Reliance Asset Reconstruction Company ... vs Narendra Plastics Private Limited

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins) No. 779 of 2021

IN THE MATTER OF:

Reliance Asset Reconstruction Company Ltd. 11th Floor, North Side, R-Tech Park, Western Express Highway, Goregaon (East) Mumbai - 400 063 Acting in its capacity as trustee of the Reliance ARC 001. ...Appellant

Vs. Narendra Plastics Pvt. Ltd. 3, Vakil Industrial Estate, Walbhat Road, Goregaon (East) Mumbai - 400 063 ...Respondent

Present: For Appellant: Mr. Arvind Nayyar, Sr. Advocate with Mr. Amit Mahaliyan and Mr. Akshay Joshi, Advocates.

For Respondents: Mr. Ramji Srinivasan, Sr. Advocate with Ms. Jyoti Sinha, Mr. C. Nageshwaran, Mr. Prateek Kumar, Ms. Raveena Rai and Ms. Smriti Nair, Advocates.

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The appeal has been filed by the 'Appellant' - 'Reliance Asset Reconstruction Company

Limited' under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in short

'Code') against the 'impugned order' dated 13.08.2021 passed by the 'Adjudicating

Company Appeal (AT) (Ins) No.779 of 2021 Page 1 of 25 Authority' (National Company Law Tribunal), Mumbai Bench - (C-III) in CP (IB)-

1864/MB/2019 .

2. The Appellant Company is registered as a 'Securitization Company' and 'Reconstruction

Company' pursuant to Section 3 of 'The Securitization and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002' (for short SARFAESI Act) and

acting in its capacity as a 'Trustee' of the 'Reliance ARC 001'. It is the case of the

'Appellant Company' that the CD / Respondent in the year 2012 had approached ING

Vyasya Bank Limited (Bank) for grant and sanction of cash credit facilities for an amount

of Rs.10 crore. The Bank had sanctioned a cash credit facility for Rs. 2 crores to the CD.

The CD had created 'Security Interest' on movable properties of the CD/its guarantors

/mortgagors to secure the said financial facilities. The CD again approached the bank for

grant of additional ad hoc credit facilities of Rs. 10 Crore and working capital demand loan

of Rs. 50 lakhs in the year 2013 over and above the said cash credit facilities as stated

above. The additional facilities were also secured by the interest on moveable properties of

the CD/its guarantors /mortgagors to secure the said additional financial facilities.

3. The Ld. Sr. Counsel for the Appellant has also stated that the above said loan facilities was

disbursed, availed and utilized by the CD /Respondent . The CD failed to pay the 'dues'

and have 'defaulted' and it was also stated that they failed to observe other terms and

conditions of the said sanction loans/security documents executed and accordingly the ING

Vyasya Bank Limited (Bank) as per 'RBI Regulations' declared 'Non-performing Asset'

(NPA) on 30.06.2014. it was also stated by him that as per the audited Balance Sheet as on

31.03.2014, the CD was referred to BIFR to seek declaration as 'sick unit' and the same

was registered on 15.07.2014. They have also stated that once a reference of filing before

BIFR has been made under the provisions of Section 22 of SICA it gets into operation

Company Appeal (AT) (Ins) No.779 of 2021 Page 2 of 25 and all legal proceedings gets suspended as per the provisions of SICA. It is also revealed

from the pleadings that the Bank has assigned the 'Debt' of the CD to the present Appellant

Company vide 'Assignment Agreement' dated 19.09.2014 . The Bank subscribed 85% of

the security receipt issued under the said assignment. It was also stated that through this

assignment all the 'Debt' of the CD alongwith underlying assets / securities mortgaged to

the 'Assigner' was assigned to the Appellant and the said Appellant was empowered to

take all the measures prescribed under law for recovery of 'Debt' from the CD. It was also

mentioned that the Bank, as stated above, merged with the 'Kotak Mahindra Bank' w.e.f.

01.04.2015 pursuant to an order of RBI dated 31.03.2014, as a result of which all incidental

rights of bank vested with 'Kotak Mahindra Bank'. The Appellant Company acting on

behalf of Reliance ARC 001 Trust had issued notice dated 25.05.2015 u/s 13 of the

'SARFAESI Act' to the CD and Guarantors raising a demand of Rs. 13,55,26,323/-

together with further interest thereon @13.73% p.a. till realization of full payment from

the CD and its Guarantor. It was also stated that the CD has never disputed its liability in

any of the replies sent to the Appellant by the CD. On getting the SICA repealed, the CD

came out of BIFR on 01.12.2016 and accordingly as per provisions of SICA, particularly,

Section 22(1) of SICA computation of Limitation which got halted, was again started

running from 02.12.2016. As per the Appellant, the CD was before BIFR from 15.07.2014

to 01.12.2016 requires to be excluded in computation of Limitation period for filing

application under Section 7 of the Code before the Adjudicating Authority. It was also

stated that the CD has issued one more letter dated 30.07.2016 (appearing at page 68 of

the Reply on behalf of the Respondent Volume -I) acknowledging its outstanding liabilities

/ dues payable to the Appellant Company and, thereafter, the CD has submitted a

'Settlement Proposal' to the Appellant Company vide letter dated 02.03.2017 (appearing

Company Appeal (AT) (Ins) No.779 of 2021 Page 3 of 25 at page no. 71 of the Reply on behalf of Respondent Volume -I). No doubt, it was rejected

by the Bank for being at a lower side. The CD has, thereafter, sent another revised

settlement proposal vide letter dated 08.03.2018 (appearing at page 75 of the Reply on

behalf of the Respondent), 26.06.2018 (appearing at page 77 of the Reply on behalf of the

Respondent) and Letter dated 04.12.2018 (appearing at page 81 of the Reply on behalf of

the Respondent).

4. It was also stated by the Ld. Sr. Counsel for the Appellant that the Bank/Financial Creditor

had rejected the said 'Settlement Proposals' vide letter dated 12.02.2019. The 'Settlement

Proposals' are construed as fresh acknowledgment of liability and from each of such

'Settlement Proposals' , time to file application under Section 7 of the Code was extended

from time to time and they are entitled to file application under Section 7 within three years

from 04.12.2018 as per Section 18 of the Limitation Act, 1963 R/w Article 137 of the

Limitation Act, 1963. It is sated by the Ld. Sr. Counsel for the Appellant that the Appellant

Company initiated the 'Corporate Insolvency Resolution Process' (CIRP) process on

07.05.2019 which is within three years from last of such acknowledgment of liabilities i.e.

04.12.2018.

5. The Appellant while asserting that the present appeal is not barred by limitation has cited

hon'ble Supreme Court Judgment in case of Gaurav Hargovindbhai Dave Vs. Asset

reconstruction Company (India) Limited & Anr. (2019) 10 SCC 572 para 3 & 6 wherein it

has been held "period of limitation commences from the date of NPA". The Appellant has

further cited the judgment as given below to amplify that the fresh period of limitation is

computed from the Debt of acknowledgment of Debt by the borrower from time to time

based on last communications:

A. State Bank of India Vs. Kaushuv Ray & Anr. (Civil Appeal No. 979/2021)

Company Appeal (AT) (Ins) No.779 of 2021 Page 4 of 25 Para 3 - Before this Court, the Appellant has relied upon

certain material in the form of correspondences during the

years 2014 to 2017 and balance sheets for the Financial

Years ending 2015, 2016, 2017, 2018 and 2019 to show that

the application filed under Section 7, IBC was within the

period of limitation. Admittedly, the material relied upon by

the Appellant was not before the Adjudicating Authority. The

Appellant placed reliance upon the judgment of this court in

Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal

& Anr. reported in (2021) 6 SCC 366, to submit that the

matter be remanded back to the NCLAT, after the Appellant

is granted permission to place additional material on record.

Para 5 - An Interlocutory Application has been filed on behalf

of the Appellant seeking permission to amend the application

under Section 7, IBC, along with all the relevant annexures.

Significant amount of money is due to the Appellant which is

disputed by the Corporate Debtor. We grant permission to the

Appellant to amend the application under Section 7, IBC,

subject to payment of cost of Rs. 1,00,000/- by the Appellant

to the Corporate Debtor. The appropriate forum to consider

the amended application is the NCLT. Accordingly, we set

aside the order of the NCLAT and remand the matter back to

the NCLT to consider the amended application under Section

7, IBC afresh. All questions are left open. We make it clear

Company Appeal (AT) (Ins) No.779 of 2021 Page 5 of 25 that we have not expressed any view on the merits of the

matter."

B. Laxmi Surana Vs. Union bank of India & ors. Manu/SC/0221/2021

"42. Suffice it to conclude that there is no substance even in the

second ground urged by the appellant regarding the maintainability

of the application filed by the respondent financial creditor under

Section 7 of the Code on the ground of being barred by limitation.

Instead, we affirm the view taken by the NCLT and which

commended to the NCLAT -- that a fresh period of limitation is

required to be computed from the date of acknowledgment of debt

by the principal borrower from time to time and in particular the

(corporate) guarantor/corporate debtor vide last communication

dated 08.12.2018. Thus, the application under Section 7 of the Code

filed on 13.02.2019 is within limitation."

C. Bank of India Vs. Multi ARC Coating and Straps Limited - MANU/NL/0135/2020

"10. We have gone through the matter and having heard learned Counsel

for both the sides it appears that keeping in view of provision of Section

18 of the Limitation Act and reading the same with the contents of letter

dated 09.06.2016, the same needs to be construed as an

acknowledgement of the debt outstanding and merely because in the

document the Corporate Debtor mention that the proposal was given was

without prejudice to the rights and contentions in pending Court

proceedings, will not make any difference. In this view of the matter,

when NPA was declared on 30.6.2009, the documents pointed out by the

Company Appeal (AT) (Ins) No.779 of 2021 Page 6 of 25 learned Counsel for the Appellant dated 24.04.2012 (page 277),

12.03.2014 (page-419) and 09.06.2016 (page-420) calculated from the

date of NPA, give fresh periods of limitation and filing of Section

7 Application on 11.7.18 was not barred."

6. As far as issue of settlement proposals marked as 'without prejudice' and the same

constitute admission and acknowledgement of liabilities and are liable to be so considered

by this Appellate Tribunal when both Debt and Default is admitted by the parties. They

have citied the judgment of Hon'ble Supreme Court ITC Limited Vs Blue Coast Hotels

Limited (2018) 15 SCC 99 para 33) and Hon'ble Bombay High Court in case of CG Power

& Industrial Solutions Limited Vs. Gactel Turnkey Products Limited at para 3 to 5.

7. The Ld. Sr. Counsel for the Respondent has submitted that the instant appeal is devoid of

merit including on the ground of same being barred by limitation. It is also stated that the

resultant position of facilities extended by 'original lender' (ING Vyasya Bank) sanctioned

in the year 2012 and 2013 are as follows:

SL Nature of facility Limits (Rs.) No. 1. PCL/PSL/PCFC/ERBD 10,00,00,000/- 1.1 Cash Credit (sub limit to PCL/ (10,00,00,000/-) PCFC/ PSL/ERBD/AACB) 1.2 WCDL/FCNR (sub limit to (10,00,00,000/-) PCL/ PCFC/ PSL/ERBD/AACB) 2 ILC/FLC/LUT(sub limit to (10,00,00,000/-) PCL/ PCFC/ PSL/ERBD/AACB) 3. Ad hoc Cash Credit Facility 1,00,00,000/- Total 11,00,00,000/-

Company Appeal (AT) (Ins) No.779 of 2021 Page 7 of 25

8. It was also submitted by the Ld. Sr. Counsel for the Respondent that the facilities

sanctioned by the Original Lender had been exhausted and no further disbursal under

working capital demand loan had been made to the Respondent thereafter. On 30.06.2014,

the CD was classified as NPA under RBI Norms . On 15.07.2014 , the Respondent was

constrained to mandatorily register itself as a sick Industrial company with BIFR and

SICA. On 19.09.2014, the Original Lender/Bank handed over the 'Debts' ought to it to the

Appellant vide an 'Assignment Agreement'. The Cutoff date under the said 'Assignment

Agreement' was 31.08.2014 from which all economic benefits pertaining to the loans

availed by the Respondent including all realizations and recovery, if any, made on and after

of the cutoff date were to be for the benefit to the Appellant. On 25.05.2015, the Appellant

issued a notice under Section 13(2) of the SARFAESI Act. The Respondent issued its

response to the notices. On 08.06.2016, the Appellant filed an application under Section

22(1) of the SICA seeking permission of the BIFR to enable it to initiate recovery

proceedings against the CD. However, the said Application was not persuaded / moved and

no such permission was granted till the repeal of the SICA. On 01.12.2016, SICA was

repealed by the provisions of the 'SICA Repeal Act' which came into force on 01.12.2016.

The Appellant filed an 'Original Application' No. 97 of 2017 with the DRT on 02.12.2016

alleging that the Respondent alongwith its 'Directors' were liable to pay the dues.

9. The Ld. Sr. Counsel for the Respondent has also made a submission that on 02.03.2017

'without prejudice' offer for settlement was made. However, this offer was again rejected

by the Appellant on 02.11.2017 and so further 'Settlement Proposal' was made on March,

2018 which was also not accepted by the Appellant. The Appellant declined 'without

prejudice' settlement offer (dated 04.12.2018) made by the Respondent on 12.02.2019.

Company Appeal (AT) (Ins) No.779 of 2021 Page 8 of 25 Thereafter, on 07.05.2019, the Appellant filed the Petition under Section 7 of Code before

the Adjudicating Authority seeking to initiate CIRP against the Respondent. The

Respondent has categorically stated that the 'Debt' is barred by limitation. It is a settled

law that the provisions of the Limitation Act, 1963 are applicable to the proceedings under

Section 7 of the Code. The Respondent has submitted that section 7 petition be filed within

a period of three years from the 'Date of Default'. Section 5 of the Limitation Act, 1963

may be applied to condone the delay till filing such application. It was stated by the Ld. Sr.

Counsel for the Respondent that as per petition filed under Section 7 of the Code, the CD

was declared NPA on 30.06.2014. Since, NPA occurs 90 days after 'Date of Default'. So

'Debt of Default' was 01.04.2014. They have also sated that the automatic suspension as

per Section 22 (5) of SICA for computing the extended period of limitation is limited to

suits for recovery of money or for enforcement of security and not for insolvency

proceedings and they have cited the judgment of Mazda Agencies (Partnership Firm) Vs.

Hemant Plastics & Chemicals Ltd (2021 SCC OnLine NCLAT 691). The contentions of

the Appellant to exclude the period for which Respondent was before BIFR between

15.07.2014 till 30.12.2016 is not tenable. They have also stated that 'without prejudice'

settlement letters do not amount to admission of liability and extension of limitation. They

have also stated that the Code can only be invoked for the purpose of resolution of 'Debt'

and, particularly, in cases where case is fit for initiation of 'Insolvency'. As 'Insolvency'

is the ultimate steps and death nail for the going concern. They have cited the judgment of

Hon'ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India and ORs.

(2019) 4 SCC 17). The case of the Respondent is not at all fit for initiation of 'Insolvency'.

On the issue of limitation, they have cited the following Hon'ble Apex Court Judgment:

Company Appeal (AT) (Ins) No.779 of 2021 Page 9 of 25 • B.K.Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates in Civil Appeal No.23988 of 2017

10. The Adjudicating Authority in its impugned order dated 13.08.2021 has observed as

followings:

Para 11. Further, this Company Petition has been filed by the Financial

Creditor u/s.7 on 08.05.2019. In Part-IV of the Petition the Financial

Creditor has put the date of NPA as 30.06.2014. Therefore, the issue

relating to limitation arises in the Petition as the Petition prima facie

has been filed after more than 5 years. In the Petition no pleadings

relating to extension/ exclusion of time to compute the period of

limitation has been made. The bench notes that subsequently also no

amendments in the Petition relating to extension of limitation or

exclusion to compute the period of limitation has been made. It is well

settled that the plea of limitation must be specifically pleaded by the

Petitioner in their pleadings. In the instant case, the Financial Creditor

has not specifically pleaded in its Application that it is within limitation

and/ or sought condonation of delay in any respect. The Company

Petition "" which has been filed on 07.05.2019 mentions the date of

NPA as 30.06.2014. In this regard the Financial Creditor has not

pleaded in the Company Petition to exclude any period of time. In this

regard the bench would like to refer to the case of Kattinokkula Murali

Krishna V s. Veeramalla Koteshwara Rao (2010)1 SCC 466 wherein at

paragraph 24, the Hon'ble Supreme Court has held that "it is a settled

principle of law that evidence beyond pleadings can never be permitted

to be adduced nor can such evidence be taken into consideration". In

view of this, since there is no averment or seeking condonation of delay

Company Appeal (AT) (Ins) No.779 of 2021 Page 10 of 25 in the Company Petition, therefore, this bench is of the view that since

there is no averment or pleading by the Petitioner explaining the issue

of limitation seeking condonation of delay, this Petition is barred by

limitation and the bench is inclined to "dismiss" it."

11. We have carefully gone through the submissions made by the Ld. Sr. Counsels for the

parties /pleadings available on record and the law laid down on the subject and are having

the following observations:

a. What we are observing in this case that the issue of 'Limitation' is critically

involved in this case. Another minor issue involved is issuance of

'Statement of Account' by 'Kotak Mahindra Bank'.

b. List of dates as available on record are as follows:

Company Appeal (AT) (Ins) No.779 of 2021 Page 11 of 25 Company Appeal (AT) (Ins) No.779 of 2021 Page 12 of 25 c. Period of Limitation following from date of NPA (30.06.2014) is

30.06.2019. The Petition has been filed on 07.05.2019 before the

Adjudicating Authority.

d. What has generally been considered , the date of default under Section 7 of

the Code, particular, in case of Banks date of NPA is considered as Date of

Default. As it is amply clear as per the RBI Circular, the Banks are required

to declare the Date of NPA clearly and categorically without any ambiguity.

In the present case of the Appellant, they were assigned the 'Debt' from the

Bank and the Bank has clearly defined the Date of NPA as 30.06.2014 and

the date of assignment by ING Vyasya Bank Limited / Bank has been done

on 19.09.2014. So clearly it is after the Date of NPA for amplifying. It is

further mentioned that merger of ING Vyasya Bank Limited was made with

Company Appeal (AT) (Ins) No.779 of 2021 Page 13 of 25 Kotak Mahindra Bank from 01.04.2015 by the order of RBI. Accordingly,

the 'Statement of Account' provided to the Adjudicating Authority was

from the books of Kotak Mahindra Bank. In any case, ARC cannot submit

any Statement of Account for any date which is prior to the date of

assignment i.e 19.09.2014 as the account was not in the books of

ARC/Appellant. It is the Kotak Mahindra Bank which has come in place of

assigner, ING Vyasya Bank Limited. Hence, the Statement of Account is

that of Kotak Mahindra Bank. Being the Application filed on 07.05.2019

with the Adjudicating Authority. ING Vyasya bank was no longer in

existence and was merged with Kotak Mahindra Bank.

e. Section 7 of the Code is concerned with only two factors. There must be a

'debt' and it must be 'due' and 'payable' in the law and there is a 'default'.

The Respondent is not refuting the 'Debt' nor they are refusing that it was

not due and payable in law except the Limitation issue and computation of

default. For brevity and clarity, the provision of Section 7 of the Code is

depicted below:

"Section 7: Initiation of corporate insolvency resolution

process by financial creditor.

7. (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

Company Appeal (AT) (Ins) No.779 of 2021 Page 14 of 25 Authority when a default has occurred. [Provided that

for the financial creditors, referred to in clauses (a) and

(b) of sub-section (6A) of section 21, an application for

initiating corporate insolvency resolution process

against the corporate debtor shall be filed jointly by not

less than one hundred of such creditors in the same class

or not less than ten per cent. of the total number of such

creditors in the same class, whichever is less: Provided

further that for financial creditors who are allottees

under a real estate project, an application for initiating

corporate insolvency resolution process against the

corporate debtor shall be filed jointly by not less than

one hundred of such allottees under the same real estate

project or not less than ten per cent. of the total number

of such allottees under the same real estate project,

whichever is less: Provided also that where an

application for initiating the corporate insolvency

resolution process against a corporate debtor has been

filed by a financial creditor referred to in the first and

second provisos and has not been admitted by the

Adjudicating Authority before the commencement of the

Insolvency and Bankruptcy Code (Amendment) Act,

2020, such application shall be modified to comply with

the requirements of the first or second proviso within

Company Appeal (AT) (Ins) No.779 of 2021 Page 15 of 25 thirty days of the commencement of the said Act, failing

which the application shall be deemed to be withdrawn

before its admission.] 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 fourteen days of

the receipt of the application under subsection (2),

ascertain the existence of a default from the records of

an information utility or on the basis of other evidence

furnished by the financial creditor under sub-section (3).

Company Appeal (AT) (Ins) No.779 of 2021 Page 16 of 25 [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 pending5 against the proposed resolution

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 subsection

(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 resolution process shall

commence from the date of admission of the application

under sub-section (5).

(7) The Adjudicating Authority shall communicate-- (a)

the order under clause (a) of sub-section (5) to the

financial creditor and the corporate debtor; (b) the order

Company Appeal (AT) (Ins) No.779 of 2021 Page 17 of 25 under clause (b) of sub-section (5) to the financial

creditor, within seven days of admission or rejection of

such application, as the case may be."

f. In order to bring clarity on the limitation issue, we are also depicting the

provisions of Section 18 of the Limitation Act, 1963 and Article 137 of the

Limitation Act:-

"18. Effect of acknowledgment in writing.--

(1) Where, before the expiration of the prescribed

period for a suit of 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,--

Company Appeal (AT) (Ins) No.779 of 2021 Page 18 of 25

(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."

Article 137 -

Description of Period of Time from which Application limitation period begins to run 137. Any other Three When the right to application for year apply accrues which no period of limitations provided elsewhere in this division

Apart from the above reference may be made Judgment of Hon'ble Apex

Court in Dena bank (Now bank of Baroda) vs C. Shivakumar Reddy on 4

August, 2021 in Civil Appeal No.1650 of 2020 para 96, 97, 99, 105, 106,

107, 108,110,111,112 & 113

Company Appeal (AT) (Ins) No.779 of 2021 Page 19 of 25 "96. Section 238A of the IBC provides as follows:-

"238A. The provisions of the Limitation Act, 1963 (36 of 1963)

shall, as far as may be, apply to the proceedings or appeals before

the Adjudicating Authority, the National Company Law Appellate

Tribunal, the Debt Recovery Tribunal or the Debt Recovery

Appellate Tribunal, as the case may be."

97. As observed by this Court in Sesh Nath Singh & Anr. Vs.

Baidyabati Sheoraphuli (supra), authored by one of us (Indira

Banerjee, J.), this Court held:-

"91. Legislature has in its wisdom chosen not to make the

provisions of the Limitation Act verbatim applicable to

proceedings in NCLT/NCLAT, but consciously used the words 'as

far as may be'. The words 'as far as may be' are not meant to be

otiose. Those words are to be understood in the sense in which

they best harmonise with the subject matter of the legislation and

the object which the Legislature has in view. The Courts would not

give an interpretation to those words which would frustrate the

purposes of making the Limitation Act applicable to proceedings

in the NCLT/NCLAT 'as far as may be'.

xxx xxx xxx

94. The use of words 'as far as may be', occurring in Section 238A

of the IBC tones down the rigour of the words 'shall' in the

Company Appeal (AT) (Ins) No.779 of 2021 Page 20 of 25 aforesaid Section which is normally considered as mandatory. The

expression 'as far as may be' is indicative of the fact that all or

any of the provisions of the Limitation Act may not apply to

proceedings before the Adjudicating Authority (NCLT) or the

Appellate authority (NCLAT) if they are patently inconsistent with

some provisions of the IBC. At the same time, the words 'as far as

may be' cannot be construed as a total exclusion of the

requirements of the basic principles of Section 14 of the

Limitation Act, but permits a wider, more liberal, contextual and

purposive interpretation by necessary modification, which is in

harmony with the principles of the said Section."

99.There can be no dispute with the proposition that the period of

limitation for making an application under Section 7 or 9 of the

IBC is three years from the date of accrual of the right to sue, that

is, the date of default. In Gaurav Hargovindbhai Dave v. Asset

Reconstruction Company (India) Ltd. (supra) authored by

Nariman, J. this Court held:-

"6. ......The present case being "an application" which is filed

under Section 7, would fall only within the residuary Article 137."

105.The judgment of this Court in Babulal Vardharji Gurjar

(supra) was rendered in the facts of the aforesaid case, where the

date of default had been mentioned as 8.7.2011 being the date of

Company Appeal (AT) (Ins) No.779 of 2021 Page 21 of 25 N.P.A. and it remained undisputed that there had neither been any

other date of default stated in the application nor had any

suggestion about any acknowledgement been made.

106. In the backdrop of the aforesaid facts, this court observed

that even if Section 18 of the Limitation Act and principles thereof

were applicable, the same would not apply to the application

under consideration, in view of the averments regarding default

therein and for want of any other averment with regard to

acknowledgment.

107.It is well settled, that a judgment is a precedent for the issue of

law that is raised and decided and not any observations made in the

facts of the case. As very aptly penned by V. Sudhish Pai in

"Constitutional Supremacy-A Revisit", "Judicial

utterances/pronouncements are in the setting of the facts of a

particular case. To interpret words and provisions of a statute it may

become necessary for judges to embark upon lengthy discussions, but

such discussion is meant to explain not define. Judges interpret

statutes, their words are not to be interpreted as statutes." The

aforesaid passage was extracted and incorporated as part of the

judgment of this Court in Sesh Nath Singh (supra).

108. In this case, admittedly there were fresh documents before the

Adjudicating Authority (NCLT), including a letter of offer dated

Company Appeal (AT) (Ins) No.779 of 2021 Page 22 of 25 3.03.2017 for one time settlement of the dues of the Corporate Debtor

to the Financial Creditor, upon payment of Rs.5.5 crores. The

Appellant Bank has also relied upon financial statements up to 31 st

March, 2018 apart from the final judgment and order dated 27 th

March, 2017 in O.A. 16/2015 and the subsequent Recovery Certificate

No.2060/2017 dated 25th May, 2017 which constituted cause of action

for initiation of proceedings under Section 7 of the IBC.

110. It is not necessary for this Court to examine the relevance of all

the documents filed by the Appellant Bank pursuant to its interim

applications being I.A. No.27 of 2019 and I.A. No.131 of 2019. Suffice

it to mention that the documents enclosed with the applications being

I.A. No.27 of 2019 and I.A. No.131 of 2019 and the pleadings in

the supporting affidavits, made out a case for computation of limitation

afresh from the dates of the relevant documents. It would also be

pertinent to note that the reasons for the execution of the documents are

irrelevant. It is not the case of the Respondents, that any of those

documents were extracted through coercion.

111. As per Section 18 of 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 a fresh period of

limitation from the date on which the acknowledgement is signed. Such

Company Appeal (AT) (Ins) No.779 of 2021 Page 23 of 25 acknowledgement need not be accompanied by a promise to pay

expressly or even by implication. However, the acknowledgement must

be made before the relevant period of limitation has expired.

112.In Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli

Cooperative Bank Ltd. (supra) this Court, speaking through one of us

(Indira Banerjee J.) held that the IBC does not exclude the application

of Section 14 or 18 or any other provision of the Limitation Act. There

is therefore no reason to suppose that Sections 14 or 18 of

the Limitation Act do not apply to proceedings under Section 7 or

Section 9 of the IBC.

113. In Laxmi Pat Surana v. Union Bank of India (supra) this Court

speaking through Khanwilkar J. held that there was no reason to

exclude the effect of Section 18 of the Limitation Act to proceedings

initiated under the IBC."

The citations have referred above also makes it amply clear that if

Settlement offer or other way of acknowledgement of Debt has been done

within the first period of limitation then Limitation gets extended again for the

next three years.

From the above, it is very much clear that the provisions of Limitation Act, 1963

which includes extension of limitation due to acknowledgment in writing, apply to the

present case, the petition filed before the Adjudicating Authority is within the limitation

Company Appeal (AT) (Ins) No.779 of 2021 Page 24 of 25 period and both 'Debt' and 'Defaults' are not disputed and hence, provisions of Section 7

of the Code is applicable to the case and requires positive consideration towards its

admission under the provision of the Code R/w the Limitation Act, 1963.

g. In view of the above law laid down and facts and circumstances as explained

above, the petition has been filed within the limitation period and hence Section

7 of the Code petition can be initiation against the Corporate Debtor.

h. The appeal deserves to be allowed and is accordingly allowed. We set aside the

impugned order dated 13.08.2021 of the Adjudicating Authority. The

Adjudicating Authority is directed to initiate the CIRP proceedings. However, in

the intervening period, the parties are free to settle the matter, if so advised. We

accordingly, dispose of the Appeal. No order as to costs.

(Justice Ashok Bhushan) Chairperson

(Dr. Ashok Kumar Mishra) Member(Technical)

(Dr. Alok Srivastava) Member (Technical)

22nd February, 2022

New Delhi

Raushan.K

Company Appeal (AT) (Ins) No.779 of 2021 Page 25 of 25