Supreme Court of India
DENA BANK (NOW BANK OF BARODA)versusC. SHIVAKUMAR REDDY AND ANR.
- Citation
- 2021 INSC 380
- Decided
- 4 August 2021
- Disposal
- Appeal(s) allowed
- Bench
- INDIRA BANERJEE
Holding
The Supreme Court held that the Section 7 petition was not barred by limitation because the corporate debtor’s acknowledgments and the DRT judgment and recovery certificate gave rise to a fresh cause of action and extended the limitation period, and that filing additional documents was permissible.
Summary
The appellant Bank (Dena Bank, now Bank of Baroda) filed a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) in 2018 to initiate a corporate insolvency resolution process against the corporate debtor, C. Shivakumar Reddy, after the debtor defaulted in 2013. The National Company Law Tribunal (NCLT) admitted the petition, but the National Company Law Appellate Tribunal (NCLAT) set it aside, holding that the petition was barred by the three‑year limitation period. The Supreme Court held that the limitation period was extended by the debtor’s acknowledgments of liability (interest payment in 2014, a letter in 2015, a one‑time settlement proposal in 2017, and balance‑sheet disclosures for 2016‑2018) and by the Debt Recovery Tribunal’s final judgment and recovery certificate in 2017, which created a fresh cause of action. Consequently, the petition was not time‑barred, and the NCLT was justified in allowing additional documents to be placed on record. The Court also affirmed that the Limitation Act applies to IBC proceedings and that amendment of pleadings in a Section 7 petition is permissible.
Issues considered
- The petition under Section 7 of the IBC was filed beyond three years from the date of default; is it barred by limitation?
- Do acknowledgments of debt by the corporate debtor (including OTS proposals and balance‑sheet statements) extend the limitation period under Section 18 of the Limitation Act?
- Does a final judgment/decree and a recovery certificate issued by a Debt Recovery Tribunal constitute a fresh cause of action resetting the limitation period for a Section 7 petition?
- Is the filing of additional documents or amendment of pleadings in a Section 7 petition barred by any provision of the IBC or its Rules?
- Does the Limitation Act, as incorporated by Section 238A of the IBC, apply to proceedings under Sections 7 and 9 of the IBC?
Legislation cited
- Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016s. Rule 11, s. Rule 4
- Insolvency and Bankruptcy Code, 2016s. 12, s. 14, s. 18, s. 238, s. 238A, s. 3(12), s. 7, s. 7(2), s. 7(3), s. 7(4), s. 7(5)
- Limitation Act, 1963s. 14, s. 18, s. 5, s. Article 137
- National Company Law Tribunal Rules, 2016
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993
Subjects
IBCSection 7 petitionlimitation periodacknowledgment of debtrecovery certificateNCLTNCLATfinancial creditorcorporate debtorLimitation Actamendment of pleadings
Judgment
[2021] 8 S.C.R. 1061 1061
DENA BANK (NOW BANK OF BARODA) A
v.
C. SHIVAKUMAR REDDY AND ANR.
(Civil Appeal No.1650 of 2020)
AUGUST 04, 2021 B
[INDIRA BANERJEE AND V. RAMASUBRAMANIAN, JJ.]
Insolvency and Bankruptcy Code, 2016:
s. 7 – Initiation of corporate insolvency resolution process
by financial creditor – Petition u/s. 7, if barred by limitation – On C
facts, appellant Bank sanctioned term loan and letter of credit cum
buyer’s credit in favour of corporate debtor – However, in 2013
the corporate debtor defaulted in repayment of its dues to the bank
and loan amount declared as non-performing asset-NPA –Issuance
of notice to corporate debtor in 2014, to clear its dues – Pursuant
D
thereto, in 2015 Bank filed application for recovery of the
outstanding dues – In 2017, Debt Recovery tribunal passed a
recovery order alongwith recovery certificate in favour of the Bank
– Thereafter, in 2018, Bank filed petition u/s. 7 of the IBC – Within
three months, Bank filed application to place on record additional
documents, recovery order and recovery certificate which was E
allowed – Another application allowed to place on record letter of
the corporate debtor proposing one time settlement, and financial
statements of the corporate debtor – Thereafter, petition u/s. 7
admitted by the adjudicating authority-NCLT, however, the appellate
authority-NCLAT set aside the said order, holding the application
F
to be barred by limitation – On appeal, held: Application u/s. 7 not
barred by limitation, on the ground that it had been filed beyond a
period of three years from the date of declaration of the loan account
of the corporate debtor as NPA – There was an acknowledgement
of the debt by the corporate debtor before expiry of the period of
limitation of three years, in which case the period of limitation would G
get extended by a further period of three years –Recovery order by
the DRT and the recovery certificate issued in favour of the Bank
in 2017 gave a fresh cause of action to the Bank to initiate a petition
u/s. 7 – Offer of one time settlement of a live claim made in 201, and
the balance sheets and financial statements of the corporate debtor
H
1061
1062 SUPREME COURT REPORTS [2021] 8 S.C.R.
A for 2016-2017, constitute acknowledgement of liability which
extended the limitation by three years – These documents were
brought on record before any final decision was taken in the petition
u/s. 7, thus, NCLT rightly admitted the application.
s. 7 – Application u/s. 7 for initiation of Corporate insolvency
B resolution process (CIRP) – Limitation period of three years for
filing application – Final judgment and decree of the Debt Recovery
tribunal in favour of the financial creditor, as also issuance of
recovery certificate – Held: Would give rise to a fresh cause of
action to the Financial Creditor to initiate proceedings u/s. 7 for
initiation of CIRP, within three years from the date of the final
C judgment and decree, and/or within three years from the date of
issuance of the recovery certificate.
s. 7 – Application under – Filing of additional documents –
Permissibility of – Held: There is no bar in law to the amendment of
pleadings, in a petition u/s. 7 or to the filing of additional documents,
D apart from those filed initially, along with the petition u/s. 7 of the
IBC in Form-1 – In the absence of any express provision prohibiting
or setting a time limit for filing of additional documents, it cannot
be said that the Adjudicating Authority committed any illegality or
error in permitting the Bank to file additional documents – When
E there is inordinate delay, the Adjudicating Authority might, at its
discretion, decline the request of an applicant to file additional
pleadings and/or documents, and proceed to pass a final order.
s. 3(12)– ‘Default’ –Definition of – Held: Is “non-payment’
of a debt which has become due and payable whether in whole or
F any part and is not paid by the Corporate Debtor”.
Object and scope of – Nature of construction – Held: IBC is
a beneficial legislation for equal treatment of all creditors of the
corporate debtor, as also the protection of the livelihoods of its
employees/workers, by revival of the corporate debtor – It only
G segregates the interests of the corporate debtor from those of its
promoters/persons in management – Relegation of creditors to the
remedy of coercive litigation against the corporate debtors could
be detrimental to the interests of the corporate debtor and its creditors
alike – Thus, the provisions of the IBC and the Rules and Regulations
framed thereunder to be construed liberally, in a purposive manner
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1063
REDDY AND ANR.
to further the objects of enactment of the statute, and not to be A
given a narrow, pedantic interpretation which defeats the purposes
of the Act.
Limitation Act, 1963:
Art. 137 – Applicability of, to Insolvency and Bankruptcy
Code – Held: There is no specific period of limitation prescribed in B
the Limitation Act, for an application under the IBC, before the
Adjudicating Authority (NCLT), thus, is governed by Art. 137 of the
Schedule wherein the period of limitation prescribed for such an
application is three years from the date of accrual of the right to
apply – Thus, the period of limitation for making an application u/ C
s. 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.
s. 18 – Acknowledgment in writing – Effect of – Held: As per
s. 18, an acknowledgement of present subsisting liability, made in
writing in respect of any right claimed by the opposite party and D
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 – However, the acknowledgement
must be made before the relevant period of limitation has expired –
An offer of One Time Settlement of a live claim, made within the
period of limitation, can be construed as an acknowledgment to E
attract s. 18 of the Act.
Interpretation of statutes: Construction/interpretation of
statutory provision – Held: Legislative intent of the statute is to be
seen from the words used by the legislature itself – In case of doubt
it is always safe to look into the object and purpose of the statute F
or the reason and spirit behind it – Each word, phrase or sentence
has to be construed in the light of the general purpose of the Act
itself.
Allowing the appeal, the Court
G
HELD: 1.1 Under Section 7(2) of the Insolvency and
Bankruptcy Code, 2016 read with the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016 made in
exercise of powers conferred, inter alia, by clauses (c) (d) (e) and
(f) of sub-section (1) of Section 239 read with Sections 7, 8, 9 and
H
1064 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 10 of the IBC, a financial creditor is required to apply in the
prescribed Form 1 for initiation of the Corporate Insolvency
Resolution Process, against a Corporate Debtor under Section
7 of the IBC, accompanied with documents and records required
therein, and as specified in the Insolvency and Bankruptcy Board
of India (Insolvency Resolution Process for Corporate Persons)
B
Regulations, 2016. [Para 71][1112-B-D]
1.2 Since a Financial Creditor is required to apply under
Section 7 of the IBC, in statutory Form 1, the Financial Creditor
can only fill in particulars as specified in the various columns of
the Form. There is no scope for elaborate pleadings. An
C application to the Adjudicating Authority (NCLT) under Section
7 of the IBC in the prescribed form, cannot therefore, be
compared with the plaint in a suit. Such application cannot be
judged by the same standards, as a plaint in a suit, or any other
pleadings in a Court of law. [Para 73][1113-E-F]
D 1.3 The IBC is not just another statute for recovery of debts.
Nor is it a statute which merely prescribes the modalities of
liquidation of a Corporate body, unable to pay its debts. It is
essentially a statute which works towards the revival of a
Corporate body, unable to pay its debts, by appointment of a
E Resolution Professional. [Para 79][1115-A-B]
Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC
407 : [2017] 8 SCR 33; P. Mohanraj & Ors. v. Shah
Brothers Ispat Private Limited (2021) SCC Online SC
152; Swiss Ribbons Private Limited & Anr. v. Union of
F India and Ors. (2019) 4 SCC 17 : [2019] 3 SCR 535 –
referred to.
1.4 IBC has overriding effect over other laws. Section 238
of the IBC provides that the provisions of the IBC shall have
effect, notwithstanding anything inconsistent therewith contained
G in any other law, for the time being in force, or any other
instrument, having effect by virtue of such law. Unlike coercive
recovery litigation, the Corporate Insolvency Resolution Process
under the IBC is not adversarial to the interests of the Corporate
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1065
REDDY AND ANR.
Debtor. On the other hand, the IBC is a beneficial legislation for A
equal treatment of all creditors of the Corporate Debtor, as also
the protection of the livelihoods of its employees/workers, by
revival of the Corporate Debtor through the entrepreneurial skills
of persons other than those in its management, who failed to clear
the dues of the Corporate Debtor to its creditors. It only
B
segregates the interests of the Corporate Debtor from those of
its promoters/persons in management. [Para 84-86][1120-A-D]
1.5 Relegation of creditors to the remedy of Coercive
litigation against the Corporate Debtors could be detrimental to
the interests of the Corporate Debtor and its creditors alike.
While multiple coercive proceedings against a Corporate Debtor C
in different forums could impede its commercial/business
activities, deplete its cash reserves, dissipate its assets,
moveable and immoveable and precipitate its commercial death,
such proceedings might not be economically viable for the
creditors as well, because of the length of time consumed in the D
litigations, the expenses of litigation, and the uncertainties of
realisation of claims even after ultimate success in the litigation.It
is, therefore, imperative that the provisions of the IBC and the
Rules and Regulations framed thereunder be construed liberally,
in a purposive manner to further the objects of enactment of the
statute, and not be given a narrow, pedantic interpretation which E
defeats the purposes of the Act. [Para 87, 88][1120-D-G]
1.6 In construing and/or interpreting any statutory provision
one must look into the legislative intent of the statute. The
intention of the statute has to be found in the words used by the
legislature itself. In case of doubt it is always safe to look into F
the object and purpose of the statute or the reason and spirit
behind it. Each word, phrase or sentence has to be construed in
the light of the general purpose of the Act itself. The interpretative
effort “must be illumined by the goal, though guided by the
words”. When a question arises as to the meaning of a certain G
provision in a statute the provision has to be read in its context.
The statute has to be read as a whole. The previous state of the
law, the general scope and ambit of the statute and the mischief
H
1066 SUPREME COURT REPORTS [2021] 8 S.C.R.
A that it was intended to remedy are relevant factors. [Para 89,
90][1120-G-H; 1121-A-B]
Popatlal Shah v. State of Madras AIR 1953 SC 274 :
[1953] SCR 677 – relied on.
1.7 On a careful reading of the provisions of the IBC and in
B particular the provisions of Section 7(2) to (5) of the IBC read
with the 2016 Adjudicating Authority Rules 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. The time
stipulation of fourteen days in Section 7(4) to ascertain the
C existence of a default is apparently directory not mandatory. The
proviso inserted by amendment with effect from 28th December,
2019 provides that if the Adjudicating Authority has not
ascertained the default and passed an order under sub-section
(5) of Section 7 of the IBC within the aforesaid time, it shall record
its reasons in writing for the same. No other penalty is stipulated.
D Furthermore, the proviso to Section 7(5)(b) of the IBC obliges
the Adjudicating Authority to give notice to an applicant, to rectify
the defect in its application within seven days of receipt of such
notice from the Adjudicating Authority, before rejecting its
application under Clause (b) of sub-section (5) of Section 7 of the
E IBC. When the Adjudicating Authority calls upon the applicant
to cure some defects that defect has to be rectified within seven
days. There is no penalty prescribed for inability to cure the
defects in an application within seven days from the date of receipt
of notice, and in an appropriate case, the Adjudicating Authority
may accept the cured application, even after expiry of seven days,
F for the ends of justice. Section 12 of the IBC imposes a time limit
for completion of the Corporate Insolvency Resolution Process.
This time limit starts running from the date of admission of an
application to initiate the Corporate Insolvency Resolution
Process. [Para 91-94][1121-C-H; 1122-A]
G Arcelormittal (India) Pvt. Ltd. v. Satish Kumar Gupta
and Anr. (2019) 2 SCC 1 : [2018] 12 SCR 362 – referred
to.
1.8 The insolvency Committee of the Ministry of Corporate
Affairs, Government of India, in a report published in March 2018,
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1067
REDDY AND ANR.
stated that the intent of the IBC could not have been to give a A
new lease of life to debts which were already time barred.
Thereafter, Section 238A was incorporated in the IBC by the
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
(Act 26 of 2018), with effect from 6th June 2018. [Para 97][1123-
G-H; 1124-A]
B
1.9 There is no specific period of limitation prescribed in
the Limitation Act, 1963, for an application under the IBC, before
the Adjudicating Authority (NCLT). An application for which no
period of limitation is provided anywhere else in the Schedule to
the Limitation Act, is governed by Article 137 of the Schedule to
the said Act. Under Article 137 of the Schedule to the Limitation C
Act, the period of limitation prescribed for such an application is
three years from the date of accrual of the right to apply. 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. [Para 100, 101][1125-A-D] D
Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli
Cooperative Bank Ltd. and Anr. (2021) SCC Online
SC 244; Gaurav Hargovindbhai Dave v. Asset
Reconstruction Company (India) Ltd. and Anr. (2019)
SCC Online SC 1239 : (2019) 10 SCC 572 : [2019] 13 E
SCR 224; B. K. Educational Services Private Limited v.
Parag Gupta and Associates (2019) 11 SCC 633 :
[2018] 12 SCR 794; Jignesh Shah and Anr. v. Union of
India and Anr. (2019) SCC online SC 1254 : (2019)
10 SCC 750 : [2019] 12 SCR 678; Vashdeo R.
Bhojwani v. Abhyudaya Co-operative Bank Ltd. & Ors. F
(2019) 9 SCC 158 : [2019] 12 SCR 75; Balkrishna
Savalram Pujari Waghmare v. Shree Dhyaneshwar
Maharaj Sansthan [1959] 2 Suppl. SCR 476 – referred
to.
1.10 Limitation is essentially a mixed question of law and G
facts and when a party seeks application of any particular provision
for extension or enlargement of the period of limitation, the
relevant facts are required to be pleaded and requisite evidence
is required to be adduced. [Para 106][1126-E-F]
H
1068 SUPREME COURT REPORTS [2021] 8 S.C.R.
A Babulal Vardharji Gurjar v. Veer Gurjar Aluminium
Industries Private Limited (2020) 15 SCC 1 – relied
on.
1.11 In the instant case, admittedly there were fresh
documents before the Adjudicating Authority (NCLT), including
B a letter of offer dated 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 31st March, 2018 apart from the
final judgment and order dated 27th March, 2017 in O.A.
16/2015 and the subsequent Recovery Certificate No. 2060/2017
C dated 25th May, 2017 which constituted cause of action for
initiation of proceedings under Section 7 of the IBC. [Para
110][1127-D-E]
1.12 It is not necessary for this Court to examine the
relevance of all the documents filed by the Appellant Bank
D 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
E 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. [Para 112][1127-F-
H]
F 1.13 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 acknowledgement need
G 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. [Para 113][1128-A-
B]
1.14 IBC does not exclude the application of Section 14 or
H 18 or any other provision of the Limitation Act. There is therefore
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1069
REDDY AND ANR.
no reason to suppose that Sections 14 or 18 of the Limitation Act A
do not apply to proceedings under Section 7 or Section 9 of the
IBC. [Para 114][1128-C-D]
Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli
Cooperative Bank Ltd. and Anr. (2021) SCC Online
SC 244; Laxmi Pat Surana v. Union Bank of India and B
Ors. (2021) SCC Online SC 267; Asset Reconstruction
Company (India) Limited. v. Bishal Jaiswal and Ors.
(2021) SCC Online SC 321; Khan Bahadur Shapoor
Fredoom Mazda v. Durga Prasad Chamaria and Others
AIR 1961 SC 1236 : [1962] SCR 140 – referred to.
C
1.15 Entries in books of accounts and/or balance sheets of
a Corporate Debtor would amount to an acknowledgment under
Section 18 of the Limitation Act. [Para 118][1129-E-F]
Asset Reconstruction Company (India) Limited. v. Bishal
Jaiswal and Ors. (2021) SCC Online SC 321; Bengal D
Silk Mills Co. v. Ismail Golam Hossain Ariff AIR 1962
Cal 115; Re Pandem Tea Co. Ltd. AIR 1974 Cal 170;
South Asia Industries (P) Ltd. v. General Krishna
Shamsher Jung Bahadur Rana ILR (1972) 2 Del 712;
Hegde & Golay Limited v. State Bank of India ILR 1987
Kar 2673; Reliance Asset Reconstruction Co. Ltd. v. E
Hotel Poonja International Pvt. Ltd. (2021) 7 SCC
352 – referred to.
1.16 The finding of the NCLAT that there was nothing on
record to suggest that the ‘Corporate Debtor’ acknowledged the
debt within three years and agreed to pay debt is not sustainable F
in law, in view of the Statement of Accounts/Balance sheets/
Financial Statements for the years 2016-2017 and 2017-2018 and
the offer of One Time Settlement referred to above including in
particular, the offer of One Time Settlement made on 3rd March,
2017. [Para 126][1134-F-G] G
1.17 Section 18 of the Limitation Act speaks of an
acknowledgment in writing of liability, signed by the party against
whom such property or right is claimed. Even if the writing
containing the acknowledgment is undated, evidence might be
H
1070 SUPREME COURT REPORTS [2021] 8 S.C.R.
A given of the time when it was signed. The explanation clarifies
that an acknowledgment may be sufficient even though it is
accompanied by refusal to pay, deliver, perform or permit to enjoy
or is coupled with claim to set off, or is addressed to a person
other than a person entitled to the property or right. ‘Signed’ is
to be construed to mean signed personally or by an authorised
B
agent. [Para 127][1134-G-H; 1135-A]
1.18 In the instant case, Rs.111 lakhs had been paid towards
outstanding interest on 28th March, 2014 and the offer of One
Time Settlement was within three years thereafter. In any case,
NCLAT overlooked the fact that a Certificate of Recovery has
C been issued in favour of Appellant Bank on 25th May 2017. The
Corporate Debtor did not pay dues in terms of the Certificate of
Recovery. The Certificate of Recovery in itself gives a fresh cause
of action to the Appellant Bank to institute a petition under
Section 7 of IBC. The petition under Section 7 IBC was well
D within three years from 28th March 2014. [Para 128][1135-B-C]
Jignesh Shah and Anr. v. Union of India and Anr. (2019)
SCC online SC 1254 : (2019) 10 SCC 750 : [2019] 12
SCR 678; Ferro Alloys Corporation Limited v. Rajhans
Steel Limited (1999) SCC Online Pat 1196 – referred
E to.
1.19 ‘Default’ is defined in Section 3(12) to mean “non-
payment’ of a debt which has become due and payable whether in
whole or any part and is not paid by the Corporate Debtor”. [Para
133][1136-F]
F 1.20 It is true that, when the petition under Section 7 of
IBC was filed, the date of default was mentioned as 30.09.2013
and 31.12.2013 was stated to be the date of declaration of the
Account of the Corporate Debtor as NPA. However, it is not
correct to say that there was no averment in the petition of any
G acknowledgment of debt. Such averments were duly incorporated
by way of amendment, and the Adjudicating Authority rightly
looked into the amended pleadings. [Para 134][1136-G-H]
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DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1071
REDDY AND ANR.
1.21 The Appellant Bank filed the Petition under Section 7 A
of the IBC on 12th October 2018. Within three months, the
Appellant Bank filed an application in the NCLT, for permission
to place additional documents on record including the final
judgment and order/decree dated 27.3.2017 and the Recovery
Certificate dated 25.5.2017, enabling the Appellant Bank to
B
recover Rs.52 crores odd. The judgment and order/decree of
the DRT and the Recovery Certificate gave a fresh cause of action
to the Appellant Bank to initiate a petition under Section 7 of the
IBC. [Para 135][1137-A-B]
1.22 On or about 5th March 2019, the Appellant Bank filed
another application for permission to place on record additional C
documents including inter alia financial statements, Annual Report
etc. of the period from 1st April 2016 to 31st March 2017, and
again, from 1st April 2017 to 31st March 2018 and a letter dated
3rd March 2017 proposing a One Time Settlement. This
application was also allowed on 6th March 2021. The Adjudicating D
Authority, took into consideration the new documents and
admitted the petition under Section 7 of the IBC.Even assuming
that documents were brought on record at a later stage, the
Adjudicating Authority was not precluded from considering the
same. The documents were brought on record before any final
decision was taken in the Petition under Section 7 of IBC. [Para E
136, 137][1137-C-E]
1.23 A final judgment and order/decree is binding on the
judgment debtor. Once a claim fructifies into a final judgment
and order/decree, upon adjudication, and a certificate of Recovery
is also issued authorizing the creditor to realize its decretal dues, F
a fresh right accrues to the creditor to recover the amount of the
final judgment and/or order/decree and/or the amount specified
in the Recovery Certificate.The Appellant Bank was thus entitled
to initiate proceedings u/s. 7 within three years from the date of
issuance of the Recovery Certificate. The Petition of the Appellant G
Bank, would not be barred by limitation at least till 24th May,
2020. [Para 138, 139][1137-E-G]
1.24 While it is true that default in payment of a debt triggers
the right to initiate the Corporate Resolution Process, and a
Petition under Section 7 or 9 of the IBC is required to be filed H
1072 SUPREME COURT REPORTS [2021] 8 S.C.R.
A within the period of limitation prescribed by law, which in this
case would be three years from the date of default by virtue of
Section 238A of the IBC read with Article 137 of the Schedule to
the Limitation Act, the delay in filing a Petition in the NCLT is
condonable under Section 5 of the Limitation Act unlike delay in
filing a suit. Furthermore, Section 14 and 18 of the Limitation
B
Act are also applicable to proceedings under the IBC. [Para
140][1137-G-H; 1138-A-B]
1.25 Section 18 of the Limitation Act cannot also be
construed with pedantic rigidity in relation to proceedings under
the IBC. This Court sees no reason why an offer of One Time
C Settlement of a live claim, made within the period of limitation,
should not also be construed as an acknowledgment to attract
Section 18 of the Limitation Act. Be that as it may, the Balance
Sheets and Financial Statements of the Corporate Debtor for 2016-
2017, constitute acknowledgement of liability which extended the
D limitation by three years, apart from the fact that a Certificate of
Recovery was issued in favour of the Appellant Bank in May
2017. The NCLT rightly admitted the application by its order
dated 21st March, 2019. [Para 141][1138-B-D]
1.26 An application under Section 7 of the IBC would not
E be barred by limitation, on the ground that it had been filed beyond
a period of three years from the date of declaration of the loan
account of the Corporate Debtor as NPA, if there were an
acknowledgement of the debt by the Corporate Debtor before
expiry of the period of limitation of three years, in which case the
period of limitation would get extended by a further period of
F three years. Moreover, a judgment and/or decree for money in
favour of the Financial Creditor, passed by the DRT, or any other
Tribunal or Court, or the issuance of a Certificate of Recovery in
favour of the Financial Creditor, would give rise to a fresh cause
of action for the Financial Creditor, to initiate proceedings under
G Section 7 for initiation of the Corporate Insolvency Resolution
Process, within three years from the date of the judgment and/or
decree or within three years from the date of issuance of the
Certificate of Recovery, if the dues of the Corporate Debtor to
the Financial Debtor, under the judgment and/or decree and/or
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DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1073
REDDY AND ANR.
in terms of the Certificate of Recovery, or any part thereof A
remained unpaid. [Para 142, 143][1138-D-H]
1.27 There is no bar in law to the amendment of pleadings
in an application under Section 7 of the IBC, or to the filing of
additional documents, apart from those initially filed along with
application under Section 7 of the IBC in Form-1. In the absence B
of any express provision which either prohibits or sets a time
limit for filing of additional documents, it cannot be said that the
Adjudicating Authority committed any illegality or error in
permitting the Appellant Bank to file additional documents.
Needless however, to mention that depending on the facts and
circumstances of the case, when there is inordinate delay, the C
Adjudicating Authority might, at its discretion, decline the request
of an applicant to file additional pleadings and/or documents, and
proceed to pass a final order. The decision of the Adjudicating
Authority to entertain and/or to allow the request of the Appellant
Bank for the filing of additional documents with supporting D
pleadings, and to consider such documents and pleadings did not
call for interference in appeal.The impugned judgment and order
is unsustainable in law and facts. [Para 144, 145][1138-H; 1139-
A-D]
Nazir Mohamed v. J. Kamala & Ors. (2020) SCC E
OnLine SC 676 – referred to.
Case Law Reference
[2019] 13 SCR 224 referred to Para 29
(2020) 15 SCC 1 relied on Para 55 F
[2017] 8 SCR 33 referred to Para 80
[2019] 3 SCR 535 referred to Para 83
[1953] SCR 677 relied on Para 89
[2018] 12 SCR 362 referred to Para 95 G
[2018] 12 SCR 794 referred to Para 102
[2019] 12 SCR 75 referred to Para 104
[1959] 2 Suppl. SCR 476 referred to Para 104
H
1074 SUPREME COURT REPORTS [2021] 8 S.C.R.
A [1962] SCR 140 referred to Para 117
AIR 1962 Cal referred to Para 118
AIR 1974 Cal 170 referred to Para 118
ILR (1972) 2 Del 712 referred to Para 118
B ILR 1987 Kar 2673 referred to Para 118
(2021) 7 SCC 352 referred to Para 123
[2019] 12 SCR 678 referred to Para 129
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1650
C of 2020.
From the Judgment and Order dated 18.12.2019 of the Appellate
Tribunal (NCLAT) in Company Appeal (AT) (Insolvency) No. 407 of
2019.
Dhruv Mehta, Sr. Adv., Rajesh Kumar-I, Anant Gautam, Nipun
D Sharma, Madhur Tewatia, Advs. for the Appellant.
Goutham Shivshankar, Adv. for the Respondents.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
E
1. This Appeal under Section 62 of the Insolvency and Bankruptcy
Code, 2016 (IBC) is against a judgment and final order dated
18th December 2019 passed by the National Company Law Appellate
Tribunal (NCLAT), allowing Company Appeal (AT) (Insolvency) No.407
of 2019, filed by the Respondents and setting aside an order dated
F 21st March 2019 passed by the Adjudicating Authority/National Company
Law Tribunal (NCLT), Bengaluru, whereby the Adjudicating Authority
had admitted the Petition being CP(IB) No.244/BB/2018 filed by the
Appellant Bank against the Respondent No.2 (Corporate Debtor) under
Section 7 of the IBC. The NCLAT held that the said Petition of the
Appellant Bank under Section 7 of the IBC, was barred by limitation.
G
The Respondent No.1 is a Director of the Corporate Debtor.
2. By a letter dated 23rd December, 2011 the Appellant Bank had
sanctioned Term Loan and Letter of Credit Cum Buyers’ Credit in favour
of the Corporate Debtor, with an upper limit of Rs.45.00 Crores.
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1075
REDDY AND ANR. [INDIRA BANERJEE, J.]
3. The said Term Loan was to be repaid in 24 quarterly instalments A
of Rs.187.50 lakhs, which were to commence two years after the date
of disbursement, and the entire Term Loan was to be repaid in eight
years, inclusive of the implementation period of one year and the
moratorium period.
4. The Corporate Debtor executed various documents including B
Demand Promissory Notes, Letters of General Lien, etc. in favour of
the Appellant Bank and also mortgaged its lease hold rights in its
immovable property specified in the petition of appeal, by depositing the
Title of Deeds of the said immovable property with the Appellant Bank.
5. On 20th September, 2013 the Corporate Debtor defaulted in C
repayment of its dues to the Appellant Bank. The Loan Account of the
Corporate was therefore declared Non Performing Asset (NPA) on
31st December 2013.
6. The Corporate Debtor addressed a letter dated 24th March
2014 to the Appellant Bank, making a request for restructuring the Term D
Loan. The Appellant Bank did not accede to the request.
7. On 22nd December 2014, the Appellant Bank issued legal notice
to the Corporate Debtor as well as the Respondent No.2, calling upon
them to make payment of Rs.52.12 crores, claimed to be due from the
Corporate Debtor as on 22nd December 2014. The Corporate Debtor E
did not make the payment.
8. On or about 1st January 2015, the Appellant Bank filed an
application being O.A. No.16/2015 under Section 19 of the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993, now known as
the Recovery of Debts and Bankruptcy Act, 1993 and hereinafter F
referred to as ‘the Debt Recovery Act’ before the Debt Recovery Tribunal
(in short, DRT) Bangalore for recovery of its outstanding dues of
Rs.52,12,49,438.60 as on 22nd December 2014.
9. By a letter dated 5th January 2015, the Corporate Debtor replied
to the said notice dated 22nd December 2014, inter alia, requesting
G
once again, that the loan be restructured. Mr. Dhruv Mehta, Senior
Advocate, appearing on behalf of the Appellant Bank submitted that the
Corporate Debtor had accepted its liability to the Appellant Bank, by its
aforesaid letter dated 5th January 2015.
H
1076 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 10. On or about 3rd March 2017, while proceedings were pending
in the DRT, the Corporate Debtor gave a proposal for one time settlement
of the Term Loan Account, upon payment of Rs.5.50 crores. The proposal
was, however, not accepted by the Appellant Bank.
11. On 27th March 2017, the Debt Recovery Tribunal, Bengaluru
B passed a final judgment and order/decree against the Corporate Debtor
in the said O.A. No.16/2015, for recovery of Rs.52,12,49,438.60 with
future interest at the rate of 16.55% per annum, from the date of filing
the application till the date of realization.
12. On 25th May 2017, the Debt Recovery Tribunal issued a
C Recovery Certificate No. 2060/2017, in favour of the Appellant Bank
for recovery of Rs.52,12,49,438.60 from the Corporate Debtor. Thereafter,
on 19th June 2017, Corporate Debtor once again gave the Appellant
Bank a proposal for One Time Settlement to mutually settle the loan
amount.
D 13. Mr. Mehta appearing for the Appellant Bank pointed out, that
the Corporate Debtor had, in its Annual Reports for the financial years
2016-2017 and 2017-2018, acknowledged its liability in respect of the
loan taken by it from the Appellant Bank.
14. On 1st October 2018, the Appellant Bank issued a Demand
E Notice to the Corporate Debtor in Form-3 contained in the Insolvency
and Bankruptcy (Application to Adjudicating Authority) Rules, 2016,
hereinafter referred to as the ‘2016 Adjudicating Authority Rules’, and
on 12th October 2018, the Appellant Bank filed the Petition being CP(IB)
No.244/BB/2018 before the Adjudicating Authority under Section 7 of
the IBC in Form-1 given in the Annexure to the 2016 Adjudicating
F Authority Rules.
15. About three months thereafter, by a Notification being GSR
No.2(e) dated 2nd January 2019 the Department of Financial Services,
Ministry of Finance, Government of India amalgamated Vijaya Bank,
Dena Bank and Bank of Baroda.
G
16. On 9th January 2019, the Appellant Bank filed an application
before Adjudicating Authority under Rule 11 of the National Company
Law Tribunal Rules 2016 hereinafter referred to as the ‘NCLT Rules’,
read with Rule 4 of the 2016 Adjudicating Authority Rules, being I.A.
No.27/2019 dated 9th January 2019 in CP(IB) No.244/BB/2018, for
H permission to place on record additional documents, including the final
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1077
REDDY AND ANR. [INDIRA BANERJEE, J.]
judgment and order dated 27.03.2017 of the DRT in OA No.16/2015 A
and the Recovery Certificate No.2060/2017 dated 25.05.2017 issued by
the DRT.
17. On 2nd February 2019, the Corporate Debtor filed its preliminary
objection to the Petition filed by the Appellant Bank under Section 7 of
the IBC, inter alia, contending that the said Petition was barred by B
limitation.
18. By an order dated 4th February 2019, the Adjudicating Authority
allowed the application of the Appellant Bank being I.A No. 27/2019 in
CP (IB) No.244/BB/2018, and directed the Appellant Bank to file an
amended petition enclosing the documents referred to in the Application C
being I.A. No.27/2019. The Registry was directed to permit the Counsel
for the Appellant Bank to amend the Company Petition accordingly.
19. On or about 5th March 2019, the Appellant Bank filed another
application under Rule 11 of the NCLT Rules, being I.A. No.131 of
2019 in CP(IB) No.244/BB/2018, before the Adjudicating Authority for D
permission to place on record additional documents, including the letter
dated 03.03.2017 of the Corporate Debtor to the Appellant Bank
proposing a One Time Settlement, the Annual Report of the Corporate
Debtor for the years 2016-2017, the Financial Statement of the Corporate
Debtor for the period from 1st April 2016 to 31st March 2017 and the
Financial Statement of the Corporate Debtor, for the period from 1st E
April 2017 to 31st March 2018. By an order dated 6.03.2019 in I.A.
No.131 of 2019, the Appellant Bank was permitted to file the documents
in the Registry.
20. By an order dated 21st March 2019 the Adjudicating Authority
admitted the Petition under Section 7 of the IBC, being CP(IB) No.244/ F
BB/2018, and appointed an Interim Resolution Professional. The objection
of the bar of limitation, raised on behalf of the Corporate Debtor was
considered at length, but rejected by the Adjudicating Authority (NCLT).
21. On 6th April 2019, the Respondent No.1, filed an appeal being
CA(AT) (Ins) No.407/2019 before the NCLAT under Section 61 of the G
IBC. The Appellant Bank filed its written statement supporting the order
of the Adjudicating Authority dated 21st March 2019 admitting the Petition
of the Appellant Bank under Section 7 of the IBC.
22. After hearing the Appellant Bank, the Respondent No.1 and
the Corporate Debtor, the NCLAT set aside the order dated 21st March H
1078 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 2019 passed by the Adjudicating Authority (NCLT) Bengaluru and
dismissed the Petition filed by the Appellant Bank under Section 7 of the
IBC, holding that the said application was barred by limitation.
23. The issue which arises for consideration of this Court, in this
appeal is, whether the NCLAT has erred in law in arriving at the
B conclusion that, the Petition filed by the Appellant Bank under Section 7
of the IBC was barred by limitation, and setting aside the order dated
21st March 2019 passed by the Adjudicating Authority, admitting the said
Petition.
24. In other words, the main question involved in this appeal is,
C whether a Petition under Section 7 of the IBC would be barred by
limitation, on the sole ground that it had been filed beyond a period of 3
years from the date of declaration of the loan account of the Corporate
Debtor as NPA, even though the Corporate Debtor might subsequently
have acknowledged its liability to the Appellant Bank, within a period of
three years prior to the date of filing of the Petition under Section 7 of
D the IBC, by making a proposal for a One Time Settlement, or by
acknowledging the debt in its statutory Balance Sheets and Books of
Accounts.
25. Another question which arises for the consideration of this
Court is, whether a final judgment and decree of the DRT in favour of
E the Financial Creditor, or the issuance of a Certificate of Recovery in
favour of the Financial Creditor, would give rise to a fresh cause of
action to the Financial Creditor to initiate proceedings under Section 7 of
the IBC within three years from the date of the final judgment and decree,
and/or within three years from the date of issuance of the Certificate of
F Recovery.
26. A third issue which arises for adjudication of this Court is,
whether there is any bar in law to the amendment of pleadings, in a
Petition under Section 7 of the IBC, or to the filing of additional documents,
apart from those filed initially, along with the Petition under Section 7 of
G the IBC in Form-1.
27. Mr. Mehta appearing on behalf of the Appellant Banksubmitted
that the Adjudicating Authority had passed its order dated 21 st March
2019, admitting the Petition of the Appellant Bank under Section 7 of the
IBC, after taking into consideration the documents filed by the Appellant
Bank along with its interim applications being I.A. No. 27 of 2019 and
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1079
REDDY AND ANR. [INDIRA BANERJEE, J.]
I.A. No.131 of 2019, and arriving at the finding that the Petition filed by A
the Appellant Bank under Section 7 of the IBC was not barred by
limitation.
28. Mr. Mehta submitted that NCLAT has allowed the appeal of
the Respondent No.1, set aside the order of the Adjudicating Authority,
and dismissed the Petition of the Appellant Bank under Section 7 of B
IBC, recording a finding that there was nothing on record that suggested
that the Corporate Debtor had acknowledged its debt to the Appellant
Bank. The Appellate Authority has ignored the documents filed by the
Appellant Bank along with I.A. No.131 of 2019, which had duly been
allowed by the Adjudicating authority.
C
29. Mr. Mehta pointed out that, the NCLAT cited the judgments
of this Court in Jignesh Shah and Anr. v. Union of India and Anr.1
and Gaurav Hargovindbhai Dave v. Asset Reconstruction Company
(India) Ltd. and Anr.2 and held that the account of the Corporate Debtor
having been declared as NPA on 31st December 2013, the Petition under
Section 7 of the IBC, filed after five years was barred by limitation. D
30. Mr. Mehta argued that the NCLAT had returned a finding
that there was nothing on record to show that the Corporate Debtor had
admitted its debt to the Appellant Bank, overlooking relevant materials
on record, including:
E
(i) Admission of the Corporate Debtor of payment of Rs.111
lakhs on 28th March, 2014 towards interest on the loan.
(ii) Letter dated 5th January, 2015 of the Corporate Debtor to
the Appellant Bank, in response to the Demand Notice,
acknowledging its liability to the Appellant Bank. F
(iii) A statement of objection filed by the Corporate Debtor in
the DRT, Bangalore on or about 9th December 2015, denying
the Appellant Bank’s claim of Rs.52,04,438 as baseless,
but admitting that part of the amount was due.
(iv) The Financial Statements and Balance Sheets of the G
Corporate Debtor for the years 2016-2017 (year ending
31st March 2017) and for the years 2017-2018 (year ending
31st March 2018).
1. 2019 SCC online SC 1254: (2019) 10 SCC 750
2. 2019 SCC Online SC 1239: (2019) 10 SCC 572 H
1080 SUPREME COURT REPORTS [2021] 8 S.C.R.
A (v) Offer made by the Corporate Debtor on 03.03.2017 to settle
its dues to the Appellant Bank on onetime payment of Rs.5.5
crores.
(vi) Final judgment and decree/order dated 27th March, 2017
passed by the DRT, Bengaluru, in favour of the Appellant
B Bank for an amount of Rs.52,12,49,438.60 in O.A. No.16/
2015, with future interest at 16.55% per annum and the
Recovery certificate No.2060/2017 issued by the DRT on
25th May 2017.
31. Mr. Mehta argued that the Corporate Debtor had admitted
C having paid Rs.111 lakhs towards interest on 28th March, 2014. This
showed that the loan was alive and there was a subsisting jural
relationship. On 03.03.2017, within three years, the Corporate Debtor
had submitted a proposal for One Time Settlement (OTS) of its Term
Loan Account with the Appellant Bank. In doing so, the Corporate Debtor
had acknowledged its liability to the Appellant Bank. The Petition under
D Section 7 of the IBC was filed well within three years from the date of
such acknowledgement.
32. Mr. Mehta also pointed out that on 27th March 2017 the DRT,
Bengaluru had passed a final judgment and order/decree for an amount
of Rs.52,12,49,438.60 in favour of the Appellant Bank in O.A. No.16/
E 2015 along with future interest at 16.55% per annum with monthly rests,
from the date of application till the date of realisation, and had issued a
Recovery Certificate No.2060 of 2017, dated 25th May 2017 for realisation
of the said amount from the Corporate Debtor and the Respondent No.1.
The Appellant Bank filed the Petition under Section 7 of the IBC for
F initiation of the Corporate Insolvency Resolution Process well within 3
years from the aforesaid dates.
33. Mr. Mehta also submitted that the Corporate Debtor had in its
financial statements for the period from 1st April 2016 to 31st March
2017 and the period from 1st April 2017 to 31st March 2018, admitted
G that the Corporate Debtor had defaulted in repayment of its loan to the
Appellant Bank. The financial statements of the Corporate Debtor, for
the period from 1st April 2017 to 31st March 2018 reflect dues of Rs.67
crores to the Appellant Bank along with interest as on 31st March 2018,
but excluding penal interest.
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1081
REDDY AND ANR. [INDIRA BANERJEE, J.]
34. Mr. Mehta argued that the Corporate Debtor had thus admitted A
the existence of jural relationship of debtor and creditor, between the
Corporate Debtor and the Appellant Bank, which is evident from the
documents referred to above. In their objections filed in this Court, the
Respondents have admitted that they deposited Rs.111 lakhs in the current
account of the Corporate Debtor with the Appellant Bank on 28 th March
B
2014, thereby acknowledging that the jural relationship of debtor and
creditor between the Corporate Debtor and the Appellant Bank continued
after 31st December, 2013.
35. Mr. Mehta has also referred to the Counter Affidavit filed by
the Respondent No.1 and the Corporate Debtor, where they admitted
that the Corporate Debtor had sent a letter dated 3rd March 2017 to the C
Appellant Bank, offering to make payment of Rs.5.5 crores by way of
One Time Settlement. Moreover, the judgment and order/decree dated
27th March, 2017 passed by the DRT and the Recovery Certificate
No.2060/2017 referred to above, which gave rise to a fresh cause of
action to the Appellant Bank to initiate proceedings against the Corporate D
Debtor under Section 7 of the IBC, are matters of record and in any
case, duly admitted.
36. Relying on the judgments of this Court in Sesh Nath Singh
and Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. And Anr.3,
Laxmi Pat Surana v. Union Bank of India and Ors. 4 and Asset E
Reconstruction Company (India) Limited. v. Bishal Jaiswal and
Ors.5 Mr. Mehta argued that Section 18 of the Limitation Act applied to
proceedings under the IBC. This issue was no longer res integra.
37. On the other hand, Mr. Goutham Shivshankar appearing on
behalf of the Respondents, submitted that under the scheme of the IBC, F
NCLAT is the final forum for determination of facts. Mr. Shivshankar
argued that there is a factual determination by the NCLAT that records
reveal no acknowledgement of debt for the purpose of extending
limitation.
38. Mr. Shivshankar contended the NCLAT has duly dealt with G
the question of acknowledgement holding:
3. 2021 SCC Online SC 244
4. 2021 SCC Online SC 267
5. 2021 SCC Online SC 321 H
1082 SUPREME COURT REPORTS [2021] 8 S.C.R.
A “In the present case there is nothing on record to suggest that
the ‘Corporate Debtor’ acknowledged the debt within three
years and agreed to pay the debt. The application moved by
‘Corporate Debtor’ to restructure the debt or payment of the
interest does not amount to acknowledgement of debt. There
is nothing on record to suggest that the ‘Corporate Debtor’
B
or its authorized representative by its signature has accepted
or acknowledged the debt within three years from the date of
default or from the date when the account was declared NPA,
i.e. on 31 st December 2013. The Balance Sheet of the
‘Corporate Debtor’ for the year 2016-2017 filed after 31st
C March 2017 cannot be termed to be a document of
acknowledgment in terms of section 18 of the Limitation Act.”
39. According to Mr. Shivshankar, the NCLAT was entirely right
in coming to the factual conclusion that the Petition of the Appellant
Bank under Section 7 of the IBC was barred by limitation.
D Mr. Shivshankar argued that NCLT arrived at this conclusion on the
basis of facts and materials on record and it cannot be said that the
conclusion is perverse or otherwise warrants intervention of this Court
in a Second Appeal, restricted to questions of law under Section 62 of
the IBC.
E 40. Mr. Shivshankar argued that this appeal has been filed on the
basis of documents that were brought on record before the Adjudicating
Authority (NCLT) at a belated stage, in a manner contrary to the
provisions of IBC and the law laid down by this Court.
41. Mr. Shivshankar emphatically argued that Appellant Bank filed
F its Petition under Section 7 of the IBC on 12th October 2018, about five
years after the date of default and was thus well beyond the period of
limitation of three years, under Article 137 of the Schedule to the
Limitation Act.
42. Mr. Shivshankar pointed out that the Petition under Section 7
G of the IBC mentions the date of default as 30th September 2013, and 31st
December 2013 as the date of declaration of the account of the Corporate
Debtor as NPA. There was no averment in the petition of any
acknowledgement of debt which extended the period of limitation.
43. Mr. Shivshankar argued that, under Section 7(3) of the IBC, a
Financial creditor is required to furnish “record of the default recorded
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1083
REDDY AND ANR. [INDIRA BANERJEE, J.]
with the information utility or record of evidence of default as may be A
specified” and “ any other information as may be specified by the Board”.
44. Mr. Shivshankar further argued that as per Section 7(4) of the
IBC, the NCLT was required to “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)” within “fourteen B
days of the receipt of the application”. Mr. Shivshankar further argued
that under Section 7(5) of the IBC, it was open to the NCLT to allow
seven days to the financial creditor to rectify any defect in its application.
45. Mr. Shivshankar argued the Adjudicating Authority (NCLT),
instead of proceeding in the manner expressly stipulated in the IBC and
without adhering to the time lines stipulated therein, delayed the C
adjudication of the question of admissibility of the petition under Section
7 of the IBC by four months, and allowed the Appellant Bank to introduce
documents at a belated stage and these documents were considered by
the NCLT despite vehement objections by the Respondents.
46. Mr. Shivshankar further argued that on 2nd February 2019, D
Corporate Debtor filed its preliminary objection to the petition under
Section 7 of the IBC, taking, a specific objection that the petition was
time barred since the date of default was admittedly stated to be 30th
September 2013. However, the NCLT after hearing arguments on 8th
February 2019, adjourned the matter with a direction on Counsel appearing E
for the Appellant Bank, to file a gist of the case as also a copy of the
order passed by the Karnataka High Court, in a Writ Petition filed by the
Corporate Debtor, whereby the execution of the judgment and/or order/
decree of the DRT in O.A. 16 of 2015 had been stayed.
47. Mr. Shivshankar submitted that, taking advantage of the limited
liberty granted to the Appellant Bank by the Adjudicating Authority to F
file a gist of the case and some orders/judgments, the Appellant Bank in
abuse of the process of the Tribunal, filed I.A. No. 131 of 2019, introducing
a whole new set of documents and setting up an entirely new case for
extension of limitation, on the ground of alleged acknowledgement of
debt. G
48. Mr. Shivshankar argued that I.A. No.131 of 2019 was
supported by an affidavit. The documents listed above were introduced
for the first time. Even at this stage all the documents were not filed.
Some of the documents were never filed in the NCLT and were first
brought on record in the reply filed before NCLAT.
H
1084 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 49. Mr. Shivshankar submitted that on 6th March 2019 the NCLT
passed an order, permitting learned counsel for the Appellant Bank to
file a set of documents in the Registry, after serving copies thereof on
the Respondents, and posted the case on 18 th March 2019.
Mr. Shivshankar argued that the Respondents had specifically objected
to the belated filing of additional documents. However, the NCLT
B
completely ignored the objections raised on behalf of the Respondents
and passed its order dated 21st March 2019, admitting the petition under
Section 7 of the IBC.
50. Mr. Shivshankar submitted that the Respondents immediately
appealed to the NCLAT, inter alia contending that the Adjudicating
C Authority had erred in permitting the Appellant Bank to substantially
improve upon its original petition filed under Section 7 of the IBC, by
filing additional documents and making out an entirely new case, after
the expiry of fourteen days specified in Section 7 for ascertainment of
default. Mr. Shivshankar submitted that it was in this background that
D the NCLAT made the factual finding at Paragraph 4 of the impugned
order, that there was nothing on record to say that there was any
acknowledgement of debt, renewing or extending limitation.
51. Mr. Shivshankar argued that it is now well settled that the
Limitation Act applies to proceedings under the IBC. Mr. Shivshankar
E also agreed that Section 18 of the Limitation Act would apply to
proceedings in the NCLT under Section 7 of the IBC. However, he
argued that, what falls for consideration in this appeal, is whether the
Appellant Bank had placed sufficient materials on record, with its petition
under Section 7 of the IBC, to attract Section 18 of the Limitation Act.
F 52. Mr. Shivshankar finally argued that Section 62 of the IBC,
under which this appeal has been filed, is restricted to questions of law,
unlike an appeal to the NCLAT from an order of the Adjudicating Authority
(NCLT), which is an appeal both on facts and in law.
53. Mr. Shivshankar cited the judgment of this Court in Nazir
G Mohamed v. J. Kamala& Ors. 6, authored by one of us (Indira
Banerjee J.) where this Court held:-
“To be a question of law “involved in the case”, there must
be first, a foundation for it laid in the pleadings, and the
H 6. 2020 SCC OnLine SC 676
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1085
REDDY AND ANR. [INDIRA BANERJEE, J.]
question should emerge from the sustainable findings of fact, A
arrived at by Courts of facts, and it must be necessary to
decide that question of law for a just and proper decision of
the case. (emphasis supplied)
54. There can be no dispute with the proposition that, to be a
question of law involved in the case, there must be first a foundation laid B
in the pleadings, and the question should emerge from the sustainable
findings of fact, arrived at by Courts of facts, as reiterated by this Court
in Nazir Mohamad v. J. Kamala (supra), rendered in the context of a
second appeal under Section 100 of the Civil Procedure Code.
55. Mr. Shivshankar next cited the judgment of this Court in C
Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries
Private Limited7, where this Court speaking through Maheshwari J.,
held:
“35. Apart from the above and even if it be assumed that the
principles relating to acknowledgment as per Section 18 of D
the Limitation Act are applicable for extension of time for the
purpose of the application under Section 7 of the Code, in
our view, neither the said provision and principles come in
operation in the present case nor do they enure to the benefit
of Respondent 2 for the fundamental reason that in the
application made before NCLT, Respondent 2 specifically E
stated the date of default as “8-7-2011 being the date of NPA”.
It remains indisputable that neither has any other date of
default been stated in the application nor has any suggestion
about any acknowledgment been made. As noticed, even in
Part V of the application, Respondent 2 was required to state F
the particulars of financial debt with documents and evidence
on record. In the variety of descriptions which could have
been given by the applicant in the said Part V of the application
and even in residuary Point 8 therein, nothing was at all stated
at any place about the so-called acknowledgment or any other
date of default. G
35.1. Therefore, on the admitted fact situation of the present
case, where only the date of default as “8-7-2011” has been
7 (2020) 15 SCC 1 : 2020 SCC Online SC 647
H
1086 SUPREME COURT REPORTS [2021] 8 S.C.R.
A stated for the purpose of maintaining the application under
Section 7 of the Code, and not even a foundation is laid in the
application for suggesting any acknowledgment or any other
date of default, in our view, the submissions sought to be
developed on behalf of Respondent 2 at the later stage cannot
be permitted. It remains trite that the question of limitation is
B
essentially a mixed question of law and facts and when a
party seeks application of any particular provision for
extension or enlargement of the period of limitation, the
relevant facts are required to be pleaded and requisite evidence
is required to be adduced. Indisputably, in the present case,
C Respondent 2 never came out with any pleading other than
stating the date of default as “8-7-2011” in the application.
That being the position, no case for extension of period of
limitation is available to be examined. In other words, even if
Section 18 of the Limitation Act and principles thereof were
applicable, the same would not apply to the application under
D
consideration in the present case, looking to the very averment
regarding default therein and for want of any other averment
in regard to acknowledgment. In this view of the matter,
reliance on the decision in Mahabir Cold Storage [Mahabir
Cold Storage v. CIT, 1991 Supp (1) SCC 402] does not
E advance the cause of Respondent 2.”
56. Relying on the aforesaid judgment, Mr. Shivshankar contended
that the foundation for a plea of extension of limitation by virtue of
acknowledgment of debt should be in the pleadings and cannot be
developed at a later stage. Mr. Shivshankar emphatically argued that in
F this case, there was no foundation in the pleadings for a case of extension
of limitation under Section 18 of the Limitation Act.
57. Relying on Babulal Vardharji Gurjar (supra) Mr. Shivshankar
argued that subsequent improvement in pleadings, at the fag-end of the
NCLT proceedings, ought not to have been countenanced.
G Mr. Shivshankar further argued that, in any case, a proper construction
of the documents relied upon by the Appellant Bank would show that
they do not amount to acknowledgment under Section 18 of the Limitation
Act, which requires that any acknowledgment must be made “before
the expiration of the period of limitation for a suit or application”.
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1087
REDDY AND ANR. [INDIRA BANERJEE, J.]
58. Mr. Shivshankar cited a Full Bench judgment of Allahabad A
High Court in Munshi Lal v. Hira Lal& Anr.8, where the High Court
held:-
“Now, it is clear that a document said to constitute an
acknowledgment has to be construed in the context in which
it is given and that, where its language is not clear in itself, B
the context may be examined to see what it is to which the
words refer. That is not to say that any equivocation in an
acknowledgment can be cured by ascertaining what the
probable intention of the acknowledgor was. That is quite a
different thing. But, where, after examining in the light of the
context what it was that the person giving the acknowledgment C
was actually referring to the conclusion follows that it is an
unequivocal acknowledgment of a right, then that
acknowledgment is sufficient to satisfy section 19 of the
Limitation Act.”
59. Mr. Shivshankar further pointed out that the Corporate Debtor’s D
reply dated 5th January 2015 to the legal notice issued by the Appellant
Bank, the reply filed by the Corporate Debtor in O. S. No.16/2015 before
the DRT, Bengaluru, the OTS Proposal dated 3 rd March 2017, OTS
Proposal dated 19th June 2017 and the Balance Sheets/Annual Reports
of the Corporate Debtor and a group company of the Corporate Debtor, E
namely Kaveri Telecom Products Limited, for the financial years
2016-17 and 2017-18 are irrelevant for the purpose of Section 18 of the
Limitation Act and many of those documents were in response to
suggestions made by the Appellant Bank seeking willingness to restructure
the account of the Respondents. Moreover, payment of outstanding
interest of Rs.111 lakhs was made in March 2014 that is over four years F
before the date of filing of the petition under Section 7 of the IBC.
60. Mr. Shivshankar also argued that the letter dated 24th March
2014 written by the Corporate Debtor was not on record in the
proceedings before the Adjudicating Authority. The document was
introduced for the first time along with the reply filed by the Appellant G
Bank before the NCLAT. This document cannot be considered as part
of the records at all.
8 ILR 1947 All 11: AIR 1947 All 74(FB) H
1088 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 61. Mr. Shivshankar finally submitted that the communications
from the Respondents were only to buy peace and end the litigation and
cannot, therefore, be construed as acknowledgment of debts for the
purpose of Section 18 of the Limitation Act.
62. Referring to the judgment of this Court in Gaurav
B Hargovindbhai Dave (supra), Mr. Shivshankar argued that a proposal
for One Time Settlement cannot be construed as an acknowledgment of
debt for the purpose of Section 18 of the Limitation Act.
63. Mr. Shivshankar drew our attention to the fact that a review
petition was pending in this Court against the decision in Gaurav
C Hargovindbhai Dave (supra). Admittedly, however, the effect of the
judgment has not been stayed. Until and unless the review application is
allowed and the judgment is reversed, it would operate as a precedent.
64. Mr. Shivshankar finally cited Jignesh Shah (supra) where
this Court observed:-
D “The aforesaid judgments correctly hold that a suit for
recovery based upon a cause of action that is within limitation
cannot in any manner impact the separate and independent
remedy of a winding-up proceeding.In law, when time begins
to run, it can only be extended in the manner provided in the
E Limitation Act. For example, an acknowledgment of liability
under Section 18 of the Limitation Act would certainly extend
the limitation period, but a suit for recovery, which is a
separate and independent proceeding distinct from the remedy
of winding up would, in no manner, impact the limitation within
which the winding-up proceeding is to be filed, by somehow
F keeping the debt alive for the purpose of the winding-up
proceeding.”
65. Mr. Shivshankar concluded his arguments with the submission
that the Petition under Section 7 of the IBC was not based on the Recovery
Certificate issued by the DRT or the judgment and order of the DRT.
G Therefore, there could be no question of reckoning limitation from the
date of failure to make payment in terms of the Recovery Certificate.
66. The IBC is an Act “to consolidate and amend the laws
relating to reorganisation and insolvency resolution of corporate
persons, partnership firms and individuals in a time-bound manner
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1089
REDDY AND ANR. [INDIRA BANERJEE, J.]
for maximisation of value of assets of such persons, to promote A
entrepreneurship, availability of credit and balance the interests of
all the stakeholders including alteration in the order of priority of
payment of Government dues and to establish an Insolvency and
Bankruptcy Board of India, and for matters connected therewith or
incidental thereto”.
B
67. The IBC aims at promoting, inter alia, investments and also
resolution of insolvency of Corporate persons. As per its Statement of
Objects and Reasons “the objective of the Insolvency and Bankruptcy
Code, 2015 is to consolidate and amend the laws relating to
reorganization and insolvency resolution of corporate persons,
partnership firms and individuals in a time bound manner for C
maximization of value of assets of such persons, to promote
entrepreneurship, availability of credit and balance the interests of
all the stakeholders including alteration in the priority of payment
of government dues and to establish an Insolvency and Bankruptcy
Fund, and matters connected therewith or incidental thereto. An D
effective legal framework for timely resolution of insolvency and
bankruptcy would support development of credit markets and
encourage entrepreneurship. It would also improve Ease of Doing
Business, and facilitate more investments leading to higher economic
growth and development”.
E
68. Under the scheme of the IBC, the Insolvency Resolution
Process begins, when a default takes place, in the sense that a debt
becomes due and is not paid. Some of the relevant provisions of the
IBC, are set out hereinbelow for convenience:
“3. Definitions.—In this Code, unless the context otherwise F
requires,—
(6) “claim” means—
(a) a right to payment, whether or not such right is reduced
to judgment, fixed, disputed, undisputed, legal,
equitable, secured or unsecured; G
(b) right to remedy for breach of contract under any law
for the time being in force, if such breach gives rise to
a right to payment, whether or not such right is reduced
to judgment, fixed, matured, unmatured, disputed,
undisputed, secured or unsecured; H
1090 SUPREME COURT REPORTS [2021] 8 S.C.R.
A (7) “corporate person” means a company as defined in clause
(20) of Section 2 of the Companies Act, 2013 (18 of 2013), a
limited liability partnership, as defined in clause (n) of sub-
section (1) of Section 2 of the Limited Liability Partnership
Act, 2008 (6 of 2009), or any other person incorporated with
limited liability under any law for the time being in force but
B
shall not include any financial service provider;
(8) “corporate debtor” means a corporate person who owes
a debt to any person;
…..
C (10) “creditor” means any person to whom a debt is owed
and includes a financial creditor, an operational creditor, a
secured creditor, an unsecured creditor and a decree-holder;
(11) “debt” means a liability or obligation in respect of a
claim which is due from any person and includes a financial
D debt and operational debt;
(12) “default” means non-payment of debt when whole or
any part or instalment of the amount of debt has become due
and payable and is not 5[paid] by the debtor or the corporate
debtor, as the case may be;
E
4. Application of this Part.—(1) This Part shall apply to
matters relating to the insolvency and liquidation of corporate
debtors where the minimum amount of the default is one lakh
rupees:
Provided that the Central Government may, by notification,
F
specify the minimum amount of default of higher value which
shall not be more than one crore rupees.
5. Definitions.—In this Part, unless the context otherwise
requires—
G ***
(7) “financial creditor” means any person to whom a
financial debt is owed and includes a person to whom such
debt has been legally assigned or transferred to;
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1091
REDDY AND ANR. [INDIRA BANERJEE, J.]
(8) “financial debt” means a debt along with interest, if A
any, which is disbursed against the consideration for the
time value of money and includes—
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any
acceptance credit facility or its dematerialised B
equivalent;
(c) any amount raised pursuant to any note purchase
facility or the issue of bonds, notes, debentures, loan
stock or any similar instrument;
C
(d) the amount of any liability in respect of any lease or
hire-purchase contract which is deemed as a finance
or capital lease under the Indian Accounting Standards
or such other accounting standards as may be
prescribed;
D
(e) receivables sold or discounted other than any
receivables sold on non-recourse basis;
(f) any amount raised under any other transaction,
including any forward sale or purchase agreement,
having the commercial effect of a borrowing;
E
(g) any derivative transaction entered into in connection
with protection against or benefit from fluctuation in
any rate or price and for calculating the value of any
derivative transaction, only the market value of such
transaction shall be taken into account;
F
(h) any counter-indemnity obligation in respect of a
guarantee, indemnity, bond, documentary letter of credit
or any other instrument issued by a bank or financial
institution;
(i) the amount of any liability in respect of any of G
the guarantee or indemnity for any of the items
referred to in sub-clauses (a) to (h) of this clause;
6. Persons who may initiate corporate insolvency resolution
process.—Where any corporate debtor commits a default, a
financial creditor, an operational creditor or the corporate H
1092 SUPREME COURT REPORTS [2021] 8 S.C.R.
A debtor itself may initiate corporate insolvency resolution
process in respect of such corporate debtor in the manner as
provided under this Chapter.
7. Initiation of corporate insolvency resolution process by
financial creditor.—(1) A financial creditor either by itself or
B jointly with 15[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.
C
Provided that for the financial creditors, referred to in clauses
(a) and (b) of sub-section (6-A) 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
D 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
E 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
F 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,
G such application shall be modified to comply with the
requirements of the first or second proviso within thirty days
of the commencement of the said Act, failing which the
application shall be deemed to be withdrawn before its
admission.]
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1093
REDDY AND ANR. [INDIRA BANERJEE, J.]
Explanation.—For the purposes of this sub-section, a default A
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 B
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 C
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. D
(4) The Adjudicating Authority shall, within fourteen days of
the receipt of the application under sub-section (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):
E
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— F
(a) a default has occurred and the application under sub-
section (2) is complete, and there is no disciplinary
proceedings pending against the proposed resolution
professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub- G
section (2) is incomplete or any disciplinary proceeding is
pending against the proposed resolution professional, it
may, by order, reject such application:
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1094 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 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.
B (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
C financial creditor and the corporate debtor;
(b) the order 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.
D 8. Insolvency resolution by operational creditor.—(1) An
operational creditor may, on the occurrence of a default,
deliver a demand notice of unpaid operational debtor copy
of an invoice demanding payment of the amount involved in
the default to the corporate debtor in such form and manner
as may be prescribed.
E
(2) The corporate debtor shall, within a period of ten days of
the receipt of the demand notice or copy of the invoice
mentioned in sub-section
(1) bring to the notice of the operational creditor—
F (a) existence of a dispute, if any, or record of the pendency
of the suit or arbitration proceedings filed before the receipt
of such notice or invoice in relation to such dispute;
(b) the payment of unpaid operational debt—
(i) by sending an attested copy of the record of electronic
G transfer of the unpaid amount from the bank account
of the corporate debtor; or
(ii) by sending an attested copy of record that the
operational creditor has encashed a cheque issued by
the corporate debtor.
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1095
REDDY AND ANR. [INDIRA BANERJEE, J.]
Explanation.—For the purposes of this section, a “demand A
notice” means a notice served by an operational creditor to
the corporate debtor demanding payment of the operational
debt in respect of which the default has occurred.”
12. Time-limit for completion of insolvency resolution
process.—(1) Subject to sub-section (2), the corporate B
insolvency resolution process shall be completed within a
period of one hundred and eighty days from the date of
admission of the application to initiate such process.
(2) The resolution professional shall file an application to
the Adjudicating Authority to extend the period of the C
corporate insolvency resolution process beyond one hundred
and eighty days, if instructed to do so by a resolution passed
at a meeting of the committee of creditors by a vote of sixty-
six per cent of the voting shares.
(3) On receipt of an application under sub-section (2), if the D
Adjudicating Authority is satisfied that the subject-matter of
the case is such that corporate insolvency resolution process
cannot be completed within one hundred and eighty days, it
may by order extend the duration of such process beyond
one hundred and eighty days by such further period as it
thinks fit, but not exceeding ninety days: E
Provided that any extension of the period of corporate
insolvency resolution process under this section shall not be
granted more than once:
Provided further that the corporate insolvency resolution F
process shall mandatorily be completed within a period of
three hundred and thirty days from the insolvency
commencement date, including any extension of the period
of corporate insolvency resolution process granted under this
section and the time taken in legal proceedings in relation to
such resolution process of the corporate debtor: G
Provided also that where the insolvency resolution process of
a corporate debtor is pending and has not been completed
within the period referred to in the second proviso, such
resolution process shall be completed within a period of ninety
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1096 SUPREME COURT REPORTS [2021] 8 S.C.R.
A days from the date of commencement of the Insolvency and
Bankruptcy Code (Amendment) Act, 2019.
12-A. Withdrawal of application admitted under Section 7, 9
or 10.—The Adjudicating Authority may allow the withdrawal
of application admitted under Section 7 or Section 9 or
B Section 10, on an application made by the applicant with the
approval of ninety per cent. voting share of the committee of
creditors, in such manner as may be specified.
13. Declaration of moratorium and public announcement.—
(1) The Adjudicating Authority, after admission of the
C application under Section 7 or Section 9 or Section 10, shall,
by an order—
(a) declare a moratorium for the purposes referred to in
Section 14;
(b) cause a public announcement of the initiation of
D corporate insolvency resolution process and call for the
submission of claims under Section 15; and
(c) appoint an interim resolution professional in the manner
as laid down in Section 16.
(2) The public announcement referred to in clause (b) of sub-
E
section (1) shall be made immediately after the appointment
of the interim resolution professional.
14. Moratorium.—(1) Subject to provisions of sub-sections
(2) and (3), on the insolvency commencement date, the
Adjudicating Authority shall by order declare moratorium for
F
prohibiting all of the following, namely—
(a) the institution of suits or continuation of pending suits
or proceedings against the corporate debtor including
execution of any judgment, decree or order in any court
of law, tribunal, arbitration panel or other authority;
G
(b) transferring, encumbering, alienating or disposing of
by the corporate debtor any of its assets or any legal right
or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security
H interest created by the corporate debtor in respect of its
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1097
REDDY AND ANR. [INDIRA BANERJEE, J.]
property including any action under the Securitisation and A
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (54 of 2002);
(d) the recovery of any property by an owner or lessor
where such property is occupied by or in the possession of
the corporate debtor. B
Explanation.—For the purposes of this sub-section, it is hereby
clarified that notwithstanding anything contained in any other
law for the time being in force, a license, permit, registration,
quota, concession, clearances or a similar grant or right given
by the Central Government, State Government, local authority, C
sectoral regulator or any other authority constituted under
any other law for the time being in force, shall not be
suspended or terminated on the grounds of insolvency, subject
to the condition that there is no default in payment of current
dues arising for the use or continuation of the license, permit,
registration, quota, concession, clearances or a similar grant D
or right during the moratorium period.]
(2) The supply of essential goods or services to the corporate
debtor as may be specified shall not be terminated or
suspended or interrupted during moratorium period.
E
(2-A) Where the interim resolution professional or resolution
professional, as the case may be, considers the supply of goods
or services critical to protect and preserve the value of the
corporate debtor and manage the operations of such
corporate debtor as a going concern, then the supply of such
goods or services shall not be terminated, suspended or F
interrupted during the period of moratorium, except where
such corporate debtor has not paid dues arising from such
supply during the moratorium period or in such circumstances
as may be specified.
(3) The provisions of sub-section (1) shall not apply to— G
(a) such transactions, agreements or other arrangements
as may be notified by the Central Government in
consultation with any financial sector regulator or any
other authority;]
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1098 SUPREME COURT REPORTS [2021] 8 S.C.R.
A (b) a surety in a contract of guarantee to a corporate
debtor.]
(4) The order of moratorium shall have effect from the date
of such order till the completion of the corporate insolvency
resolution process:
B Provided that where at any time during the corporate
insolvency resolution process period, if the Adjudicating
Authority approves the resolution plan under sub-section (1)
of Section 31 or passes an order for liquidation of corporate
debtor under Section 33, the moratorium shall cease to have
C effect from the date of such approval or liquidation order, as
the case may be.
15. Public announcement of corporate insolvency resolution
process.—(1) The public announcement of the corporate
insolvency resolution process under the order referred to in
D Section 13 shall contain the following information, namely:—
(a) name and address of the corporate debtor under the
corporate insolvency resolution process;
(b) name of the authority with which the corporate debtor
is incorporated or registered;
E
(c) the last date for submission of claims, as may be
specified;
(d) details of the interim resolution professional who shall
be vested with the management of the corporate debtor
and be responsible for receiving claims;
F
(e) penalties for false or misleading claims; and
(f) the date on which the corporate insolvency resolution
process shall close, which shall be the one hundred and
eightieth day from the date of the admission of the
G application under Sections 7, 9 or Section 10, as the case
may be.
(2) The public announcement under this section shall be made
in such manner as may be specified.
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1099
REDDY AND ANR. [INDIRA BANERJEE, J.]
16. Appointment and tenure of interim resolution A
professional.—(1) The Adjudicating Authority shall appoint
an interim resolution professional on the insolvency
commencement date.
(2) Where the application for corporate insolvency resolution
process is made by a financial creditor or the corporate debtor, B
as the case may be, the resolution professional, as proposed
respectively in the application under Section 7 or Section 10,
shall be appointed as the interim resolution professional, if
no disciplinary proceedings are pending against him.
(3) Where the application for corporate insolvency resolution C
process is made by an operational creditor and—
(a) no proposal for an interim resolution professional is
made, the Adjudicating Authority shall make a reference
to the Board for the recommendation of an insolvency
professional who may act as an interim resolution D
professional;
(b) a proposal for an interim resolution professional is made
under sub-section (4) of Section 9, the resolution
professional as proposed, shall be appointed as the interim
resolution professional, if no disciplinary proceedings are E
pending against him.
(4) The Board shall, within ten days of the receipt of a reference
from the Adjudicating Authority under sub-section (3),
recommend the name of an insolvency professional to the
Adjudicating Authority against whom no disciplinary F
proceedings are pending.
(5) The term of the interim resolution professional shall
continue till the date of appointment of the resolution
professional under Section 22.
17. Management of affairs of corporate debtor by interim G
resolution professional.—(1) From the date of appointment of
the interim resolution professional,—
(a) the management of the affairs of the corporate debtor
shall vest in the interim resolution professional;
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1100 SUPREME COURT REPORTS [2021] 8 S.C.R.
A (b) the powers of the board of directors or the partners of
the corporate debtor, as the case may be, shall stand
suspended and be exercised by the interim resolution
professional;
(c) the officers and managers of the corporate debtor shall
B report to the interim resolution professional and provide
access to such documents and records of the corporate
debtor as may be required by the interim resolution
professional;
(d) the financial institutions maintaining accounts of the
C corporate debtor shall act on the instructions of the interim
resolution professional in relation to such accounts and
furnish all information relating to the corporate debtor
available with them to the interim resolution professional.
18. Duties of interim resolution professional.—(1) The interim
D resolution professional shall perform the following duties,
namely—
(a) collect all information relating to the assets, finances and
operations of the corporate debtor for determining the
financial position of the corporate debtor, including
E information relating to—
(i) business operations for the previous two years;
(ii) financial and operational payments for the previous
two years;
(iii) list of assets and liabilities as on the initiation date;
F
and
(iv) such other matters as may be specified;
(b) receive and collate all the claims submitted by creditors
to him, pursuant to the public announcement made under
G Sections 13 and 15;
(c) constitute a committee of creditors;
(d) monitor the assets of the corporate debtor and manage
its operations until a resolution professional is appointed
by the committee of creditors;
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1101
REDDY AND ANR. [INDIRA BANERJEE, J.]
(e) file information collected with the information utility, if A
necessary; and
(f) take control and custody of any asset over which the
corporate debtor has ownership rights as recorded in the
balance sheet of the corporate debtor, or with information
utility or the depository of securities or any other registry B
that records the ownership of assets including—
(i) assets over which the corporate debtor has ownership
rights which may be located in a foreign country;
(ii) assets that may or may not be in possession of the
corporate debtor; C
(iii) tangible assets, whether movable or immovable;
(iv) intangible assets including intellectual property;
(v) securities including shares held in any subsidiary
of the corporate debtor, financial instruments, D
insurance policies;
(vi) assets subject to the determination of ownership by
a court or authority;
(g) to perform such other duties as may be specified by the
Board. E
Explanation.—For the purposes of this section, the term
“assets” shall not include the following, namely—
(a) assets owned by a third party in possession of the
corporate debtor held under trust or under contractual F
arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the
corporate debtor; and
(c) such other assets as may be notified by the Central
Government in consultation with any financial sector G
regulator.
20. Management of operations of corporate debtor as going
concern.—(1) The interim resolution professional shall make
every endeavour to protect and preserve the value of the
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1102 SUPREME COURT REPORTS [2021] 8 S.C.R.
A property of the corporate debtor and manage the operations
of the corporate debtor as a going concern.
21. Committee of creditors.—(1) The interim resolution
professional shall after collation of all claims received against
the corporate debtor and determination of the financial
B position of the corporate debtor, constitute a committee of
creditors.
(2) The committee of creditors shall comprise all financial
creditors of the corporate debtor:
Provided that a financial creditor or the authorised
C representative of the financial creditor referred to in sub-
section (6) or sub-section (6-A) or sub-section (5) of Section
24, if it is a related party of the corporate debtor, shall not
have any right of representation, participation or voting in a
meeting of the committee of creditors:
D Provided further that the first proviso shall not apply to a
financial creditor, regulated by a financial sector regulator,
if it is a related party of the corporate debtor solely on account
of conversion or substitution of debt into equity shares or
instruments convertible into equity shares or completion of
E such transactions as may be prescribed, prior to the
insolvency commencement date.
22. Appointment of resolution professional.—(1) The first
meeting of the committee of creditors shall be held within seven
days of the constitution of the committee of creditors.
F (2) The committee of creditors, may, in the first meeting, by a
majority vote of not less than sixty-six] per cent of the voting
share of the financial creditors, either resolve to appoint the
interim resolution professional as a resolution professional
or to replace the interim resolution professional by another
resolution professional.
G
(3) Where the committee of creditors resolves under sub-section
(2)—
(a) to continue the interim resolution professional as
resolution professional subject to a written consent from
H the interim resolution professional in the specified form],
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1103
REDDY AND ANR. [INDIRA BANERJEE, J.]
it shall communicate its decision to the interim resolution A
professional, the corporate debtor and the Adjudicating
Authority; or
(b) to replace the interim resolution professional, it shall
file an application before the Adjudicating Authority for
the appointment of the proposed resolution B
professional along with a written consent from the proposed
resolution professional in the specified form.
(4) The Adjudicating Authority shall forward the name of the
resolution professional proposed under clause (b) of sub-
section (3) to the Board for its confirmation and shall make C
such appointment after confirmation by the Board.
(5) Where the Board does not confirm the name of the proposed
resolution professional within ten days of the receipt of the
name of the proposed resolution professional, the
Adjudicating Authority shall, by order, direct the interim D
resolution professional to continue to function as the resolution
professional until such time as the Board confirms the
appointment of the proposed resolution professional.
23. Resolution professional to conduct corporate insolvency
resolution process.—(1) Subject to Section 27, the resolution E
professional shall conduct the entire corporate insolvency
resolution process and manage the operations of the corporate
debtor during the corporate insolvency resolution process
period:
Provided that the resolution professional shall continue to F
manage the operations of the corporate debtor after the expiry
of the corporate insolvency resolution process period, until
an order approving the resolution plan under sub-section (1)
of Section 31 or appointing a liquidator under Section 34 is
passed by the Adjudicating Authority.
G
(2) The resolution professional shall exercise powers and
perform duties as are vested or conferred on the interim
resolution professional under this Chapter.
(3) In case of any appointment of a resolution professional
under sub-sections (4) of Section 22, the interim resolution
H
1104 SUPREME COURT REPORTS [2021] 8 S.C.R.
A professional shall provide all the information, documents and
records pertaining to the corporate debtor in his possession
and knowledge to the resolution professional.
25. Duties of resolution professional.—(1) It shall be the duty
of the resolution professional to preserve and protect the assets
B of the corporate debtor, including the continued business
operations of the corporate debtor.
(2) For the purposes of sub-section (1), the resolution
professional shall undertake the following actions, namely—
(a) take immediate custody and control of all the assets of
C the corporate debtor, including the business records of the
corporate debtor;
(b) represent and act on behalf of the corporate debtor
with third parties, exercise rights for the benefit of the
corporate debtor in judicial, quasi-judicial or arbitration
D proceedings;
(c) raise interim finances subject to the approval of the
committee of creditors under Section 28;
25-A. Rights and duties of authorised representative of
financial creditors.—(1) The authorised representative under
E
sub-section (6) or sub-section (6-A) of Section 21 or sub-
section (5) of Section 24 shall have the right to participate
and vote in meetings of the committee of creditors on behalf
of the financial creditor he represents in accordance with the
prior voting instructions of such creditors obtained through
F physical or electronic means.
(2) It shall be the duty of the authorised representative to
circulate the agenda and minutes of the meeting of the
committee of creditors to the financial creditor he represents.
(3) The authorised representative shall not act against the
G interest of the financial creditor he represents and shall always
act in accordance with their prior instructions:
Provided that if the authorised representative represents
several financial creditors, then he shall cast his vote in
respect of each financial creditor in accordance with
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1105
REDDY AND ANR. [INDIRA BANERJEE, J.]
instructions received from each financial creditor, to the extent A
of his voting share:
Provided further that if any financial creditor does not give
prior instructions through physical or electronic means, the
authorised representative shall abstain from voting on behalf
of such creditor. B
(3-A) Notwithstanding anything to the contrary contained in
sub-section (3), the authorised representative under sub-
section (6-A) of Section 21 shall cast his vote on behalf of all
the financial creditors he represents in accordance with the
decision taken by a vote of more than fifty per cent. of the C
voting share of the financial creditors he represents, who have
cast their vote:
Provided that for a vote to be cast in respect of an application
under Section 12-A, the authorised representative shall cast
his vote in accordance with the provisions of sub-section (3). D
(4) The authorised representative shall file with the committee
of creditors any instructions received by way of physical or
electronic means, from the financial creditor he represents,
for voting in accordance therewith, to ensure that the
appropriate voting instructions of the financial creditor he E
represents is correctly recorded by the interim resolution
professional or resolution professional, as the case may be.
Explanation.—For the purposes of this section, the “electronic
means” shall be such as may be specified.]
27. Replacement of resolution professional by committee of F
creditors.—(1) Where, at any time during the corporate
insolvency resolution process, the committee of creditors is of
the opinion that a resolution professional appointed under
Section 22 is required to be replaced, it may replace him with
another resolution professional in the manner provided under
G
this section.
(2) The committee of creditors may, at a meeting, by a vote of
sixty-six per cent. of voting shares, resolve to replace the
resolution professional appointed under Section 22 with
H
1106 SUPREME COURT REPORTS [2021] 8 S.C.R.
A another resolution professional, subject to a written consent
from the proposed resolution professional in the specified form.
(3) The committee of creditors shall forward the name of the
insolvency professional proposed by them to the Adjudicating
Authority.
B (4) The Adjudicating Authority shall forward the name of the
proposed resolution professional to the Board for its
confirmation and a resolution professional shall be appointed
in the same manner as laid down in Section 16.
(5) Where any disciplinary proceedings are pending against
C the proposed resolution professional under sub-section (3),
the resolution professional appointed under Section 22 shall
continue till the appointment of another resolution
professional under this section.
30. Submission of resolution plan.—(1) A resolution applicant
D may submit a resolution plan along with an affidavit stating
that he is eligible under Section 29-A to the resolution
professional prepared on the basis of the information
memorandum.
(2) The resolution professional shall examine each resolution
E plan received by him to confirm that each resolution plan—
(a) provides for the payment of insolvency resolution
process costs in a manner specified by the Board in priority
to the payment of other debts of the corporate debtor;
(b) provides for the payment of debts of operational
F
creditors in such manner as may be specified by the Board
which shall not be less than—
(i) the amount to be paid to such creditors in the event of a
liquidation of the corporate debtor under Section 53; or
G (ii) the amount that would have been paid to such creditors,
if the amount to be distributed under the resolution plan
had been distributed in accordance with the order of
priority in sub-section (1) of Section 53,
whichever is higher, and provides for the payment of debts
H of financial creditors, who do not vote in favour of the
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1107
REDDY AND ANR. [INDIRA BANERJEE, J.]
resolution plan, in such manner as may be specified by the A
Board, which shall not be less than the amount to be paid
to such creditors in accordance with sub-section (1) of
Section 53 in the event of a liquidation of the corporate
debtor.
Explanation 1.—For the removal of doubts, it is hereby B
clarified that a distribution in accordance with the
provisions of this clause shall be fair and equitable to such
creditors.
Explanation 2.—For the purposes of this clause, it is hereby
declared that on and from the date of commencement of C
the Insolvency and Bankruptcy Code (Amendment) Act,
2019, the provisions of this clause shall also apply to the
corporate insolvency resolution process of a corporate
debtor—
(i) where a resolution plan has not been approved or D
rejected by the Adjudicating Authority;
(ii) where an appeal has been preferred under Section 61
or Section 62 or such an appeal is not time barred under
any provision of law for the time being in force; or
(iii) where a legal proceeding has been initiated in any E
court against the decision of the Adjudicating Authority
in respect of a resolution plan;]
(c) provides for the management of the affairs of the
corporate debtor after approval of the resolution plan;
F
(d) the implementation and supervision of the resolution
plan;
(e) does not contravene any of the provisions of the law
for the time being in force;
(f) conforms to such other requirements as may be specified G
by the Board.
Explanation.—For the purposes of clause (e), if any approval
of shareholders is required under the Companies Act, 2013
(18 of 2013) or any other law for the time being in force for
the implementation of actions under the resolution plan, such H
1108 SUPREME COURT REPORTS [2021] 8 S.C.R.
A approval shall be deemed to have been given and it shall not
be a contravention of that Act or law.
(3) The resolution professional shall present to the
committee of creditors for its approval such resolution
plans which confirm the conditions referred to in sub-
B section (2).
(4) The committee of creditors may approve a resolution plan
by a vote of not less than sixty-six per cent of voting share of
the financial creditors, after considering its feasibility and
viability, the manner of distribution proposed, which may take
C into account the order of priority amongst creditors as laid
down in sub-section (1) of Section 53,including the priority
and value of the security interest of a secured creditor and
such other requirements as may be specified by the Board:
Provided that the committee of creditors shall not approve a
D resolution plan, submitted before the commencement of the
Insolvency and Bankruptcy Code (Amendment) Ordinance,
2017, where the resolution applicant is ineligible under
Section 29-A and may require the resolution professional to
invite a fresh resolution plan where no other resolution plan
is available with it:
E
Provided further that where the resolution applicant referred
to in the first proviso is ineligible under clause (c) of Section
29-A, the resolution applicant shall be allowed by the
committee of creditors such period, not exceeding thirty days,
to make payment of overdue amounts in accordance with the
F proviso to clause (c) of Section 29-A:
Provided also that nothing in the second proviso shall be
construed as extension of period for the purposes of the
proviso to sub-section (3) of Section 12, and the corporate
insolvency resolution process shall be completed within the
G period specified in that sub-section.]
Provided also that the eligibility criteria in Section 29-A as
amended by the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018 (Ord. 6 of 2018) shall apply
to the resolution applicant who has not submitted resolution
H
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REDDY AND ANR. [INDIRA BANERJEE, J.]
plan as on the date of commencement of the Insolvency and A
Bankruptcy Code (Amendment) Ordinance, 2018.
(5) The resolution applicant may attend the meeting of the
committee of creditors in which the resolution plan of the
applicant is considered:
Provided that the resolution applicant shall not have a right B
to vote at the meeting of the committee of creditors unless
such resolution applicant is also a financial creditor.
(6) The resolution professional shall submit the resolution plan
as approved by the committee of creditors to the Adjudicating
Authority. C
31. Approval of resolution plan.—(1) If the Adjudicating
Authority is satisfied that the resolution plan as approved by
the committee of creditors under sub-section (4) of Section
30 meets the requirements as referred to in sub-section (2) of
Section 30, it shall by order approve the resolution plan which D
shall be binding on the corporate debtor and its employees,
members, creditors, including the Central Government, any
State Government or any local authority to whom a debt in
respect of the payment of dues arising under any law for the
time being in force, such as authorities to whom statutory E
dues are owed, guarantors and other stakeholders involved
in the resolution plan:
Provided that the Adjudicating Authority shall, before passing
an order for approval of resolution plan under this sub-
section, satisfy that the resolution plan has provisions for its F
effective implementation.
(2) Where the Adjudicating Authority is satisfied that the
resolution plan does not confirm to the requirements referred
to in sub-section (1), it may, by an order, reject the resolution
plan.
G
(3) After the order of approval under sub-section (1),—
(a) the moratorium order passed by the Adjudicating
Authority under Section 14 shall cease to have effect; and
(b) the resolution professional shall forward all records
relating to the conduct of the corporate insolvency H
1110 SUPREME COURT REPORTS [2021] 8 S.C.R.
A resolution process and the resolution plan to the Board to
be recorded on its database.
(4) The resolution applicant shall, pursuant to the resolution
plan approved under sub-section (1), obtain the necessary
approval required under any law for the time being in force
B within a period of one year from the date of approval of the
resolution plan by the Adjudicating Authority under sub-
section (1) or within such period as provided for in such law,
whichever is later:
Provided that where the resolution plan contains a provision
C for combination, as referred to in Section 5 of the Competition
Act, 2002 (12 of 2003), the resolution applicant shall obtain
the approval of the Competition Commission of India under
that Act prior to the approval of such resolution plan by the
committee of creditors.]
D 33. Initiation of liquidation.—(1) Where the Adjudicating
Authority,—
(a) before the expiry of the insolvency resolution process
period or the maximum period permitted for completion of
the corporate insolvency resolution process under Section
E 12 or the fast track corporate insolvency resolution process
under Section 56, as the case may be, does not receive a
resolution plan under sub-section (6) of Section 30; or
(b) rejects the resolution plan under Section 31 for the
non-compliance of the requirements specified therein,
F it shall—
(i) pass an order requiring the corporate debtor to be
liquidated in the manner as laid down in this Chapter;
(ii) issue a public announcement stating that the corporate
debtor is in liquidation; and
G
(iii) require such order to be sent to the authority with which
the corporate debtor is registered.
(2) Where the resolution professional, at any time during the
corporate insolvency resolution process but before
H confirmation of resolution plan, intimates the Adjudicating
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1111
REDDY AND ANR. [INDIRA BANERJEE, J.]
Authority of the decision of the committee of A
creditors approved by not less than sixty-six per cent of the
voting share] to liquidate the corporate debtor, the
Adjudicating Authority shall pass a liquidation order as
referred to in sub-clauses (i), (ii) and (iii) of clause (b) of
sub-section (1).
B
Explanation.—For the purposes of this sub-section, it is hereby
declared that the committee of creditors may take the decision
to liquidate the corporate debtor, any time after its constitution
under sub-section (1) of Section 21 and before the
confirmation of the resolution plan, including at any time
before the preparation of the information memorandum. C
(3) Where the resolution plan approved by the Adjudicating
Authority is contravened by the concerned corporate debtor,
any person other than the corporate debtor, whose interests
are prejudicially affected by such contravention, may make
an application to the Adjudicating Authority for a liquidation D
order as referred to in sub-clauses (i), (ii) and (iii) of clause
(b) of sub-section (1).
(4) On receipt of an application under sub-section (3), if the
Adjudicating Authority determines that the corporate debtor
has contravened the provisions of the resolution plan, it shall E
pass a liquidation order as referred to in sub-clauses (i), (ii)
and (iii) of clause (b) of sub-section (1).
(5) Subject to Section 52, when a liquidation order has been
passed, no suit or other legal proceeding shall be instituted
by or against the corporate debtor: F
Provided that a suit or other legal proceeding may be instituted
by the liquidator, on behalf of the corporate debtor, with the
prior approval of the Adjudicating Authority…”.
69. The scheme of the IBC is to ensure that when a default takes
G
place, in the sense that a debt becomes due and is not paid, the Corporate
Insolvency Resolution Process begins.Where any corporate debtor
commits default, a financial creditor, an operational creditor or the
corporate debtor itself may initiate Corporate Insolvency Resolution
Process in respect of such corporate debtor in the manner as provided
in Chapter II of the IBC. H
1112 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 70. The provisions of the IBC are designed to ensure that the
business and/or commercial activities of the Corporate Debtor are
continued by a Resolution Professional, post imposition of a moratorium,
which would give the Corporate Debtor some reprieve from coercive
litigation, which could drainthe Corporate Debtor of its financial
resources. This is to enable the Corporate Debtor to improve its financial
B
health and at the same time repay the dues of its creditors.
71. Under Section 7(2) of the IBC, read with the Statutory 2016
Adjudicating Authority Rules, made in exercise of powers conferred,
inter alia, by clauses (c) (d) (e) and (f) of sub-section (1) of Section
C 239 read with Sections 7, 8, 9 and 10 of the IBC, a financial creditor is
required to apply in the prescribed Form 1 for initiation of the Corporate
Insolvency Resolution Process, against a Corporate Debtor under Section
7 of the IBC, 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,
D 2016, hereinafter referred to as the 2016 IB Board of India Regulations.
72. Statutory Form 1 under Rule 4(1) of the 2016 Adjudicating
Authority 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
E Resolution Professional. Parts IV and V which require particulars of
Financial Debt with Documents, Records and Evidence of default, is
extracted hereinbelow:
PART IV
F 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
G COMPUTATION OF AMOUNT AND DAYS OF
DEFAULT IN TABULAR FORM)
H
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PART V A
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.
ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE
ISSUED BY THE REGISTRAR OF COMPANIES (IF THE CORPORATE
DEBTOR IS A COMPANY) B
2 PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL
PANEL ADJUDICATIN G 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 C
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 DEF AULT AS AVAILABLE WITH ANY CREDIT
INFORMATION COMPANY
(ATTACH A COPY) D
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
73. Since a Financial Creditor is required to apply under Section 7 E
of the IBC, in statutory Form 1, the Financial Creditor can only fill in
particulars as specified in the various columns of the Form. There is no
scope for elaborate pleadings. An application to the Adjudicating Authority
(NCLT) under Section 7 of the IBC in the prescribed form, cannot
therefore, be compared with the plaint in a suit. Such application cannot F
be judged by the same standards, as a plaint in a suit, or any other
pleadings in a Court of law.
74. Section 7(3) requires a financial creditor making an application
under Section 7(1) to furnish records of the default recorded with the
information utility or such other record or evidence of default as may be G
specified; the name of the resolution professional proposed to act as an
Interim Resolution Professional and any other information as may be
specified by the Insolvency and Bankruptcy Board of India.
75. Section 7(4) of the IBC casts an obligation on the Adjudicating
Authority to ascertain the existence of a default from the records of an H
1114 SUPREME COURT REPORTS [2021] 8 S.C.R.
A information utility or on the basis of other evidence furnished by the
financial creditor within fourteen days of the receipt of the application
under Section 7. As per the proviso to Section 7(4) of the IBC, inserted
by amendment, by Act 26 of 2019, if the Adjudicating Authority has not
ascertained the existence of default and passed an order within the
stipulated period of time of fourteen days, it shall record its reasons for
B
the same in writing. The application does not lapse for non-compliance
of the time schedule. Nor is the Adjudicating Authority obliged to dismiss
the application. On the other hand, the application cannot be dismissed,
without compliance with the requisites of the Proviso to Section 7(5) of
the IBC.
C 76. Section 7(5)(a) provides that when the Adjudicating Authority
is satisfied that a default has occurred, and the application under sub-
section (2) of Section 7 is complete and there is no disciplinary proceeding
pending against the proposed resolution professional, it may by order
admit such application. As per Section 7(5)(b), if the Adjudicating
D Authority is satisfied that default has not occurred or the application
under sub-Section (2) of Section 7 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 sub-section (b) of
Section 5, give notice to the applicant, to rectify the defects in his
E application, within 7 days of receipt of such notice from the Adjudicating
Authority.
77. The Corporate Insolvency Resolution Process commences
on the date of admission of the application under sub-section (5) of Section
7 of the IBC. Section 7(7) casts an obligation on the Adjudicating Authority
F to communicate an order under clause (a) of sub-section (5) of Section
7 to the financial creditor and the corporate debtor and to communicate
an order under clause (b) of sub-section (5) of Section 7 to the financial
creditor within seven days of admission or rejection of such application,
as the case may be. Sections 8 and 9 of IBC pertain to Insolvency
G Resolution by an operational creditor and are not attracted in the facts
and circumstances of this case.Section 10 pertains to initiation of
Corporate Insolvency Resolution Process by the Corporate Debtor itself,
and is also not attracted in the facts and circumstances of the case.
78. Section 12(1) of the IBC requires the Corporate Insolvency
H Process to be completed within a period of 180 days from the date of
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1115
REDDY AND ANR. [INDIRA BANERJEE, J.]
admission of the application to initiate such process. The period of 180 A
days is not extendable more than once.
79. The IBC is not just another statute for recovery of debts. Nor
is it a statute which merely prescribes the modalities of liquidation of a
Corporate body, unable to pay its debts. It is essentially a statute which
works towards the revival of a Corporate body, unable to pay its debts, B
by appointment of a Resolution Professional.
80. In Innoventive Industries Ltd vs. ICICI Bank9, this Court,
speaking through Nariman, J. extracted excerpts from the Report of the
Bankruptcy Law Reforms Committee of November, 2015 some of which
are reproduced hereinbelow:- C
“…When a firm (referred to as the corporate debtor in the
draft law) defaults, the question arises about what is to be
done. Many possibilities can be envisioned. One possibility
is to take the firm into liquidation. Another possibility is to
negotiate a debt restructuring, where the creditors accept a D
reduction of debt on an NPV basis, and hope that the
negotiated value exceeds the liquidation value. Another
possibility is to sell the firm as a going concern and use the
proceeds to pay creditors. Many hybrid structures of these
broad categories can be envisioned.
E
***
Speed is of essence
Speed is of essence for the working of the bankruptcy
code, for two reasons. First, while the “calm period” can
help keep an organisation afloat, without the full clarity of F
ownership and control, significant decisions cannot be made.
Without effective leadership, the firm will tend to atrophy and
fail. The longer the delay, the more likely it is that liquidation
will be the only answer. Second, the liquidation value tends
to go down with time as many assets suffer from a high
G
economic rate of depreciation.
From the viewpoint of creditors, a good realisation can
generally be obtained if the firm is sold as a going concern.
Hence, when delays induce liquidation, there is value
9. (2018) 1 SCC 407 H
1116 SUPREME COURT REPORTS [2021] 8 S.C.R.
A destruction. Further, even in liquidation, the realisation is
lower when there are delays. Hence, delays cause value
destruction. Thus, achieving a high recovery rate is primarily
about identifying and combating the sources of delay.
***
B Control of a company is not divine right.—When a firm
defaults on its debt, control of the company should shift to
the creditors. In the absence of swift and decisive mechanisms
for achieving this, management teams and shareholders retain
control after default. Bankruptcy law must address this.
C Objectives…”
81. In Innoventive Industries Ltd vs. ICICI Bank (supra) this
Court noted the objectives set by the Bankruptcy Law Reforms
Committee in recommending the IBC,
“The Committee set the following as objectives desired from
D implementing a new Code to resolve insolvency and
bankruptcy:
(1) Low time to resolution.
(2) Low loss in recovery.
E (3) Higher levels of debt financing across a wide variety of
debt instruments.
………
Principles driving the design
F The Committee chose the following principles to design the
new insolvency and bankruptcy resolution framework:
I. The Code will facilitate the assessment of viability of the
enterprise at a very early stage.
(1) The law must explicitly state that the viability of the
G enterprise is a matter of business, and that matters of business
can only be negotiated between creditors and debtor. While
viability is assessed as a negotiation between creditors and
debtor, the final decision has to be an agreement among
creditors who are the financiers willing to bear the loss in the
insolvency.
H
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REDDY AND ANR. [INDIRA BANERJEE, J.]
(2) The legislature and the courts must control the process of A
resolution, but not be burdened to make business decisions.
(3) The law must set up a calm period for insolvency resolution
where the debtor can negotiate in the assessment of viability
without fear of debt recovery enforcement by creditors.
(4) The law must appoint a resolution professional as the B
manager of the resolution period, so that the creditors can
negotiate the assessment of viability with the confidence that
the debtors will not take any action to erode the value of the
enterprise. The professional will have the power and
responsibility to monitor and manage the operations and
assets of the enterprise. The professional will manage the C
resolution process of negotiation to ensure balance of power
between the creditors and debtor, and protect the rights of all
creditors. The professional will ensure the reduction of
asymmetry of information between creditors and debtor in
the resolution process. D
II. The Code will enable symmetry of information between
creditors and debtors.
(5) The law must ensure that information that is essential for
the insolvency and the bankruptcy resolution process is
created and available when it is required. E
(6) The law must ensure that access to this information is made
available to all creditors to the enterprise, either directly or
through the regulated professional.
(7) The law must enable access to this information to third
parties who can participate in the resolution process, through F
the regulated professional.
III. The Code will ensure a time-bound process to better
preserve economic value.
(8) The law must ensure that time value of money is preserved,
and that delaying tactics in these negotiations will not extend G
the time set for negotiations at the start.
IV. The Code will ensure a collective process.
(9) The law must ensure that all key stakeholders will
participate to collectively assess viability. The law must ensure
H
1118 SUPREME COURT REPORTS [2021] 8 S.C.R.
A that all creditors who have the capability and the willingness
to restructure their liabilities must be part of the negotiation
process. The liabilities of all creditors who are not part of the
negotiation process must also be met in any negotiated
solution.
B V. The Code will respect the rights of all creditors equally.
(10) The law must be impartial to the type of creditor in
counting their weight in the vote on the final solution in
resolving insolvency.
VI. The Code must ensure that, when the negotiations fail to
C establish viability, the outcome of bankruptcy must be binding.
(11) The law must order the liquidation of an enterprise which
has been found unviable. This outcome of the negotiations
should be protected against all appeals other than for very
exceptional cases.
D
VII. The Code must ensure clarity of priority, and that the
rights of all stakeholders are upheld in resolving bankruptcy.
(12) The law must clearly lay out the priority of distributions
in bankruptcy to all stakeholders. The priority must be
designed so as to incentivise all stakeholders to participate
E
in the cycle of building enterprises with confidence.
(13) While the law must incentivise collective action in resolving
bankruptcy, there must be a greater flexibility to allow
individual action in resolution and recovery during
bankruptcy compared with the phase of insolvency
F
resolution.”
82. As observed by this Court, speaking through Nariman, J in P.
Mohanraj & Ors. v. Shah Brothers Ispat Private Limited10 :-
“10. A cursory look at Section 14(1)makes it clear that subject
G to the exceptions contained in sub-sections (2) and (3), on
the insolvency commencement date, the Adjudicating Authority
shall mandatorily, by order, declare a moratorium to prohibit
what follows in clauses (a) to (d). Importantly, under sub-
H 10. 2021 SCC Online SC 152
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1119
REDDY AND ANR. [INDIRA BANERJEE, J.]
section (4), this order of moratorium does not continue A
indefinitely, but has effect only from the date of the order
declaring moratorium till the completion of the corporate
insolvency resolution process which is time bound, either
culminating in the order of the Adjudicating Authority
approving a resolution plan or in liquidation.
B
11. The two exceptions to Section 14(1)are contained in sub-
sections (2) and (3) of Section 14. Under sub-section (2), the
supply of essential goods or services to the corporate debtor
during this period cannot be terminated or suspended or even
interrupted, as otherwise the corporate debtor would be
brought to its knees and would not able to function as a going C
concern during this period...”
83. In Swiss Ribbons Private Limited & Anr. v. Union of India
and Ors.11, authored by Nariman, J. this Court observed:-
“28. It can thus be seen that the primary focus of the D
legislation is to ensure revival and continuation of the
corporate debtor by protecting the corporate debtor from its
own management and from a corporate death by liquidation.
The Code is thus a beneficial legislation which puts the
corporate debtor back on its feet, not being a mere recovery
legislation for creditors. The interests of the corporate debtor E
have, therefore, been bifurcated and separated from that of
its promoters/those who are in management. Thus, the
resolution process is not adversarial to the corporate debtor
but, in fact, protective of its interests. The moratorium imposed
by Section 14 is in the interest of the corporate debtor itself, F
thereby preserving the assets of the corporate debtor during
the resolution process. The timelines within which the
resolution process is to take place again protects the corporate
debtor’s assets from further dilution, and also protects all its
creditors and workers by seeing that the resolution process
goes through as fast as possible so that another management G
can, through its entrepreneurial skills, resuscitate the
corporate debtor to achieve all these ends.”
11. (2019) 4 SCC 17
H
1120 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 84. IBC has overriding effect over other laws. Section 238 of the
IBC provides that the provisions of the IBC shall have effect,
notwithstanding anything inconsistent therewith contained in any other
law, for the time being in force, or any other instrument, having effect by
virtue of such law.
B 85. Unlike coercive recovery litigation, the Corporate Insolvency
Resolution Process under the IBC is not adversarial to the interests of
the Corporate Debtor, as observed by this Court in Swiss Ribbons Private
Limited v. Union of India (supra).
86. On the other hand, the IBC is a beneficial legislation for equal
C treatment of all creditors of the Corporate Debtor, as also the protection
of the livelihoods of its employees/workers, by revival of the Corporate
Debtor through the entrepreneurial skills of persons other than those in
its management, who failed to clear the dues of the Corporate Debtor to
its creditors. It only segregates the interests of the Corporate Debtor
from those of its promoters/persons in management.
D
87. Relegation of creditors to the remedy of Coercive litigation
against the Corporate Debtors could be detrimental to the interests of
the Corporate Debtor and its creditors alike. While multiple coercive
proceedings against a Corporate Debtor in different forums could impede
its commercial/business activities, deplete its cash reserves, dissipate its
E assets, moveable and immoveable and precipitate its commercial death,
such proceedings might not be economically viable for the creditors as
well, because of the length of time consumed in the litigations, the
expenses of litigation, and the uncertainties of realisation of claims even
after ultimate success in the litigation.
F 88. It is, therefore, imperative that the provisions of the IBC and
the Rules and Regulations framed thereunder be construed liberally, in a
purposive manner to further the objects of enactment of the statute, and
not be given a narrow, pedantic interpretation which defeats the purposes
of the Act.
G 89. In construing and/or interpreting any statutory provision one
must look into the legislative intent of the statute. The intention of the
statute has to be found in the words used by the legislature itself. In case
of doubt it is always safe to look into the object and purpose of the
statute or the reason and spirit behind it. Each word, phrase or sentence
has to be construed in the light of the general purpose of the Act itself,
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1121
REDDY AND ANR. [INDIRA BANERJEE, J.]
as observed by Mukherjea J., in Popatlal Shah v. State of Madras12 A
and a plethora of other judgments of this Court. To quote Krishna Iyer
J., the interpretative effort “must be illumined by the goal, though
guided by the words”.
90. When a question arises as to the meaning of a certain provision
in a statute the provision has to be read in its context. The statute has to B
be read as a whole. The previous state of the law, the general scope and
ambit of the statute and the mischief that it was intended to remedy are
relevant factors.
91. On a careful reading of the provisions of the IBC and in
particular the provisions of Section 7(2) to (5) of the IBC read with the C
2016 Adjudicating Authority Rules 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.
92. The time stipulation of fourteen days in Section 7(4) to
ascertain the existence of a default is apparently directory not mandatory. D
The proviso inserted by amendment with effect from 28th December,
2019 provides that if the Adjudicating Authority has not ascertained the
default and passed an order under sub-section (5) of Section 7 of the
IBC within the aforesaid time, it shall record its reasons in writing for
the same. No other penalty is stipulated.
E
93. Furthermore, the proviso to Section 7(5)(b) of the IBC obliges
the Adjudicating Authority to give notice to an applicant, to rectify the
defect in its application within seven days of receipt of such notice from
the Adjudicating Authority, before rejecting its application under Clause
(b) of sub-section (5) of Section 7 of the IBC. When the Adjudicating
Authority calls upon the applicant to cure some defects that defect has F
to be rectified within seven days. There is no penalty prescribed for
inability to cure the defects in an application within seven days from the
date of receipt of notice, and in an appropriate case, the Adjudicating
Authority may accept the cured application, even after expiry of seven
days, for the ends of justice. G
94. Section 12 of the IBC imposes a time limit for completion of
the Corporate Insolvency Resolution Process. This time limit starts running
from the date of admission of an application to initiate the Corporate
12. AIR 1953 SC 274 H
1122 SUPREME COURT REPORTS [2021] 8 S.C.R.
A Insolvency Resolution Process. Section 12 is, therefore, not attracted in
this case.
95. In any case, Section 12 has been considered by this Court in
Arcelormittal (India) Pvt. Ltd. V. Satish Kumar Gupta and Anr.13
This Court held :-
B “86. Given the fact that both the NCLT and NCLAT are to decide
matters arising under the Code as soon as possible, we cannot
shut our eyes to the fact that a large volume of litigation has
now to be handled by both the aforesaid Tribunals. What
happens in a case where the NCLT or the N CLAT decide a
C matter arising out of Section 31 of the Code beyond the time-
limit of 180 days or the extended time-limit of 270 days? Actus
curiae neminem gravabit — the act of the court shall harm
no man — is a maxim firmly rooted in our jurisprudence
(see Jang Singh v. Brij Lal [Jang Singh v. Brij Lal, (1964) 2
SCR 145 : AIR 1966 SC 1631] , SCR at p. 149 and A.R.
D Antulay v. R.S. Nayak [A.R. Antulay v. R.S. Nayak, (1988) 2
SCC 602 : 1988 SCC (Cri) 372 : 1988 Supp (1) SCR 1] , SCR
at p. 71). It is also true that the time taken by a Tribunal
should not set at naught the time-limits within which the
corporate insolvency resolution process must take place.
E However, we cannot forget that the consequence of the
chopper falling is corporate death. The only reasonable
construction of the Code is the balance to be maintained
between timely completion of the corporate insolvency
resolution process, and the corporate debtor otherwise being
put into liquidation. We must not forget that the corporate
F debtor consists of several employees and workmen whose daily
bread is dependent on the outcome of the corporate insolvency
resolution process. If there is a resolution applicant who can
continue to run the corporate debtor as a going concern,
every effort must be made to try and see that this is made
G possible. [ Regulation 32 of the Insolvency and Bankruptcy
Board of India (Liquidation Process) Regulations, 2016, states
that the liquidator may also sell the corporate debtor as a
going concern.] A reasonable and balanced construction of
this statute would therefore lead to the result that, where a
H 13. (2019) 2 SCC 1
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1123
REDDY AND ANR. [INDIRA BANERJEE, J.]
resolution plan is upheld by the appellate authority, either by A
way of allowing or dismissing an appeal before it, the period
of time taken in litigation ought to be excluded. This is not to
say that the NCLT and NCLAT will be tardy in decision-making.
This is only to say that in the event of the NCLT, or the NCLAT,
or this Court taking time to decide an application beyond the
B
period of 270 days, the time taken in legal proceedings to
decide the matter cannot possibly be excluded, as otherwise
a good resolution plan may have to be shelved, resulting in
corporate death, and the consequent displacement of
employees and workers.
87. Coming to the facts of the present case, let us first examine C
the resolution plan presented by Numetal. Numetal was
incorporated in Mauritius on 13-10-2017, expressly for the
purpose of submission of a resolution plan qua the corporate
debtor i.e. ESIL. Two other companies viz. AHL and AEL, were
also incorporated on the same day in Mauritius. Shri Rewant D
Ruia, son of Shri Ravi Ruia (who was the promoter of ESIL)
held the entire share capital of AHL, which in turn held the
entire shareholding of AEL, which in turn held the entire share
capital of Numetal. At this stage there can be no doubt
whatsoever that Shri Rewant Ruia, being the son of Shri Ravi
Ruia, would be deemed to be a person acting in concert with E
the corporate debtor, being covered by Regulation 2(1)(q)(v)
of the 2011 Takeover Regulations.
96. Even in the case of Section 12 of the IBC, this Court taking
note of the workload of the Adjudicating Authority, in effect held that the
time stipulation was directory. This Court observed that failure to F
complete the Resolution Process within stipulated time should not result
in corporate death by shelving of an otherwise good resolution plan. This
Court emphasized the need to maintain balance between timely completion
of the Corporate Insolvency Resolution Process and the Corporate
Debtor otherwise being put into liquidation, for failure to maintain the G
time schedule.
97. The insolvency Committee of the Ministry of Corporate Affairs,
Government of India, in a report published in March 2018, stated that
the intent of the IBC could not have been to give a new lease of life to
debts which were already time barred. Thereafter Section 238A was H
1124 SUPREME COURT REPORTS [2021] 8 S.C.R.
A incorporated in the IBC by the Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 (Act 26 of 2018), with effect from 6th June
2018.
98. Section 238A of the IBC provides as follows:-
“238A. The provisions of the Limitation Act, 1963 (36 of 1963)
B 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.”
99. As observed by this Court in Sesh Nath Singh & Anr. Vs.
C 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
D ‘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
E 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
F 238A of the IBC tones down the rigour of the words ‘shall’ in
the 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
G
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
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1125
REDDY AND ANR. [INDIRA BANERJEE, J.]
modification, which is in harmony with the principles of the A
said Section.”
100. There is no specific period of limitation prescribed in the
Limitation Act, 1963, for an application under the IBC, before the
Adjudicating Authority (NCLT). An application for which no period of
limitation is provided anywhere else in the Schedule to the Limitation B
Act, is governed by Article 137 of the Schedule to the said Act. Under
Article 137 of the Schedule to the Limitation Act, the period of limitation
prescribed for such an application is three years from the date of accrual
of the right to apply.
101. There can be no dispute with the proposition that the period C
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 D
under Section 7, would fall only within the residuary Article
137.”
102. In B. K. Educational Services Private Limited v. Parag
Gupta and Associates14, this Court speaking through Nariman, J. held:-
“42. It is thus clear that since the Limitation Act is applicable E
to applications filed under Sections 7 and 9 of the Code from
the inception of the Code, Article 137 of the Limitation Act
gets attracted. “The right to sue”, therefore, accrues when a
default occurs. If the default has occurred over three years
prior to the date of filing of the application, the application F
would be barred under Article 137 of the Limitation Act, save
and except in those cases where, in the facts of the case,
Section 5 of the Limitation Act may be applied to condone the
delay in filing such application.”
103. In Jignesh Shah v. Union of India (supra) this Court
G
speaking through Nariman, J. reiterated the proposition that the period
of limitation for making an application under Section 7 or 9 of the IBC
was three years from the date of accrual of the right to sue, that is, the
date of default.
14 (2019) 11 SCC 633 H
1126 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 104. In Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank
Ltd. & Ors.15 this Court rejected the contention that the default was a
continuing wrong and Section 23 of the Limitation Act 1963 would apply,
relying upon Balkrishna Savalram Pujari Waghmare v. Shree
Dhyaneshwar Maharaj Sansthan16.
B 105. To quote P.B. Gajendragadkar, J in Balkrishna Savalram
Pujari Wagmare (supra):-
“......Section 23 refers not to a continuing right but to a
continuing wrong. It is the very essence of a continuing wrong
that it is an act which creates a continuing source of injury
C and renders the doer of the act responsible and liable for the
continuance of the said injury. If the wrongful act causes an
injury which is complete, there is no continuing wrong even
though the damage resulting from the act may continue. If,
however, a wrongful act is of such a character that the injury
caused by it itself continues, then the act constitutes a
D continuing wrong. In this connection it is necessary to draw
a distinction between the injury caused by the wrongful act
and what may be described as the effect of the said injury. It
is only in regard to acts which can be properly characterised
as continuing wrongs that Section 23 can be invoked. .....”
E 106. There can be no dispute with the proposition of law laid
down in Babulal Vardharji Gurjar (supra) that limitation is essentially
a mixed question of law and facts and when a party seeks application of
any particular provision for extension or enlargement of the period of
limitation, the relevant facts are required to be pleaded and requisite
F evidence is required to be adduced.
107. 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 N.P.A. and
it remained undisputed that there had neither been any other date of
G default stated in the application nor had any suggestion about any
acknowledgement been made.
108. In the backdrop of the aforesaid facts, this court observed
that even if Section 18 of the Limitation Act and principles thereof were
15 (2019) 9 SCC 158
H 16. 1959 Supp (2) SCR 476
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1127
REDDY AND ANR. [INDIRA BANERJEE, J.]
applicable, the same would not apply to the application under consideration, A
in view of the averments regarding default therein and for want of any
other averment with regard to acknowledgment.
109. 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 B
“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 C
passage was extracted and incorporated as part of the judgment of this
Court in Sesh Nath Singh (supra).
110. In this case, admittedly there were fresh documents before
the Adjudicating Authority (NCLT), including a letter of offer dated
3.03.2017 for one time settlement of the dues of the Corporate Debtor D
to the Financial Creditor, upon payment of Rs.5.5 crores. The Appellant
Bank has also relied upon financial statements up to 31st March, 2018
apart from the final judgment and order dated 27th March, 2017 in O.A.
16/2015 and the subsequent Recovery Certificate No.2060/2017 dated
25 th May, 2017 which constituted cause of action for initiation of E
proceedings under Section 7 of the IBC.
111. Babulal Vardharji Gurjar (supra) is not an authority for the
proposition that there can be no amendment of pleadings at the fag end
of the NCLT proceeding. Moreover, in this case, the amendments were
not made at the fag end of the proceedings but within 2/3 months of their F
initiation, before admission of the petition under Section 7 of the IBC.
112. 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 G
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. H
1128 SUPREME COURT REPORTS [2021] 8 S.C.R.
A 113. 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 acknowledgement
need not be accompanied by a promise to pay expressly or even by
B
implication. However, the acknowledgement must be made before the
relevant period of limitation has expired.
114. 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
C 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.
115. In Laxmi Pat Surana v. Union Bank of India (supra) this
Court speaking through Khanwilkar J. held that there was no reason to
D exclude the effect of Section 18 of the Limitation Act to proceedings
initiated under the IBC.
116. InAsset Reconstruction Company (India) Limited. v. Bishal
Jaiswal and Anr. (supra) where this Court speaking through Nariman
J. relied, inter alia, on Sesh Nath Singh (supra) and Laxmi Pat Surana
E (supra) and held that the question of applicability of Section 18 of the
Limitation Act to proceedings under the IBC was no longer res integra.
117. In Khan Bahadur Shapoor Fredoom Mazda v. Durga
Prasad Chamaria and Others17, this Court held:-
F “6. It is thus clear that acknowledgment as prescribed by
Section 19 merely renews debt; it does not create a new right
of action. It is a mere acknowledgment of the liability in respect
of the right in question; it need not be accompanied by a
promise to pay either expressly or even by implication. The
statement on which a plea of acknowledgment is based must
G relate to a present subsisting liability though the exact nature
or the specific character of the said liability may not be
indicated in words. Words used in the acknowledgment must,
however, indicate the existence of jural relationship between
H 17 AIR 1961 SC 1236
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1129
REDDY AND ANR. [INDIRA BANERJEE, J.]
the parties such as that of debtor and creditor, and it must A
appear that the statement is made with the intention to admit
such jural relationship. Such intention can be inferred by
implication from the nature of the admission, and need not be
expressed in words. If the statement is fairly clear then the
intention to admit jural relationship may be implied from it.
B
The admission in question need not be express but must be
made in circumstances and in words from which the court
can reasonably infer that the person making the admission
intended to refer to a subsisting liability as at the date of the
statement. In construing words used in the statements made
in writing on which a plea of acknowledgment rests oral C
evidence has been expressly excluded but surrounding
circumstances can always be considered. Stated generally
courts lean in favour of a liberal construction of such
statements though it does not mean that where no admission
is made one should be inferred, or where a statement was
D
made clearly without intending to admit the existence of jural
relationship such intention could be fastened on the maker
of the statement by an involved or far-fetched process of
reasoning. Broadly stated that is the effect of the relevant
provisions contained in Section 19, and there is really no
substantial difference between the parties as to the true legal E
position in this matter.”
118. It is well settled that entries in books of accounts and/or
balance sheets of a Corporate Debtor would amount to an
acknowledgment under Section 18 of the Limitation Act. In Asset
Reconstruction Company (India) Limited v. Bishal Jaiswall and F
Anr. (supra) authored by Nariman, J. this Court quoted with approval
the judgments, inter alia, of Bengal Silk Mills Co. v. Ismail Golam
Hossain Ariff,18 [“Bengal Silk Mills”] and in Re Pandem Tea Co.19
Ltd., the judgment of the Delhi High Court in South Asia Industries (P)
Ltd. v. General Krishna Shamsher Jung Bahadur Rana20 and the
judgment of Karnataka High Court in Hegde Golay Ltd. v. State Bank G
18 AIR 1962 Cal 115
19 AIR 1974 Cal 170
20 ILR (1972) 2 Del 712 H
1130 SUPREME COURT REPORTS [2021] 8 S.C.R.
A of India21 and held that an acknowledgement of liability that is made in
a balance sheet can amount to an acknowledgement of debt.
119. In Bengal Silk Mills Co. (supra) the Calcutta High Court
held:-
“9. ….. I am unable to agree with the reasoning of the Nagpur
B decision that a balance-sheet does not save limitation because
it is drawn up under a duty to set out the claims made on the
company and not with the intention of acknowledging liability.
The balance-sheet contains admissions of liability; the agent
of the company who makes and signs it intends to make those
C admissions. The admissions do not cease to be
acknowledgements of liability merely on the ground that they
were made in discharge of a statutory duty. I notice that in
the Nagpur case the balance-sheet had been signed by a
director and had not been passed either by the Board of
Directors or by the company at its annual general meeting
D and it seems that the actual decision may be distinguished on
the ground that the balance-sheet was not made or signed by
a duly authorized agent of the company.”
……………..
E 11. To come under section 19 an acknowledgement of a debt
need not be made to the creditor nor need it amount to a
promise to pay the debt. In England it has been held that a
balance-sheet of a company stating the amount of its
indebtedness to the creditor is a sufficient acknowledgement
in respect of a specialty debt under section 5 of the Civil
F Procedure Act, 1833 (3 and 4 Will — 4c. 42), see Re : Atlantic
and Pacific Fibre Importing and Manufacturing Co. Ltd.,
[1928] Ch. 836…….”
120. In Re Pandem Tea Co. Ltd. (supra), Sabyasachi Mukharji
J.held:
G
“4. Now the question is whether the statements, which are
contained in the profits and loss accounts and the assets and
liabilities side indicating the liability of the petitioning creditor
along with the statement of the Directors made to the
21 ILR 1987 Kar 2673
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1131
REDDY AND ANR. [INDIRA BANERJEE, J.]
shareholders as Directors’ report should be read together and A
if so whether reading these two statements together these
amount to an acknowledgement as contemplated under
Section 18 of the Limitation Act, 1963, or Section 19 of the
Limitation Act, 1908. In my opinion, both these statements
have to be read together. The balance-sheet is meant to be
B
presented and passed by the shareholders and is generally
accompanied by the Directors’ report to the shareholders.
Therefore in understanding the balance-sheets and in
explaining the statements in the balance-sheets, the balance-
sheets together with the Directors’ report must be taken
together to find out the true meaning and purport of the C
statements. Counsel appearing for petitioning creditor
contended that under the statute the balance-sheet was a
separate document and as such if there was unequivocal
acknowledgement on the balance-sheet the statement of the
Directors’ report should not be taken into consideration. It is
D
true the balance-sheet is a statutory document and perhaps
is a separate document but the balance-sheet not confirmed
or passed by the shareholders cannot be accepted as correct.
Therefore, in order to validate the balance-sheet, it must be
duly passed by the shareholders at the appropriate meeting
and in order to do so it must be accompanied by a report, if E
any, made by the Directors. Therefore, even though the
balance-sheet may be a separate document these two
documents in the facts and circumstances of the case should
be read together and should be construed together. It was
held by the Supreme Court in the case of L.C.
F
Mills v. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67 : AIR
1971 SC 1482, that it was clear that the statement on which
the plea of acknowledgement was founded should relate to a
subsisting liability as the section required and it should be
made before the expiration of the period prescribed under
the Act. It need not, however, amount to a promise to pay for G
an acknowledgement did not create a new right of action but
merely extended the period of limitation. The statement need
not indicate the exact nature or the specific character of the
liability. The words used in the statement in question must,
however, relate to a present subsisting liability and indicate
H
1132 SUPREME COURT REPORTS [2021] 8 S.C.R.
A the existence of a jural relationship between the parties such
as, for instance, that of a debtor and a creditor and the
intention to admit such jural relationship. Such an intention
need not, however, be in express terms and could be inferred
by implication from the nature of the admission and the
surrounding circumstances. Generally speaking, a liberal
B
construction of the statement in question should be given.
That of course did not mean that where a statement was made
without intending to admit the existence of jural relationship,
such intention should be fastened on the person making the
statement by an involved and far-fetched reasoning. In order
C to find out the intention of the document by which
acknowledgement was to be construed the document as a
whole must be read and the intention of the parties must be
found out from the total effect of the document read as a
whole. …”
D 121. In South Asia Industries (P) Ltd. v. General Krishna
Shamsher Jung Bahadur Rana (supra), this Court observed:-
“46. Shri Rameshwar Dial argued that statements in the
balance-sheet of a company cannot amount to
acknowledgement of liability because the balance-sheet is
E made under compulsion of the provisions in the Companies
Act. There is no force in this argument. In the first place, section
18 of the Limitation Act, 1963, requires only that the
acknowledgement of liability must have been made in writing,
but it does not prescribe that the writing should be in any
particular kind of document. So, the fact that the writing is
F contained in a balance-sheet is immaterial. In the second
place, it is true that section 131 of the Companies Act, 1913
(section 210 of the Companies Act, 1956) makes it compulsory
that an annual balance sheet should be prepared and placed
before the Company by the Directors, and section 132 (section
G 211 of the Companies Act, 1956) requires that the balance-
sheet should contain a summary, inter alia, of the current
liabilities of the company. But, as pointed out by Bachawat J.
in Bengal Silk Mills v. Ismail Golam Hossain Ariff, AIR 1962
Cal 115 although there was statutory compulsion to prepare
the annual balance-sheet, there was no compulsion to make
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1133
REDDY AND ANR. [INDIRA BANERJEE, J.]
any particular admission, and a document is not taken out of A
the purview of section 18 of the Indian Limitation Act, 1963
(section 19 of the Indian Limitation Act, 1908) merely on the
ground that it is prepared under compulsion of law or in
discharge of statutory duty. Reference may also be made to
the decisions in Raja of Vizianagram v. Vizianagram Mining
B
Co. Ltd., AIR 1952 Mad 136, Jones v. Bellgrove Properties
Ltd., (1949) 1 All ER 498; and Lahore Enamelling and
Stamping Co. v. A.K. Bhalla, AIR 1958 Punj 341, in which
statements in balance-sheets of companies were held to amount
to acknowledgements of liability of the companies.
47. Shri Rameshwar Dial referred to the decision of the Privy C
Council in Consolidated Agencies Ltd. v. Bertram Ltd., (1964)
3 All ER 282. We shall advert to this decision presently when
we deal with another argument of Shri Rameshwar Dial, and
it is sufficient to state so far as the argument under
consideration is concerned that even in this decision of the D
Privy Council it has been recognised that balance-sheets could
in certain circumstances amount to acknowledgements of
liability. It cannot, therefore, be said as a general proposition
of law that statements in balance-sheets of a company cannot
operate at all as acknowledgements of liability as contended
by Shri Rameshwar Dial.” E
122. In Hegde & Golay Limited v. State Bank of India reported
in ILR 1987 Kar 2673, the Karnataka High Court held:
“43. The acknowledgement of liability contained in the
balance-sheet of a company furnishes a fresh starting point F
of limitation. It is not necessary, as the law stands in India,
that the acknowledgement should be addressed and
communicated to the creditor.”
123. In Reliance Asset Reconstruction Co. Ltd. v. Hotel Poonja
International Pvt. Ltd.22, the Appellant had relied on two documents in G
the Paper Book, that is, (i) the Balance Sheet of the Corporate Debtor
dated 16th August, 2017 and (ii) a letter dated 23rd April, 2019 issued by
the Corporate Debtor to contend that the proceedings under Section 7
of the IBC were not barred by limitation, as limitation would start running
22. 2021 SCC Online SC 289 H
1134 SUPREME COURT REPORTS [2021] 8 S.C.R.
A afresh for a period of three years from the respective dates of those
documents in acknowledgment of liability.
124. This Court, however, did not accept the balance sheet dated
16th August, 2017 and 23rd April, 2019 for two reasons, the first reason
being that there was no evidence or materials to show that the documents
B had been signed before the expiry of the prescribed period of limitation.
In addition, the Court found that there had been no pleading with regard
to the alleged acknowledgement in the application under Section 7 of the
IBC. This Court also found that the two documents could not be construed
as admission that amounted to acknowledgement of the jural relationship
and the existence of liability, since the balance sheet dated 16th August,
C 2017 did not acknowledge or admit any liability. Rather the Corporate
Debtor had disputed and denied its liability. Similarly, the letter dated 23rd
April, 2019 was also found not be an acknowledgment or admission of
liability. On the other hand, the language of the letter made it absolutely
clear that the liability had in fact been denied.
D 125. Significantly, in Reliance Asset Reconstruction (supra), the
loan had been sanctioned by Vijaya Bank in May 1986. The loan amount
was declared NPA on 1st April 1993, an original application moved under
the Debt Recovery Act was compromised in 2001 and the DRT had
issued a Recovery Certificate in May 2003. Vijaya Bank assigned its
E Reliance Asset Reconstruction in May 2011 after which amended
Recovery Certificate was issued in December 2012. The petition under
Section 7 of the IBC was, however filed on 27th July 2018.
126. The finding of the NCLAT that there was nothing on record
to suggest that the ‘Corporate Debtor’ acknowledged the debt within
F three years and agreed to pay debt is not sustainable in law, in view of
the Statement of Accounts/Balance sheets/Financial Statements for the
years 2016-2017 and 2017-2018 and the offer of One Time Settlement
referred to above including in particular, the offer of One Time Settlement
made on 3rd March, 2017.
G 127. Section 18 of the Limitation Act speaks of an
Acknowledgment in writing of liability, signed by the party against whom
such property or right is claimed. Even if the writing containing the
acknowledgment is undated, evidence might be given of the time when
it was signed. The explanation clarifies that an acknowledgment may be
sufficient even though it is accompanied by refusal to pay, deliver, perform
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1135
REDDY AND ANR. [INDIRA BANERJEE, J.]
or permit to enjoy or is coupled with claim to set off, or is addressed to a A
person other than a person entitled to the property or right. ‘Signed’ is to
be construed to mean signed personally or by an authorised agent.
128. In the instant case, Rs.111 lakhs had been paid towards
outstanding interest on 28th March, 2014 and the offer of One Time
Settlement was within three years thereafter. In any case, NCLAT B
overlooked the fact that a Certificate of Recovery has been issued in
favour of Appellant Bank on 25th May 2017. The Corporate Debtor did
not pay dues in terms of the Certificate of Recovery. The Certificate of
Recovery in itself gives a fresh cause of action to the Appellant Bank to
institute a petition under Section 7 of IBC. The petition under Section 7
IBC was well within three years from 28th March 2014. C
129. In Jignesh Shah and Another v. Union of India (supra),
this Court relied upon a judgment of the Patna High Court in Ferro
Alloys Corporation Limited v. Rajhans Steel Limited23, the relevant
portion whereof is extracted hereinbelow:-
D
“….In my opinion, the contention lacks merit. Simply because
a suit for realization of the debt of the petitioner Company
against Opposite Party 1 was instituted in the Calcutta High
Court on its Original Side, such institution of the suit and the
pendency thereof in that Court cannot enure for the benefit
of the present winding-up proceeding. The debt having E
become time-barred when this petition was presented in this
Court, the same could not be legally recoverable through this
Court by resorting to winding-up proceedings because the
same cannot legally be proved under Section 520 of the Act.
It would have been altogether a different matter if the petitioner F
Company approached this Court for winding-up of the
opposite party No.1, after obtaining a decree from the Calcutta
High Court in Suit No.1073 of 1987, and the decree remaining
unsatisfied, as provided in clause (b) of sub-section (1) of
Section 434.”
G
130. In effect, this Court speaking through Nariman J., approved
the proposition that an application under Section 7 or 9 of the IBC may
be time barred, even though some other recovery proceedings might
have been instituted earlier, well within the period of limitation, in respect
23. (1999) SCC Online Pat1196 H
1136 SUPREME COURT REPORTS [2021] 8 S.C.R.
A of the same debt. However, it would have been a different matter, if the
applicant had approached the Adjudicating Authority after obtaining a
final order and/or decree in the recovery proceedings, if the decree
remained unsatisfied. This Court held that a decree and/or final
adjudication would give rise to a fresh period of limitation for initiation of
the Corporate Insolvency Resolution Process.
B
131. It is true that the finding of Patna High Court in Ferro Alloys
Corporation Limited v. Rajhans Steel Limited (supra) was rendered
in the context of Section 434(1)(b) of the Companies Act 1956, which
provided that a company would be deemed to be unable to pay its debts
if execution or other process issued on a decree or order of any Court or
C Tribunal in favour of a creditor of the company was returned unsatisfied
in whole or in part.
132. We see no reason why the principles should not apply to an
application under Section 7 of the IBC which enables a financial creditor
to file an application initiating the Corporate Insolvency Resolution
D Process against a Corporate Debtor before the Adjudicating Authority,
when a default has occurred. As observed earlier in this judgment, on a
conjoint reading of the provisions of the IBC quoted above, it is clear
that a final judgment and/or decree of any Court or Tribunal or any
Arbitral Award for payment of money, if not satisfied, would fall within
E the ambit of a financial debt, enabling the creditor to initiate proceedings
under Section 7 of the IBC.
133. It is not in dispute that the Respondent No.2 is a Corporate
Debtor and the Appellant Bank, a Financial Creditor. The question is,
whether the petition under Section 7 of the IBC has been instituted within
F 3 years from the date of default. ‘Default’ is defined in Section 3(12) to
mean “non-payment’ of a debt which has become due and payable whether
in whole or any part and is not paid by the Corporate Debtor”.
134. It is true that, when the petition under Section 7 of IBC was
filed, the date of default was mentioned as 30th September 2013 and
G 31st December 2013 was stated to be the date of declaration of the
Account of the Corporate Debtor as NPA. However, it is not correct to
say that there was no averment in the petition of any acknowledgment
of debt. Such averments were duly incorporated by way of amendment,
and the Adjudicating Authority rightly looked into the amended pleadings.
H
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1137
REDDY AND ANR. [INDIRA BANERJEE, J.]
135. As observed above, the Appellant Bank filed the Petition A
under Section 7 of the IBC on 12th October 2018. Within three months,
the Appellant Bank filed an application in the NCLT, for permission to
place additional documents on record including the final judgment and
order/decree dated 27.3.2017 in O.A. 16/2015 and the Recovery
Certificate dated 25.5.2017, enabling the Appellant Bank to recover Rs.52
B
crores odd. The judgment and order/decree of the DRT and the Recovery
Certificate gave a fresh cause of action to the Appellant Bank to initiate
a petition under Section 7 of the IBC.
136. On or about 5th March 2019, the Appellant Bank filed another
application for permission to place on record additional documents
including inter alia financial statements, Annual Report etc. of the period C
from 1st April 2016 to 31st March 2017, and again, from 1st April 2017 to
31st March 2018 and a letter dated 3rd March 2017 proposing a One
Time Settlement. This application was also allowed on 6th March 2021.
The Adjudicating Authority, took into consideration the new documents
and admitted the petition under Section 7 of the IBC. D
137. Even assuming that documents were brought on record at a
later stage, as argued by Mr. Shivshankar, the Adjudicating Authority
was not precluded from considering the same. The documents were
brought on record before any final decision was taken in the Petition
under Section 7 of IBC. E
138. A final judgment and order/decree is binding on the judgment
debtor. Once a claim fructifies into a final judgment and order/decree,
upon adjudication, and a certificate of Recovery is also issued authorizing
the creditor to realize its decretal dues, a fresh right accrues to the creditor
to recover the amount of the final judgment and/or order/decree and/or F
the amount specified in the Recovery Certificate.
139. The Appellant Bank was thus entitled to initiate proceedings
under Section 7 of the IBC within three years from the date of issuance
of the Recovery Certificate. The Petition of the Appellant Bank, would
not be barred by limitation at least till 24th May, 2020. G
140. While it is true that default in payment of a debt triggers the
right to initiate the Corporate Resolution Process, and a Petition under
Section 7 or 9 of the IBC is required to be filed within the period of
limitation prescribed by law, which in this case would be three years
from the date of default by virtue of Section 238A of the IBC read with
H
1138 SUPREME COURT REPORTS [2021] 8 S.C.R.
A Article 137 of the Schedule to the Limitation Act, the delay in filing a
Petition in the NCLT is condonable under Section 5 of the Limitation
Act unlike delay in filing a suit. Furthermore, as observed above Section
14 and 18 of the Limitation Act are also applicable to proceedings under
the IBC.
B 141. Section 18 of the Limitation Act cannot also be construed
with pedantic rigidity in relation to proceedings under the IBC. This Court
sees no reason why an offer of One Time Settlement of a live claim,
made within the period of limitation, should not also be construed as an
acknowledgment to attract Section 18 of the Limitation Act. In Gaurav
Hargovindbhai Dave (supra) cited by Mr. Shivshankar, this Court had
C no occasion to consider any proposal for one time settlement. Be that as
it may, the Balance Sheets and Financial Statements of the Corporate
Debtor for 2016-2017, as observed above, constitute acknowledgement
of liability which extended the limitation by three years, apart from the
fact that a Certificate of Recovery was issued in favour of the Appellant
D Bank in May 2017. The NCLT rightly admitted the application by its
order dated 21st March, 2019.
142. To sum up, in our considered opinion an application under
Section 7 of the IBC would not be barred by limitation, on the ground
that it had been filed beyond a period of three years from the date of
E declaration of the loan account of the Corporate Debtor as NPA, if
there were an acknowledgement of the debt by the Corporate Debtor
before expiry of the period of limitation of three years, in which case the
period of limitation would get extended by a further period of three years.
143. Moreover, a judgment and/or decree for money in favour of
F the Financial Creditor, passed by the DRT, or any other Tribunal or Court,
or the issuance of a Certificate of Recovery in favour of the Financial
Creditor, would give rise to a fresh cause of action for the Financial
Creditor, to initiate proceedings under Section 7 of the IBC for initiation
of the Corporate Insolvency Resolution Process, within three years from
the date of the judgment and/or decree or within three years from the
G date of issuance of the Certificate of Recovery, if the dues of the
Corporate Debtor to the Financial Debtor, under the judgment and/or
decree and/or in terms of the Certificate of Recovery, or any part thereof
remained unpaid.
144. There is no bar in law to the amendment of pleadings in an
H application under Section 7 of the IBC, or to the filing of additional
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR 1139
REDDY AND ANR. [INDIRA BANERJEE, J.]
documents, apart from those initially filed along with application under A
Section 7 of the IBC in Form-1. In the absence of any express provision
which either prohibits or sets a time limit for filing of additional documents,
it cannot be said that the Adjudicating Authority committed any illegality
or error in permitting the Appellant Bank to file additional documents.
Needless however, to mention that depending on the facts and
B
circumstances of the case, when there is inordinate delay, the Adjudicating
Authority might, at its discretion, decline the request of an applicant to
file additional pleadings and/or documents, and proceed to pass a final
order. In our considered view, the decision of the Adjudicating Authority
to entertain and/or to allow the request of the Appellant Bankfor the
filing of additional documents with supporting pleadings, and to consider C
such documents and pleadings did not call for interference in appeal.
145. For the reasons discussed above, the impugned judgment
and order is unsustainable in law and facts. The appeal is accordingly
allowed, and the impugned judgment and order of the NCLAT is set
aside. D
Nidhi Jain Appeal allowed.
E
F
G
H
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