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TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 315
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....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 Asset (NPA) on 31st December 2013. 6. The Corporate....
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....wledged 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/BB/2018, for permission to place on record additional documents, includi....
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....e 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 acknowledging the debt in its statutory Balance Sheets and Books of Accounts. 25. Another ques....
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....as 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 passed by the DRT, Bengaluru, in favour of the Appellant Bank for an amount of Rs. 52,12,49,438.60 in O.A. No.16/2015, with future interest a....
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....ppellant 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 of the Limitation Act applied to proceedings under the IBC. This issue was no longer res integra. 37. On the other hand, Mr. Goutham Shivshankar ap....
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....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 manner expressly stipulated in the IBC and without adhering to the time lines stipulated therein, delayed the adjudication of the question of admissibility of the petition ....
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.... 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 that Section 62 of the IBC, under which this appeal has been filed, is restricted to questions of law, unlike an appeal to the NCLAT from an order of the Adjudicating Authority (NCLT), wh....
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....re 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 Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other....
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....ts 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 from the Respondents were only to buy peace and end the litigation and cannot, therefore, be construed as acknowledgment of debts for the purpose of Section 18 of the Limitation Act. 62. Referring to the judgment of this Court ....
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....ts 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 takes place, in the sense that a debt becomes due and is not paid. Some of the relevant provisions of the IBC, are set out hereinbelow for convenience: "3. Definitions.-In this Code, unless the context otherwise requires,- (6) "claim" means- (....
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....suant 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 transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 6. Person....
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....porate 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 information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3): Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the same.] (5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application under sub-section (2) is complete, and there is no....
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....ct 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 Adjudicating Authority is satisfied that the subject-matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days: Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once: Provided further that the corporate insolvency resolution process shall mandatorily be completed within a p....
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.... 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 given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period.] (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. (2-A) Where the interi....
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....fied. 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 Section 10, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him. (3) Where the application for corporate insolvency resolution process is made by an operational creditor and- (a) no proposal for an interim resolution professional is made, the Adjudicating Authority shall make a reference to the Board for the recommendation of an insolvency professional who may act as an interim resolution professional; (b) a proposal for an interim resolution professional is made under subsection (4) of Section 9, the resolution professional as proposed, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him. (4) The Board shall, within ten days....
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....sset 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 ownership rights which may be located in a foreign country; (ii) assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets including intellectual property; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; (g) to perform such other duties as may be specified by the Board. Explanation.-For the purposes of this section, the term "assets" shall not include the following, namely- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notif....
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....rofessional, it shall file an application before the Adjudicating Authority for the appointment of the proposed resolution professional along with a written consent from the proposed resolution professional in the specified form. (4) The Adjudicating Authority shall forward the name of the resolution professional proposed under clause (b) of sub-section (3) to the Board for its confirmation and shall make such appointment after confirmation by the Board. (5) Where the Board does not confirm the name of the proposed resolution professional within ten days of the receipt of the name of the proposed resolution professional, the Adjudicating Authority shall, by order, direct the interim resolution professional to continue to function as the resolution professional until such time as the Board confirms the appointment of the proposed resolution professional. 23. Resolution professional to conduct corporate insolvency resolution process.-(1) Subject to Section 27, the resolution professional shall conduct the entire corporate insolvency resolution process and manage the operations of the corporate debtor during the corporate insolvency resolution process period: Provided that....
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....the authorised representative represents several financial creditors, then he shall cast his vote in respect of each financial creditor in accordance with instructions received from each financial creditor, to the extent of his voting share: Provided further that if any financial creditor does not give prior instructions through physical or electronic means, the authorised representative shall abstain from voting on behalf of such creditor. (3-A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised representative under sub-section (6-A) of Section 21 shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote: Provided that for a vote to be cast in respect of an application under Section 12-A, the authorised representative shall cast his vote in accordance with the provisions of sub-section (3). (4) The authorised representative shall file with the committee of creditors any instructions received by way of physical or electronic means, from the financial credito....
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....to such creditors in the event of a liquidation of the corporate debtor under Section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of Section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53 in the event of a liquidation of the corporate debtor. Explanation 1.-For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2.-For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor- (i) where a resolution plan has not been approved or r....
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.... with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.] Provided also that the eligibility criteria in Section 29-A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. 31. Approval of resolution plan.-(1) If the Adjudicating Authority is ....
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....solvency resolution process under Section 56, as the case may be, does not receive a resolution plan under sub-section (6) of Section 30; or (b) rejects the resolution plan under Section 31 for the non-compliance of the requirements specified therein, it shall- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors approved by not less than sixty-six per cent of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). Explanation.-For the purposes of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corp....
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.... 10 of the IBC, a financial creditor is required to apply in the prescribed Form 1 for initiation of the Corporate Insolvency Resolution Process, against a Corporate Debtor under Section 7 of the IBC, accompanied with documents and records required therein, and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, hereinafter referred to as the 2016 IB Board of India Regulations. 72. Statutory Form 1 under Rule 4(1) of the 2016 Adjudicating Authority Rules comprises Parts I to V, of which Part I pertains to particulars of the Applicant, Part II pertains to particulars of the Corporate Debtor and Part III pertains to particulars of the proposed Interim Resolution Professional. Parts IV and V which require particulars of Financial Debt with Documents, Records and Evidence of default, is extracted hereinbelow: PART IV PARTICULARS OF FINANCIAL DEBT 1 TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT 2 AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) PART V PARTICULARS OF FINANCIAL D....
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....he application under Section 7. As per the proviso to Section 7(4) of the IBC, inserted by amendment, by Act 26 of 2019, if the Adjudicating Authority has not ascertained the existence of default and passed an order within the stipulated period of time of fourteen days, it shall record its reasons for the same in writing. The application does not lapse for non-compliance of the time schedule. Nor is the Adjudicating Authority obliged to dismiss the application. On the other hand, the application cannot be dismissed, without compliance with the requisites of the Proviso to Section 7(5) of the IBC. 76. Section 7(5)(a) provides that when the Adjudicating Authority is satisfied that a default has occurred, and the application under subsection (2) of Section 7 is complete and there is no disciplinary proceeding pending against the proposed resolution professional, it may by order admit such application. As per Section 7(5)(b), if the Adjudicating Authority is satisfied that default has not occurred or the application under sub-Section (2) of Section 7 is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such appl....
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....as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned. *** Speed is of essence Speed is of essence for the working of the bankruptcy code, for two reasons. First, while the "calm period" can help keep an organisation afloat, without the full clarity of ownership and control, significant decisions cannot be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. *** Control of a company is not divine right.-When a firm defaults on its debt, control of the company should shift ....
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....for the insolvency and the bankruptcy resolution process is created and available when it is required. (6) The law must ensure that access to this information is made available to all creditors to the enterprise, either directly or through the regulated professional. (7) The law must enable access to this information to third parties who can participate in the resolution process, through the regulated professional. III. The Code will ensure a time-bound process to better preserve economic value. (8) The law must ensure that time value of money is preserved, and that delaying tactics in these negotiations will not extend the time set for negotiations at the start. IV. The Code will ensure a collective process. (9) The law must ensure that all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution. V. The Code will respect the rights of all creditors equally. (10) The law mu....
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....an thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends." 84. IBC has ove....
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....e general purpose of the Act itself, as observed by Mukherjea J., in Popatlal Shah v. State of Madras AIR 1953 SC 274 and a plethora of other judgments of this Court. To quote Krishna Iyer J., the interpretative effort "must be illumined by the goal, though guided by the words". 90. When a question arises as to the meaning of a certain provision in a statute the provision has to be read in its context. The statute has to be read as a whole. The previous state of the law, the general scope and ambit of the statute and the mischief that it was intended to remedy are relevant factors. 91. On a careful reading of the provisions of the IBC and in particular the provisions of Section 7(2) to (5) of the IBC read with the 2016 Adjudicating Authority Rules there is no bar to the filing of documents at any time until a final order either admitting or dismissing the application has been passed. 92. The time stipulation of fourteen days in Section 7(4) to ascertain the existence of a default is apparently directory not mandatory. The proviso inserted by amendment with effect from 28th December, 2019 provides that if the Adjudicating Authority has not ascertained the default and passed....
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....lling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the corporate insolvency resolution process, and the corporate debtor otherwise being put into liquidation. We must not forget that the corporate debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the corporate insolvency resolution process. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. [ Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, states that the liquidator may also sell the corporate debtor as a going concern.] A reasonable and balanced construction of this statute would therefore lead to the result that, where a resolution plan is upheld by the appellate authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. This is not to say that the NCLT and NCLAT will be tardy in decision-making. This is only to say that in the event of the NCLT, or the NCLAT, ....
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....bt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be." 99. As observed by this Court in Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli (supra), authored by one of us (Indira Banerjee, J.), this Court held:- "91. Legislature has in its wisdom chosen not to make the provisions of the Limitation Act verbatim applicable to proceedings in NCLT/NCLAT, but consciously used the words 'as far as may be'. The words 'as far as may be' are not meant to be otiose. Those words are to be understood in the sense in which they best harmonise with the subject matter of the legislation and the object which the Legislature has in view. The Courts would not give an interpretation to those words which would frustrate the purposes of making the Limitation Act applicable to proceedings in the NCLT/NCLAT 'as far as may be'. xxx xxx xxx 94. The use of words 'as far as may be', occurring in Section 238A of the IBC tones down the rigour of the words 'shall' in the aforesaid Section which is normally considered as mandatory. The expression 'as far as may be' is indicative of the fact that all or any of the provisions of the Limitation Act may not apply to proceedings be....
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....nder Section 7 or 9 of the IBC was three years from the date of accrual of the right to sue, that is, the date of default. 104. In Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd. & Ors. (2019) 9 SCC 158 this Court rejected the contention that the default was a continuing wrong and Section 23 of the Limitation Act 1963 would apply, relying upon Balkrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan 1959 Supp (2) SCR 476. 105. To quote P.B. Gajendragadkar, J in Balkrishna Savalram Pujari Wagmare (supra):- "......Section 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constitutes a continuing wrong. In this connection it is necessary to draw a distinction between the injury caused by the wr....
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.... 16/2015 and the subsequent Recovery Certificate No.2060/2017 dated 25th May, 2017 which constituted cause of action for initiation of proceedings under Section 7 of the IBC. 111. Babulal Vardharji Gurjar (supra) is not an authority for the proposition that there can be no amendment of pleadings at the fag end of the NCLT proceeding. Moreover, in this case, the amendments were not made at the fag end of the proceedings but within 2/3 months of their initiation, before admission of the petition under Section 7 of the IBC. 112. It is not necessary for this Court to examine the relevance of all the documents filed by the Appellant Bank pursuant to its interim applications being I.A. No.27 of 2019 and I.A. No.131 of 2019. Suffice it to mention that the documents enclosed with the applications being I.A. No.27 of 2019 and I.A. No.131 of 2019 and the pleadings in the supporting affidavits, made out a case for computation of limitation afresh from the dates of the relevant documents. It would also be pertinent to note that the reasons for the execution of the documents are irrelevant. It is not the case of the Respondents, that any of those documents were extracted through coercion. 11....
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....h intention 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....
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....ra), Sabyasachi Mukharji J. held: "4. Now the question is whether the statements, which are contained in the profits and loss accounts and the assets and liabilities side indicating the liability of the petitioning creditor along with the statement of the Directors made to the shareholders as Directors' report should be read together and if so whether reading these two statements together these amount to an acknowledgement as contemplated under Section 18 of the Limitation Act, 1963, or Section 19 of the Limitation Act, 1908. In my opinion, both these statements have to be read together. The balance-sheet is meant to be presented and passed by the shareholders and is generally accompanied by the Directors' report to the shareholders. Therefore in understanding the balance-sheets and in explaining the statements in the balancesheets, the balance-sheets together with the Directors' report must be taken together to find out the true meaning and purport of the statements. Counsel appearing for petitioning creditor contended that under the statute the balance-sheet was a separate document and as such if there was unequivocal acknowledgement on the balance-sheet the stateme....
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.... Shri Rameshwar Dial argued that statements in the balancesheet of a company cannot amount to acknowledgement of liability because the balance-sheet is made under compulsion of the provisions in the Companies Act. There is no force in this argument. In the first place, section 18 of the Limitation Act, 1963, requires only that the acknowledgement of liability must have been made in writing, but it does not prescribe that the writing should be in any particular kind of document. So, the fact that the writing is contained in a balance-sheet is immaterial. In the second place, it is true that section 131 of the Companies Act, 1913 (section 210 of the Companies Act, 1956) makes it compulsory that an annual balance sheet should be prepared and placed before the Company by the Directors, and section 132 (section 211 of the Companies Act, 1956) requires that the balance-sheet should contain a summary, inter alia, of the current liabilities of the company. But, as pointed out by Bachawat J. in Bengal Silk Mills v. Ismail Golam Hossain Ariff, AIR 1962 Cal 115 although there was statutory compulsion to prepare the annual balance-sheet, there was no compulsion to make any particular admission....
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....here was no evidence or materials to show that the documents had been signed before the expiry of the prescribed period of limitation. In addition, the Court found that there had been no pleading with regard to the alleged acknowledgement in the application under Section 7 of the IBC. This Court also found that the two documents could not be construed as admission that amounted to acknowledgement of the jural relationship and the existence of liability, since the balance sheet dated 16th August, 2017 did not acknowledge or admit any liability. Rather the Corporate Debtor had disputed and denied its liability. Similarly, the letter dated 23rd April, 2019 was also found not be an acknowledgment or admission of liability. On the other hand, the language of the letter made it absolutely clear that the liability had in fact been denied. 125. Significantly, in Reliance Asset Reconstruction (supra), the loan had been sanctioned by Vijaya Bank in May 1986. The loan amount was declared NPA on 1st April 1993, an original application moved under the Debt Recovery Act was compromised in 2001 and the DRT had issued a Recovery Certificate in May 2003. Vijaya Bank assigned its Reliance Asset Rec....
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.... cannot enure for the benefit of the present winding-up proceeding. The debt having become time-barred when this petition was presented in this Court, the same could not be legally recoverable through this Court by resorting to winding-up proceedings because the same cannot legally be proved under Section 520 of the Act. It would have been altogether a different matter if the petitioner Company approached this Court for winding-up of the opposite party No.1, after obtaining a decree from the Calcutta High Court in Suit No.1073 of 1987, and the decree remaining unsatisfied, as provided in clause (b) of sub-section (1) of Section 434." 130. In effect, this Court speaking through Nariman J., approved the proposition that an application under Section 7 or 9 of the IBC may be time barred, even though some other recovery proceedings might have been instituted earlier, well within the period of limitation, in respect of the same debt. However, it would have been a different matter, if the applicant had approached the Adjudicating Authority after obtaining a final order and/or decree in the recovery proceedings, if the decree remained unsatisfied. This Court held that a decree and/or fin....
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....nal judgment and order/decree dated 27.3.2017 in O.A. 16/2015 and the Recovery Certificate dated 25.5.2017, enabling the Appellant Bank to recover Rs. 52 crores odd. The judgment and order/decree of the DRT and the Recovery Certificate gave a fresh cause of action to the Appellant Bank to initiate a petition under Section 7 of the IBC. 136. On or about 5th March 2019, the Appellant Bank filed another application for permission to place on record additional documents including inter alia financial statements, Annual Report etc. of the period from 1st April 2016 to 31st March 2017, and again, from 1st April 2017 to 31st March 2018 and a letter dated 3rd March 2017 proposing a One Time Settlement. This application was also allowed on 6th March 2021. The Adjudicating Authority, took into consideration the new documents and admitted the petition under Section 7 of the IBC. 137. Even assuming that documents were brought on record at a later stage, as argued by Mr. Shivshankar, the Adjudicating Authority was not precluded from considering the same. The documents were brought on record before any final decision was taken in the Petition under Section 7 of IBC. 138. A final judgment and ....