Raghav Butola vs Jammu And Kashmir Bank

IN THE MATTER OF: Raghav Butola Suspended Director of Perfect Radiators & Oil Coolers Pvt. Ltd. ...Appellant

Versus

Jammu and Kashmir Bank ...Respondent

Present: For Appellant : Ms. Madhumita Bhattacharjee, Mr. Anant, Advocates. For Respondent :

ORDER

(Hybrid Mode)

03.02.2026: Heard learned counsel for the Appellant. This Appeal has

been filed against the order dated 07.01.2026 passed by the Adjudicating

Authority by which Section 7 application filed by the Jammu and Kashmir

Bank has been admitted. The application was filed by the Financial Creditor

claiming default of Rs.63,16,83,242/- as on 31.12.2024. the date of default

was mentioned as 31.01.2019. The Adjudicating Authority admitted the

application, which order is challenged in this appeal.

2. Learned counsel for the Appellant challenging the order submits that

the application was barred by time and ought to have been rejected. It is

further submitted that the Adjudicating Authority has adjusted the amount

which was part of the resolution plan of the Principal Borrower and another

Corporate Guarantor which ought not to have been adjusted and that should

have been part of Form-1 and since proceeding under Section 7 is not a

Cont'd.../ recovery forum, hence, the Adjudicating Authority committed error in

adjusting the debt of the Financial Creditor. It is submitted that on the said

grounds the application was liable to be rejected.

3. We have considered the submissions of learned counsel for the

Appellant and perused the record.

4. The Adjudicating Authority in the impugned order has framed the issue

regarding limitation as well as whether there was a debt. On question of

limitation in Para 22 of the impugned order following observation has been

made:

"22. For examining this issue, it is necessary to take into account the events that occurred after the account of the Principal Borrower was declared NPA on 31.01.2019. The Applicant issued a statutory notice under Section 13(2) of the SARFAESI Act on 12.03.2019. For settlement of liability, Principal Borrower gave OTS Proposal vide letter dated 03.12.2019. In terms of Article 137 of the Limitation Act, 1963, the Applicant was entitled to a period of three years from the date of default to initiate action. During the period of limitation of three years applicable for the Principal Borrower, the Applicant Financial Creditor invoked the Corporate Guarantee on 12.02.2020 and 01.01.2022, calling upon the Corporate Debtor/Guarantor herein to pay the outstanding debt within the period of seven days. As neither the Principal Borrower nor the Corporate Debtor discharged the outstanding liability despite issuing of these demand notices, a fresh cause of action has accrued to the Applicant in respect of the Corporate

Company Appeal (AT) (Ins.) No. 240 of 2026 2 of 7 Guarantor as the limitation for filing the insolvency application against the Corporate Guarantor starts after a default is committed by the Corporate Guarantor in paying the debt demanded in the guarantee invocation notice. The first guarantee invocation letter was issued on 12.02.2020, in which 7 days' time was given for the payment of debt, but the same was not paid, therefore, the date of default in case of the Corporate Guarantor herein can be said to have occurred on 19.02.2020. Thereafter, considering the order of the Hon'ble Supreme Court in In Re:

Cognizance for Extension of Limitation, (2022) 3 SCC 117, after excluding the period falling between 15.03.2020 to 28.02.2022, the period of limitation would extend up to 03.02.2025 [total days available of 1095 (-) 25 days expired up to 15.03.2020]. During the duration of the said period, the outstanding debt has also been acknowledged by the Principal Borrower/Corporate Debtor in its Balance Sheet of the FYs 2021-2022 and 2023-24, which constitute acknowledgements under Section 18 of the Limitation Act, 1963. As a result, the limitation period stood extended up to 31.03.2027, taking into account the acknowledgement reflected in the Balance Sheet for FY 2023-24. This application was filed on 14.04.2005, which is well within the period of limitation. Recently, the Hon'ble NCLAT, New Delhi, in the matter of UCO Bank v. Poddar Mech Tech Services Pvt. Ltd., (2025) ibclaw.in 1125 NCLAT held that an entry made in the books of account, including the balance sheet of Principal Borrower amounts to an acknowledgment by Guarantor within the meaning of Section 18 of the Limitation Act. The relevant paras of the said judgement are reproduced below: -

Company Appeal (AT) (Ins.) No. 240 of 2026 3 of 7 ........."

5. Learned counsel for the Appellant submits that admittedly, the date of

default which was claimed in Form-1 itself was 31.01.2019 and guarantee

against the Corporate Debtor was invoked on 12.02.2020, hence, limitation

shall begin from 12.02.2020 and even after giving benefit of Covid period as

per the order of the Hon'ble Supreme Court in In Re: Cognizance for

Extension of Limitation, (2022) 3 SCC 117, Application filed on 14.04.2025

was much beyond time.

6. Admittedly, the guarantee was invoked on 12.02.2020, hence, three

years' period shall commence from the said date. The Adjudicating Authority

has returned a finding that in Balance Sheet of the year 2021-22 and 2023-

24, there is acknowledgment, which is acknowledgment within the meaning

of Section 18 of the Limitation Act, therefore, limitation period stood extended

and Application filed on 14.04.2025 is well within time. The Hon'ble Supreme

Court in the matter of "Asset Reconstruction Co. (India) Ltd. Vs. Bishal

Jaiswal, (2021) 6 SCC 366", held that acknowledgment in the balance sheet

is acknowledgement within the meaning of Section 18 of the Limitation Act.

We, thus, are of the view that the Adjudicating Authority has rightly come to

the conclusion that application filed on 14.04.2025 is not barred by time and

by virtue of Section 18 the limitation shall extend and the application is well

within time.

7. The next submission raised by learned counsel for the Appellant is that

Section 7 application is not recovery proceeding, hence, the Adjudicating

Authority ought not to adverted to the amount received in liquidation

Company Appeal (AT) (Ins.) No. 240 of 2026 4 of 7 proceeding of the Principal Borrower and CIRP of Himalayan Mineral and

Water Pvt. Ltd. In Para 27 of the order, the Adjudicating Authority has made

following observation:

"27. We have considered the above submissions of the Corporate Debtor. After examination of the records connected with the above-mentioned two proceedings i.e. one liquidation proceeding against the Principal Borrower and second insolvency proceeding against the Corporate Guarantor, M/s Himalayan Mineral Waters Pvt Ltd., we find that during the liquidation proceeding of the Principal Borrower, though Rs. 49,57,94,158/- was admitted by the Liquidator but an amount of Rs. 9,31,52,095.23/- was only paid to the Applicant Financial Creditor. In resolution proceeding of Himalayan Minerals Pvt. Ltd., though claim of Rs. 58,18,76,715/- was admitted by the Resolution Professional but only Rs. 2,39,97,861/- approximately is computed to be payable to the Applicant Financial Creditor on approval of the Resolution Plan based on the size of the Plan: Thus, out of the total outstanding dues of Rs. 63,16,83,342.24/- payable by the Principal Borrower, the Applicant Financial Creditor has already been paid Rs. 9,31,52,095.23/- from the liquidation proceedings against the Principal Borrower. The balance amount of Rs. 2,39,97,861/- is payable from another Corporate Guarantor in terms of its approved resolution plan. Therefore, a substantial amount of debt of the Principal Borrower due to be paid to the Applicant Financial Creditor herein is still outstanding. Thus, the present Corporate Debtor being the second Corporate Guarantor against whom the present Application has been filed, this Application

Company Appeal (AT) (Ins.) No. 240 of 2026 5 of 7 against it would be considered for its resolution in respect of the remaining debt of Rs. 51,45,33,386 (Rs.

63,16,83,342.24 - [Rs. 9,31,52,095.23+ Rs. 2,39,97,861]), which have remained unpaid by the Corporate Debtor herein even after invocation of the corporate guarantee against it. This debt is much beyond the threshold of Rs. 1 crore as contemplated under the provisions of the Code."

8. The Adjudicating Authority has noted claim of debt and default

amounting to Rs.63,16,83,342/- and observation in Para 27 are made by the

Adjudicating Authority while considering the question, "Whether there is debt

and default within the meaning of the IBC?". The Adjudicating Authority has

taken note of the liquidation proceeding of the Principal Borrower and another

Corporate Guarantor of the Corporate Debtor and the amount which was

given to the Corporate Debtor in resolution Process has been mentioned and

finding has been returned that even after giving benefit of said amount

received, still there is debt due, hence, said observation was only in reference

to finding out debt and default on the part of the Corporate Debtor for the

purpose of Section 7 application. For finding debt and default, the

Adjudicating Authority has not committed any error in taking into

consideration the amount received by the Corporate Debtor by the Liquidator

of the Principal Borrower and CIRP of another Corporate Guarantor.

9. Learned counsel for the Appellant has further submitted that in Form-

1, the Financial Creditor has not disclosed all relevant facts which has been

taken into consideration by the Adjudicating Authority in Para 27.

Company Appeal (AT) (Ins.) No. 240 of 2026 6 of 7

10. The Form-1 which is filed by the Financial Creditor is part of the record

and has been filed by the Appellant as annexure to the appeal. In Part IV of

the Form-1 the details of debt and date of default has been pleaded. Learned

counsel for the Appellant has taken exception to the amounts which have

been recorded with regard to liquidation of the Principal Borrower and

resolution process of the another Corporate Guarantor. In so far as filing of

Form-1, the necessary ingredients for proving debt and default are mentioned

in Form-1. When the Form-1 and application was found complete, the

Adjudicating Authority could have proceeded to admit the application. As far

as amount of liquidation and CIRP of the Corporate Guarantor is concerned,

those are resolution made by the Adjudicating Authority itself and matter of

public knowledge, hence, there cannot be said to be any suppression on the

part of the Applicant.

11. We, thus, are of the view that there is no an error on which this Tribunal

may interfere with the order admitting Section 7 application. We, thus, are of

the view that there are no good grounds to entertain this appeal. Appeal is

dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Archana/md

Company Appeal (AT) (Ins.) No. 240 of 2026 7 of 7