B. Prashanth Hegde vs State Bank Of India

2026 INSC 155 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 477 OF 2022

B. PRASHANTH HEGDE …APPELLANT(S)

VERSUS

STATE BANK OF INDIA & ANR. …RESPONDENT (S)

JUDGMENT

MANOJ MISRA, J.

1. This appeal, under Section 62 of the Insolvency

and Bankruptcy Code, 20161, impugns judgment and

order of the National Company Law Appellate

Tribunal, Principal Bench at New Delhi2, dated

17.12.2021, passed in Company Appeal (AT) (Ins) No.

68 of 2019 and I.A. No. 1078 of 2021.

FACTS

2. A brief narration of facts in a chronological order

would be apposite. The first respondent (State Bank Signature Not Verified Digitally signed by KAVITA PAHUJA Date: 2026.02.13 17:02:29 IST Reason:

1 IBC 2 NCLAT

Page 1 of 57 Civil Appeal No. 477/2022 of India3), claiming itself to be the Financial Creditor4

of M/s. Metal Closure Pvt. Ltd. (i.e., the Corporate

Debtor5), filed an application under Section 76 of IBC

on behalf of self and on behalf of a consortium of

3 SBI 4 FC 5 CD 6 Section 7. Initiation of corporate insolvency resolution process by financial creditor. – (1) A financial creditor either by itself or jointly with other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government, may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

…..xxx….

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 14 days of the receipt of the application under sub- section (2), 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):

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 disciplinary proceedings pending against the proposed professional, it may, by order admit such application; or

(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order reject such application Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.

(6) The corporate insolvency process shall commence from the date of admission of the application under sub-section (5).

(7) …xxxx..

Page 2 of 57 Civil Appeal No. 477/2022 banks comprising SBI, Punjab National Bank7,

Corporation Bank and UCO Bank against CD for

initiating Corporate Insolvency Resolution Process8,

inter alia, alleging that CD is a defaulter of dues,

exceeding Rs. 280 crores, payable against various

credit facilities extended from time to time by

members of the consortium.

3. CD contested the application, inter alia, on the

ground that the same was filed beyond 3 years from

the date when the right to apply had accrued and

therefore, the application under Section 7 was liable

to be dismissed on the ground of limitation.

4. On 14.12.2018, the National Company Law

Tribunal, Bangalore Bench9 admitted the CIRP

petition and declared a moratorium under Section 14

of IBC.

5. Aggrieved by the order of NCLT dated 14.12.2018,

the suspended Managing Director of CD filed an

7 PNB 8 CIRP 9 NCLT

Page 3 of 57 Civil Appeal No. 477/2022 appeal (i.e., Company Appeal (AT) (Ins) No. 68 of

2019 under Section 6110 of IBC before NCLAT.

6. In the meanwhile, NCLT recommended liquidation

of the CD which was kept in abeyance pending

disposal of the appeal by NCLAT.

7. On 26.09.2019, NCLAT dismissed the aforesaid

appeal, inter alia, holding: (a) that credit facilities,

extended from time to time by various partners of the

consortium were secured by mortgage of immovable

properties of CD therefore, the limitation period

would be governed by Article 62 of the Schedule to

the Limitation Act, 196311, which prescribes

limitation of 12 years; and (b) that though the

limitation to file an application under Section 7 of

10 Section 61. Appeals and Appellate Authority. – (1) Notwithstanding anything to the contrary contained under the Companies Act, 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this Part may prefer an appeal to the National Company Law Appellate Tribunal.

(2) … xxx … (3) … xxx … (4) … xxx … (5) An appeal against an order for initiation of corporate insolvency resolution process passed under sub-section (2) of section 54-O, may be filed on grounds of material irregularity or fraud committed in relation to such an order.

11

1963 Act

Page 4 of 57 Civil Appeal No. 477/2022 IBC is three years, as per Article 13712 of the

Schedule to the 1963 Act, the right to apply accrued

on 01.12.2016 i.e., when IBC came into force

therefore, the application is not barred by limitation.

Consequently, the appeal, which was pressed on the

sole ground of limitation, was dismissed.

8. On dismissal of the appeal by NCLAT, NCLT, by a

separate order, directed liquidation of CD.

9. Aggrieved by the order of NCLAT dated 26.09.2019,

the suspended Managing Director of CD filed an

appeal under Section 6213 of IBC before this Court.

This Court, vide order dated 21.10.2019, allowed the

appeal, set aside the order of NCLAT and restored the

appeal on the file of NCLAT for being decided afresh,

12 Description of Suit Period of limitation Time from which period begins to run PART II – OTHER APPLICATIONS Article 137. Any other application for which Three years When the right to apply accrues no period of limitation is provided elsewhere in this Division

13 Section 62: Appeal to Supreme Court. (1) Any person aggrieved by an order of the National Company Law Appellate Tribunal may file an appeal to the Supreme Court on a question of law arising out of such order under this Code within forty-five days from the date of receipt of such order.

(2) The Supreme Court may, if it is satisfied that a person was prevented by sufficient cause from filing an appeal within forty-five days, allow the appeal to be filed within a further period not exceeding fifteen days.

Page 5 of 57 Civil Appeal No. 477/2022 having regard to the decisions of this Court on the

issue of limitation.

10. Pursuant to the order of remand, NCLAT

allowed the appeal, vide order dated 14.10.2020, inter

alia, holding:

(i) The default had occurred on or before

31.01.2010 i.e., the date when the account

was declared Non-Performing Asset14.

(ii) Limitation period, prescribed by Article

137 of the Schedule to the 2003 Act, is 3

years from the date of default, which

expired on 30.01.2013.

(iii) Application under Section 7 of IBC was

filed on 25.04.2018 and, therefore, barred

by limitation.

11. Aggrieved by the aforesaid order, SBI (i.e., the

first respondent) filed Company Appeal No. 3765 of

2021 before this Court. This appeal was allowed, vide

order dated 15.04.2021, thereby giving an

14 NPA

Page 6 of 57 Civil Appeal No. 477/2022 opportunity to SBI to amend its pleading (i.e., the

application under Section 7 of IBC), on payment of

costs, for introducing facts to explain that the

application under Section 7 was within the period of

limitation. The relevant portion of the order of this

Court dated 15.04.2021 is extracted below:

“6. There can be no doubt whatsoever that the Appellant has been completely remiss and deficient in pleading acknowledgement of the liabilities on the facts of this case. However, given the staggering amount allegedly due from the Respondents, we offer one further opportunity to the Appellant to amend its pleadings so as to incorporate what is stated in the written submissions filed by it before the NCLAT, subject to costs of Rs. 1,00,000 to be paid by the Appellant to the Respondent within a period of four weeks from today.

7. We, therefore, allow the appeal, set aside the judgment of the NCLAT dated 14.10.2020, and restore the appeal to the file to be decided in light of judgment on Civil Appeal No.323 of 2021.”

12. Pursuant to the above order, NCLAT allowed the

amendment vide order dated 15.07.2021. As a

result, the Section 7 application was comprehensively

amended, thereby introducing detailed facts qua the

debt to demonstrate that the application was within

limitation. Thereafter, NCLAT, vide impugned order

Page 7 of 57 Civil Appeal No. 477/2022 dated 17.12.2021, dismissed the appeal of the

suspended Managing Director and held the Section 7

application to be within limitation.

13. We have heard learned counsel for the parties at

length and have perused the record. Written

submissions were also provided for our convenience.

FINDINGS OF NCLAT

14. Before noticing the submissions made before us, it

is necessary to understand the context in which those

submissions were made. Therefore, in our view, it

would be useful to notice the findings returned by

NCLAT on the issues arising before it. The relevant

paragraphs of the impugned judgment of NCLAT are

reproduced below:

“31. The table below gives the relevant dates in connection with the debts of the Corporate Debtor owed to the four banks in the consortium, which are as per arguments and pleadings of the Respondent No.1, and which would be necessary for calculating the limitation and the dates when the Corporate Debtor acknowledged the debts through various documents:

Action SBI PNB Corporation UCO BANK Bank CD’s loan accounts 28.05.2014 30.06.2014 10.10.2014 31.12.2014 declared defaulter by banks with implicit acknowledgment of debts which is relevant for counting limitation CD’s debts entered in its 30.09.2015 30.09.2015 30.09.2015 30.09.2015 balance sheets for year ending 31.03.2014 and

Page 8 of 57 Civil Appeal No. 477/2022 31.3.2015

CD’s reply to Section 13(2) 13.11.2015 13.11.2015 13.11.2015 13.11.2015 SARFAESI notice filed with debt details

32. From the dates in the table in the previous paragraph, the learned senior counsel for Respondent No.1 has argued that banks and CD were discussing restructuring of debts, and thereby CD implicitly acknowledged the respective debts as relevant for counting limitation in accordance with the judgment of Hon’ble Supreme Court in ARCIL vs. Bishal Jaiswal (2021 SCC OnLine SC 321). Debt restructuring efforts with SBI went on till 28.5.2014, with PNB till 30.06.2014, with Corporation Bank till 10.10.2014 and with UCO Bank till 31.12.2014. As a result of the restructuring efforts certain letters of arrangement and consortium agreements were entered into by the consortium of banks and the CD. Hence these are relevant dates when debts were in default and cause of action started. As regards the claim of the appellant that the dates of default of debts of the banks were in 2010, it was clarified by learned senior counsel for Respondent No.1 that the date of NPA which was shifted to 2010 was in accordance with an RBI Master Circular dated 1.7.2013 for the purposes of banks working and asset classification. The actions taken by the banks and the CD between 2010 and 2014 when CD's debt was being restructured, including signing of new working capital consortium agreements and their sanction, in continuation of the old debts did provide acknowledgements of the loans by CD. The Statement of Accounts are detailed in items 7 & 8 of Part IV of the Section 7 application are, therefore, sufficient for purpose of acknowledgement of debt liability to the four banks.

33. Learned senior counsel for Respondent No.1 has stated in his written submissions (attached at pp. 33-34 of the Convenience Compilation of the Appellant Vol. I filed vide Diary number 27721 dated 1.7.2020) that while originally the account of the Corporate Debtor was classified as NPA on 21.1.2010, it is an admitted fact that there were actions taken thereafter during 2010 to 2014 to restructure the account of the Corporate Debtor. As a result, various Consortium Agreements were executed between the four banks and the Corporate Debtor. The existence of the Consortium Agreements and letter of arrangement are given in item 5 of Part V of amended Section 7 application (attached at pp. 93-114 of written submissions and Convenience Compilation of Appellant, volume 1). These

Page 9 of 57 Civil Appeal No. 477/2022 Working Capital Consortium Agreements and letter of arrangement and their existence has not been denied by the Corporate Debtor. It is the contention of the Respondent No.1 that, through these Consortium Agreements the Corporate Debtor has inter-alia admitted its debt default and liability to pay to all the four banks till the date of signing of the Working Capital Consortium Agreement dated 21.3.2014.

34. The judgments of Hon’ble Supreme Court in Swiss Ribbons (P) Ltd. (supra), Innoventive Industries Ltd. (supra) and B.K. Educational Services (P) Ltd. (supra) do not explicitly cover the issue of acknowledgement of debt through documents such as balance sheet. In the matter of ARCIL vs. Bishal Jaiswal (supra), the Hon’ble Supreme Court has held that fresh limitation will start from the date of acknowledgement in the balance sheet of the CD. This judgment of Supreme Court now holds the fort insofar as calculation of limitation period is concerned taking into account the acknowledgements by CD in certain documents like the balance sheets and in other documents. In the case of Reliance Asset Reconstruction Co. Ltd. vs. Hotel Poonja International Pvt. Ltd., the balance sheets were not relied upon because no evidence had been put forward to show that they were signed before the expiry of the prescribed period of limitation and there was no pleading to the said effect in the application under Section 7 of IBC. As opposed to this situation, in the present case the balance sheets relate to the period within three years from the date of NPA of the four banks, which are 28.5.2014 for SBI, 30. 6.2014 for PNB 10.10.2014 for Corporation Bank and 31.12.2014 for UCO Bank and hence the acknowledgements which were implicit in these balance sheets are within three years of the date of start of limitation, and therefore extend limitation as per section 18 of the Limitation Act.

35. In the case of Indian Overseas Bank vs. Patel Woods Products Limited 2020 SCC OnLine NCLAT 551, the Securitization Application filed by Indian Overseas Bank had been disposed of. Since Section 7 application which was filed thereafter, took the date of default as barred by limitation and expressly for recovery of amount. Hence, the Section 7 application was not admitted. In contrast, in the present appeal, there is no decree for execution and the Section 7 application is also considered to be within limitation, due to various acknowledgements in balance

Page 10 of 57 Civil Appeal No. 477/2022 sheets for the financial years 2013-14 and 2014-15 and reply filed before DRT, which provide fresh lease of life to the issue of limitation.

36. xxx omitted xxx

37. In Swiss Ribbons (P) Ltd. case (supra), Hon’ble Supreme Court has held that in so far as set-off and counterclaim is concerned, such set-off may be considered at the stage of filing of proof of claims during the resolution process by the Resolution Professional. In the present appeal, only counter claim has been made before DRT but no set off amount has been adjudicated upon. Moreover, any amount of counterclaim cannot retract from the fact of acknowledgement of the debts.

38. In ARCIL vs. Bishal Jaiswal (supra), Hon’ble Supreme Court has very clearly held that 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 IBC enures. This ratio is supportive of claim made by Respondent No.1 SBI in the present case, where acknowledgements in writing signed by the Corporate Debtor come into play to extend the period of limitation under section 18 of the Limitation Act.

39. In Bengal Silk Mills Co. (supra), it was held that a compulsion in law to prepare a balance sheet does not imply compulsion to make any particular admission and if a qualification regarding a particular creditor or credit is made with caveats, the case has to be examined on the basis of its context to establish whether an acknowledgement of liability has, in fact, been made for extending the limitation. In the present case, there is no caveat regarding acknowledgement or otherwise of the debt.

On the contrary, the Auditor’s report in the balance sheet only adverts to the fact that the Corporate Debtor is not a going concern but makes no qualifying remarks about the debt which is included in the balance sheet.

40. Learned Counsels for Appellant and Respondent No.1 both have referred to the Master Circular No. RBI/2013- 14/62 DBOD No. BP. BC. 1/ 21.04.048/2013-14 dated July 1, 2013 (pp. 166-167 of written submissions and convenience compilation of appellant, Vol. I) with appellant interpreting its provisions regarding asset classification as NPA to be year 2010 from which the dates of default should

Page 11 of 57 Civil Appeal No. 477/2022 be considered whereas Respondent No.1 claims that the year should be 2014. We agree with the argument of Ld. Senior Counsel of Respondent No.1 that while the asset classification of the restructured loan account would be governed as per applicable prudential norms regarding classification as NPA, insofar as acknowledgement of the debts is concerned they were implicitly present in working capital consortium agreements and other documents executed by the CD and banks and the debts were therefore alive at the time these agreements were entered into.

41. We now consider the contention of the Corporate Debtor that the amount of counterclaim raised against the banks by the Corporate Debtor being Rs.1500 crores which is much more than the amount of debt, hence there will be a net amount payable to the corporate debtor and not to the banks. Therefore, there is no debt in default and liable to be paid to the banks. We note that the counterclaim has not been decided and so it remains just a proposition yet to be adjudicated upon. Moreover, merely raising a counterclaim in DRT proceedings does not in any way detract from the fact that debts are acknowledged, and they are in default, and therefore liable to be paid by the Corporate Debtor as the application under Section 7 is found to be within limitation.

42. We are convinced by the argument of Respondent No.1 that the date of NPA of the debt due to SBI is 31.1.2010 only for the purposes of the RBI guidelines. The actual date to default is the dates on which NPAs were initially declared by respective banks with 28.5.2014 for SBI, 30.6.2014 for PNB, 10.10.2014 for Corporation Bank and 31.12.2014 for UCO Bank, since the debts of respective banks were acknowledged by the CD till those dates. This is so because during the period from 2010 to 2014 when efforts were made by the four banks and the Corporate Debtor to restructure the debts, there was admission and implicit acknowledgment of the debts by the Corporate Debtor.

43. We then find that the acknowledgement of these debts have been made, inter alia, in the CD's balance sheets for year ending 31.3.2014 and 31.3.2015 which was signed on 30.9.2015, which is within three years from the date the debts were acknowledged in 2014 during debt restructuring process when Working Capital Consortium Agreements etc were signed by the CD and the banks. Thus, the debts get a fresh lease of limitation for three years from 30.9.2015. This

Page 12 of 57 Civil Appeal No. 477/2022 limitation period will run till 29.9.2018 in accordance with Article 137 of Limitation Act. The Section 7 application was filed on 25.4.2018 which is within three years from 30.9.2015. Hence, we find that on the basis of amended application under Section 7 and the documents attached thereto, as well as pleadings of Respondent No.1, the Section 7 application is found to be within limitation. The debts are in default, and they are due and payable to the four banks viz., SBI, PNB, Corporation Bank and UCO Bank.

44. We are also of the view that criminal complaints filed against officials of consortium of banks, and further action thereon have no bearing or relevance to the proceedings under Section 7 of the IBC.

45. In the light of discussion in above paragraphs, we are convinced that the debts of the four banks (SBI, PNB, Corporation Bank and UCO Bank) are in default, due and liable to be paid by the Corporate Debtor as on the date of filing of amended Section 7 application. The amended Section 7 application is found to be in limitation. Thus, State Bank of India (Respondent No.1) and other banks (who have authorized SBI to act on their behalf) have been able to establish to our complete satisfaction that the ingredients of application under Section 7 of IBC against the Corporate Debtor have been met and the application u/s 7 deserves to be admitted.” (Emphasis supplied)

15. In a nutshell, the findings/ conclusions of NCLAT

can be summarized as under:

(a) There is no dispute that CD is a defaulter.

The dispute is whether the Section 7

application is within the period of limitation

as specified in Article 137 of the Schedule to

the 1963 Act, or not.

Page 13 of 57 Civil Appeal No. 477/2022 (b) Documents on record indicate that CD was

in negotiations with the creditor banks for

restructuring of its debt(s) and, ultimately,

signed Working Capital Consortium

Agreement(s) with the Banks, thereby

acknowledging its dues.

(c) As per document(s) available on record, the

NPA declaration date(s) are 28.5.2014 for SBI,

30.6.2014 for PNB, 10.10.2014 for

Corporation Bank and 31.12.2014 for UCO

Bank.

(d) On 30.09.2015, CD in its balance-sheet(s)

of 2013-2014 and 2014-2015 acknowledged

the debt(s). Such acknowledgement would

extend limitation up to 29.09.2018, whereas

the Section 7 application was filed on

25.4.2018 and therefore, the same is within

limitation.

(e) The NPA date 31.01.2010 mentioned by

SBI is for classification of debt because the

Page 14 of 57 Civil Appeal No. 477/2022 restructuring exercise failed; therefore, it

cannot be taken as the date of default for

purposes of computing the limitation period.

(f) Mere filing of counterclaim would not wipe

out the debt.

(g) Lodging of FIR is inconsequential for

determining the issue qua admission of the

Section 7 application.

SUBMISSIONS ON BEHALF OF THE APPELLANT

16. On behalf of the appellant, it was submitted that

the application under Section 7 ought to have been

dismissed on the following grounds:

(i) The original as well as the amended

application did not contain particulars of

the default. They only disclose as to when

the accounts were declared NPA. Such

application is against the form (i.e., Form-I)

prescribed for filing an application under

Section 7.

Page 15 of 57 Civil Appeal No. 477/2022 (ii) Limitation starts from the date of

default. In absence of disclosure of the date

of default, extension of the limitation period

by acknowledgement (i.e., under Section

1815 of the 1963 Act) did not arise.

(iii) The amendment made pursuant to the

order of remand was way beyond what was

permitted by the order of remand dated

15.04.2021.

(iv) The balance-sheet(s) relied upon by

NCLAT were neither authenticated nor

approved in the meeting of shareholders

and were not filed with the Registrar of

15 Section 18. Effect of acknowledgment in writing.—(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment 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 limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.—For the purposes of this section,— (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,

(b) the word “signed” means signed either personally or by an agent duly authorised in this behalf, and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.

Page 16 of 57 Civil Appeal No. 477/2022 Companies16. Besides, acknowledgement, if

any, in the balance-sheet(s) was qualified

and, as such, it did not extend the

limitation.

(v) The Section 7 application is vitiated by

fraud, malice and suppression of material

facts and, therefore, hit by Sections 65 and

75 of IBC.

17. To buttress the above submissions, reliance was

placed on Section 7 (3) (a) of IBC to contend that sub-

section (3) mandates FC to furnish record of the

default recorded with the information utility, or such

other record or evidence of default, as may be

specified; the Insolvency and Bankruptcy (Application

to Adjudicating Authority) Rules, 201617 prescribe

Form 1 for filing an application under Section 7 of

IBC; Part IV of Form-I mandates mentioning of the

amount claimed to be in default and the date on

which the default occurred along with workings for

16 ROC 17 2016 Rules

Page 17 of 57 Civil Appeal No. 477/2022 computation of the amount(s) and days of default in a

tabular form; additionally, Part V requires FC to file

evidence and record of default with the information-

utility, if any. In the present case, FC did not comply

with these provisions. In absence thereof, the finding

that a default had occurred could not have been

recorded by the Adjudicating Authority, having regard

to the decisions of this Court in Indus Biotech

Private Limited V. Kotak India Venture (Offshore)

Fund & Ors18 and Swiss Ribbons Pvt. Ltd. & Anr V.

Union of India & Ors19. Besides, the original

application filed on 25.04.2018 mentions no date of

default, and in the amended application, the date(s) of

default is/are shown as 28.05.2014, 30.06.2014,

10.10.2014 and 31.12.2014, which are none other

than the date(s) on which each member of the

consortium declared their respective accounts NPA.

Most importantly, NCLAT’s order dated 14.10.2020

identifies 31.01.2010 as the date on which CD’s

18 (2021) 6 SCC 436 19 (2019) 4 SCC 17

Page 18 of 57 Civil Appeal No. 477/2022 account was declared NPA. This finding of NCLAT was

not disturbed in appeal and, therefore, it was

impermissible for NCLAT to record a different finding

on the date of default.

18. In the alternative, it was argued that the NPA date

cannot be taken as the date of default. Limitation for

the purposes of filing an application under Section 7

commences from the date of default in payment of

amount exceeding Rs. 1 lakh (as it then was, now Rs.

1 crore). This position is clear from the decisions of

this Court in M/s. Innoventive Industries Ltd. v.

ICICI Bank & Anr.20 and Laxmi Pat Surana v.

Union Bank of India & Anr21.

19. It was further argued that the remand order dated

15.04.2021 allowed FC to amend the Section 7

application to incorporate what was stated in the

written submissions. But the case set up in the

amended application is much beyond what the order

of remand permitted. Since the remit of remand was

20 (2018) 1 SCC 407 21 (2021) 8 SCC 481

Page 19 of 57 Civil Appeal No. 477/2022 limited, it was not open for NCLAT to consider and

allow a completely different case than what was

permitted by this Court.

20. It was also submitted that in absence of the date

of default in the application under Section 7, an

assessment as to whether the limitation period got

extended by acknowledgment was not possible.

Besides, a balance-sheet can be considered as an

acknowledgment only when it is duly approved by the

shareholders in an appropriate meeting, as was held

by the Calcutta High Court in Pandam Tea Company

Ltd.22 Whereas the balance-sheet relied by NCLAT was

not authenticated, and one which was never approved

in the shareholder meeting. Besides, the last balance-

sheet filed by CD with ROC was in the year 2013, and

the same balance-sheet made no acknowledgement of

liability as it was qualified by stating:

“Company has filed SARFAESI Appeal under Section 17 of the SARFAESI Act and claimed cost of compensation which is higher than the consortium bank’s total advances.”

22 1973 SCC OnLine Cal 93

Page 20 of 57 Civil Appeal No. 477/2022

21. As regards initiation of CIRP with a mala fide

intent, it was submitted that CIRP proceeding was

initiated not to resolve insolvency, but to circumvent

proceedings initiated by CD against the consortium of

banks. In that context, the following facts were

highlighted:

(i) First Information Report(s) were lodged

by the appellant against various accused,

including the consortium of banks and

their officials, which were investigated by

the Criminal Investigation Department (CID

Economic Offences Wing, Bengaluru,

Karnataka) culminating in two chargesheets

dated 05.05.2018 and 07.12.2018 arising

from Case Nos. 580 of 2016 and 486 of

2015 respectively.

(ii) The chargesheets reveal forging of

cheques with appellant’s signatures, forging

of statements of accounts, siphoning of

Page 21 of 57 Civil Appeal No. 477/2022 money and sale of machinery in open

market, unauthorized RTGS payments,

forging of bills of lading to make

unauthorized payments etc. They also

reveal that after taking over physical

possession of the assets of CD, the bank

made no efforts to auction the units. These

findings in the chargesheet(s) reflect the

true intent of the officials of the first

respondent in invoking proceedings under

the Securitization and Reconstruction of

Financial Assets and Enforcement of

Security Interest Act, 200223 , which was to

shut down operations of CD. Even the order

of the Karnataka High Court dated

13.03.2023 in W.P. No. 18864 of 2021

directed the Trial Court to take cognizance

against both banks, i.e., SBI and PNB, in

accordance with law, and directed the

23 SARFAESI

Page 22 of 57 Civil Appeal No. 477/2022 Investigation Officer to file additional

chargesheet by showing both banks as

accused.

(iii) Besides, FC filed a claim under the

Recovery of Debts Due to Banks and

Financial Institutions Act, 199324, in which

CD filed a counterclaim seeking Rs. 1299

crores. The said proceeding was initiated in

2015, by which time the appeal under

Section 17 of SARFAESI Act, questioning

the taking over of physical possession of the

plants of CD and appointment of Forensic

Auditor, was pending. In this background,

when proceedings under the RDDB Act and

SARFAESI Act were pending, there was no

justification to invoke the provisions of IBC

in the year 2018 i.e., 02 years after IBC

came into force. The mala fide intention to

initiate proceedings under IBC also

24 RDDB Act

Page 23 of 57 Civil Appeal No. 477/2022 becomes clear from the fact that after filing

of the application under Section 7 of IBC,

the first respondent had been seeking

adjournment in proceedings under the

SARFAESI Act and RDDB Act.

22. Finally, it was submitted that the

Adjudicating Authority was required to examine

whether it was expedient to initiate CIRP in the

context of pending litigation between the parties,

as held by this Court in Vidarbha Industries

Power Ltd. v. Axis Bank Ltd.25

23. Based on the above submissions, the learned

counsel for the appellant prayed that the impugned

order passed by NCLAT be set aside and the Section

7 application be dismissed.

SUBMISSIONS ON BEHALF OF RESPONDENT

24. Per contra, on behalf of the first respondent, it

was submitted:

25

(2022) 8 SCC 352

Page 24 of 57 Civil Appeal No. 477/2022

(i) The application under Section 7 of IBC was

well within limitation as CD had

acknowledged its dues from time to time in

writing and therefore, a fresh period of

limitation started from each such

acknowledgement. In this regard, the relevant

dates were provided in a tabular form

reproduced below:

Date Particulars 31.01.2010 Account declared NPA. 18.03.2010 As a part of restructuring, working 30.03.2011 capital consortium agreements 18.04.2013 executed between CD and Financial 21.03.2014 Creditors granting further credit facilities, wherein CD acknowledged

earlier credit facilities obtained from the Financial Creditors.

28.05.2014 Even after restructuring, on account of non-adherence of terms of repayment, the account of CD turned NPA with SBI. However, in terms of RBI26 guidelines, the date of NPA was shifted to 31.01.2010 for the purpose of provisioning.

30.06.2014 Account of CD turned NPA with 10.10.2014 PNB, Corporation Bank and UCO 31.12.2014 Bank 15.09.2015 SBI issued demand notice under Section 13(2) of SARFAESI Act.

26 Reserve Bank of India

Page 25 of 57 Civil Appeal No. 477/2022 30.09.2015 CD acknowledged debt in its Balance Sheets for FYs 2013-14 and 2014-15.

13.11.2015 CD sent reply to demand notice u/s 13(2) SARFAESI Act wherein it acknowledged the debt.

28.12.2015 SBI filed OA27 No. 21 of 2016 before DRT28.

28.01.2016 CD filed application u/s 17 of SARFAESI Act enclosing balance sheets dated 30.09.2015 for the FYs 2013-14 and 2014-15.

Note: DRT by its order dated 21.03.2024 dismissed the application filed by the CD.

02.08.2016 SBI filed application u/s 14 of SARFAESI Act. CMM29 Bangalore passed an order directing physical possession of plant and machinery.

24.04.2018 SBI filed application u/s 7 of IBC. 09.08.2018 After more than 3 years, CD filed its counterclaim before DRT in OA and thereby acknowledged its debt.

14.12.2018 NCLT passed CIRP Order.

(ii) Acknowledgement in the balance-sheets,

filed by CD, of its debts due to FCs would

extend the limitation period under Section 18

of 1963 Act, as held by this Court in Asset

Reconstruction Company (India) Ltd. v.

27 Original Application 28 Debt Recovery Tribunal 29 Chief Metropolitan Magistrate

Page 26 of 57 Civil Appeal No. 477/2022 Bishal Jaiswal & Anr.30 Further, the

balance-sheet(s) were signed by the

Director(s) of CD including the appellant, and

verified by their Chartered Accountant.

Therefore, the application under Section 7 of

IBC was not barred by limitation.

(iii) It is incorrect to state that the default, if

any, occurred on or before 31.01.2010,

because the account of CD was repeatedly

restructured between 2010 – 2014

whereunder CD was granted further

facilities/ concessions. Besides that, various

Working Capital Consortium Agreements were

executed between CD and Banks recording

admission of dues and grant of further credit

facilities, the last of which is dated

21.03.2014. As CD failed to adhere to the

terms of repayment even after restructuring,

the account with SBI, once again, turned NPA

30 (2021) 6 SCC 366

Page 27 of 57 Civil Appeal No. 477/2022 on 28.05.2014. This date was shifted back to

31.01.2010 for the purposes of provisioning

as per RBI norms, on account of failure of the

restructuring exercise. However, the date of

NPA remains 28.05.2014 as per IRAC norms

for accounts in the books of the bank.

(iv) The above facts were clarified through the

amended application, under Section 7 of IBC,

pursuant to the order of this Court dated

15.04.2021. The amended application

categorically mentions the date of default and

also how subsequent acknowledgements were

made by CD, thereby extending the period of

limitation.

(v) CIRP proceedings were not mala fide.

Rather, criminal proceedings were initiated by

CD to avoid repayment of credit facilities, and

those proceedings have been challenged

before the Karnataka High Court through

Criminal Petition No. 6885 of 2018, wherein

Page 28 of 57 Civil Appeal No. 477/2022 stay has been granted on 20.09.2018.

Further, mere filing of chargesheet does not

prove the allegations. Besides, the same

allegations made by the appellant before DRT

in TSA No. 9 of 2023 were discarded vide

order dated 21.03.2024.

(vi) Mere filing of counterclaim before DRT

would have no bearing on the outstanding

debt unless the same is decreed. Moreover,

the counterclaim was filed with the sole intent

to detract CIRP proceeding, which would be

clear from the following date(s) and event(s):

(a) SBI filed O.A. before DRT on

28.12.2015.

(b) Application under Section 7 was filed

on 24.04.2018.

(c) Counterclaim was filed by CD before

DRT on 09.08.2018 i.e., after filing of

application under Section 7.

Page 29 of 57 Civil Appeal No. 477/2022

(vii) There is nothing in IBC which interdicts a

CD from pursuing its remedies, as held by

this Court in Swiss Ribbons (supra).

Therefore, the counterclaim for compensation

would not come in the way of CIRP

proceeding. Moreover, the claim for

compensation would be deemed rejected on

dismissal of TSA No. 9 of 2023 by DRT vide

order dated 21.03.2024.

(viii) Once the Adjudicating Authority is

satisfied that there is a default of an amount

exceeding the threshold, there is hardly any

discretion left with the Adjudicating Authority

to refuse admission of an application under

Section 7 IBC, as held by this Court in M.

Suresh Kumar Reddy v. Canara Bank and

Others31.

25. Based on the above submissions, it was prayed on

behalf of the respondent that the appeal be dismissed.

31 (2023) 8 SCC 387

Page 30 of 57 Civil Appeal No. 477/2022 ISSUES

26. We have considered the rival submissions. In our

view, the main issues which arise for our consideration

in this appeal are:

(i) Whether the application under Section 7 of IBC

was liable to be dismissed for lack of material

particulars regarding the debt and date of default,

as required by Form I prescribed by the 2016

Rules?

(ii) Whether the application under Section 7 of IBC

was within limitation?

(iii) Whether the application under Section 7 of IBC

was for an oblique purpose and, therefore, ought

not to have been admitted, more so, when

proceedings inter se parties for recovery of debt

were pending before various judicial fora?

ANALYSIS

27. Before we proceed to address the issues, we must

bear in mind that these proceedings emanate from an

application under sub-section (1) of Section 7 of IBC.

Page 31 of 57 Civil Appeal No. 477/2022 Section 7 falls in Part II of IBC. Section 4 (1) of IBC,

which falls in Part II, states that this Part shall apply to

matters relating to the insolvency and liquidation of

corporate debtors where the minimum amount of

default is one lakh rupees. The Proviso to sub-section (1)

of Section 4 provides that the Central Government may,

by notification, specify the minimum amount of default

of a higher value, which shall not be more than one

crore rupees. In exercise of that power, vide notification

dated 24th March 2020, the Central Government

specified one crore rupees as the minimum amount of

default for the purposes of the said section. Thus, a

default of one crore rupees or above, post notification

dated 24th March 2020, is the threshold at which Part II

of IBC applies. In the aforesaid context, we shall

examine as to what are those essential ingredients

which an application under sub-section (1) of Section 7

of IBC must satisfy.

Page 32 of 57 Civil Appeal No. 477/2022 ESSENTIAL INGREDIENTS FOR AN APPLICATION UNDER SECTION 7(1) OF IBC

28. Sub-section (1) of Section 7 provides that an

application may be filed at the instance of a financial

creditor either by itself or jointly with other financial

creditors, or any other person on behalf of the financial

creditor, as may be specified by the Central

Government, when a default has occurred. Section 3

(12)32 of IBC defines default as non-payment of debt

when whole or any part or instalment of the amount of

debt has become due and payable and is not paid.

Explanation to sub-section (1) of Section 7 of IBC

clarifies that for the purposes of sub-section (1), 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.

Therefore, the essential ingredients which an application

under sub-section (1) of Section 7 must satisfy are: (a)

32 Section 3. – In this Code, unless the context otherwise requires, -

(12) “default” means any non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be;

Page 33 of 57 Civil Appeal No. 477/2022 the applicant must be a financial creditor; (b) there

must be a financial debt; (c) there must be a default in

respect of payment of financial debt owed not only to the

applicant financial creditor but to any other financial

creditor of the corporate debtor; and (d) the default must

not be of a value lower than the threshold specified

under Section 4 of IBC.

LIMITATION FOR FILING THE APPLICATION UNDER

SECTION 7

29. Even if the essential ingredients of an application

under Section 7 are satisfied, the application for

initiating CIRP is not to be entertained if it is not within

limitation. Section 238-A of IBC inserted by Act 26 of

2018 with effect from 06.06.2018 provides that the

provisions of 1963 Act would apply to proceedings or

appeals before the Adjudicating Authority, the NCLAT,

the Debt Recovery Tribunal or the Debt Recovery

Appellate Tribunal, as the case may be.

Page 34 of 57 Civil Appeal No. 477/2022

30. In B. K. Educational Services (P) Ltd. v. Parag

Gupta & Associates33 this Court held that the

definition of “default” in Section 3(12) of IBC uses the

expression “due and payable” followed by the expression

“and is not paid by the debtor or the corporate

debtor…”. It was held that when the expressions “due”

and “due and payable” occur in Sections 3 (11) and 3

(12) of IBC, they refer to a default which is non-payment

of a debt that is due in law i.e., such debt is not barred

by the law of limitation. Thus, the corporate insolvency

resolution process against a corporate debtor can only

be initiated either by a financial or operational creditor

in relation to debts which have not become time barred.

In addition to above, it was held that Article 137 of 1963

Act would be applicable to an application under Section

7 or 9 of IBC and that the right to sue accrues when

default occurs. Therefore, if the default has occurred

over three years prior to the date of filing of the

33 (2019) 11 SCC 633

Page 35 of 57 Civil Appeal No. 477/2022 application, the application would be barred under

Article 137 of 1963 Act.

31. In Sesh Nath Singh and Anr. v. Baidyabati

Sheoraphuli Cooperative Bank Ltd. and Anr.34 this

Court held that Section 238-A of IBC makes the

provisions of 1963 Act, as far as may be, applicable to

proceedings before NCLT and NCLAT, and since IBC

does not exclude the application of Sections 6 or 14 or

18 of 1963 Act to proceedings under IBC, the same

would be applicable to proceedings in NCLT/ NCLAT to

the extent feasible. In consequence, even if the default

had occurred more than three years prior to the date of

filing the application under Sections 7 or 9 of IBC, if

there had been acknowledgment of debt within three

years of filing the application, while the debt had not

become barred by time, the application would be within

limitation as the acknowledgment would extend the

period of limitation under Section 18 of 1963 Act.35

34 (2021) 7 SCC 313 35 Dena Bank (Now Bank of Baroda) v. C. Shivakumar Raddy and another, (2021) 10 SCC 330

Page 36 of 57 Civil Appeal No. 477/2022 FORM AND MANNER OF SUCH APPLICATION

32. Sub-section (2) of Section 7 provides the procedure

to be adopted in making an application under sub-

section (1) of Section 7. According to sub-section (2) of

Section 7, the application under sub-section (1) of

Section 7 by a financial creditor is to be made in such

form and manner and accompanied with such fee as

may be prescribed36.

33. In exercise of the powers conferred by clauses (c),

(d), (e) and (f) of sub-section (1) of Section 239 read with

Sections 7, 8, 9 and 10 of IBC, the Central Government

has notified the Insolvency and Bankruptcy (Application

to Adjudicating Authority) Rules, 201637. Rule 4 thereof

provides that an application under Section 7 of IBC

shall be made in Form 1, 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. Rule 10 thereof, with which we are not

36 Section 3 (26) - ‘prescribed’ means prescribed by rules made by the Central Government. 37 2016 Rules

Page 37 of 57 Civil Appeal No. 477/2022 concerned, provides for other procedural aspects

including fee.

34. As one of the issues i.e., issue (i), which arises for

our consideration, is whether the application was in

conformity with the Form prescribed, we deem it

appropriate to reproduce Form 1 below:

Form 1 [See sub-rule (1) of Rule 4] 5 [APPLICATION BY FINANCIAL CREDITOR(S) TO INITIATE CORPORATE INSOLVENCY RESOLUTION PROCESS *UNDER CHAPTER II OF PART II/ UNDER CHAPTER IV OF PART II OF THE CODE [*strike out whichever is not applicable]] [Under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016] [Date] To, The National Company Law Tribunal [Address] From, [Names and addresses of the registered offices of the financial creditors] In the matter of [name of the corporate debtor] Subject : Application to initiate corporate insolvency resolution process in the matter of [name of the corporate debtor] under the Insolvency and Bankruptcy Code, 2016 Madam/Sir, [Names of the financial creditor(s)], hereby submit this application to initiate a corporate insolvency resolution process in the matter of [name of corporate debtor]. The details for the purpose of this application are set out below:

Part I PARTICULARS OF APPLICANT (PLEASE PROVIDE FOR EACH FINANCIAL CREDITOR MAKING THE APPLICATION)

1. NAME OF FINANCIAL CREDITOR

Page 38 of 57 Civil Appeal No. 477/2022

2. DATE OF INCORPORATION OF FINANCIAL CREDITOR

3. IDENTIFICATION NUMBER OF FINANCIAL CREDITOR

4. ADDRESS OF THE REGISTERED OFFICE OF THE FINANCIAL CREDITOR

5. NAME AND ADDRESS OF THE PERSON AUTHORISED TO SUBMIT APPLICATION ON ITS BEHALF (ENCLOSE AUTHORISATION)

6. NAME AND ADDRESS OF PERSON RESIDENT IN INDIA AUTHORISED TO ACCEPT THE SERVICE OF PROCESS ON ITS BEHALF (ENCLOSE AUTHORISATION) Part II PARTICULARS OF THE CORPORATE DEBTOR

1. NAME OF THE CORPORATE DEBTOR

2. IDENTIFICATION NUMBER OF CORPORATE DEBTOR

3. DATE OF INCORPORATION OF CORPORATE DEBTOR

4. NOMINAL SHARE CAPITAL AND THE PAID-UP SHARE CAPITAL OF THE CORPORATE DEBTOR AND/OR DETAILS OF GUARANTEE CLAUSE AS PER MEMORANDUM OF ASSOCIATION (AS APPLICABLE)

5. ADDRESS OF THE REGISTERED OFFICE OF THE CORPORATE DEBTOR 6 [6. DETAILS OF THE CORPORATE DEBTOR AS PER THE NOTIFICATION UNDER SECTION 55 (2) OF THE CODE—

(i) ASSETS AND INCOME

(ii) CLASS OF CREDITORS OR AMOUNT OF DEBT

(iii) CATEGORY OF CORPORATE PERSON (WHERE APPLICATION IS UNDER CHAPTER IV OF PART II OF THE CODE)] Part III PARTICULARS OF THE PROPOSED INTERIM RESOLUTION PROFESSIONAL

1. NAME, ADDRESS, EMAIL ADDRESS AND THE REGISTRATION NUMBER OF THE PROPOSED INTERIM RESOLUTION PROFESSIONAL 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 DEBT [DOCUMENTS, RECORDS AND EVIDENCE OF DEFAULT]

1. PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS ESTIMATED VALUE AS PER THE CREDITOR

Page 39 of 57 Civil Appeal No. 477/2022 ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES (IF THE CORPORATE DEBTOR IS A COMPANY)

2. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON THE DEFAULT, IF ANY (ATTACH A COPY OF THE ORDER)

3. RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY (ATTACH A COPY OF SUCH RECORD)

4. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER OF ADMINISTRATION, OR COURT DECREE (AS MAY BE APPLICABLE), UNDER THE INDIAN SUCCESSION ACT, 1925 (10 OF 1925) (ATTACH A COPY)

5. THE LATEST AND COMPLETE COPY OF THE FINANCIAL CONTRACT REFLECTING ALL AMENDMENTS AND WAIVERS TO DATE (ATTACH A COPY)

6. A RECORD OF DEFAULT AS AVAILABLE WITH ANY CREDIT INFORMATION COMPANY (ATTACH A COPY)

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 I, hereby certify that, to the best of my knowledge, [name of proposed insolvency professional], is fully qualified and permitted to act as an insolvency professional in accordance with the Insolvency and Bankruptcy Code, 2016 and the associated rules and regulations.

7 [Name of the financial creditor] has paid the requisite fee for this application through [state means of payment] on [date] and served a copy of this application by registered post/speed post/by hand/electronic means to the registered office of the corporate debtor and to the Board]. Yours sincerely, Signature of person authorised to act on behalf of the financial creditor Name in block letters Position with or in relation to the financial creditor Address of person signing Instructions Please attach the following to this application:

Annex I Copies of all documents referred to in this application. Annex II Written communication by the proposed interim resolution

Page 40 of 57 Civil Appeal No. 477/2022 professional as set out in Form, 2.

Annex Proof that the specified application fee has been paid. III Annex Where the application is made jointly, the particulars specified in IV this form shall be furnished in respect of all the joint applicants along with a copy of authorisation to the financial creditor to file and act on this application on behalf of all the applicants.

8 [Annex Proofs of serving a copy of the application (a) to the corporate V debtor, and (b) to the Board.]

RELEVANCE OF THE FORM

35. Statutory Form 1 under Rule 4 (1) of the 2016

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 require

particulars of financial debt with documents, records

and evidence of default including the date on which

the default occurred. We are concerned with

compliance of Parts IV and V.

36. The purpose of providing the necessary

particulars in a prescribed form is to give a bird’s eye

Page 41 of 57 Civil Appeal No. 477/2022 view of the details of the corporate debtor, the financial

debt, the default and the date of default so that the

Adjudicating Authority can discard frivolous

applications at the threshold. This is clear from clause

(b) of sub-section (5) of Section 7 of IBC which

empowers the Adjudicating Authority to reject an

incomplete application. However, as per the proviso to

clause (b) of sub-section (5) of Section 7, if the

application is incomplete, the Adjudicating Authority is

required to give notice to the applicant to rectify the

defects within 7 days of receipt of such notice before

rejecting the application.

37. In Dena Bank38, upon consideration of the

provisions of IBC and the Rules and Regulations

framed thereunder, this Court held that the provisions

of IBC and the Rules and Regulations framed

thereunder must be construed liberally and in a

purposive manner to further the objects of enactment

of the statute, and should not be given a narrow and

38 See Footnote 35

Page 42 of 57 Civil Appeal No. 477/2022 pedantic interpretation which defeats the purpose of

the Act. This Court on a careful reading of the

provisions of IBC, and particularly the provisions of

sub-sections (2) to (5) of Section 7 read with the 2016

Rules, held that 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. It was also held that 14 days’ time, stipulated

in Section 7(4) to ascertain the existence of a default

and of curing the defects in 7 days of receipt of notice

under the proviso to sub-section (5) of Section 7, is

directory and not mandatory, and in an appropriate

case, the adjudicating authority may accept the cured

application even after the expiry of the aforesaid

period.

38. In E.S. Krishnamurthy & Ors v. Bharath Hi-

Tech Builders (P) Ltd.39, after noticing the earlier

decisions, this Court held that to assess whether the

corporate debtor is in default, the adjudicating

39 (2022) 3 SCC 161, paragraphs 30 and 34

Page 43 of 57 Civil Appeal No. 477/2022 authority has to merely see the records of the

information utility or other evidence produced by the

financial creditor to satisfy itself that a default has

occurred. It is of no consequence that the debt is

disputed so long as the debt is due i.e., payable, unless

interdicted by some law or has not yet become due in

the sense that it is payable at some future date. It was

held that the adjudicating authority thus has only to

verify whether an application under sub-section (2) is

complete and whether a default above the specified

threshold has occurred.

39. In M. Suresh Kumar Reddy (supra), a decision

relied by the respondents, after considering the earlier

decisions, this Court clarified that the decision in

Vidharba Industries (supra), a decision relied upon

by the appellant, was confined to its own facts and

cannot be read and understood as taking a view

contrary to the one taken in Innoventive (supra) and

E. S. Krishnamurthy (supra). Consequently, it was

held, once the Adjudicating Authority (NCLT) is

Page 44 of 57 Civil Appeal No. 477/2022 satisfied that a default has occurred, there is hardly

any discretion left with it to deny admission of the

application under Section 7 of IBC.40

40. In our view, a conjoint reading of sub-sections (1),

(2) and (5) of Section 7 makes it clear that an

application under Section 7 of a financial creditor for

initiating CIRP of CD hinges on a default on part of CD

of financial debt of an amount exceeding the specified

threshold. The Form prescribed for making the

application inter alia serves the purpose of bringing out

the necessary ingredients for presentation of an

application under Section 7(1) of IBC. The purpose of

providing the date of default is to show that the debt is

due and payable i.e., it has not become time barred.

Therefore, in our view, if the application is

substantially in conformity with the prescribed Form

and discloses the necessary ingredients for making an

application under sub-section (1) of Section 7 and

provides the relevant materials/ information to

40 See paragraph 11 of M. Suresh Kumar Reddy (citation at Footnote 31)

Page 45 of 57 Civil Appeal No. 477/2022 substantiate those ingredients, the purpose of

adhering to the Form is served, and such application is

not liable to be rejected under clause (b) of sub-section

(5) of Section 7 of IBC on the ground of any

insignificant omission or error in the application. The

aforesaid view finds support from use of the expression

‘may’ before ‘reject’ in Section 7(5)(b) of IBC. This

means that if the Adjudicating Authority is satisfied

from the materials placed before it in the application

that all the necessary ingredients are satisfied for

presentation of an application under Section 7(1) of

IBC, it may not reject the application for an

insignificant omission or non-adherence to the Form.

41. In light of the aforesaid legal position, we will

consider the issues posited above.

ISSUE (I)

42. In the present case, there is no dispute about the

existence of financial debt and default. The dispute is

as regards the date of default. Date of default assumes

importance because it is the factor which determines

Page 46 of 57 Civil Appeal No. 477/2022 whether the application under sub-section (1) of Section

7 is within limitation or not. The argument on behalf of

the appellant that the application does not specify the

exact date of default but only the date on which the debt

was declared NPA and, therefore, was liable to be

rejected, in our view, is misconceived as the application

was comprehensively amended pursuant to the order of

this Court in the earlier round of litigation. The

amended application was taken on record by the order

of NCLAT dated 15.07.2021. Once the amended

application was accepted on record, it became part of

the record and had to be considered.

43. The argument that amendments were more

extensive than what was permitted by this Court cannot

be accepted considering the decision of this Court in

Dena Bank (supra) where the power of the Adjudicating

Authority to allow rectification of application and

acceptance of documents beyond the stipulated time

frame was recognized.

Page 47 of 57 Civil Appeal No. 477/2022

44. The amended application and the documents

placed gave the material particulars of how the debt was

restructured and fresh working capital consortium

agreements were entered into. In that context, the dates

on which the accounts were declared NPA were

portrayed as the date(s) of default. These NPA dates

were 28.5.2014, 30.6.2014, 10.10.2014 and 31.12.2014

for SBI, PNB, Corporation Bank and UCO Bank

respectively. The application also disclosed that on

30.09.2015, CD’s debt was disclosed in the balance

sheets of the year ending 31.03.2014 and 31.03.2015,

signed by one of its directors /officers.

45. What is important here is that CD and the

creditors undertook a debt restructuring exercise and in

connection therewith various Working Capital

Consortium agreements were executed and signed

acknowledging the existing debt, thereby giving it a

fresh lease of life. In that context, as to when the initial

default had occurred lost its relevance because, by

virtue of the restructuring exercise and subsequent

Page 48 of 57 Civil Appeal No. 477/2022 agreements, the existing debt got a fresh lease of life. In

such circumstances, the disclosure of NPA date(s) as the

date(s) of default was justified which, coupled with

acknowledgment in the balance sheets, served the

purpose of indicating that the debt was not time barred

as on 25.04.2018 i.e., the date of presentation of the

Section 7 application. We are therefore of the view that

the amended application under Section 7 disclosed all

the material particulars to fulfill the ingredients of an

application under Section 7(1) of IBC. Issue No.(i) is

decided in the aforesaid terms.

ISSUE (II)

46. On the issue as to whether the Section 7

application was within limitation, the application was

presented on 25.04.2018 i.e., within three years from

30.09.2015 i.e., the date on which CD’s balance sheets

for the year ending 31.03.2014 and 31.03.2015 were

signed. An acknowledgment of debt in the balance sheet

of the CD is considered sufficient to extend the period of

limitation if other conditions of a valid acknowledgment

Page 49 of 57 Civil Appeal No. 477/2022 are fulfilled41. To wriggle out from the consequences of

the aforesaid acknowledgement, the appellant has

raised a plea that the balance sheets were not submitted

for approval of the members of CD and were not

authenticated by the person authorized. What

transpires from the record is that the balance sheets

were signed by one of the directors of CD and were

brought on record by CD itself in S.A. No.152 of 2016

for challenging the measures taken by the Banks under

the SARFAESI Act42.

47. Section 18 of 1963 Act provides that 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 limitation shall be computed from the

time when the acknowledgement was so signed. Clause

41 Asset Reconstruction Company v. Bishal Jaiswal (See Footnote 30)

42 See: Paragraph 9 of Written Submissions on behalf SBI

Page 50 of 57 Civil Appeal No. 477/2022

(a) of the Explanation to Section 18 provides that an

acknowledgement may be sufficient though it omits to

specify the exact nature of the property or right, or avers

that the time for payment, delivery, performance or

enjoyment has not yet come or is accompanied by a

refusal to pay, deliver, perform or permit to enjoy, or is

coupled with a claim to set off, or is addressed to a

person other than a person entitled to the property or

right. Clause (b) of the said Explanation provides that

for the purposes of Section 18, the word ‘signed’ means

signed either personally or by an agent duly authorized

in this behalf. A director of a company can be

considered its agent for the purposes of Section 18 of

1963 Act.

48. As there appears no dispute that the director of CD

had signed the balance sheets and those were produced

by CD in proceedings before DRT, the acknowledgment

therein of the debt, albeit with a caveat that the recovery

matter is sub judice before DRT, in our view, would be

Page 51 of 57 Civil Appeal No. 477/2022 sufficient to serve as an acknowledgment within the

purview of Section 18 of 1963 Act.

49. Thus, we find no error in the view taken by NCLAT

that such acknowledgement had the effect of extending

the period of limitation by three years starting from

30.09.2015. Insofar as the claim that acknowledgment

was not made within three years from the date of default

is concerned, suffice it to say that from time-to-time

various Working Capital Consortium Agreements were

executed between CD and the Banks. As many as four

such agreements i.e., dated 18.03.2010, 30.03.2011,

18.04.2013 and 21.03.2014, were set up in the

amended application to indicate that CD availed fresh

credit facilities and in the process acknowledged its past

liability. In such circumstances, NCLAT was correct in

holding that the acknowledgment was within the period

of limitation and, therefore, the period of limitation

would run till 29.09.2018. In consequence, the Section

7 application filed on 25.04.2018 was within the period

of limitation as prescribed by Article 137. Page 52 of 57 Civil Appeal No. 477/2022

50. At this stage, we shall deal with another submission

made on behalf of the appellant. According to the

appellant, NCLAT had observed that NPA date in respect

of credit facilities extended by SBI was shifted to the

year 2010 as per RBI master circular dated 01.07.2013,

therefore, if the date of NPA falls in the year 2010, the

acknowledgement in the balance sheet(s) made on

30.09.2015 would be beyond the period of three years.

Consequently, it would not extend the limitation period.

The aforesaid submission is out of context. NCLAT had

not observed that the date of default would fall in the

year 2010. Rather, NCLAT referred to the master

circular of RBI to indicate that the shifting of NPA date

to the year 2010 was merely for bank’s asset

classification. In our view, how a bank classifies its debt

for managing its balance sheet is not a factor

determining the starting point of limitation more so,

when the debt is restructured and is acknowledged in

fresh working capital consortium agreements entered for

availing credit facilities. What is relevant is that by

Page 53 of 57 Civil Appeal No. 477/2022 virtue of execution of these working capital consortium

agreements the banks got a fresh lease of life for their

dues and based on those agreements, new NPA date(s)

became relevant as starting point for computing

limitation.

51. In Axis Bank Limited v. Naren Seth and

another43, this Court held that a one-time settlement

proposal of the debtor can constitute a valid

acknowledgment. Likewise, in Dena Bank (supra), this

Court held that an offer for one-time settlement of a live

claim, made within the period of limitation, can be

construed as an acknowledgment to attract Section 18

of 1963 Act. In light thereof, if CD had entered into

various working capital consortium agreements with the

Banks while availing further credit facilities and in the

process acknowledged its past debt, it would constitute

a valid acknowledgment for extending the limitation

period. Thus, the NPA dates, based on subsequent

working capital consortium agreements, coupled with

43 (2024) 1 SCC 679

Page 54 of 57 Civil Appeal No. 477/2022 acknowledgment of debt(s) in the balance sheets signed

on 30.09.2015, extended the limitation period up to

29.09.2018, within which the Section 7 application

came to be filed.

52. Another argument that NPA date in the earlier

order of NCLT / NCLAT was found to be falling in the

year 2010 therefore the application was time barred, is

also worthy of rejection. This is because the earlier order

of NCLAT was set aside and, subsequently, the Section 7

application was comprehensively amended under order

of this Court which has attained finality. As a result,

there was no bar for NCLAT to return a fresh finding

regarding the date on which the account was declared

NPA. In consequence, we do not find any error in the

finding returned by NCLAT that the Section 7

application was within limitation. Issue No. (ii) is

decided accordingly.

ISSUE (III)

53. The next issue raised on behalf of the appellant is

that the application under Section 7 was filed with an

Page 55 of 57 Civil Appeal No. 477/2022 oblique purpose to stall the proceedings initiated by the

Banks at other fora and to penalize CD for initiating

criminal proceedings against the Banks. In addition, it

is submitted on behalf of the appellant that a

counterclaim of Rs.1500 crores was set up, which was

more than the outstanding debt, and therefore, the

application under Section 7 of IBC was submitted to

avoid the consequences of those proceedings.

54. We do not find any substance in the aforesaid plea

as initiation of proceedings by a financial creditor under

other statutes does not bar filing of an application under

the provisions of IBC. Moreover, mere pendency of a

counterclaim for damages against a financial creditor

will not operate as a bar on the right of the financial

creditor to invoke the provisions of IBC.

55. Insofar as the institution and pendency of criminal

proceedings are concerned, they will be decided on their

own merits. Besides, mere allegations about commission

of offences by officers of the financial creditor cannot

stifle proceedings under IBC, particularly when those

Page 56 of 57 Civil Appeal No. 477/2022 offences have no bearing on the existence of the

financial debt. Issue No. (iii) is decided in terms above.

CONCLUSION

56. In conclusion, we find no merit in the appeal. The

same is dismissed. Interim order, if any, is discharged.

57. Pending applications, if any, shall stand disposed of.

.....................................J. (P. S. NARASIMHA)

...................................J. (MANOJ MISRA)

New Delhi;

February 12, 2026

Page 57 of 57 Civil Appeal No. 477/2022