Power of Attorney Limitation Issue in Insolvency Application: Court Clarifies Authorized Filer Requirement

Hemanshu Jamnadas Domadia Shareholder & Director of M/s Silver Proteins Pvt Ltd (Company under CIRP Process) Versus Central Bank of India, Shalabh Kumar Daga

Hemanshu Jamnadas Domadia Shareholder & Director of M/s Silver Proteins Pvt Ltd (Company under CIRP Process) Versus Central Bank of India, Shalabh Kumar ... Issues Involved:
1. Whether the Application/Petition is filed by a person having proper authorisationRs.
2. Whether the Application/Petition is barred by limitationRs.

Issue-Wise Detailed Analysis:

1. Whether the Application/Petition is filed by a person having proper authorisationRs.

The Hon'ble Supreme Court in the case of Rajendra Narottamdas Sheth and Another clarified the legal position regarding the maintainability of an application when filed by a power of attorney holder under Section 7 of the Insolvency and Bankruptcy Code (I&B Code). The Court held that an authorised person, distinct from a power of attorney holder, can file an application under Section 7, and a power of attorney holder is not competent to file an application on behalf of a financial creditor. However, the Court also noted that if general authorisation is made by any financial creditor in favour of its officers to do needful in legal proceedings, mere use of the word 'Power of Attorney' while delegating such power will not take away the authority of such officer.

In the present case, the Application under Section 7 of the Code was filed by the Assistant General Manager, who is the principal officer of Respondent number 1 Bank. The officer is duly authorised through a General Power of Attorney dated 27 September 2011, which is still valid and effective. The officer is authorised to grant loans, execute documents, recover loans, and initiate proceedings under the Insolvency and Bankruptcy Code. Additionally, a permission letter dated 11 June 2018 categorically allows the bank to file the present Application. Thus, the Application was filed by an authorised person, and the objection on this ground is untenable.

2. Whether the Application/Petition is barred by limitationRs.

The Appellant argued that the account of the Corporate Debtor was classified as Non-Performing Asset (NPA) on 01 July 2015, and the date of default mentioned in the Section 7 petition is 01 July 2015. Therefore, the limitation period for filing the Petition ended on 30 June 2018, but the Application was filed on 22 October 2018, making it time-barred. The Appellant contended that the Adjudicating Authority wrongly considered a credit entry of Rs. 5,99,760 on 30 December 2015, which was made by an unrelated party, 'Dynamic Extractor', and returned by the Appellant.

Section 19 of the Limitation Act states that a fresh period of limitation shall be computed from the time when a payment on account of a debt is made by the person liable to pay the debt or by his agent. The Appellant argued that the payment must be made within the prescribed period of limitation and acknowledged in writing by the payer. The Appellant submitted that the said payment by 'Dynamic Extractor' was wrongfully made and returned, thus not extending the limitation period.

The Respondent, Central Bank of India, submitted that the financial facility was sanctioned and renewed on several occasions, with the last renewal on 30 September 2013. The Respondent argued that a sum of Rs. 5,99,760 and Rs. 87,57,769 was deposited in the Bank by the Corporate Debtor or on behalf of the Corporate Debtor on 30 December 2015. The Respondent also submitted balance sheets as of 31 March 2017, 31 March 2018, and 31 March 2019, showing the amount due and payable to the Bank, which constitutes an acknowledgment of debt under Section 18 of the Limitation Act.

The Hon'ble Supreme Court in Dena Bank (now Bank of Baroda) vs. C Shivkumar Reddy & Anr. held that an acknowledgment of present subsisting liability in writing extends the limitation period. The Court also noted that entries in balance sheets amount to an acknowledgment under Section 18 of the Limitation Act. In the present case, the balance sheets signed by the Appellant show the amount due to the Respondent Bank, extending the limitation period.

The Hon'ble Supreme Court in Rajendra Narottamdas Sheth and Another reaffirmed that Section 18 of the Limitation Act applies to applications under Section 7 of the I&B Code. The Court held that if the Application is filed beyond the period of three years from the date of default, the financial creditor must furnish information relating to the acknowledgment of debt in writing by the corporate debtor within the initial period of three years to extend the limitation period.

In the present case, the account of the Corporate Debtor was classified as NPA on 01 July 2015, and the date of default mentioned in the Section 7 petition is 01 July 2015. The statement of the account shows a credit entry of Rs. 5,99,760 on 30 December 2015, which the Appellant claims was made by an unrelated party and returned. However, there is no evidence supporting this claim, and it is unlikely that an unrelated party would transfer such a vast amount. Additionally, the balance sheets for subsequent years show the amount due to the Respondent Bank, extending the limitation period.

Based on the above discussion, the learned Adjudicating Authority rightly admitted the Application filed under Section 7 of the Insolvency and Bankruptcy Code 2016. The Appeal filed by the Appellant lacks merit and is dismissed.

Conclusion:
The company appeal (AT) (Insolvency) No. 623 of 2020 fails. No order as to costs.