Supreme Court of India
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD.versusM/S HOTEL POONJA INTERNATIONAL PVT. LTD.
- Citation
- 2021 INSC 35
- Decided
- 21 January 2021
- Disposal
- Dismissed
- Bench
- INDIRA BANERJEE
Holding
The application under Section 7 of the IBC is time‑barred as no valid acknowledgment of liability was made before the limitation period expired, and Article 137 of the Limitation Act applies.
Summary
The appellant, Reliance Asset Reconstruction Company Ltd., was assigned the loan of Hotel Poonja International Pvt. Ltd. (the corporate debtor) after the latter defaulted on a Rs.40 lakh term loan and was declared a non‑performing asset in 1993. A settlement was reached in 2001, a recovery certificate was issued by the Debt Recovery Tribunal in 2003, and an amended certificate in 2012 following the assignment of the debt to the appellant. The appellant filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC) in 2018 to initiate a corporate insolvency resolution process, which was dismissed by the NCLT and upheld by the NCLAT on the ground of limitation. The Supreme Court examined whether the application was time‑barred under Article 137 of the Limitation Act, 1963, and whether the corporate debtor’s balance sheet (2017) and a settlement‑offer letter (2019) amounted to a valid acknowledgment under Section 18 that could restart the limitation period. The Court held that the right to sue accrued on 1 April 1993 (or at the latest on 27 March 2003 when the recovery certificate was issued) and no valid acknowledgment was made before the limitation expired; consequently, the Section 7 application was barred. The appeal was dismissed.
Issues considered
- The applicability of Article 137 of the Limitation Act, 1963 to applications filed under Section 7 of the IBC.
- Whether the corporate debtor’s balance sheet dated 16 August 2017 and the letter dated 23 April 2019 constitute a written acknowledgment under Section 18 of the Limitation Act that would restart the limitation period.
- Whether the substitution of the appellant in the DRT execution proceedings affects the limitation period for filing a Section 7 application.
Legislation cited
- Insolvency and Bankruptcy Code, 2016s. 62, s. 7, s. 9
- Limitation Act, 1963s. Article 137, s. Section 18
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993
- SARFAESI Act, 2002s. 3
Subjects
InsolvencyLimitationSection 7 IBCArticle 137Acknowledgment of liabilityTime‑barred applicationCorporate debtorAsset Reconstruction Company
Judgment
[2021] 1 S.C.R. 495 495
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. A
v.
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.
(Civil Appeal No. 4221 of 2020)
JANUARY 21, 2021
B
[INDIRA BANERJEE AND SANJIV KHANNA, JJ.]
Insolvency and Bankruptcy Code, 2016 – s.62 – The Assignor
Bank, along with Corporation Bank sanctioned a term loan of Rs.40
lakhs to the corporate debtor – The corporate debtor failed to repay
loan – The Assignor Bank declared the account of corporate debtor
as an “Non-Performing Asset” (NPA) on 01.04.1993 – Assignor C
Bank filed application before the Debt Recovery Tribunal for
recovery of dues – A settlement was reached between the Assignor
Bank and the corporate debtor – Accordingly, DRT issued a
Recovery Certificate on 27.03.2003 – Corporate debtor again failed
to comply with the settlement – Thereafter, an agreement between
the Assignor Bank and the appellant was entered into, the appellant D
was substituted as applicant in place of the Assignor Bank in DRT
and an amended Recovery Certificate was issued on 13.12.2012 –
On 27.07.2018, the appellant filed application u/s. 7 of the IBC
against the corporate debtor for initiation of Corporate Insolvency
Resolution Process (CIRP) before the NCLT, which was dismissed –
E
The NCLAT also found that application u/s.7 was barred by limitation
– Before the Supreme Court, appellant adverted to two documents,
that is, (i) the Balance sheet of the corporate debtor dated
16.08.2017 and (ii) a letter dated 23.04.2019 issued by the corporate
debtor in the Paper Book to contend that the proceedings u/s. 7 of
the IBC are not barred by limitation, as limitation would start running F
afresh for a period of three years u/s.18 of the Limitation Act –
Held: The right to sue accrues when a default occurs, and if that
default has occurred over three years prior to the date of filing of
an application u/s. 7 of the IBC, the application would be barred u/
Art.137 of the Limitation Act – The right to sue accrued on
01.04.1993 when the amount of the corporate debtor with the G
Assignor Bank was declared NPA – In Part IV of its application u/s.
7 of the IBC, the appellant itself declared the date of default as
01.04.1993 – Thus, the claim is apparently barred by limitation –
Even the application u/s.7 of the IBC was filed almost 6 years after
issuance of the amended Recovery Certificate (issued on
H
495
496 SUPREME COURT REPORTS [2021] 1 S.C.R.
A 13.12.2012) – As far as two documents referred by the appellants
are concerned, the two documents cannot be construed as
admissions that amount to acknowledgment of the jural relationship
and existence of liability – The balance sheet dated 16.08.2017
does not acknowledge or admit any debt – Further, the letter dated
23.04.2019 again is not an acknowledgment and admission of
B liability – The language and tone of the letter makes it absolutely
clear that the liability was denied – The Balance Sheet of the
corporate debtor dated 16.08.2017 and the letter dated 23.04.2019,
do not constitute any acknowledgment of liability and were not even
referred to by the appellant in its application under IBC – The NCLAT,
rightly held that the application u/s.7 of the IBC is barred by
C limitation.
Limitation Act, 1963 – Art. 137 – Insolvency and Bankruptcy
Code, 2016 – ss. 7 and 9 – In B.K. Educational Services Private
Ltd. v. Parag Gupta and Associates (2009) 11 SCC 633: [2018] 12
SCR 794 held that the Limitation Act is applicable to applications
D filed under Sections 7 and 9 of the Code from the inception of the
Code, Article 137 of the Limitation Act gets attracted.
Limitation Act, 1963 – Art. 137 – Insolvency and Bankruptcy
Code, 2016 – s. 7 – Held: In Gaurav Hargovindbhai Dave v. Asset
Reconstruction Company (India) Ltd. and Ors. (2019) 10 SCC 572,
E it was held that “an application” which is filed u/s. 7, would fall
only within the residuary Art. 137.
Dismissing the appeal, the Court
HELD: 1. It is well settled by a catena of decisions of this
Court, that Article 137 of the Limitation Act gets attracted to
applications filed under Sections 7 and 9 of the IBC. The right to
F sue accrues when a default occurs, and if that default has occurred
over three years prior to the date of filing of an application under
Section 7 of the IBC, the application would be barred 6 under
Article 137 of the Limitation Act. At the highest, limitation started
ticking on 27th March 2003, when a Recovery Certificate was
G issued by the DRT. The appellant has not disclosed any material
in its application under Section 7 of the IBC to demonstrate that
the application is not barred by limitation. [Para 19][503-F-G]
2. In its application under Section 7 of the Insolvency
Bankruptcy Code, 2016, the Appellant has not shown that the
debt due to the Appellant from the Corporate Debtor is not barred
H by limitation. The right to sue accrued on 1st April 1993 when
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 497
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.
the amount of the Corporate Debtor with the Assignor Bank was A
declared NPA. In Part IV of its application under Section 7 of the
IBC, the Appellant declared the date of default as 1st April, 1993.
The claim is apparently barred by limitation. Even the judgment
of the DRT was dated 09.04.2001 and the Recovery Certificate
was dated 27th March 2003. The Appellant’s own statement of
accounts as on 18th July 2018 is not material to the question of B
limitation for making an application under Section 7 of the IBC,
which is three years from the date of accrual of the right to sue.
[Para 23][504-F-H; 505-A]
3. Under Section 18 of the Limitation Act, 1963, the
acknowledgement of liability in writing, signed by a party in respect
C
of any right or property claimed by such party within the
prescribed period of limitation to file a suit and/or application,
leads to computation of the period of limitation afresh, from
the time when the acknowledgement is so signed. [Para 24]
[505-A-B]
4. In this case, the Corporate Debtor has not signed any D
acknowledgement in writing after the settlement of 30th June
2001, on the basis of which, a Recovery Certificate was issued by
the DRT on 27 th March 2003. An arrangement between the
Assignor Bank and the Appellant and the consequential
substitution of the Appellant as party to the Execution/Recovery
proceedings in the DRT does not save limitation to initiate E
proceedings under Section 7 of IBC. In any case, even the
amended Recovery Certificate, relied upon by the Appellant, is
dated 13th December, 2012. The application under Section 7 of
the IBC was filed almost 6 years after issuance of the amended
Recovery Certificate. [Para 25][505-C-D]
5. As per Section 18 of Limitation Act, an acknowledgement F
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 G
promise to pay expressly or even by implication. However, the
acknowledgement must be made before the relevant period of
limitation has expired. [Para 30][506-D-F]
Khan Bahadur Shapoor Freedom Mazda v. Durga
Prasad Chamaria and Others, AIR 1961 SC 1236 :
[1962] 1 SCR 140 – relied on. H
498 SUPREME COURT REPORTS [2021] 1 S.C.R.
A 6. In the present case, reliance ought not to be placed on
the balance sheet dated 16th August 2017 and letter dated 23rd
April 2019 primarily for two reasons. First, there is no evidence
or material to show that the documents were signed before the
expiry of the prescribed period of limitation. There is no pleading
to the said effect in the application under Section 7 of the IBC
B filed by the appellant in the statutory form. In fact, the two
documents were never relied upon. Secondly, the two documents
cannot be construed as admissions that amount to
acknowledgment of the jural relationship and existence of liability.
The balance sheet dated 16th August 2017 does not acknowledge
or admit any debt. Rather, the Corporate Debtor has disputed
C and denied its liability. The letter dated 23rd April 2019 again is
not an acknowledgment and admission of liability. The language
and tone of the letter makes it absolutely clear that the liability
was denied. [Paras 32, 33 and 34][507-F-H; 508-A, G]
7. The Balance Sheet of the Corporate Debtor dated 16th
August, 2017 and the letter dated 23rd April, 2019, as observed,
D do not constitute any acknowledgment of liability and were not
even referred to by the Appellant in its application under IBC. It
is, therefore, not necessary for this Court to delve into
the question of whether Section 18 of the Limitation Act is
attracted in the case of a petition under Section 7 of the IBC.
[Para 35][509-D-E]
E B.K. Educational Services Private Limited v. Parag
Gupta and Associates (2019) 11 SCC 633: [2018]
12 SCR 794; Gaurav Hargovindbhai Dave v. Asset
Reconstruction Company (India) Ltd. and Ors. (2019)
10 SCC 572; Radha Export (India) Private Limited v.
K.P. Jayaram (2020) 10 SCC 538; Balakrishna
F Savalram Pujari Waghmare v. Shree Dhyaneshwar
Maharaj Sansthan [1959] Supp (2) SCR 476; Khan
Bahadur Shapoor Freedom Mazda v. Durga Prasad
Chamaria and Others, AIR 1961 SC 1236 :
[1962] SCR 140 – relied on.
Vashdeo R. Bhojwani v. Abhyudaya Cooperative Bank
G Ltd. & Anr., (2019) 9 SCC 158 : [2019] 12 SCR 75 ;
Mobilox Innovations Private Limited v. Kirusa Software
Private Limited (2018) 1 SCC 353 : [2017] 10 SCR
1006; Transmission Corporation of Andhra Pradesh
Limited v. Equipment Conductors and Cables Limited
(2019) 12 SCC 697 : [2018] 13 SCR 1067 – referred
H to.
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 499
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.
Case Law Reference A
[2018] 12 SCR 794 relied on Para 20
(2019) 10 SCC 572 relied on Para 21
(2020) 10 SCC 538 relied on Para 22
[2019] 12 SCR 75 referred to Para 26
[1959] Supp (2) SCR 476 relied on Para 47 B
[1962] SCR 140 referred to Para 31
[2017] 10 SCR 1006 referred to Para 38
[2018] 13 SCR 1067 referred to Para 38
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4221
of 2020. C
From the Judgment and Order dated 05.02.2020 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal(AT)
(Insolvency) No. 1011 of 2019.
Siddharth Dave, Sr. Adv., Ms. Ruchi Kohli, Adv. for the appellant.
The Judgment of the Court was delivered by D
INDIRA BANERJEE, J.
This appeal under Section 62 of the Insolvency and Bankruptcy
Code, 2016 hereinafter referred to as “IBC”, is against a judgment and
order dated 5th February 2020 passed by the National Company Law
Appellate Tribunal, New Delhi, hereinafter referred to as the “NCLAT”,
dismissing the Company Appeal (AT) (Insolvency) No. 1011 of 2019 E
filed by the Appellant, whereby the Appellant had challenged an order
dated 20th August 2019 passed by the Adjudicating Authority, i.e. the
National Company Law Tribunal, Bengaluru Bench, hereinafter referred
to as the “NCLT” rejecting an application being CP (IB) No.170/BB/
2018 filed by the Appellant under Section 7 of the IBC.
F
2. The Appellant is a company incorporated under the Companies
Act, 1956 and registered as a Securitisation and Asset Reconstruction
Company, pursuant to Section 3 of the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI).
G
3. The Respondent M/s Hotel Poonja International Pvt. Ltd.,
hereinafter referred to as the “Corporate Debtor”, was granted credit/
loan facilities inter alia by Vijaya Bank, hereinafter referred to as the
“Assignor Bank”. Pursuant to an agreement executed between the
Assignor Bank and the Appellant on or about 3rd May 2011, the Assignor
Bank has assigned its dues from the Corporate Debtor to the Appellant. H
500 SUPREME COURT REPORTS [2021] 1 S.C.R.
A 4. By a letter dated 20th May 1986, the Assignor Bank, along with
Corporation Bank, sanctioned a term loan of Rs.40 Lakhs to the Corporate
Debtor. Loan documents were duly executed by the Corporate Debtor
through its authorized directors and guarantors, in favour of the Assignor
Bank and Corporation Bank, for securing the loan as aforesaid, availed
by the Corporate Debtor.
B
5. By a pari pasu agreement executed by and between the
Assignor Bank, Corporation Bank, and the Corporate Debtor on 23rd
November 1987, a pari pasu charge was created on the movable and
immovable properties of the Corporate Debtor, in favour of the two
banks.
C
6. The Corporate Debtor failed to repay the loan obtained from
the Assignor Bank. The Assignor Bank, therefore, declared the account
of the Corporate Debtor as a “Non Performing Asset” (NPA) on 1st
April 1993.
D 7. On or about 18th May 1998, the Assignor Bank filed an Original
Application No. 547 of 1998 under the Recovery of Debts due to Banks
and Financial Institutions Act, 1993 before the Debt Recovery Tribunal
(DRT), Andhra Pradesh and Karnataka at Bangalore for recovery of its
dues aggregating Rs.2,61,88,403.05/- odd from the Corporate Debtor.
E 8. It is the case of the Appellant that during the pendency of the
said original application, the Corporate Debtor acknowledged and admitted
its debt to the Assignor Bank and approached the Assignor Bank for a
settlement, subject to payment of a consolidated amount of Rupees
1 Crore, less Rs.25 Lakhs that had already been paid. The Corporate
Debtor agreed to pay the balance Rs.75 Lakhs in instalments, along
F with interest. Accordingly, a settlement was executed between the
Assignor Bank and the Corporate Debtor on 30 th June 2001, on the
basis of which the DRT issued a Recovery Certificate on 27th March
2003.
9. The Appellant contends that since the Corporate Debtor failed
G to pay the settlement amount, the Assignor Bank became entitled to
recover the decretal amount from the Corporate Debtor. The Assignor
Bank, therefore, filed an application for execution in the DRT, for recovery
of the decretal amount of Rs.2,61,88,403.05, after deducting Rs.25 lakhs
already paid by the Corporate Debtor. After the execution of the
agreement dated 03rd May 2011, between the Assignor Bank and the
H
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 501
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.[INDIRA BANERJEE, J.]
Appellant, the Appellant was substituted as applicant in place of the A
Assignor Bank, in the proceedings before the DRT, and an amended
Recovery Certificate was issued on 13th December, 2012.
10. On or about 27th July 2018, the Appellant filed a petition before
the NCLT, Bengaluru bearing No.CP(IB) No.170/BB/2018 under Section
7 of the IBC against the Corporate Debtor, for initiation of Corporate B
Insolvency Resolution Process (CIRP).
11. By an order dated 20th August 2019, the NCLT, dismissed the
said petition under Section 7 of the IBC, holding that it was the settled
proposition of law that the provisions of the IBC could not be invoked
for recovery of outstanding dues, but could only be invoked to initiate C
CIRP for just reasons.
12. The NCLT, Bengaluru took note of the following relevant
facts:
“In the instant case, it is not in dispute that Vijaya Bank had
sanctioned loan of 40 lakhs to Corporate Debtor on D
20.05.1986 and it has defaulted in making payment of the
loan as per the terms of the loan agreement. The account of
the Corporate Debtor was classified as NPA on 1.04.1993.
Vijaya Bank also filed original application OA No.547/1998
before DRT, Bangalore and DRT has decreed and issued a E
recovery certificate by issuing an order dated 9th April, 2001.
Further, due to non-repayment of the amount as per the order
dated 9th April, 2001, DRT, Bangalore issued another recovery
certificate vide DCP no.2691 dated 27.03.2003 directing the
Recovery Officer to recover the amount of debt as stated
therein. Subsequently, Vijaya Bank assigned the loan F
disbursed in favour of the Corporate Debtor to the Petitioner/
Financial Creditor herein vide Assignment Agreement dated
3rd May, 2011. Consequently, an amended recovery certificate
dated 13 th May, 2011 was issued by the DRT, Bangalore
recognizing the assignment to the petitioner/Financial Creditor G
and vesting rights of recovery with it.”
13. Being aggrieved by the judgment and order of NCLT,
Bengaluru dismissing the application of the Appellant under Section 7 of
the IBC, the Appellant filed an appeal therefrom, being Company Appeal
H
502 SUPREME COURT REPORTS [2021] 1 S.C.R.
A (AT) (INS.) No.1011 of 2019, before the NCLAT. The Appeal has been
dismissed by the judgment and order impugned.
14. The NCLAT also found that the application filed by the Appellant
under Section 7 of the IBC was barred by limitation. The NCLAT,
however, made it clear that the dismissal of the application under Section
B 7 of the IBC, would not preclude the appellant from availing the
appropriate remedy for redressal of its grievances, in accordance with
law, before the competent forum.
15. The application of the Appellant in Statutory Form 1 under
Section 7 of the IBC read with Rule 4 of the Insolvency and Bankruptcy
C (Application to Adjudicating Authority) Rules, 2016 to initiate the
Corporate Insolvency Resolution Process (CIRP) is included in the Paper
Book filed in this appeal, as Annexure P-7. Part IV of the application
relating to the particulars of the financial debt claimed to be due to the
Appellant from the Corporate Debtor is extracted hereinbelow:-
D PART - IV
PARTICULAR OF FINANCIAL DEBT
1. TOTAL AMOUNT OF DEBT GRANTED DATE(s) OF
THE DISBURSMENT *
Debt granted by Vijya Bank Assignor)- Rs 40,00,000
E
(Rupees Forty Lakhs)
Nature of Facility – Term Loan
Date of Sanction – 20.05.1986
2. AMOUNT CLAIMED TO BE IN DEFAULT AND THE
F DATE ON WHICH THE DEFAULT OCCURRED
(ATTACH THE WORKINGS FOR COMPUTATION OF
AMOUNT AND DAYS OF DEFAULT IN TABULAR
FORM)
Total outstanding – Rs. 145,44,46,651.32 (Rupees One
G Hundred Forty Four lakhs Forty Six Thousand Six Hundred
Fifty One and Paisa Thirty Two Only) as on 18.07.2018
(Amt in Rs.)
H
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 503
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.[INDIRA BANERJEE, J.]
A
16. The particulars of the financial debt with documents, records
B
and evidence of default are given in Part V of the application. In support
of its claim, the Appellant relied on the judgment of the DRT in O.A.
No.547/1998, dated 9th April, 2001, the Recovery Certificate issued by
the DRT dated 27th March 2003 and an order dated 14th December
2017 in the Execution/ Recovery Proceedings before the DRT, as will
appear from Sl. No.2 of Part V of the application before the DRT. C
17. The Appellant also relied on the Assignment Agreement dated
3rd May 2011 (Serial No.5 of Part V); a Statement of Accounts of the
Appellant as on 8th July 2018 along with Certificate under the Bankers
Books Evidence Act, 1891 (Serial No.7 of Part V); a memo of the
Recovery Officer dated 3rd June 2011 in the DRT, regarding assignment D
of the decretal dues of the judgment debtor in favour of the Appellant,
and an amended Recovery Certificate dated 13th December 2012 (Serial
No.8 of Part V).
18. Admittedly, as stated in Part IV of the application filed by the
Appellant in the NCLT under Section 7 of the IBC, the account of the E
Corporate Debtor was declared as Non Performing Asset on 1st April,
1993, that is, over 15 years before the application under Section 5 was
filed in the NCLT.
19. It is well settled by a catena of decisions of this Court, that
Article 137 of the Limitation Act gets attracted to applications filed under F
Sections 7 and 9 of the IBC. The right to sue accrues when a default
occurs, and if that default has occurred over three years prior to the
date of filing of an application under Section 7 of the IBC, the application
would be barred under Article 137 of the Limitation Act. At the highest,
limitation started ticking on 27th March 2003, when a Recovery Certificate
was issued by the DRT. The appellant has not disclosed any material in G
its application under Section 7 of the IBC to demonstrate that the
application is not barred by limitation.
20. In B.K. Educational Services Private Limited v. Parag
Guptaand Associates reported in (2019) 11 SCC 633, this Court held:
H
504 SUPREME COURT REPORTS [2021] 1 S.C.R.
A “42. It is thus clear that since the Limitation Act is applicable
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
B
would be barred under Article 137 of the Limitation Act,..”
21. In Gaurav Hargovindbhai Dave v. Asset Reconstruction
Company (India) Ltd. And Ors. reported in (2019) 10 SCC 572, where
the account of the Corporate Debtor was declared NPA on 21.7.2011,
this Court observed:
C
“6. …The present case being “an application” which is filed
under Section 7, would fall only within the residuary Article
137. As rightly pointed out by the learned counsel appearing
on behalf of the appellant, time, therefore, begins to run on
21-7-2011, as a result of which the application filed under
D Section 7 would clearly be time-barred…”
22. In Radha Export (India) Private Limited v. K.P. Jayaram
reported in (2020) 10 SCC 538, authored by one of us (Justice Indira
Banerjee), this Court referred to B.K. Educational Services (P)
Ltd. v. Parag Gupta & Associates (supra), and held:
E
35. It was for the applicant invoking the corporate insolvency
resolution process, to prima facie show the existence in his
favour, of a legally recoverable debt. In other words, the
respondent had to show that the debt is not barred by
limitation, which they failed to do.
F
23. In its application under Section 7 of the IBC, the Appellant
has not shown that the debt due to the Appellant from the Corporate
Debtor is not barred by limitation. The right to sue accrued on 1st April
1993 when the amount of the Corporate Debtor with the Assignor Bank
was declared NPA. In Part IV of its application under Section 7 of the
G IBC, the Appellant declared the date of default as 1st April, 1993. The
claim is apparently barred by limitation. Even the judgment of the DRT
in OA No.547/98 was dated 09.04.2001 and the Recovery Certificate
was dated 27th March 2003. The Appellant’s own statement of accounts
as on 18th July 2018 is not material to the question of limitation for making
H
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 505
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.[INDIRA BANERJEE, J.]
an application under Section 7 of the IBC, which is three years from the A
date of accrual of the right to sue.
24. Under Section 18 of the Limitation Act, 1963, the
acknowledgement of liability in writing, signed by a party in respect of
any right or property claimed by such party within the prescribed period
of limitation to file a suit and/or application, leads to computation of the B
period of limitation afresh, from the time when the acknowledgement is
so signed.
25. In this case, the Corporate Debtor has not signed any
acknowledgement in writing after the settlement of 30th June 2001, on
the basis of which, a Recovery Certificate was issued by the DRT on C
27th March 2003. An arrangement between the Assignor Bank and the
Appellant and the consequential substitution of the Appellant as party to
the Execution/Recovery proceedings in the DRT does not save limitation
to initiate proceedings under Section 7 of IBC. In any case, even the
amended Recovery Certificate, relied upon by the Appellant, is dated
13th December, 2012. The application under Section 7 of the IBC was D
filed almost 6 years after issuance of the amended Recovery Certificate.
26. In Vashdeo R. Bhojwani v. Abhyudaya Cooperative Bank
Ltd. & Anr., reported in (2019) 9 SCC 158, this Court had set aside the
orders of the NCLT and the NCLAT, holding that the application under
Section 7 of the IBC was time barred, as the loan account had been E
declared Non Performing Asset on 23rd December 1999 and thereafter
the Debt Recovery Tribunal had issued a Recovery Certificate dated
24th December 2001. Insolvency proceedings before the NCLT were
admitted on 5th March 2018.
27. In Vashdeo R. Bhojwani (supra), this Court rejected the F
contention that the default was a continuing wrong and Section 23 of the
Limitation Act 1963 would apply, relying upon Balakrishna Savalram
Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan reported
in 1959 Supp (2) SCR 476.
28. To quote P.B. Gajendragadkar, J in Balakrishna Savalram G
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
H
506 SUPREME COURT REPORTS [2021] 1 S.C.R.
A 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
B
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. .....”
C 29. Counsel appearing on behalf of the Appellant has adverted to
two documents in 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 in the Paper Book to contend
that the proceedings under Section 7 of the IBC are not barred by
D limitation, as limitation would start running afresh for a period of three
years from the respective dates of those documents as acknowledgement
of liability. Reliance is placed upon Section 18 of the Limitation Act.
30. As per Section 18 of Limitation Act, an acknowledgement of
present subsisting liability, made in writing in respect of any right claimed
E 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
implication. However, the acknowledgement must be made before the
relevant period of limitation has expired.
F
31. In Khan Bahadur Shapoor Freedom Mazda v. Durga
Prasad Chamaria and Others,reported in AIR 1961 SC 1236, this
Court held :-
“6. It is thus clear that acknowledgment as prescribed by
G 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
relate to a present subsisting liability though the exact nature
H
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 507
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.[INDIRA BANERJEE, J.]
or the specific character of the said liability may not be A
indicated in words. Words used in the acknowledgment must,
however, indicate the existence of jural relationship between
the parties such as that of debtor and creditor, and it must
appear that the statement is made with the intention to admit
such jural relationship. Such intention can be inferred by
B
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.
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 C
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
evidence has been expressly excluded but surrounding
circumstances can always be considered. Stated generally
D
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
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 E
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
position in this matter.”
32. In the present case, reliance ought not to be placed on the F
balance sheet dated 16th August 2017 and letter dated 23rd April 2019
primarily for two reasons. First, there is no evidence or material to show
that the documents were signed before the expiry of the prescribed
period of limitation. There is no pleading to the said effect in the application
under Section 7 of the IBC filed by the appellant in the statutory form. In
fact, the two documents were never relied upon. G
33. Secondly, the two documents cannot be construed as admissions
that amount to acknowledgment of the jural relationship and existence
of liability. The balance sheet dated 16 th August 2017 does not
acknowledge or admit any debt. Rather, the Corporate Debtor has
H
508 SUPREME COURT REPORTS [2021] 1 S.C.R.
A disputed and denied its liability. Point (d) of the Report of the independent
auditor at page 86 of the paper book reads:
“d) Note No. 28 Claims against the Company under adjudication
not acknowledged as debts for reasons stated in point (b) and (c)
above.
B Our opinion is not modified in respect of these matters.”
Point (d) quoted above read with the immediately preceding sub-
paragraph (point c) makes it clear that the Balance Sheet cannot be
treated as an acknowledgment of liability. This is also clear from the last
sub-heading of Note 27 and Note 28 of the Balance Sheet at page 147
C of the paper book, set out hereinbelow:
“As on the date of this report the matter is pending before the
Hon’ble High Court of Karnataka, Bangalore. The Board of
Directors have decided that no interest be provided in the
books of account for the year ended 31 st March 2017. The
D Board is also of the opinion based on legal advice obtained
by it in the matter that no interest be provided in the books till
the matter acquires clarity and the entire amount demanded
by Reliance except for a sum of Rs.40.00 lakhs be treated as
“contingent liability not provided for”.
E The Board is also of the opinion that developments subsequent
to the decree of the DRT Bangalore have not been considered
by Reliance while demanding the amount of Rs.97.12 crores.
These developments have a substantial bearing on the case.
Note No. 28 Claims against the Company under adjudication
F not acknowledged as debt:
Commercial and other claims Rs. 113.85 crores
Previous Year Rs. 72.92 crores”
34. The letter dated 23rd April 2019 again is not an acknowledgment
G and admission of liability. The language and tone of the letter makes it
absolutely clear that the liability was denied. The Corporate Debtor
contended that it had paid more than the double the amount it had
borrowed. Nevertheless, the Corporate Debtor offered a one-time
settlement seeking opinion/concurrence of the Appellant with regard to
such offer to settle the dispute, which offer was not accepted by the
H
M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. v. 509
M/S HOTEL POONJA INTERNATIONAL PVT. LTD.[INDIRA BANERJEE, J.]
Appellant. The relevant part of the letter dated 23rd April 2019 is extracted A
hereinbelow:
“Since we have agreed to clear the loan account under one
time settlement scheme for a sum of Rs. 1.00 crore out of which
we have already paid Rs. 40 lakhs, what has remained unpaid
is Rs. 60 Lakhs. If you calculate the total amount paid by us B
till now, it is more than double the amount borrowed by us.
Anyhow, we have now decided to offer Rs. 65 Lakhs in full
and final settlement of our claim. We therefore, kindly request
you to accept our offer for a sum of Rs. 65 Lakhs in full
settlement of the claim and close the case. In the event of
willingness on your part to accept our said offer for Rs. 65 C
Lakhs, we undertake to pay it off on or before 30.06.2019.
Therefore, please let us have your opinion in the matter at the
earliest.”
35. The Balance Sheet of the Corporate Debtor dated 16 th August,
2017 and the letter dated 23rd April, 2019, as observed above, do not D
constitute any acknowledgment of liability and were not even referred
to by the Appellant in its application under IBC. It is, therefore, not
necessary for this Court to delve into the question of whether Section 18
of the Limitation Act is attracted in the case of a petition under Section
7 of the IBC. E
36. At the cost of repetition, it is reiterated that in its application
under Section 7 of the IBC, the Appellant declared the date of default as
1st April, 1993. At the highest, limitation started running from 27th March,
2003, when the Recovery Certificate was issued by the DRT in favour
of the Assignor. The NCLAT has rightly held that the application of the F
Appellant under Section 7 of the IBC barred by limitation.
37. In any case, there are pending proceedings in the DRT, in
respect of the dues of the Corporate Debtor. The Appellant has been
substituted in place of the Assignor Bank in the execution proceedings in
the DRT. There is an amended Certificate issued by the DRT. Orders G
have, from time to time, been passed in the Execution Proceedings. The
Appellant is not without remedy against the Corporate Debtor.
38. As held by this Court in Mobilox Innovations Private Limited
v. Kirusa Software Private Limited reported in (2018) 1 SCC 353, the
IBC is not intended to be a substitute to a recovery forum. In
H
510 SUPREME COURT REPORTS [2021] 1 S.C.R.
A Transmission Corporation of Andhra Pradesh Limited v. Equipment
Conductors and Cables Limited reported in (2019) 12 SCC 697, this
Court followed its earlier judgment in Mobilox Innovations Private Ltd.
(supra) and observed as hereunder:-
“In a recent judgment of this Court in Mobilox Innovations
B Private Limted v. Kirusa Software Private Limited (2018) 1
SCC 353, this Court has categorically laid down that IBC is
not intended to be substitute to a recovery forum. It is also
laid down that whenever there is existence of real dispute,
the IBC provisions cannot be invoked….”
C 39. There is no infirmity in the judgment and order of the NCLAT
under appeal that calls for interference of this Court. The appeal is
therefore, dismissed.
Ankit Gyan Appeal dismissed.
D
E
F
G
H
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