TaxTMI 
TaxTMI 
2022 (7) TMI 1284
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....llant has been dismissed on the ground of limitation. 2. In brief, Tourism Finance Corporation of India (TFCI) sanctioned a term loan of Rs. 5,00,00,000/-, repayable in 20 quarterly instalments of Rs. 25,00,000/- each on 24.09.1996 to Nishiland Park Limited (Corporate Debtor). However, a sum of Rs. 4,75,00,000/- was disbursed and the Corporate Debtor executed a deed of hypothecation and other security documents in favour of TFCI. TFCI initiated proceedings under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (in short 'SARFAESI Act') against the Corporate Debtor by serving demand notice on 14.01.2003. However, TFCI assigned its debt of the Corporate Debtor on 27.09.2013 by executing an Assignment Agreement in favour of the present Appellant. The Corporate Debtor and Mr. Paresh Shah (as Mortgagor) were confirming parties to the Assignment Agreement. The Appellant had issued a demand notice under the SARFAESI Act on 13.12.2014 to the Corporate Debtor and its guarantor to pay the amount due and took possession of the Breach Candy Flat mortgaged by the Corporate Debtor, in terms of Rule 8(1) of the SARFAESI....
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....n the ground that the date of default mentioned in the Petition is of the year 1998 and the application under Section 7 of the Code was filed on 04.03.2019, after 21 years, it is observed that: "iv. Since the Assignment Agreement dated 27.09.2013 is much beyond 3 years after the date of default, the contention that Section 25(3) of the Contract Act would be an exception to the provisions of Section 18 of the Limitation Act, would not have any relevance as far as triggering off date of default is concerned. This Argument may be appropriate in a recovery proceeding. This proceeding not being a recovery proceeding, this argument cannot be accepted. v. The date of default mentioned in the Petition relates to pre-assignment era and the said default cannot be related to post assignment proceedings. vii. Even assuming that Section 18 of the Limitation Act is applicable, the letter of acknowledgement dated 05.12.2016 is beyond three years from 27.09.2013, the date of Assignment Agreement. The sine qua non for application of Section 18 of Limitation Act is that the acknowledgement of liability in writing must be before the expiration of the prescribed period (of l....
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....ct of the Assigned Loan to the Assignee as and from the effective date in terms of the financing documents, the Borrower is not entitled to any right of set off, counter claim, deduction, recoupment, recovery, recourse, revision or rebate in respect of any amount under the Financing Documents or Applicable law. (k) The Borrower hereby confirms that the entire Assigned Loan shall be a lawful claim by the Assignee on the Borrower from the date of this Deed and all payments in future in respect of the Assigned Loan shall be made to the Assignee." 8. Counsel for the Appellant has argued that the Adjudicating Authority has failed to appreciate that though initially the default occurred in respect of the financial assistance in the year 1998 but the debt was subsequently revived by the Corporate Debtor in favour of the Appellant by becoming a confirming party and signatory to the Assignment Agreement with an express promise to pay, creating a fresh contractual liability to pay the entire debt from the effected date i.e. the date of the Assignment Agreement. The Appellant has placed reliance upon Section 25(3) of the Indian Contract Act, 1872 which is reproduced as under:- ....
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....al and Anr. (Civil Appeal No. 323 of 2021), Laxmi Pat Surana Vs. Union Bank of India& Anr. (Civil Appeal No. 2374 of 2020), Yogesh Kumar Jashwantlal Thakar Vs. Indian Overseas Bank and Ors. (2020) SCC Online NCLAT 636 and Dena Bank Vs. C. Shiva Kumar Reddy and Anr. (Civil Appeal No. 1650 of 2020. 12. On the other hand, Counsel for the Respondent has submitted that there is no error in the order impugned herein as it is the case of the Appellant itself that the default had occurred in the year 1998 and the period of three years has since been expired and the limitation cannot be revived by the Assignment Agreement. It is also submitted that even though the debt has been assigned to the Appellant by the Assignment Agreement dated 27.09.2013, the application under Section 7 of the Code came to be filed on 04.03.2019 after a period of 6 years whereas the limitation, in terms of Article 137 of the Limitation Act, 1961 is three years from the date of default. It is submitted that even Section 18 of the Limitation Act, 1961 is of no help to the Appellant as it has been rightly held by the Adjudicating Authority that the letter of acknowledgement dated 05.12.2016 was beyond the period o....
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....hese aspects, as these are matters to be agitated before the Magistrate by way of defence of the respondent." 17. The Hon'ble Bombay High Court in the case of Dinesh B. Chokshi (Supra) held that:- "8. Section 25 of the Contract Act reads thus:- "25. Agreement without consideration void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.--An agreement made without consideration is void, unless-- (1) it is expressed in writing and registered under the law for the time being in force for registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless ash 10 crappln-2933.07-grp (2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor mig....
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....h regard to a time barred debt falls within the exception provided under Section 25 of the Contract Act and makes it a valid transaction which can be enforced by law. 22. Hence, the finding of fact recorded by the Courts below that Ex. A1 agreement is an acknowledgement of the liability of the 1st defendant in respect of the debt availed by him in the year 1997 does not suffer from any infirmity. Consequently, the suit cannot be held to be barred by limitation. Though no specific issue was framed, the trial court as well as lower Appellate Court for different reasons held that the suit was not barred by limitation. The said conclusion being in accordance with the settled principles of law warrants no interference by this Court." 19. The Hon'ble Bombay High Court in the case of R. Suresh Chandra & Co. (Supra) held that: 10. .......I understand that after the expiry of the period of limitation nothing short of a clear promise can provide a fresh period of limitation. But such a promise can also be inferred by necessary implication. The Supreme Court in (Hiralal v. Badkulal)2, A.I.R. 1953 S.C. 225 quoted with approval a Privy Council decision in (Maniram v. Seth R....
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.... pay such amount or else there would be no requirement of making any such acknowledgment. 29. Aforesaid letters (Ex.PW-2/2 & Ex.PW-2/3) indicate the categorical endorsement of the liability to make the payments, and thus, it could be treated as an implied promise to pay. The circumstances under which such an acknowledgement was made, viz. after the reminders by the Bank for repayment of the loan amount, further lends support to the hypothesis that the aforesaid letters are in the nature of a promise to pay. Prior to the aforesaid acknowledgements, there was a confirmation of the balance amount by the respondent/defendant. Any written acknowledgment after the confirmation of the balance amount can safely be treated as a promise to pay and not mere acknowledgement." 21. The Hon'ble Madras High court in the case of Sri Kapaleeswara Temple (Supra) held that: 5. The question as to how far a contractual obligation created under Section 25(3) of the Indian Contract Act is enforceable in a Court of law has come up for consideration in several ways. In Kishen Lal v. Gohli, AIR 1938 Lah 757 it was held that when a promise falls under Sub-section (3) of Section 25. it con....
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....he letter cannot be treated as evidence of an agreement under Section 25 of the Contract Act to pay a barred debt, the Bench observed as follows: "Assuming that the debt or a portion thereof was barred, the letter contains an unconditional promise to pay whatever balance might be found to be due to the plaintiff. This is a valid agreement under Section 25 of the Contract Act." 6. It is thus clear that there are a catena of decisions and plethora of authority for holding that though a debt might have become time-barred on the date a debtor entered into a fresh obligation with the creditor to Day the liability, the said obligation, if it satisfies the conditions laid down in Section 25(3) of the Indian Contract Act, will amount to a fresh contract in the eye of law and can certainly be made the basis of an action for recovering the amount promised and acknowledged therein by the debtor. While Section 18 of the Limitation Act (Section 19 of the old Act) deals with an acknowledgment made by a debtor within the period of limitation, the contractual obligation which a debtor enters into under the terms of Section 25(3) has no reference whatsoever to the acknowledged deb....
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.... Act. A signs a written promise to pay B Rs.500/- on account of the debt. This is a contract." 8. In view of section 25(3) of the Act, when a debt has become barred by limitation, a written promise to pay, furnishes a fresh cause of action. Section 25(3) of the Act in substance does is not to revive a dead right, for the right is never dead at any time, but to resuscitate the remedy to enforce payment by suit, and if the payment could be enforced by a suit, it means that it still has the character of legally enforceable debt as contemplated by the explanation under section 138 of the Act. In view of the illustration (e), the cheque becomes a promise made in writing, to pay under section 25(3) of the Act." 23. The Hon'ble High Court of Karanatatka in the case of Adivelu (Supra) held that: 5. Acknowledgment of liability is nothing but an admission of the truth of one's own liability. It is well settled that an unqualified, unequivocal and unconditional acknowledgment of a debt is a clear admission of the liability to pay it. Such an admission may be in any form and may be 'express' or 'implied', as held by the Supreme Court in the case of SHAP....
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....t for the year 2013-14. The first partial repayment of Rs. 75,00,000/- was made by the Corporate Debtor on 12.06.2015. The finding recorded by the Adjudicating Authority does not talk of this partial payment which acknowledges the debt and extends the period of limitation from the said date i.e. 12.06.2015 for another period of three years. 26. The Hon'ble Supreme Court in the case of Asset Reconstruction Company (India) Limited (Supra) held that: 8. The aforesaid question is no longer res integra as two recent judgments of this Court have applied the provisions of Section 14 and Section 18 of the Limitation Act to the IBC. Thus, in Sesh Nath Singh v.Baidyabati Sheoraphuli Co-operative Bank Ltd., Civil Appeal No. 9198 of 2019 (decided on 22.03.2021), after setting out the issues that arose in that case in paragraph 57, and after referring to Section 238A of IBC, held: "66. Similarly under Section 18 of the Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, ....
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.... For, Section 238A predicates that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactment of Section 238A of the Code on 06.06.2018, validity whereof has been upheld by this Court, it is not open to contend that the limitation for filing application under Section 7 of the Code would be limited to Article 137 of the Limitation Act and extension of prescribed period in certain cases could be only under Section 5 of the Limitation Act. There is no reason to exclude the effect of Section 18 of the Limitation Act to the proceedings initiated under the Code. Section 18 of the Limitation Act reads thus: "18. Effect of acknowledgement in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitati....
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.... of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgement in writing signed by the party against whom such right to initiate resolution process under Section 7 of the Code enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgement, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgement of the debt, from time to time, for institution of the proceedings under Section 7 of the Code. Further, the acknowledgement must be of a liability in respect of which the financial creditor can initiate action under Section 7 of the Code." 27. The Hon'ble Supreme Court in the case of Laxmi Pant Surana (Supra) held that: 35. The purport of such observation has been dealt with in the case of Babulal Vardharji Gurjar (II) (supra). Suffice it to observe that this Court had not ruled out the application of Section 18 of the Limitation Act to the proceedings under the Code, if the fact situat....
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....period of Limitation. Furthermore, in view of the fact, that ingredients of Section 18 of the Limitation Act, 1963 are quite applicable both for 'Suit' and 'Application' and the debit confirmation letters in the instant case were duly acknowledged in accordance with Law laid down on the subject, the instant Appeal deserves to be dismissed and accordingly the same is dismissed, since there being no legal infirmities found in the impugned order passed by Adjudicating Authority in admitting CP No. (IB) Company Appeal (AT) (Insolvency) No. 236 of 2020 34 257/7/NCLT/AHM/2019 and declaring moratorium etc. Resultantly, all connected Interlocutory Applications are closed. There shall be no order as to costs. 29. It is needless to mention that the partial repayment of Rs. 75,00,000/- was made between 27.09.2013 to 27.09.2016 and because of said payment on 12.06.2015 the period of limitation had once again extended upto 12.06.2018. The Adjudicating Authority has further lost sight of the fact that another partial repayment of Rs. 50,00,000/- was made by the Corporate Debtor on 24.06.2018 which means that now the limitation would stand extended for a period of three years u....