TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1644
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The brief facts for the consideration of this application are the following: - The applicant/Financial Creditor is an assignee of financial debt assigned by IIFCL and other bankers as per various Assignment deeds dated 31st March, 2015. The debt claimed in this case originally owed to Infrastructure Finance Company Limited (IIFCL); State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State of Bank of India, State Bank of Patiala and State Bank of Travancore. The above said lenders have assigned their respective parts of the debt in favour of the Financial Creditor as per various Assignment deeds ( Ext. 10 to 15). 3. The Corporate Debtor had availed the loan from the Consortium lenders for setting up 1080 MW coal based plant at Chandwa of Latehar District in the state of Jharkhand in two phases comprising of 2X270 MW in each phase by executing common loan agreement with the lenders bank referred to above. The Corporate Debtor had further availed loan facilities aggregating to Rs. 2175,00,00,000/- ( Rs. Two Thousand One Hundred Seventy Five Crore only) for the Phase-I Project and availed Rs. 2387,00,000/- ( Two thousand Three Hundred Eighty-Seven Crores) for Phase-II Projec....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../or proceed against the corporate debtor. The instant proceeding is bad for misjoinder and non-joinder of the necessary parties. g. The financial creditor has raised their claim against the corporate debtor, who is alleged to have borrowed sums and for repayment of all the monies advanced to the corporate debtor. h. The said application is not properly affirmed and/or verified and thus the same is liable to be dismissed. i. The said application is not filed in terms of the provision of the section 7 of the Insolvency and Bankruptcy Code, 2016 and thus liable to be dismissed. j. The purported amount claimed by the alleged FC are yet to be ascertained and proceedings in that regard are already pending before the DRT Kolkata. k. There are various disputes exist between the parties which have occurred due to the default on the part of the FC and other consortium lenders in failing to fulfil the obligations in terms of the documents on the strength of which the FC is claiming the purported dues. l. Various other contentions are also seen taken by the Corporate Debtor, which are not stated here for convenience and since the Corporate Debtor at the stage of hearing not pressed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... entertained in an application of this nature. Bearing in mind the said proposition of law regarding the scope of enquiry in a case of this nature the Ld. Counsel for the Corporate Debtor fairly admits that he is not pressing the Corporate Debtor's contentions regarding the disputes relating to ascertaining default in repayment by the Corporate Debtor. Being satisfied that the Corporate Debtor has committed default in repayment of the outstanding amount as claimed by the Financial Creditor, the question is whether the application filed is barred by law of limitation?. 8. When this case was taken up for hearing, the learned counsel appearing for and on behalf of the Corporate Debtor has argued only the question of limitation and not raised any other grounds raised in the reply affidavit. According to him the application filed under section 7 of I & B Code is hopelessly barred by limitation, which fact is evident from the allegations made in the application. He further would submit that the application was filed not within the period of limitation prescribed in law and contentions regarding filing this application in time are erroneous both on facts and in law. 9. In view of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t that the acknowledgement has to be unequivocal and that the acknowledgement of debt in balance sheets cannot be a proof of acknowledgement of debt by the Corporate Debtor. He referred to the judgement of Hon'ble Appellate Tribunal in Sh. G Eswara Rao Vs. Stressed Assets Stabilisation Fund and M/s. Saritha Synthetics & Industries Ltd. (Company Appeal (AT) (Insolvency) No. 1097 of 2019. The learned counsel referred to paras 4,14,15,16, 22 and 24 of the said judgment. Relying upon the above said judgment, he would submit that the entry in the balance sheet cannot be treated as acknowledgement. 13. The learned counsel appearing for the Financial Creditor, on the other hand, submitted that Balance Sheet as a proof of acknowledgement of debt of a company is an admission of indebtedness as sufficient acknowledgement under Indian Limitation Act. According to him, the limitation period is calculated from the date of signing of financial statement and the Balance Sheet of Corporate Debtor for the period ending 31.02.2017 signed by its directors on 29th May 2017, produced on the side of the Financial Creditor is a document, which could be safely relied upon as the proof of acknowledgem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riod of expiry of limitation from the date of default the financial statement is a valid and legal acknowledgement. 16. He further would submit that all the Banks and Financial Institutions have assigned the debt and the debt outstanding is secured and that the Financial Creditor is only assignee to claim of loan. As on the date the debt is due and payable according to the Financial Creditor. According to him, the main issue considered by the Hon'ble Appellate Tribunal in the above said judgment of Sh. G Eswara Rao Vs. Stressed Assets Stabilization Fund & Anr. is whether the date of Decree passed by the Debt Recovery Tribunal can be taken as a date of default. According to him the below mentioned judgements laid down the proposition of law regarding the acceptance of Balance Sheet as a sufficient proof of acknowledgement. 17. Learned Sr. Counsel has then taken us to para 9 and 10 of (2011) 11 SCC 571 in the case of USHA RECTIFER CORPORATION (INDIA) VS. COMMISSIONER OF CENTRAL EXCISE NEW DELHI The paragraph 9 & 10 of the above said judgement read as under:- " 9. The demand for payment of Central Excise duty in the present case appears to have been made on the basis of statem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upport of the contention that the balance- sheets do not amount to acknowledgement of liability, because they were prepared under compulsion of law Mr. Banerji relies upon the decision in Kashinath V. New Akot Ginning and Pressing Co. Ltd. I.L.R. 1950 Nag. At 568 : A.I.R. 1951 Nag. 255. It is true that the balance-sheets were required to be made both by the Indian Companies Act, 1913 as also by the articles of association of the defendant company. There was a compulsion upon the managing agents to prepare the documents but there was no compulsion upon them to make any particular admission. They faithfully discharged their duty and in doing so they made honest admissions of the company's liabilities. Those admissions, though made in discharge of their duty, are nevertheless conscious and voluntary admissions. A document is not taken out of the purview of section 19 of the Indian Limitation. Act merely on the ground that it is made under compulsion of law, see Venkata v. Partha Saradhi, 1892 I.L.R. 16 Mad. 220 at 222, Udaya Thevar v. Subrahmama Chetti, (1986) 6 M.L.J. 266 Good V. Jane Job, 7 E1 and E1 6 at 11 : 120 E.R. 810 at 812. I am unable to agree with the reasoning of the N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edgment given by the managing agents in its own favour without its express consent. In the instant case the company did not repudiate the acknowledgment. Instead the company passed the balance-sheet at the annual general meeting of its shareholders. The company therefore elected to ratify the acts of the managing agents. The effect of the ratification is that the acknowledgement has the same effect as if it had been made with the express authority of the company. In these circumstances the managing agents must be held to have been duly authorised by the company to acknowledge the liability of the company in respect of the debt due to one of its partners, see Ledingham v. Bermejo Estancio Co. Ltd., (1947) 1 A.E.R. 749 at 753. In view of this finding it is not necessary to consider the further question whether the auditors acknowledged the debt and if so, whether they had any authority to make any acknowledgement on behalf of the company. 13. It must follow that the balance sheets in question was sufficient acknowledgements within the meaning of section 19 of the Indian Limitation Act and consequently the claim of the plaintiff is not barred by the law of limitation". 19. The lear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Supreme Court. A.V.Murthy Vs. B.S. Nagabasavanna is an equivalent citation appears to us to be applicable in the case in hand. The said case was instituted on the strength of a cheque under Sections 118, 138 and 139 of Negotiable Instrument Act, 1881. The Ld. Magistrate dismissed the complaint on the findings that the alleged borrowing was four years prior to the issuance of the cheque and hence that debt was not legally enforceable in view of bar of limitation. The complainant challenged the order before the Addl. Sessions Judge who had quashed the entire proceeding and aggrieved thereby, the complainant filed a Criminal Revision before the High Court of Karnataka and the Hon'ble High Court of Karnataka upheld the view and confirmed the order and thereby the complainant/Appellant filed Criminal Appeal No.206 of 2002 before the Hon'ble Supreme Court. The para Nos. 3 to 7 in the above said judgement is very relevant for our consideration as regards the admission of balance sheet as a proof of acknowledgement. It is reproduced hereunder. 3. We heard learned counsel for the appellant. Learned counsel contended that it was incorrect on the part of the Session Judge to hol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e respondent is shown in the balance sheet, it may amount to acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made. However, we do not express any final opinion on all these aspects, as these are matters to be agitated before the Magistrate by way of defence of the respondent. 6. This is not a case where the cheque was drawn in respect of a debt or liability, which was completely barred from being enforced under law. If for example, the cheque was drawn in respect of a debt or liability payable under a wagering contract, it could have been said that that debt or liability is not legally enforceable as it is a claim, which is prohibited under law. This case is not a case of that type. But we are certain that at this stage of the proceedings, to say that the cheque drawn by the respondent was in respect of a debt or liability, which was not legally enforceable, was clearly illegal and erroneous. 7. There lore, we set aside the order passed by the learned Single Judge of the High Court, allow this appeal and remand the matter to the Magistrate to proceed with the complaint in accordance with law. We make it cle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e sheet extends the period of limitation. The acknowledgement is as on 31.03.2015. This suit is filed in 2017. The suit is clearly within limitation. The present application is allowed. 25. According to the Ld. Counsel for the Corporate Debtor the above referred citations not at all attracted in this case because the Hon'ble Supreme Court has not discussed in the said judgments whether Section 18 of the Limitation Act would apply when the claim is otherwise barred by time. The Hon'ble Supreme Court in the case of Jignesh Shah & Anr. Versus Union of India & Anr. (2019) 10 SCC 750, clearly stated that period of limitation can only be extended in the manner provided in the limitation Act and highlighted acknowledgment of liability under section 18. In the said judgement in paragraph 21, the Hon'ble Supreme Court states as follows: "21. The aforesaid judgements correctly hold that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy of a winding up proceeding. In law, when time begins to run, it can only be extended in the manner provided in the Limitation Act. For example, an acknowled....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Securitization 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. iv) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated, suspended, or interrupted during moratorium period. v) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. vi) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process. vii) Provided that where at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves ....