TaxTMI 
TaxTMI 
2021 (8) TMI 315
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....C. The NCLAT held that the said Petition of the Appellant Bank under Section 7 of the IBC, was barred by limitation. The Respondent No.1 is a Director of the Corporate Debtor. 2. By a letter dated 23rd December, 2011 the Appellant Bank had sanctioned Term Loan and Letter of Credit Cum Buyers' Credit in favour of the Corporate Debtor, with an upper limit of Rs. 45.00 Crores. 3. The said Term Loan was to be repaid in 24 quarterly instalments of Rs. 187.50 lakhs, which were to commence two years after the date of disbursement, and the entire Term Loan was to be repaid in eight years, inclusive of the implementation period of one year and the moratorium period. 4. The Corporate Debtor executed various documents including Demand Promissory Notes, Letters of General Lien, etc. in favour of the Appellant Bank and also mortgaged its lease hold rights in its immovable property specified in the petition of appeal, by depositing the Title of Deeds of the said immovable property with the Appellant Bank. 5. On 20th September, 2013 the Corporate Debtor defaulted in repayment of its dues to the Appellant Bank. The Loan Account of the Corporate was therefore declared Non Performing Ass....
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....l Reports for the financial years 2016- 2017 and 2017-2018, acknowledged its liability in respect of the loan taken by it from the Appellant Bank. 14. On 1st October 2018, the Appellant Bank issued a Demand Notice to the Corporate Debtor in Form-3 contained in the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, hereinafter referred to as the '2016 Adjudicating Authority Rules', and on 12th October 2018, the Appellant Bank filed the Petition being CP(IB) No.244/BB/2018 before the Adjudicating Authority under Section 7 of the IBC in Form-1 given in the Annexure to the 2016 Adjudicating Authority Rules. 15. About three months thereafter, by a Notification being GSR No.2(e) dated 2nd January 2019 the Department of Financial Services, Ministry of Finance, Government of India amalgamated Vijaya Bank, Dena Bank and Bank of Baroda. 16. On 9th January 2019, the Appellant Bank filed an application before Adjudicating Authority under Rule 11 of the National Company Law Tribunal Rules 2016 hereinafter referred to as the 'NCLT Rules', read with Rule 4 of the 2016 Adjudicating Authority Rules, being I.A. No.27/2019 dated 9th January 2019 in CP(IB) No.244/B....
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.... Corporate Debtor, the NCLAT set aside the order dated 21st March 2019 passed by the Adjudicating Authority (NCLT) Bengaluru and dismissed the Petition filed by the Appellant Bank under Section 7 of the IBC, holding that the said application was barred by limitation. 23. The issue which arises for consideration of this Court, in this appeal is, whether the NCLAT has erred in law in arriving at the conclusion that, the Petition filed by the Appellant Bank under Section 7 of the IBC was barred by limitation, and setting aside the order dated 21st March 2019 passed by the Adjudicating Authority, admitting the said Petition. 24. In other words, the main question involved in this appeal is, whether a Petition under Section 7 of the IBC would be barred by limitation, on the sole ground that it had been filed beyond a period of 3 years from the date of declaration of the loan account of the Corporate Debtor as NPA, even though the Corporate Debtor might subsequently have acknowledged its liability to the Appellant Bank, within a period of three years prior to the date of filing of the Petition under Section 7 of the IBC, by making a proposal for a One Time Settlement, or by acknowle....
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....as barred by limitation. 30. Mr. Mehta argued that the NCLAT had returned a finding that there was nothing on record to show that the Corporate Debtor had admitted its debt to the Appellant Bank, overlooking relevant materials on record, including: (i) Admission of the Corporate Debtor of payment of Rs. 111 lakhs on 28th March, 2014 towards interest on the loan. (ii) Letter dated 5th January, 2015 of the Corporate Debtor to the Appellant Bank, in response to the Demand Notice, acknowledging its liability to the Appellant Bank. (iii) A statement of objection filed by the Corporate Debtor in the DRT, Bangalore on or about 9th December 2015, denying the Appellant Bank's claim of Rs. 52,04,438 as baseless, but admitting that part of the amount was due. (iv) The Financial Statements and Balance Sheets of the Corporate Debtor for the years 2016-2017 (year ending 31st March 2017) and for the years 2017-2018 (year ending 31st March 2018). (v) Offer made by the Corporate Debtor on 03.03.2017 to settle its dues to the Appellant Bank on one time payment of Rs. 5.5 crores. (vi) Final judgment and decree/order dated 27th March, 2017 passe....
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....ellant Bank on 28th March 2014, thereby acknowledging that the jural relationship of debtor and creditor between the Corporate Debtor and the Appellant Bank continued after 31st December, 2013. 35. Mr. Mehta has also referred to the Counter Affidavit filed by the Respondent No.1 and the Corporate Debtor, where they admitted that the Corporate Debtor had sent a letter dated 3rd March 2017 to the Appellant Bank, offering to make payment of Rs. 5.5 crores by way of One Time Settlement. Moreover, the judgment and order/decree dated 27th March, 2017 passed by the DRT and the Recovery Certificate No.2060/2017 referred to above, which gave rise to a fresh cause of action to the Appellant Bank to initiate proceedings against the Corporate Debtor under Section 7 of the IBC, are matters of record and in any case, duly admitted. 36. Relying on the judgments of this Court in Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. And Anr. 2021 SCC Online SC 244, Laxmi Pat Surana v. Union Bank of India and Ors. 2021 SCC Online SC 267 and Asset Reconstruction Company (India) Limited. v. Bishal Jaiswal and Ors. 2021 SCC Online SC 321 Mr. Mehta argued that Section 18 o....
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....t that the Petition under Section 7 of the IBC mentions the date of default as 30th September 2013, and 31st December 2013 as the date of declaration of the account of the Corporate Debtor as NPA. There was no averment in the petition of any acknowledgement of debt which extended the period of limitation. 43. Mr. Shivshankar argued that, under Section 7(3) of the IBC, a Financial creditor is required to furnish "record of the default recorded with the information utility or record of evidence of default as may be specified" and " any other information as may be specified by the Board". 44. Mr. Shivshankar further argued that as per Section 7(4) of the IBC, the NCLT was required to "ascertain the existence of default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3)" within "fourteen days of the receipt of the application". Mr. Shivshankar further argued that under Section 7(5) of the IBC, it was open to the NCLT to allow seven days to the financial creditor to rectify any defect in its application. 45. Mr. Shivshankar argued the Adjudicating Authority (NCLT), instead of proceeding in the m....
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....Mr. Shivshankar submitted that the Respondents immediately appealed to the NCLAT, inter alia contending that the Adjudicating Authority had erred in permitting the Appellant Bank to substantially improve upon its original petition filed under Section 7 of the IBC, by filing additional documents and making out an entirely new case, after the expiry of fourteen days specified in Section 7 for ascertainment of default. Mr. Shivshankar submitted that it was in this background that the NCLAT made the factual finding at Paragraph 4 of the impugned order, that there was nothing on record to say that there was any acknowledgement of debt, renewing or extending limitation. 51. Mr. Shivshankar argued that it is now well settled that the Limitation Act applies to proceedings under the IBC. Mr. Shivshankar also agreed that Section 18 of the Limitation Act would apply to proceedings in the NCLT under Section 7 of the IBC. However, he argued that, what falls for consideration in this appeal, is whether the Appellant Bank had placed sufficient materials on record, with its petition under Section 7 of the IBC, to attract Section 18 of the Limitation Act. 52. Mr. Shivshankar finally argued th....
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....siduary Point 8 therein, nothing was at all stated at any place about the so-called acknowledgment or any other date of default. 35.1. Therefore, on the admitted fact situation of the present case, where only the date of default as "8-7-2011" has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgment or any other date of default, in our view, the submissions sought to be developed on behalf of Respondent 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, Respondent 2 never came out with any pleading other than stating the date of default as "8-7-2011" in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation....
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....sued by the Appellant Bank, the reply filed by the Corporate Debtor in O. S. No.16/2015 before the DRT, Bengaluru, the OTS Proposal dated 3rd March 2017, OTS Proposal dated 19th June 2017 and the Balance Sheets/Annual Reports of the Corporate Debtor and a group company of the Corporate Debtor, namely Kaveri Telecom Products Limited, for the financial years 2016- 17 and 2017-18 are irrelevant for the purpose of Section 18 of the Limitation Act and many of those documents were in response to suggestions made by the Appellant Bank seeking willingness to restructure the account of the Respondents. Moreover, payment of outstanding interest of Rs. 111 lakhs was made in March 2014 that is over four years before the date of filing of the petition under Section 7 of the IBC. 60. Mr. Shivshankar also argued that the letter dated 24th March 2014 written by the Corporate Debtor was not on record in the proceedings before the Adjudicating Authority. The document was introduced for the first time along with the reply filed by the Appellant Bank before the NCLAT. This document cannot be considered as part of the records at all. 61. Mr. Shivshankar finally submitted that the communications f....
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....Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto". 67. The IBC aims at promoting, inter alia, investments and also resolution of insolvency of Corporate persons. As per its Statement of Objects and Reasons "the objective of the Insolvency and Bankruptcy Code, 2015 is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto. An effective legal framework for timely resolution of insolvency and bankruptcy would support development of credit markets and encourage entrepreneurship. It would also improve Ease of Doing Business, and facilitate more investments leading to higher economic growth and development". 68. Under the scheme of the IBC, the Insolvency Resolution Process begins, when a default take....
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.... (8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire-purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such trans....
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....l be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission.] Explanation.-For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an informat....
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....n attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation.-For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding payment of the operational debt in respect of which the default has occurred." 12. Time-limit for completion of insolvency resolution process.-(1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process. (2) The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of sixty-six per cent of the voting shares. (3) On receipt of an application under sub-section (2), if the A....
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.... date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right ....
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....resolution process; (b) name of the authority with which the corporate debtor is incorporated or registered; (c) the last date for submission of claims, as may be specified; (d) details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims; (e) penalties for false or misleading claims; and (f) the date on which the corporate insolvency resolution process shall close, which shall be the one hundred and eightieth day from the date of the admission of the application under Sections 7, 9 or Section 10, as the case may be. (2) The public announcement under this section shall be made in such manner as may be specified. 16. Appointment and tenure of interim resolution professional.-(1) The Adjudicating Authority shall appoint an interim resolution professional on the insolvency commencement date. (2) Where the application for corporate insolvency resolution process is made by a financial creditor or the corporate debtor, as the case may be, the resolution professional, as proposed respectively in the application under Section 7 or....
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.... and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to- (i) business operations for the previous two years; (ii) financial and operational payments for the previous two years; (iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under Sections 13 and 15; (c) constitute a committee of creditors; (d) monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors; (e) file information collected with the information utility, if necessary; and (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including- (i) assets over which the corporate debtor has ow....
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....ed, prior to the insolvency commencement date. 22. Appointment of resolution professional.-(1) The first meeting of the committee of creditors shall be held within seven days of the constitution of the committee of creditors. (2) The committee of creditors, may, in the first meeting, by a majority vote of not less than sixty-six] per cent of the voting share of the financial creditors, either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional. (3) Where the committee of creditors resolves under sub-section (2)- (a) to continue the interim resolution professional as resolution professional subject to a written consent from the interim resolution professional in the specified form], it shall communicate its decision to the interim resolution professional, the corporate debtor and the Adjudicating Authority; or (b) to replace the interim resolution professional, it shall file an application before the Adjudicating Authority for the appointment of the proposed resolution professional along with a written consent from the prop....
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....porate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasijudicial or arbitration proceedings; (c) raise interim finances subject to the approval of the committee of creditors under Section 28; 25-A. Rights and duties of authorised representative of financial creditors.-(1) The authorised representative under sub-section (6) or subsection (6-A) of Section 21 or sub-section (5) of Section 24 shall have the right to participate and vote in meetings of the committee of creditors on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors obtained through physical or electronic means. (2) It shall be the duty of the authorised representative to circulate the agenda and minutes of the meeting of the committee of creditors to the financial creditor he represents. (3) The authorised representative shall not act against the interest of the financial creditor he represents and shall always act in accordance with their prior instructions: Provided that if the authorised representative represents several financial creditors, then he shall cast....
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....the name of the proposed resolution professional to the Board for its confirmation and a resolution professional shall be appointed in the same manner as laid down in Section 16. (5) Where any disciplinary proceedings are pending against the proposed resolution professional under sub-section (3), the resolution professional appointed under Section 22 shall continue till the appointment of another resolution professional under this section. 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be pai....
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....ors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53,including the priority and value of the security interest of a secured creditor and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29-A, the resolution applicant shall be allowed by the committee of credit....
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....oval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.] 33. Initiation of liquidation.-(1) Where the Adjudicating Authority,- (a) before the expiry of ....
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....en passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority...". 69. 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 of the IBC. 70. The provisions of the IBC are designed to ensure that the business and/or commercial activities of the Corporate Debtor are continued by a Resolution Professional, post imposition of a moratorium, which would give the Corporate Debtor some reprieve from coercive litigation, which could drain the Corporate Debtor of its financial resources. This is to enable the Corporate Debtor to improve its financial health and at the same time repay the dues of its credit....
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....PY) 7 COPIES OF ENTRIES IN A BANKERS BOOK IN ACCORDANCE WITH THE BANKERS BOOKS EVIDENCE ACT, 1891 (18 OF 1891) (ATTACH A COPY) 8 LIST OF OTHER DOCUMENTS ATTACHED TO THIS APPLICATION IN ORDER TO PROVE THE EXISTENCE OF FINANCIAL, DEBT, THE AMOUNT AND DATE OF DEFAULT 73. Since a Financial Creditor is required to apply under Section 7 of the IBC, in statutory Form 1, the Financial Creditor can only fill in particulars as specified in the various columns of the Form. There is no scope for elaborate pleadings. An application to the Adjudicating Authority (NCLT) under Section 7 of the IBC in the prescribed form, cannot therefore, be compared with the plaint in a suit. Such application cannot be judged by the same standards, as a plaint in a suit, or any other pleadings in a Court of law. 74. Section 7(3) requires a financial creditor making an application under Section 7(1) to furnish records of the default recorded with the information utility or such other record or evidence of default as may be specified; the name of the resolution professional proposed to act as an Interim Resolution Professional and any other information as may be specified by the Insolvency and Ban....
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....ted in the facts and circumstances of this case. Section 10 pertains to initiation of Corporate Insolvency Resolution Process by the Corporate Debtor itself, and is also not attracted in the facts and circumstances of the case. 78. Section 12(1) of the IBC requires the Corporate Insolvency Process to be completed within a period of 180 days from the date of admission of the application to initiate such process. The period of 180 days is not extendable more than once. 79. The IBC is not just another statute for recovery of debts. Nor is it a statute which merely prescribes the modalities of liquidation of a Corporate body, unable to pay its debts. It is essentially a statute which works towards the revival of a Corporate body, unable to pay its debts, by appointment of a Resolution Professional. 80. In Innoventive Industries Ltd vs. ICICI Bank (2018) 1 SCC 407, this Court, speaking through Nariman, J. extracted excerpts from the Report of the Bankruptcy Law Reforms Committee of November, 2015 some of which are reproduced hereinbelow:- "...When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many ....
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....facilitate the assessment of viability of the enterprise at a very early stage. (1) The law must explicitly state that the viability of the enterprise is a matter of business, and that matters of business can only be negotiated between creditors and debtor. While viability is assessed as a negotiation between creditors and debtor, the final decision has to be an agreement among creditors who are the financiers willing to bear the loss in the insolvency. (2) The legislature and the courts must control the process of resolution, but not be burdened to make business decisions. (3) The law must set up a calm period for insolvency resolution where the debtor can negotiate in the assessment of viability without fear of debt recovery enforcement by creditors. (4) The law must appoint a resolution professional as the manager of the resolution period, so that the creditors can negotiate the assessment of viability with the confidence that the debtors will not take any action to erode the value of the enterprise. The professional will have the power and responsibility to monitor and manage the operations and assets of the enterprise. The professional will ....
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....ust be designed so as to incentivise all stakeholders to participate in the cycle of building enterprises with confidence. (13) While the law must incentivise collective action in resolving bankruptcy, there must be a greater flexibility to allow individual action in resolution and recovery during bankruptcy compared with the phase of insolvency resolution." 82. As observed by this Court, speaking through Nariman, J in P. Mohanraj & Ors. v. Shah Brothers Ispat Private Limited 2021 SCC Online SC 152 :- "10. A cursory look at Section 14(1) makes it clear that subject to the exceptions contained in sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall mandatorily, by order, declare a moratorium to prohibit what follows in clauses (a) to (d). Importantly, under sub-section (4), this order of moratorium does not continue indefinitely, but has effect only from the date of the order declaring moratorium till the completion of the corporate insolvency resolution process which is time bound, either culminating in the order of the Adjudicating Authority approving a resolution plan or in liquidation. 11. The two exception....
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....otection of the livelihoods of its employees/workers, by revival of the Corporate Debtor through the entrepreneurial skills of persons other than those in its management, who failed to clear the dues of the Corporate Debtor to its creditors. It only segregates the interests of the Corporate Debtor from those of its promoters/persons in management. 87. Relegation of creditors to the remedy of Coercive litigation against the Corporate Debtors could be detrimental to the interests of the Corporate Debtor and its creditors alike. While multiple coercive proceedings against a Corporate Debtor in different forums could impede its commercial/business activities, deplete its cash reserves, dissipate its assets, moveable and immoveable and precipitate its commercial death, such proceedings might not be economically viable for the creditors as well, because of the length of time consumed in the litigations, the expenses of litigation, and the uncertainties of realisation of claims even after ultimate success in the litigation. 88. It is, therefore, imperative that the provisions of the IBC and the Rules and Regulations framed thereunder be construed liberally, in a purposive manner to ....
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....nalty prescribed for inability to cure the defects in an application within seven days from the date of receipt of notice, and in an appropriate case, the Adjudicating Authority may accept the cured application, even after expiry of seven days, for the ends of justice. 94. Section 12 of the IBC imposes a time limit for completion of the Corporate Insolvency Resolution Process. This time limit starts running from the date of admission of an application to initiate the Corporate Insolvency Resolution Process. Section 12 is, therefore, not attracted in this case. 95. In any case, Section 12 has been considered by this Court in Arcelormittal (India) Pvt. Ltd. V. Satish Kumar Gupta and Anr. (2019) 2 SCC 1 This Court held :- "86. Given the fact that both the NCLT and NCLAT are to decide matters arising under the Code as soon as possible, we cannot shut our eyes to the fact that a large volume of litigation has now to be handled by both the aforesaid Tribunals. What happens in a case where the NCLT or the NCLAT decide a matter arising out of Section 31 of the Code beyond the time-limit of 180 days or the extended time-limit of 270 days? Actus curiae neminem gravabit -....
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....ated on the same day in Mauritius. Shri Rewant Ruia, son of Shri Ravi Ruia (who was the promoter of ESIL) held the entire share capital of AHL, which in turn held the entire shareholding of AEL, which in turn held the entire share capital of Numetal. At this stage there can be no doubt whatsoever that Shri Rewant Ruia, being the son of Shri Ravi Ruia, would be deemed to be a person acting in concert with the corporate debtor, being covered by Regulation 2(1)(q)(v) of the 2011 Takeover Regulations. 96. Even in the case of Section 12 of the IBC, this Court taking note of the workload of the Adjudicating Authority, in effect held that the time stipulation was directory. This Court observed that failure to complete the Resolution Process within stipulated time should not result in corporate death by shelving of an otherwise good resolution plan. This Court emphasized the need to maintain balance between timely completion of the Corporate Insolvency Resolution Process and the Corporate Debtor otherwise being put into liquidation, for failure to maintain the time schedule. 97. The insolvency Committee of the Ministry of Corporate Affairs, Government of India, in a report published ....
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....ore the Adjudicating Authority (NCLT). An application for which no period of limitation is provided anywhere else in the Schedule to the Limitation Act, is governed by Article 137 of the Schedule to the said Act. Under Article 137 of the Schedule to the Limitation Act, the period of limitation prescribed for such an application is three years from the date of accrual of the right to apply. 101. There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. In Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. (supra) authored by Nariman, J. this Court held:- "6. ......The present case being "an application" which is filed under Section 7, would fall only within the residuary Article 137." 102. In B. K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633, this Court speaking through Nariman, J. held:- "42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the C....
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.... be adduced. 107. The judgment of this Court in Babulal Vardharji Gurjar (supra) was rendered in the facts of the aforesaid case, where the date of default had been mentioned as 8.7.2011 being the date of N.P.A. and it remained undisputed that there had neither been any other date of default stated in the application nor had any suggestion about any acknowledgement been made. 108. In the backdrop of the aforesaid facts, this court observed that even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration, in view of the averments regarding default therein and for want of any other averment with regard to acknowledgment. 109. It is well settled, that a judgment is a precedent for the issue of law that is raised and decided and not any observations made in the facts of the case. As very aptly penned by V. Sudhish Pai in "Constitutional Supremacy-A Revisit", "Judicial utterances/pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to....
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....nd Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. (supra) this Court, speaking through one of us (Indira Banerjee J.) held that the IBC does not exclude the application of Section 14 or 18 or any other provision of the Limitation Act. There is therefore no reason to suppose that Sections 14 or 18 of the Limitation Act do not apply to proceedings under Section 7 or Section 9 of the IBC. 115. In Laxmi Pat Surana v. Union Bank of India (supra) this Court speaking through Khanwilkar J. held that there was no reason to exclude the effect of Section 18 of the Limitation Act to proceedings initiated under the IBC. 116. In Asset Reconstruction Company (India) Limited. v. Bishal Jaiswal and Anr. (supra) where this Court speaking through Nariman J. relied, inter alia, on Sesh Nath Singh (supra) and Laxmi Pat Surana (supra) and held that the question of applicability of Section 18 of the Limitation Act to proceedings under the IBC was no longer res integra. 117. In Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others AIR 1961 SC 1236, this Court held:- "6. It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not....
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....ent of the Delhi High Court in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana ILR (1972) 2 Del 712 and the judgment of Karnataka High Court in Hegde Golay Ltd. v. State Bank of India ILR 1987 Kar 2673 and held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt. 119. In Bengal Silk Mills Co. (supra) the Calcutta High Court held:- "9. ..... I am unable to agree with the reasoning of the Nagpur decision that a balance-sheet does not save limitation because it is drawn up under a duty to set out the claims made on the company and not with the intention of acknowledging liability. The balancesheet contains admissions of liability; the agent of the company who makes and signs it intends to make those admissions. The admissions do not cease to be acknowledgements of liability merely on the ground that they were made in discharge of a statutory duty. I notice that in the Nagpur case the balance-sheet had been signed by a director and had not been passed either by the Board of Directors or by the company at its annual general meeting and it seems that the actual decision may be d....
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.... be a separate document these two documents in the facts and circumstances of the case should be read together and should be construed together. It was held by the Supreme Court in the case of L.C. Mills v. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67 : AIR 1971 SC 1482, that it was clear that the statement on which the plea of acknowledgement was founded should relate to a subsisting liability as the section required and it should be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay for an acknowledgement did not create a new right of action but merely extended 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 must, however, relate to a present subsisting liability and indicate the existence of a 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, however, be in express terms and could be inferred by implication from the nature of the admission and the surrounding circumstances. Gen....
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....statements in balance-sheets of companies were held to amount to acknowledgements of liability of the companies. 47. Shri Rameshwar Dial referred to the decision of the Privy Council in Consolidated Agencies Ltd. v. Bertram Ltd., (1964) 3 All ER 282. We shall advert to this decision presently when we deal with another argument of Shri Rameshwar Dial, and it is sufficient to state so far as the argument under consideration is concerned that even in this decision of the Privy Council it has been recognised that balancesheets could in certain circumstances amount to acknowledgements of liability. It cannot, therefore, be said as a general proposition of law that statements in balance-sheets of a company cannot operate at all as acknowledgements of liability as contended by Shri Rameshwar Dial." 122. In Hegde & Golay Limited v. State Bank of India reported in ILR 1987 Kar 2673, the Karnataka High Court held: "43. The acknowledgement of liability contained in the balance-sheet of a company furnishes a fresh starting point of limitation. It is not necessary, as the law stands in India, that the acknowledgement should be addressed and communicated to the creditor ." ....
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....he offer of One Time Settlement referred to above including in particular, the offer of One Time Settlement made on 3rd March, 2017. 127. Section 18 of the Limitation Act speaks of an Acknowledgment in writing of liability, signed by the party against whom such property or right is claimed. Even if the writing containing the acknowledgment is undated, evidence might be given of the time when it was signed. The explanation clarifies that an acknowledgment may be sufficient even though it is accompanied by refusal to pay, deliver, perform or permit to enjoy or is coupled with claim to set off, or is addressed to a person other than a person entitled to the property or right. 'Signed' is to be construed to mean signed personally or by an authorised agent. 128. In the instant case, Rs. 111 lakhs had been paid towards outstanding interest on 28th March, 2014 and the offer of One Time Settlement was within three years thereafter. In any case, NCLAT overlooked the fact that a Certificate of Recovery has been issued in favour of Appellant Bank on 25th May 2017. The Corporate Debtor did not pay dues in terms of the Certificate of Recovery. The Certificate of Recovery in itself gives a....
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.... Court or Tribunal in favour of a creditor of the company was returned unsatisfied in whole or in part. 132. We see no reason why the principles should not apply to an application under Section 7 of the IBC which enables a financial creditor to file an application initiating the Corporate Insolvency Resolution Process against a Corporate Debtor before the Adjudicating Authority, when a default has occurred. As observed earlier in this judgment, on a conjoint reading of the provisions of the IBC quoted above, it is clear that a final judgment and/or decree of any Court or Tribunal or any Arbitral Award for payment of money, if not satisfied, would fall within the ambit of a financial debt, enabling the creditor to initiate proceedings under Section 7 of the IBC. 133. It is not in dispute that the Respondent No.2 is a Corporate Debtor and the Appellant Bank, a Financial Creditor. The question is, whether the petition under Section 7 of the IBC has been instituted within 3 years from the date of default. 'Default' is defined in Section 3(12) to mean "non-payment' of a debt which has become due and payable whether in whole or any part and is not paid by the Corporate Debtor". ....
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....edings under Section 7 of the IBC within three years from the date of issuance of the Recovery Certificate. The Petition of the Appellant Bank, would not be barred by limitation at least till 24th May, 2020. 140. While it is true that default in payment of a debt triggers the right to initiate the Corporate Resolution Process, and a Petition under Section 7 or 9 of the IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238A of the IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a Petition in the NCLT is condonable under Section 5 of the Limitation Act unlike delay in filing a suit. Furthermore, as observed above Section 14 and 18 of the Limitation Act are also applicable to proceedings under the IBC. 141. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitatio....