V. K. Abdul Rahim vs The Federal Bank Ltd. & Anr

V.K. Abdul Rahim ...Appellant

Vs

The Federal Bank Ltd. & Anr. ....Respondents Present: For Appellant: Mr. Mushtaq, Mr. Adhil Saifudheen and Mr. Ranjay N, Advocates. For Respondents: Mr. P.I. Jose and Mr Kunal Manav, Advocates for Respondent No. 1 Ms. P.S. Chandralekha, Advocate for Respondent No. 2

ORDER

27.01.2020 The Appellant shareholder and Director of Respondent No. 2-

Corporate Debtor M/s Sargam Builders Pvt. Ltd. has filed this Appeal against

Impugned Order dated 20.09.2019 filed by the Respondent No. 1 - The Federal

Bank Limited (Financial Creditor). By the Impugned Order (page-120), the

Adjudicating Authority (National Company Law Tribunal, Kochi Bench) admitted

Application under Section 7 of Insolvency and Bankruptcy Code, 2016 ('IBC' in

short). The Adjudicating Authority found that there was debt due and default

and also that the debt was within limitation period and admitted the Application.

2. Before us, learned Counsel for the Appellant submitted that the

Application filed by the Bank was time barred keeping in view of the Judgment

of the Hon'ble Supreme Court in "B.K. Educational Services Pvt. Ltd. Vs.

Parag Gupta & Associates" (2018 SCC Online SC 1921). According to the

learned Counsel, the Bank had sent Notice (Annexure-35, page-247) on

Company Appeal(AT)(Insolvency) No. 1297 of 2019 Page 1 of 5 15.01.2013 informing the Corporate Debtor that the Account of the Corporate

Debtor had become NPA. It is stated that the Corporate Debtor had taken a loan

from the Bank in 2009 and also a Bank Guarantee was executed by the Bank at

the instance of the Corporate Debtor and on both these counts, the debts arisen

had defaulted. Learned Counsel for the Appellant stated that Section 7

Application (Annexure-49, page-403) was filed on 31.07.2018 which was clearly

time barred keeping in view Article 137 of the Limitation Act, 1963. Learned

Counsel referred to the Impugned Order to state that the Impugned Order relied

on Article 62 of the Limitation Act to record that there was a mortgage and thus

the debt was not time barred.

3. Learned Counsel for the Respondent pointed out that the Appellant had

appeared before the Adjudicating Authority and raised the question of limitation

and Bank filed on record documents to show that there were series of

acknowledgments which under Section 18 of the Limitation Act protected the

Bank and also extended the periods of limitation.

4. Learned Counsel for the Appellant is objecting to claim that the documents

being relied on as acknowledgement were not filed before the Adjudicating

Authority.

5. Learned Counsel for the Bank stated that the documents being relied on

were part of O.A. which was filed before Debt Recovery Tribunal and copy of that

O.A. with Annexures were filed before the Adjudicating Authority. The Counsel

does not dispute that as per Judgment in the matter of "B.K. Educational

Services Pvt. Ltd. Vs. Parag Gupta & Associates" (2018 SCC Online SC

Company Appeal(AT)(Insolvency) No. 1297 of 2019 Page 2 of 5 1921), for purpose of Application under Section 7 of IBC, period of limitation is

to be looked into from date of default which is when Account became NPA and

relevant provision to rely on is Article 137 of the Limitation Act. He, however,

states that there are series of Acknowledgements which save the limitation under

Section 18 of the Limitation Act.

6. Learned Counsel for the Respondent is referring to Annexure A-37 as

Reply of Corporate Debtor to Notice dated 15.02.2013 which was sent by the

Corporate Debtor clearly acknowledging the debt on 05.02.2013. Learned

Counsel has then pointed out documents in the Reply Affidavit filed in Appeal

(diary No. 17183) and Annexure-R1 in the said Reply which is the copy of the

letter which was sent by the Corporate Debtor on 03.02.2016 to show that within

three years from 05.02.2013, there was further acknowledgment by the

Corporate Debtor giving fresh period of limitation of three years and Section 7

Application came to be filed within such period on 31.07.2018 which was within

limitation period.

7. Learned Counsel for the Appellant for Corporate Debtor referred to

Annexure- R2 of his Rejoinder (diary no. 17729) i.e., letter dated 11.03.2016 to

point out that One Time Settlement which was offered was withdrawn. It is stated

that this letter was issued with regard to the above letter dated 03.02.2016 being

relied on by the Respondent-Bank. Learned Counsel submitted that when the

Appellant had withdrawn the letter dated 03.02.2016, the Respondent-Bank

could not rely on the same as an acknowledgement.

8. Section 18 of the Limitation Act, 1963 reads as under:

Company Appeal(AT)(Insolvency) No. 1297 of 2019 Page 3 of 5

"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, 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."

[Emphasis supplied]

Company Appeal(AT)(Insolvency) No. 1297 of 2019 Page 4 of 5

9. Proceeding under Section 7 of IBC is an "Application". Considering the

above Section 18 of the Limitation Act, 1963, when the documents relied by the

Respondent - Bank are considered, it can be seen that if the Account became

NPA on 15.01.2013, there was reply sent by the Corporate Debtor to the Bank

on 05.02.23013 which contained acknowledgment for the debt. As per Section

18 of the Limitation Act, 1963, fresh period of limitation shall be computed from

the time when the acknowledgment was signed. Then there is a letter dated

03.02.2016 (Annexjure-R1, diary No. 17183) within three years of the earlier

dated 05.02.2013 and thus it would give fresh period of limitation. Section 7

Application thus filed on 31.07.2018 could not be said to be time barred.

Although the learned Counsel for the parties are at Bar questioning each other

as to which or the other Acknowledgement was filed before the Adjudicating

Authority, we are not entering into that technicality of procedure as fact remains

in this matter that the Appellant before us is not disputing the genuineness of

the issuance of such letters/acknowledgments. We are not relying on Article 62

of the Limitation Act which Adjudicating Authority did. But we rely on above

reasons to hold the Application under Section 7 of IBC to be within limitation.

The Appeal is dismissed. No orders as to cost.

[Justice A.I.S. Cheema] Member (Judicial)

[Justice Anant Bijay Singh] Member (Judicial)

(Kanthi Narahari) Member(Technical) Akc/Md

Company Appeal(AT)(Insolvency) No. 1297 of 2019 Page 5 of 5