Uco Bank vs Xenitis Infotech Ltd

UCO Bank ...Appellant

Versus

Xenitis Infotech Ltd. ...Respondent

For Appellant: Mr. Rana Mukherjee, Sr. Adv. with Mr. Partha Sil, Mr. Tavish B. Prasad, Ms. Daisy and Ms. Deboleena Dutta, Advocates For Respondents: Mr. Prakash Sharma, Adv.

ORDER

24.08.2022: This appeal is directed against the order dated 19.03.2020

by which an application filed by the present Appellant (UCO Bank) as the

Financial Creditor, under Section 7 of the Insolvency and Bankruptcy Code,

2016 (in short 'Code') against Xenitis Infotech Ltd. (Corporate Debtor) has been

dismissed only on the ground of limitation.

2. The Adjudicating Authority, while dismissing the application, has

observed that as per Article 137 of the Limitation Act, 1961 (in short 'the Act')

the application, may be under Section 7 or 9 of the Code, can be filed only

within a period of three years from the date of the accrual of default and since

in the present case, the default had occurred on 06.03.2010, therefore, the

limitation would expire on 06.03.2013, whereas the application was filed on

31.08.2018. It has also been observed that the Appellant cannot take the

advantage of the acknowledgment dated 19.12.2016 because the said acknowledgement has taken into effect after the expiry of period of three years

and in view thereof, the provisions of Section 18 of the Act would not be

attracted.

3. Ld. Sr. Counsel appearing on behalf of the Appellant without touching

the impact of the Section 18 of the Act has submitted that the present case is

fully covered by the provision of Section 25(3) of the Indian Contract Act, 1872.

It is submitted that the Respondent, even after the expiry of the period of

limitation to recover the dues sent a letter dated 25.10.2019 (Annexure A-5)

regarding the repayment of the debts of the bank agreed in the Joint Lenders

Meeting (JLM) held on 19.05.2017 and in pursuance thereof, it promised by

way of a commitment to continue to make payments towards the repayment

of bank debts. In support of his contention, he has relied upon a decision of

the Hon'ble Supreme Court in the case of Kotak Mahindra Bank Limited Vs.

Kew Precision Parts Pvt. Ltd. and Ors., 2022 SCC Online SC 978.

4. On the other hand, Proxy Counsel has appeared on behalf of the

Respondent and submitted that he has no instructions to argue the case.

Moreover, as per his instructions, the Respondent is not in touch with the

arguing counsel Shri Somya Chakraborty, Sr. Adv. New Delhi and therefore,

the said Sr. Adv. has not put in appearance today for want of his instructions.

However, he has requested that written arguments has been filed by the

Respondent may take into consideration.

5. We have heard Counsel for the parties and perused the record.

6. The issue is involved in this case travels into a narrow compass as to

whether a promise made by the debtor to pay the time barred debt would fall within the purview of Section 25(3) of the Indian Contract Act, 1872 and as to

whether the limitation is to start running from the date promise is made, for

a period of three years as required under Article 137 of the Act?

7. Before this question is answered we would like to refer to the provisions

of Section 25(3) which read as follows:-

25(3). Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law:-

(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits."

8. In order to bring his case within the four corners of the Section 25(3) of

the Indian Contract Act, he has read out Annexure A-5, i.e. letter dated

25.10.2019 written by the Corporate Debtor to the Appellant in which not only

there is a reference to the payments having been made during the period

starting from 31.08.2017 to 24.10.2019 but also a commitment (promise) has

been made to continue to make payments towards the repayments of the bank

debts as approved in the JLM.

9. In our considered opinion letter dated 25.10.2019 is a sufficient

evidence of the promise made by the Respondent to the Appellant to make the

payments which are due, approved in the JLM held on 19.05.2017 and thus,

would fall within the purview of Section 25(3) of the Indian Contract Act, which

provides a promise and that too in writing. Undoubtedly, if the period of

limitation is to be counted from the date of the default (NPA) and the

application under Section 7 having been filed, it would be barred by limitation

if it is to be seen in terms of Section 18 of the Act. But keeping in view the fact that after the expiry of period of limitation of three years, prescribed under

Article 137 of the Act, if the Respondent has made the promise (commitment)

to make the payments of the unpaid time barred debt, approved in the JLM,

then it is a sufficient evidence to show the intention of the Respondent for

creating a new agreement with the Appellant for the purpose of making

payments of the unpaid debts.

10. Insofar as, the written arguments of the Respondent are concerned,

suffice it to say that the whole emphasis in the written arguments is upon the

expiry of limitation in view of the provision of Section 18 of the Act, on which

no argument has been addressed by Sr. Counsel for the Appellant who has

changed the face of the case altogether during the course of hearing.

11. In view of the aforesaid discussion, we find the appeal to be meritorious

and thus, the same is hereby allowed and the impugned order is hereby set

aside. The matter is remanded back to the Adjudicating Authority to consider

the application filed under Section 7 of the Code, having been filed within the

period of limitation and decide the same in accordance with law.

12. The parties are directed to appear before the Adjudicating Authority on

21st September, 2022.

The registry is directed to send a copy of this order to the concerned

Adjudicating Authority for information.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical) SC/RR