2021 (10) TMI 144 - SC - Insolvency and Bankruptcy

Power of Attorney Holder's Insolvency Application Upheld by Supreme Court

Rajendra Narottamdas Sheth & Anr. Versus Chandra Prakash Jain & Anr.

The Supreme Court held that the application under Section 7 of the Insolvency and Bankruptcy Code was maintainable when filed by a power of attorney ... Initiation of CIRP - burden to prove - time limitation - Corporate Debtor failed to make repayment of its dues - application under Section 7 filed by a power of attorney holder - HELD THAT:- 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 - 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. In the present case, Mr. Praveen Kumar Gupta has been given general authorisation by the Bank with respect to all the business and affairs of the Bank, including commencement of legal proceedings before any court or tribunal with respect to any demand and filing of all necessary applications in this regard. Such authorisation, having been granted by way of a power of attorney pursuant to a resolution passed by the Bank’s board of directors on 06.12.2008, does not impair Mr. Gupta’s authority to file an application under Section 7 of the Code. It is therefore clear that the application has been filed by an authorised person on behalf of the Financial Creditor and the objection of the Appellants on the maintainability of the application on this ground is untenable. Time Limitation - HELD THAT:- 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 one-time settlement proposal. There is no dispute that the date of default in this case is 30.09.2014, as mentioned by the financial creditor in its application under Section 7. A copy of the debit balance confirmation letter dated 07.04.2016 was filed along with the application. As the application was filed only on 25.04.2019, which is beyond a period of three years even after taking into account the debit balance confirmation letter dated 07.04.2016, the application was barred by limitation. However, the Corporate Debtor had, in its reply before the Adjudicating Authority, placed on record a letter dated 17.11.2018, which detailed the amount repaid till 30.09.2018 and acknowledged the amount outstanding as on 30.09.2018. On the basis of this letter and the record showing that the Corporate Debtor had executed various documents amounting to acknowledgement of the debt even in the financial year 2019-20, the NCLT was of the opinion that the application was filed within the period of limitation. The burden of prima facie proving occurrence of the default and that the application filed under Section 7 of the Code is within the period of limitation, is entirely on the financial creditor. While the decision to admit an application under Section 7 is typically made on the basis of material furnished by the financial creditor, the Adjudicating Authority is not barred from examining the material that is placed on record by the corporate debtor to determine that such application is not beyond the period of limitation. Undoubtedly, there is sufficient material in the present case to justify enlargement of the extension period in accordance with Section 18 of the Limitation Act and such material has also been considered by the Adjudicating Authority before admitting the application under Section 7 of the Code. 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. Appeal dismissed. Issues Involved:1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) when filed by a power of attorney holder.2. Limitation period for filing the application under Section 7 of the Code.Issue-wise Detailed Analysis:Maintainability of the Application under Section 7 by a Power of Attorney Holder:The first issue pertains to whether an application under Section 7 of the Code can be filed by a power of attorney holder. The Appellants argued that the application filed by the Financial Creditor was based on a power of attorney, which is not permissible. They relied on the judgment in Palogix Infrastructure Private Limited v. ICICI Bank Limited, where it was held that a power of attorney holder is not competent to file an application under Section 7. The Financial Creditor countered that the power of attorney was executed in favor of Mr. Praveen Kumar Gupta, who was duly authorized to act on behalf of the Financial Creditor.The Supreme Court examined the authorization given to Mr. Praveen Kumar Gupta, which included a broad mandate to manage the business and affairs of the Bank, including commencing legal proceedings. The Court approved the view taken by the NCLAT in Palogix Infrastructure, which held that general authorization given to an officer by means of a power of attorney would not disentitle such officer from acting as the authorized representative of the financial creditor. The Court concluded that Mr. Gupta was duly authorized to file the application under Section 7, thereby rejecting the Appellants' contention on this ground.Limitation Period for Filing the Application under Section 7:The second issue revolves around whether the application under Section 7 was barred by limitation. The Appellants contended that the date of default was 30.09.2014, and the application filed on 25.04.2019 was beyond the three-year limitation period. They argued that the only document extending the limitation period was a debit balance confirmation letter dated 07.04.2016, which was insufficient. The Financial Creditor argued that the application was within limitation due to acknowledgments of debt by the Corporate Debtor in subsequent years.The Supreme Court reiterated that Section 18 of the Limitation Act applies to applications under Section 7 of the Code. If the debt is acknowledged in writing within the initial three-year period from the date of default, a fresh period of limitation commences. The Court noted that the Corporate Debtor had acknowledged the debt through various documents, including a letter dated 17.11.2018, which detailed the amount repaid and the outstanding amount. The NCLT and NCLAT had considered these acknowledgments and concluded that the application was within the limitation period.The Court emphasized that the burden of proving that the application is within the limitation period lies on the Financial Creditor. In this case, the Corporate Debtor's acknowledgments provided sufficient material to justify the extension of the limitation period under Section 18 of the Limitation Act. The Court dismissed the appeal, affirming the decisions of the NCLT and NCLAT.Conclusion:The Supreme Court dismissed the appeal, holding that the application under Section 7 of the Code was maintainable when filed by a power of attorney holder and was within the limitation period due to acknowledgments of debt by the Corporate Debtor.