2021 (10) TMI 144 - SC - IBC

General power of attorney doesn't disqualify officer filing under Section 7; Section 18 acknowledgement tolls limitation, appeal dismissed

SC held that a general power of attorney executed by a financial institution authorising an officer to act on its behalf did not disqualify the officer ... Maintainability of a Section 7 application filed by a power of attorney holder - effect of acknowledgement in writing under Section 18 of the Limitation Act - burden on the financial creditor to prima facie demonstrate default and that the debt is not time barred - admissibility of additional documents at the stage of admission under Section 7Maintainability of a Section 7 application filed by a power of attorney holder - authority of an officer pursuant to board resolution and general power of attorney - The application under Section 7 of the Code filed by the power of attorney holder was maintainable as the holder was an authorised person of the financial creditor. - HELD THAT: - The Court approved the NCLAT view in Palogix Infrastructure that a power of attorney which records general authorisation pursuant to a board resolution does not, by virtue of being called a 'power of attorney', disentitle the officer to act as the authorised representative for filing proceedings under Section 7. The power of attorney produced showed broad authority to conduct the bank's business and to commence and prosecute legal proceedings and to sign and file applications; such authority sufficed for the person who signed the Section 7 application to be treated as the authorised person. The objection that the POA was granted before the Code came into force without an express subsequent authorisation to invoke the Code was rejected on these facts. [Paras 11, 12]Objection to maintainability on the ground that the application was filed by a power of attorney holder is untenable; the application was filed by an authorised person.Effect of acknowledgement in writing under Section 18 of the Limitation Act - burden on the financial creditor to prima facie demonstrate default and non bar by limitation - consideration of materials placed on record by the corporate debtor at admission stage - The application under Section 7 was not barred by limitation because sufficient documentary material, including acknowledgements by the corporate debtor, justified invocation of Section 18 and a fresh period of limitation. - HELD THAT: - The Court reiterated that the financial creditor bears the primary obligation to prima facie show that a default has occurred and that the debt is not time barred; the Adjudicating Authority must satisfy itself on limitation at the admission stage. Section 18 is applicable to Section 7 proceedings so that a written acknowledgement by the debtor within the initial limitation period restarts limitation. Although the date of default was 30.09.2014 and the Section 7 application was filed on 25.04.2019, the corporate debtor itself had placed on record a letter dated 17.11.2018 and other documents acknowledging outstanding amounts and repayments up to and including 2019 20. The Adjudicating Authority permissibly relied upon those materials to conclude that the application fell within the extended limitation period under Section 18. The Court clarified that had such acknowledgement documents not been on record, the application would have been liable for dismissal for want of limitation; but on the facts before it, admission was justified. [Paras 21, 22, 23]Admission of the Section 7 application was valid as sufficient acknowledgements extended limitation under Section 18 and the application was therefore within time.Final Conclusion: Appeal dismissed: the Section 7 application was maintainable when filed by the power of attorney holder authorised by the bank, and the application was within limitation on account of written acknowledgements by the corporate debtor which revived the limitation period under Section 18 of the Limitation Act. 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.