rightly records that the proceedings under the SARFAESI Act and the DRT Act would not extend the period of limitation. and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-Person placed reliance on the Judgment of the Hon ble Supreme Court in the matter of Lakshmi Ratan Cotton Mills Vs. Aluminium Corporation of India Limited reported in [1970 INSC 222] in which the Hon ble Supreme Court held as follows: The admission of liability was conditional, and therefore, cannot operate as an acknowledgement. In this connection the decision of judicial commission in Maniram v. Rupchand(1) was relied on and in particular the famous dictum of Mellish, L.J., in River Steamer Co. v. Mitchell (2) approvingly cited therein. The dictum was that an acknowledgement to take the case out of the statute of limitation must be either one from which an absolute promise to pay can be inferred, or secondly, an (1) L.R. 33 1. A. 165. (2) L.R. 6 Ch. App. 822, at 828. unconditional promise to pay the specific debt, or thirdly, that there must be a conditional promise to pay the debt and evidence that the condition has been performed. 8. It is vehemently argued that the Adjudicating Authority has erred in including the period between 21/02/2012 to 15/02/2017 due to the pending BIFR proceeding under the SICA Act, 1985. The DRT had granted decree on 10/08/2009 and iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Thereafter, there were a series of letters from the Corporate Debtor seeking One Time Settlement beginning from 04/11/2008. On 17/12/2008 a deposit of Rs. 19,00,000/- was made towards OTS and on 25/12/2008 the Corporate Debtor issued another letter informing the Financial Creditor about remittance of down payment of Rs. 20,00,000/- through RTGS. On 26/12/2008, the Corporate Debtor requested the Financial Creditor about the remittance of Rs. 76,00,000/- towards part payment of OTS, which was accepted by the Financial Creditor on 27/12/2008. On 19/11/2009, the Debt Recovery Certificate was issued by the DRT. In paragraph 5 it is categorically mentioned that in the event of pendency of proceedings before BIFR, the Applicant is directed to obtain the leave of BIFR before executing Recovery Certificate and therefore, the fresh date of default / limitation starts but is in the exclusion period from 01/03/2000 to 01/12/2016 on which date the SICA Act was repealed. On 16/02/2010 a letter was addressed by the Corporate Debtor acknowledging the making of some payments. On 30/06/2010, a Demand Letter was sent by the Financial Creditor to the Corporate Debtor. On 22/11/2011, BIFR dismisses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate a draft rehabilitation scheme. On 19/11/2009, a Debt Recovery Certificate was issued by the DRT. On 16/02/2010, a letter was addressed by the Corporate Debtor to the Financial Creditor acknowledged making of certain payments. On 12/04/2010, there is a letter addressed by the Corporate Debtor addressing to some pending issues between existing management and the Appellant herein. On 22/11/2011, BIFR dismissed the Application of the Corporate Debtor and on 21/02/2012 AIFR had granted stay of proceedings. On 04/04/2016, the Appeal before AIFR was last listed, but no Order was passed. While so, on 01/12/2016, the SICA Act was repealed. It is an admitted fact that the Corporate Debtor had not moved any Application within 180 days for continuation of the Proceedings before AIFR and as such the AIFR proceedings stood as abated by February 2017. It is the main case of the Appellant herein that the Limitation period of 3 years from the date of issuance of the Recovery Certificate by DRT has expired by the date of filing of the present Application and that the period spent between 2009 and 2016 cannot be excluded for the purpose of limitation. 12. Whether while computing limitation, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to be repealed and IBC came into force (Sections 7 to 9 and various other Sections), on the same day viz. on 1-12-2016. 13. Section 22 (1) SICA makes it clear that there is a bar for realisation of a right referred to in this Section against the Corporate Debtor when once an enquiry under Section 16 SICA is pending against it or any scheme referred to under Section 17 thereof, is being considered or an Appeal under Section 25 is pending, an exception being with the consent of the Board or that of the Appellate authority. The Hon ble Apex Court in the matter of Sabarmathi Gas Limited Vs. Shah Alloys Ltd. reported in [(2023) 3 SCC 229] referred to a three judge Bench Judgment in the matter of KSL Industries Limited Vs. Arihant Threads Ltd. reported in [(2015) 1 SCC 166] in which the issue whether a Recovery Application under the RDDB Act, 1963 would lie or be proceeded with against a sick company in view of the bar contained in Section 22 (1) of SICA, was addressed to. The Hon ble Apex Court in the matter of Sabarmathi Gas Limited Vs. Shah Alloys Ltd. (Supra) held as follows:- 23. In view of the provisions under Section 22(1) of SICA and the decisions in Paramj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its dues in the Draft Rehabilitation Scheme ( DRS ) in an application seeking permission to effect recovery of the dues and such a stage had not reached till 1-12-2016, whether there would be any justification to hold that on the repeal of SICA it could not claim the benefit flowing from the provisions under Section 22(5) of SICA, subject to the provisions under the relevant laws governing the appropriate forum chosen? (Emphasis Supplied) 14. Though the matter in Sabarmathi Gas Limited Vs. Shah Alloys Ltd. (Supra) pertained to the issue of Limitation under Section 9 Application, it goes without saying that the same ratio is also applicable to Section 7 Application under the Code. 39. When the limitation period for initiating CIRP under Section 9 IBC is to be reckoned from the date of default, as opposed to the date of commencement of IBC and the period prescribed therefor, is three years as provided by Section 137 of the Limitation Act, 1963 and the same would commence from the date of default and is extendable only by application of Section 5 of the Limitation Act, 1963 it is incumbent on the adjudicating authority to consider the claim for condonation of the dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings till the main Appeal is disposed of but in the meantime, the SICA Act, 2002 had been repealed on 01/12/2016 and the Corporate Debtor did not choose to file an Application, before the NCLT for continuation of proceedings of AIFR within 180 days from 01/12/2016 and hence, the right to enforce the Recovery Certificate, dated 19/11/2009 has accrued only in February 2017. Therefore, keeping in view the ratio of the Hon ble Apex Court in Sabarmati Gas Limited (Supra) specifically having regard to the fact that the Financial Creditor s right to rely on the Recovery Certificate dated 19/11/2009 stood suspended till February 2017 by virtue of the Orders of BIFR and AIFR, the period during which the remedy for the enforcement, thereof remained stayed, ought to be excluded. Hence, this Tribunal is of the considered view that February 2017 is to be seen as the date on which fresh cause of action arises. 16. The applicability of the Judgment of NCLAT relied upon by the Appellant in the matter of Invent Assets Securitisation Vs. M/s Girnar Fibres Limited in Company Appeal (AT) (Ins) No. 556/2020, dated 18/11/2021 is to be seen with respect to the facts of this case. The facts are dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 18. It is thus held by the Hon ble Apex Court in the matter of Dena Bank Vs. C. ShivaKumar Reddy (Supra) that once a Claim fructifies into a final Judgment, a Certificate of Recovery is issued which authorises the Creditor to realise its decretal dues and a fresh right accrues to the Creditor to recover the amount. At this juncture, we find it apposite to place reliance on the Judgment of the Hon ble Supreme Court in the matter of Kotak Mahindra Bank Vs. A. Balakrishnan reported in [(2022) 9 SCC 186], in which case referring at length to Dena Bank , the Hon ble Court concluded as follows: 86. To conclude, we hold that a liability in respect of a claim arising out of a recovery certificate would be a financial debt within the meaning of clause (8) of Section 5 IBC. Consequently, the holder of the recovery certificate would be a financial creditor within the meaning of clause (7) of Section 5 IBC. As such, the holder of such ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filing of the Section 7 Application, dated 19/08/2019. The said letters are reproduced as hereunder:- 24. In the aforenoted letter dated 06/04/2019, a reference has been made to the letter issued by the Financial Creditor on 10/11/2017, and a promise to pay an amount of Rs. 9,00,00,000/- towards OTS has been made. 25. In the aforenoted letter which is just a month prior to the filing of the Section 7 Application by the Financial Creditor, the Corporate Debtor had acknowledged the OTS Proposals and the sanction letter, dated 27/12/2008 and the amounts paid thereafter. Keeping in view, the entire correspondence and the OTS proposals between the parties from 2008 to 2022, i.e. even after the filing of the Section 7 Application, the contention of the Appellant that there was no acknowledgement of debt within 3 years of the date of the Debt Recovery Certificate pales into insignificance. The period from 21/04/2013 to 02/07/2017 is also covered in this correspondence. 26. Now, we address to the argument of the Appellant / Party-in-Person that a conditional promise to pay and part payments made do not fall within the ambit of definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and need not be accompanied by any promise to pay. If an acknowledgment shows existence of jural relationship, it may extend limitation even though there may be a denial to pay. On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time-barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional. 34. The scheme of the IBC is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the corporate insolvency resolution process begins. Where any corporate debtor commits 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 in Chapter II IBC. (Emphasis Supplied) 27. In the instant case, there is a continuous promise to pay in the OTS proposals made by the Corporate Debtor Company and this communication clearly evidences a jural relationship between the Corporate Debtor and the Financial Creditor. It is observed in the aforenoted Judgment in para 33, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to. The Judgment of the Apex Court in the matter of Khan Bahadur Shapoor Freedom Mazda Vs. Durga Prasad Chamaria reported in [(AIR) 1961 SC 1236] referred to Kotak Mahindra Bank Ltd. Vs. KEW Precision Parts Pvt. Ltd. And Ors. (Supra) has specified in clear terms that an acknowledgment need not be accompanied by a promise to pay either expressly or even by implication. It is held that a statement on which a plea of acknowledgement is based must relate to a present subsisting liability, which in the facts of the attendant matter is clear right from the year 2007/2008 onwards when the Corporate Debtor Company was trying to settle the matter through OTS proposals and making part payments pursuant to these proposals. The admission in question need not be expressed 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 on the date of the statement. The admitted OTS Proposals between the Corporate Debtor Company and the Financial Creditor substantiate that a reasonable inference can be made regarding the subsisting liability. In view of this considered opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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