TOTTEMPUDI SALALITHversusSTATE BANK OF INDIA & ORS.

                [2023] 14 S.C.R. 492 : 2023 INSC 923



                          CASE DETAILS

                     TOTTEMPUDI SALALITH
                                   v.
                  STATE BANK OF INDIA & ORS.
                    (Civil Appeal No. 2348 of 2021)
                         OCTOBER 18, 2023
        [ANIRUDDHA BOSE AND VIKRAM NATH, JJ.]
                            HEADNOTES
     Issue for consideration: Issues arose as to whether the debts in
connection with the recovery certificate issued in the year 2015,
could form subject matter of an application u/s.7 IBC; whether the
the banks having approached the DRT, were barred under the doctrine
of election from approaching the NCLT for recovery of same set of
debts; and whether the date of default should go back to the date
on which the loan account of the corporate debtor was declared
as non-performing asset.
     Insolvency and Bankruptcy Code, 2016 – s. 7 – Debts in connection
with the recovery certificate issued in the year 2015, if could form
subject matter of an application u/s. 7 – Corporate debtor faced
insolvency proceedings due to failure to repay loans to several banks
– Issuance of recovery certificate by the tribunal in the year 2015 and
2017 respectively, against the corporate debtor in which the financial
creditor-Banks had stake – On basis thereof, financial creditor initiated
proceedings u/s. 7 seeking Corporate Insolvency Resolution Process-
CIRP against the corporate debtor in the year 2019 – Tribunal admitted
the application and declared moratorium on the ground of limitation
– Appeal thereagainst, on the ground that the application u/s. 7 was
not maintainable on the ground of limitation and doctrine of election
– Dismissed by the appellate tribunal – Correctness:
    Held: Doctrine of election cannot be applied to prevent the
financial creditors from approaching the NCLT for initiation of CIRP
– Date of recovery certificate was treated to be the date on which
                                  492
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                      493
                    ORS.

the time of limitation began to tick – Letter issued by the corporate
debtor to the Banks, agreeing in principle to repay the amount due to
the financial creditors was a request to consider a one-time settlement
– In absence of averments or pleading, after initiation of insolvency
proceeding, any promise made to pay the debt cannot be treated to
have cured the fault of limitation in a pre-existing action – It cannot
by itself revive the debt though it could create an independent cause
of action – Proceedings initiated before the tribunal is a composite
application based on three recovery certificates, two of which were
instituted within the three year limitation period, but the third
recovery certificate was issued in 2015, beyond the limitation period
– However, a recovery certificate under the 1993 Act is also clothed
with the character of a deemed decree which has twelve years for
enforcement as per Art. 136 – In the event a financial creditor wants to
pursue a recovery certificate as a deemed decree, he would get twelve
years’ time – Application with respect to the two recovery certificates
issued in 2017 is maintainable – As regards recovery certificate of
2015, in case the appellate tribunal is of opinion that CIRP could
not lie, as the decree would be still alive, the claim based on the said
recovery certificate could be segregated from the composite claim
and the Committee of Creditors would treat the sum reflected in the
said recovery certificate as part of the claims made in pursuance of
the public announcement – Limitation Act, 1963 – Art. 136 and 137
– Recovery of Debts and Bankruptcy Act, 1993. [Para 7, 9, 12, 13,15]
     Insolvency and Bankruptcy – Insolvency proceedings –
Doctrine of election – Application of – Plea of corporate debtor
that the banks having approached the DRT, were barred under
the doctrine of election from approaching the NCLT for recovery
of same set of debts:
     Held: Doctrine of election embodied in the law of evidence,
bars prosecution of the same right in two different fora based on the
same cause of action – On facts, the recovery proceedings before the
DRT commenced in 2014, and at that point of time, the IBC had not
come into existence – Recovery certificate itself would give rise to
a fresh cause of action entitling a financial creditor to initiate CIRP
494         SUPREME COURT REPORTS                      [2023] 14 S.C.R.


– Such recovery certificate arose out of a proceeding from the DRT –
Enforcement mechanism for a recovery certificate is an independent
course, which a financial creditor may opt for realisation of its dues
crystalised under the 1993 Act, instead of chasing the mechanism
under the 1993 Act – Question of election between the fora for
enforcement of debt under the 1993 Act and initiation of CIRP under
the IBC arises only after a recovery certificate is issued – Reliefs under
the two statutes are different and once CIRP results in declaration of
moratorium, the enforcement mechanism under the 1993 Act or the
SARFAESI Act gets suspended – In such circumstances, after issue
of recovery certificate, the financial creditor ought to have option
for enforcing recovery through a new forum instead of sticking on
to the mechanism through which recovery certificate was issued –
Thus, the doctrine of election cannot be applied to prevent the
financial creditors from approaching the NCLT for initiation of
CIRP – Doctrines. [Para 11]

       LIST OF CITATIONS AND OTHER REFERENCES

    Kotak Mahindra Bank Limited v. A. Balakrishnan and Another (2022)
9 SCC 186 – relied on.
      Dharani Sugars and Chemicals Ltd.v. Union of India and Others
(2019) 5 SCC 480 : [2019] 6 SCR 307; Jignesh Shah and Another v. Union of
India and Another (2019) 10 SCC 750 : [2019] 12 SCR 678; Reliance Asset
Reconstruction Company Limited v. Hotel Poonja International Private
Limited (2021) 7 SCC 352 : [2021] 1 SCR 495; Babulal Vardharji Gurjar
v. Veer Gurjar Aluminium Industries Private Limited and Another (2020) 15
SCC 1 : [2020] 13 SCR 368; Kotak Mahindra Bank Ltd. v. Kew Precision
Parts Private Limited and Others (2022) 9 SCC 364; B.K. Educational
Services Private Limited v. Parag Gupta & Associates (2019) 11 SCC 633
: [2018] 12 SCR 794; Gaurav Hargovindbhai Dave v. Asset Reconstruction
Company (India) Limited and Another (2019) 10 SCC 572 : [2019] 13 SCR
224; Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Limited and
Another (2019) 9 SCC 158 : [2019] 12 SCR 75; Transcore v. Union of India
and Another (2008) 1 SCC 125 : [2006] 9 Suppl. SCR 785 – referred to.
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                          495
                    ORS.


       OTHER CASE DETAILS INCLUDING IMPUGNED
              ORDER AND APPEARANCES
     CIVIL APPELLATE JURISDICTION : Civil Appeal No.2348 of 2021.
      From the Judgment and Order dated 25.06.2021 of the National
Company Law Appellate Tribunal, Chennai in Company Appeal (AT) (CH)
(Ins) No.04 of 2021
     Appearances:
    K. Parameshwar, Ms. A. Sregurupriya, Ms. Arti Gupta, Advs. for the
Appellant.
     Ms. Avrojyoti Chatterjee, Rajiv S Roy, Siddharth Dhingra, Ms.
Jayasree Saha, Advs. for the Respondents.

       JUDGMENT / ORDER OF THE SUPREME COURT
                              JUDGMENT

     ANIRUDDHA BOSE, J.
      The appellant before us has described himself as the managing director
of the Respondent No.2, Totem Infrastructures Limited (corporate debtor)
against whom proceedings have been initiated on account of default in
repaying financial facilities extended to them by several banks in the form
of loans and bank guarantees. The total claim on account of default as
made before the National Company Law Tribunal (NCLT) was for a sum
of Rs.613,27,01,598.23/-. Several banks had extended these facilities, being
(i) Union Bank of India, (ii) IDBI, (iii) Oriental Bank of Commerce, (iv)
Bank of Baroda, (v) Karnataka Bank, (vi) Syndicate Bank and (vii) Punjab
National Bank as also the State Bank of India, who is the first respondent
in this appeal. The State Bank of Hyderabad, State Bank of Mysore, State
Bank of Travancore, State Bank of Bikaner and Jaipur and State Bank of
Patiala, had also extended such facilities, but they had merged with the
State Bank of India on 01.04.2017. Hence, the State Bank of India is now
prosecuting the composite claims of these banks. In the proceeding before
the NCLT, out of which this appeal arises, it was the State Bank of India
who had filed the application as financial creditor under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (IBC).
496          SUPREME COURT REPORTS                        [2023] 14 S.C.R.


      2. Prior to bringing the action under the IBC, notice under Section
13(2) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI) was issued to the
corporate debtor and recovery proceedings were instituted against them
before the Debt Recovery Tribunal (DRT). Three applications were filed
by the exposed lending banks, two before the DRT, Hyderabad being OA
No.154 of 2014 and OA No.221 of 2014, the former having been renumbered
as OA No.1653 of 2017. The third application was filed before the DRT,
Bengaluru which was registered as OA No.1930 of 2014. Three recovery
certificates were issued by the respective Tribunals covering the claims of
the lending banks. Two recovery certificates by the Hyderabad Tribunal were
issued on 08.09.2015 and 17.10.2017 for a sum of Rs.14,50,06,349.23/- and
Rs.1408,03,14,857.40/- respectively. In the case registered as OA No.221 of
2014, the State Bank of Hyderabad was the applicant bank. In OA No. 154
of 2014, all these banks filed a composite application. In OA No.1930 of
2014, the proceeding brought by State Bank of Bikaner and Jaipur, recovery
certificate was issued on 04.08.2017 for a sum of Rs.5,22,21,750/-. In respect
of the recovery certificate issued on 17.10.2017, the State Bank of India
claimed to be entitled to Rs.368,22,13,348.59/-.
      3. The State Bank of India’s application under Section 7 of the IBC
was filed on 06.09.2019 before the NCLT, founded on all the three recovery
certificates in which the first respondent had substantial stake. In its order
passed on 12.01.2021, the adjudicating authority admitted the application and
declared moratorium in terms of Section 14 of the IBC. By this order, one
G. Satyanarayana Murty was appointed as Interim Resolution Professional
(IRP). The appellant, who was the managing director of the corporate debtor,
appealed against the said decision of the NCLT admitting the application
and declaring moratorium primarily on the ground of limitation. Before the
National Company Law Appellate Tribunal (the Appellate Tribunal), a point
was urged, apart from the issue of limitation, that the application had been
initiated as per the Reserve Bank of India circular dated 12.02.2018 which
was held to be ultra vires the provision of Section 35AA of the Banking
Regulation Act, 1949 by this Court in the case of Dharani Sugars and
Chemicals Ltd. -vs- Union of India and Others [(2019) 5 SCC 480].
This circular essentially laid down norms for, inter-alia, invoking IBC in
relation to stressed assets. The NCLT had taken into consideration a letter
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                           497
           ORS. [ANIRUDDHA BOSE, J.]

issued by the corporate debtor on 29.01.2020 addressed to the Union Bank
and the State Bank of India, agreeing in principle to repay the amount due
to the financial creditors. The same letter requested the banks to support
the corporate debtor during the financial crises being faced by them and
sought waiver of penal interest levied. A request for one time settlement
was also made in this communication. The NCLT treated this letter to be
an acknowledgement of debt. In its decision taken on 12.01.2021 while
admitting the application, it was, inter-alia, observed:-
     “….We, are therefore, of the view that by accepting liability vide their
     letter dated 29.01.2020, agreeing to repay the debt, the Corporate
     Debtor now cannot take a stand that the debt is barred by limitation.
     Acknowledgement of debt and agreeing to repay the same amounts to
     liability and it automatically extends the limitation period.”
     The Appellate Tribunal broadly agreed with the reasoning of the NCLT
and sustained the decision delivered on 12.01.2021.
      4. The pleas of the appellant before the Appellate Tribunal were mainly
on procedural grounds. Apart from the question of limitation, arguments were
advanced that the application before the NCLT was barred under the doctrine
of election, the borrower having chosen the SARFAESI mechanism first
and having applied before the DRT. Point of limitation was also reiterated.
On the issue involving the RBI Circular dated 12.02.2018 the case of the
appellant was that the banks had approached the forum under the IBC, on
the basis of the aforesaid circular. The said circular was, however, quashed
in the case of Dharani Sugars and Chemicals Ltd. (supra). On this ground,
the appellant argued that the application was not maintainable. The Appellate
Tribunal held, inter-alia:-
     “56. In regard to the plea of the Appellant that the Adjudicating
     Authority in the impugned order even though at paragraph 12 had
     mentioned that the Corporate Debtor had raised two fold contention
     (1) that the petition is barred by limitation (2) the petition has been
     initiated as by the RBI Circular 12.02.2018 which was held ultra
     virus of section 35 AA of the Banking Regulation Act by the Hon’ble
     Supreme Court, this Tribunal ongoing through the impugned order
     is of the considered view that the Adjudicating Authority had not
     adverted to the same and the said order in this regard has not spelt
498           SUPREME COURT REPORTS                          [2023] 14 S.C.R.


      out reasons. Therefore, this Tribunal is of the earnest opinion that it
      is desirable that an ‘Adjudicating Authority’ is to disclose its mind in
      future so that the compulsion of disclosure, guarantees consideration
      apart from the fact, that the duty to assign reasons introduces clarity
      and minimizes arbitrariness. Also, it will enable the superior authority
      to evaluate the order so passed on legal plane. However, this Tribunal
      being an ‘Appellate Authority’ over the Adjudicating Authority in the
      present Appeal has dealt with the aspect of limitation concerning the
      section 7 application and the aspect of RBI circular dated 12.02.2018
      and answered the same at the relevant of this Judgment. As such,
      the Appellant cannot be an aggrieved person in this regard, in the
      considered opinion of this Tribunal.
      57. It is to be pointed out that in our ‘Justice Delivery System’, ‘Law’ is
      to be decided with reasons which carry convictions within the Codes/
      Tribunals/Lawyers/Stakeholders and Litigants to make it, stable,
      predictable and consistent with a view to have certainty and clarity
      to the benefit of one and all. It cannot be gainsaid that the judgment/
      order of a Tribunal is to be written only after deep travail and positive
      vein. Also that, the procedure for developing the law has to be one
      of evolution. In this connection it is significant to point out that the
      exception to rule of ‘Stare decisis’ is that a Court/Tribunal is not bound
      to follow the decision(s) reached ‘per incuriam’.
      58. As matter of fact, in the instant case when once the Company
      has/had defaulted and after the initiation of legal proceedings as
      available to the Lender on that date (Before the Debt Recovery
      Tribunal) and when the Financial Creditor/Lender had obtained the
      order(s) in the ‘Original Applications’ and later recovery certificates
      were issued, and when the Original Applications filed before the
      Debt Recovery Tribunal(s) had attained finality, thereafter it is for
      the Lender/Financial Creditor/Decree Holder as matter of ‘Election’
      to pursue the recovery mechanism for his/its personal benefits before
      a ‘competent forum’ or to initiate Insolvency Proceedings for the
      benefit of ‘stakeholders’ and ‘one and all’. In the event of the Decree
      Holder/Lender/Financial Creditor has/had resorted to the initiation
      of Insolvency Proceedings under relevant section of the I & B Code
TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                           499
         ORS. [ANIRUDDHA BOSE, J.]

 (after coming into force of the Code) he/it cannot be found fault with,
 since there is no fetter in ‘Law’, in this regard.
 59. It is pointed out that the decisions cited on behalf of the Appellant
 before this Tribunal, in the instant case are not applicable to the facts
 and the circumstances of the present case, hence they are neither
 considered, nor discussed.
 60. Be that as it may, in view of the detailed upshot, this Tribunal taking
 note of the respective contentions projected by the Learned Counsels
 appearing for the parties, considering the facts and circumstances
 of the present case in a proper perspective, comes to a resultant
 conclusion that the instant case there is a ‘Financial Debt’ which is
 due and payable by the ‘Corporate Debtor’. Moreover, as against the
 Corporate Debtor/Totem Infrastructure Limited, orders were passed
 by the Debt Recovery Tribunal(s) and the three ‘Recovery Certificates’
 dated 17.10.2017, 04.08.2017 and 08.09.2015 clearly establish the
 factum of Financial Debt, due and payable, and that default being
 committed by the ‘Corporate Debtor’. To put precisely, the onus of
 proving the ‘debt’ and ‘default’ on the part of the First Respondent/
 Bank in the instant case, has been duly discharged. Looking at from any
 angle, the ‘admission order’ of the section 7 application as against the
 ‘Corporate Debtor’ by the Adjudicating Authority, (‘National Company
 Law Tribunal’, Hyderabad Bench in an application filed by the First
 Respondent/Bank) as Financial creditor on 12.01.2021 in CP (IB)
 No. 625/7/HDB/2019 does not suffer from any material irregularities
 and patent illegalities in the eye of Law. Resultantly, the Appeal fails.
 CONCLUSION: In fine, the Comp App (AT)(CH)(Ins) No. 04/2021 is
 dismissed. No costs. The I A No. 09/2021 and 10/2021 are closed.”
 5. In the case of Kotak Mahindra Bank Limited -vs- A. Balakrishnan
 and Another [(2022) 9 SCC 186], a three Judge Bench of this Court
 had examined the question of limitation from the perspective of issue
 of recovery certificates in terms of provision of the Recovery of Debts
 and Bankruptcy Act, 1993 (1993 Act). We shall refer to this judgment
 henceforth as Kotak Mahindra I. It was opined by this Court in this
 judgment:-
500           SUPREME COURT REPORTS                          [2023] 14 S.C.R.


      “28. It could thus be seen that this Court in Dena Bank [Dena Bank
      v. C. Shivakumar Reddy, (2021) 10 SCC 330] in SCC paras 136 and
      141, has in unequivocal terms held that once a claim fructifies into a
      final judgment and order/decree, upon adjudication, and a certificate
      of recovery is also issued authorising the creditor to realise its decretal
      dues, 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. It has further been held that 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 IBC for initiation of the CIRP, 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 in terms of the certificate of recovery,
      or any part thereof remained unpaid.
                           ×××         ×××         ×××
      56. Insofar as the contention of the respondents with regard to clause
      (a) of sub-section (1) of Section 14 IBC is concerned, we do not find
      that the words used in clause (a) of sub-section (1) of Section 14 IBC
      could be read to mean that the decree-holder is not entitled to invoke the
      provisions of the IBC for initiation of CIRP. A plain reading of the said
      Section would clearly provide that once CIRP is initiated, there shall
      be prohibition for 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. The prohibition to institution of suit or
      continuation of pending suits or proceedings including execution of
      decree would not mean that a decree-holder is also prohibited from
      initiating CIRP, if he is otherwise entitled to in law. The effect would be
      that the applicant, who is a decree-holder, would himself be prohibited
      from executing the decree in his favour.
                           ×××         ×××         ×××
      71. We have already hereinabove, done the exercise of considering the
      relevant provisions of the IBC afresh and come to a conclusion that a
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                            501
           ORS. [ANIRUDDHA BOSE, J.]

     liability in respect of a claim arising out of a recovery certificate would
     be a “financial debt” within the meaning of clause (8) of Section 5 IBC
     and a holder of the recovery certificate would be a “financial creditor”
     within the meaning of clause (7) of Section 5 IBC. We have also held
     that a person would be entitled to initiate CIRP within a period of three
     years from the date on which the recovery certificate is issued. We are
     of the considered view that the view taken by the two-Judge Bench of
     this Court in Dena Bank [Dena Bank v. C. Shivakumar Reddy, (2021)
     10 SCC 330] is correct in law and we affirm the same.
                          ×××         ×××         ×××
     86. To conclude, we hold that a liability in respect of a claim arising
     out of a recovery certificate would be a “financial debt” within the
     meaning of clause (8) of Section 5 IBC. Consequently, the holder of the
     recovery certificate would be a financial creditor within the meaning
     of clause (7) of Section 5 IBC. As such, the holder of such certificate
     would be entitled to initiate CIRP, if initiated within a period of three
     years from the date of issuance of the recovery certificate.”
      6. The Appellate Tribunal, in the impugned order had also treated
the letter of the corporate debtor which was issued on 29.01.2020 to be
acknowledgement of debt and on that basis proceeded to compute the
limitation period. In our opinion, this reasoning was procedurally wrong. The
appellant’s stand on this position is founded on Section 18 of the Limitation
Act, 1963 and he contends that any acknowledgment beyond the period of
limitation would not revive the right to sue. Learned counsel for the appellant
has relied upon a judgment of this Court in the case of Jignesh Shah and
Another -vs- Union of India and Another [(2019) 10 SCC 750] in which
it has been held that the limitation period provided in the Limitation Act
would apply to the applications under the IBC as well. Section 238A of
the IBC itself (introduced by way of an amendment to the Code made with
effect from 06.06.2018) stipulates application of the statute of Limitation
on IBC. Section 18 of the Limitation Act stipulates: -
           “18. Effect of acknowledgment in writing.—(1) Where, before
           the expiration of the prescribed period for a suit or application in
           respect of any property or right, an acknowledgment of liability in
           respect of such property or right has been made in writing signed
502           SUPREME COURT REPORTS                          [2023] 14 S.C.R.


           by the party against whom such property or right is claimed, or
           by any person through whom he derives his title or liability, a
           fresh period of limitation shall be computed from the time when
           the acknowledgment was so signed.
           (2) Where the writing containing the acknowledgment is undated,
           oral evidence may be given of the time when it was signed; but
           subject to the provisions of the Indian Evidence Act, 1872 (1 of
           1872), oral evidence of its contents shall not be received.
           Explanation.—For the purposes of this section,—
           (a) an acknowledgment may be sufficient though it omits to
           specify the exact nature of the property or right, or avers that
           the time for payment, delivery, performance or enjoyment has
           not yet come or is accompanied by a refusal to pay, deliver,
           perform or permit to enjoy, or is coupled with a claim to set-off,
           or is addressed to a person other than a person entitled to the
           property or right,
           (b) the word “signed” means signed either personally or by an
           agent duly authorised in this behalf, and
           (c) an application for the execution of a decree or order shall
           not be deemed to be an application in respect of any property
           or right.”
      Section 238-A of the IBC stipulates: -
           “Limitation. --The provisions of the Limitation Act, 1963 (36 of
           1963) shall, as far as may be, apply to the proceedings or appeals
           before the Adjudicating Authority, the National Company Law
           Appellate Tribunal, the Debt Recovery Tribunal or the Debt
           Recovery Appellate Tribunal, as the case may be.”
      7. So far as the present proceeding is concerned, if we proceed on the
basis that the date of initial default is the starting point of limitation, then
lapse of three years from that date would have extinguished the bank’s
right to initiate action under the IBC. Secondly, even if the said letter
dated 29.01.2020 is treated to be acknowledgement of debt, the same was
made after institution of the proceeding under Section 7 of the IBC. In the
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                          503
           ORS. [ANIRUDDHA BOSE, J.]

application thus, there could be no reference to such acknowledgement. In
absence of amendment of pleadings, the Appellate Tribunal could not have
taken such purported acknowledgement of debt for the purpose of extending
the limitation period. Requirement of specific pleading on facts constituting
acknowledgement or admission of claim has been recognised in the judgment
of this Court in the case of Reliance Asset Reconstruction Company
Limited -vs- Hotel Poonja International Private Limited [(2021) 7
SCC 352]. Broadly a similar view has been taken by this Court in the case
of Babulal Vardharji Gurjar -vs- Veer Gurjar Aluminium Industries
Private Limited and Another [(2020) 15 SCC 1]. In this judgment also,
the necessity of averments to overcome the limitation question has been
emphasised by this Court. The argument of the appellant on the basis of
Section 25 (3) of the Contract Act, 1872 is anchored on the letter dated
29.01.2020. This letter reads:-
     “To
     The Assistant General Manager
     Union Bank of India,
     Industrial Finance Branch,
     6-3-1090/B/4/101, 1st Floor,
     “The Grand” Raj Bhavan Road,
     Somajiguda, Hyderabad-500 082.
     Mail-ifbhyderabad@unionbankofindla.com
                                     (Through to the Lead Bank)
     Dear Sir,
     Sub:- Request for OTS with Consortium Banks
     Ref:- Totem Infrastructure Limited
     We thank you very much for the support that has been extended by
     your bank throughout my business operations with your branch. With
     reference to your letter/Notice from your branch, we have taken note
     of it and we have discussed about this elaborately with our business
     partners.
     In principle, we have agreed among ourselves to repay the amount
     due to your bank. As you are aware, we are undergoing through rough
     phase in our business activities along with financial crisis. At this
504          SUPREME COURT REPORTS                        [2023] 14 S.C.R.


      juncture we require your bank support to come out of these problems
      and to repay the amounts due to your bank.
      In this regard, we request you to inform us to the exact outstanding
      amount payable to your bank as on the date of our account became Non
      Performing Asset (NPA) in your bank. We also request you to waive
      off all the penal interests levied by your bank on the Loan outstanding
      amount from the date of account became irregular to till date of your
      notification to us
      It would be of great relief to us, if you can waive off all the penal
      interests and penalties and other charges levied on our account and
      inform us to enable us to plan for repayments.
      So in this regard we further request you to consider this as One Time
      Settlement (OTS) option extended to us. We also request you to allow
      us to repay the said amount in at least 4 to 6 Instalments spread over
      a period of one year.
      We are highly indebted to your bank in supporting us in all our tough
      times and believing us.
      We are always committed for repayment of your outstanding dues.
      Finally we request you not to issue any public notifications or such
      actions which will spoil our reputation as well as closes all options
      for us to raise funds or to make alternative arrangements to repay the
      loan outstanding amounts.
      Kindly organise Consortium meeting or joint Lenders Meeting at the
      earliest, preferably before 07th February 2020 to discuss and to come
      to an understanding.
      We hope that you will consider our humble request.
      Kindly do the needful and oblige.
      Looking forward to your favourable response.
      Thanking you,
      Yours Faithfully
      (Salalith Tottempudi)
      Managing Director”
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                             505
           ORS. [ANIRUDDHA BOSE, J.]

       8. An argument based on Section 25(3) of the Contract Act, 1872 was
examined by this court in Kotak Mahindra Bank Ltd. -vs- Kew Precision
Parts Private Limited and Others [(2022) 9 SCC 364]. We shall refer to
this judgment henceforth as Kotak Mahindra II. Analysing the provision of
Section 25 (3) of the Contract Act, 1872 this Court has held in this judgment:-
     “33. There is a distinction between acknowledgment under Section
     18 of the Limitation Act, 1963 and a promise within the meaning of
     Section 25 of the Contract Act. Both promise and acknowledgment in
     writing, signed by a party or its agent authorised in that behalf, have
     the effect of creating a fresh starting of limitation. The difference is
     that an acknowledgment under Section 18 of the Limitation Act has to
     be made within the period of limitation and need not be accompanied
     by any promise to pay. If an acknowledgment shows existence of jural
     relationship, it may extend limitation even though there may be a denial
     to pay. On the other hand, Section 25(3) is only attracted when there
     is an express promise to pay a debt that is time-barred or any part
     thereof. Promise to pay can be inferred on scrutinising the document.
     Only the promise should be clear and unconditional.”
      9. We accept the submission of the appellant that this letter was a
request to consider a one-time settlement. But again, in absence of averments
or pleading, after initiation of insolvency proceeding, any promise made to
pay the debt cannot be treated to have cured the fault of limitation in a pre-
existing action. A promise of this nature would constitute an independent
cause of action.
      10. We shall now return to the point argued by the appellant that the
date of default should go back to the date on which the loan account of the
corporate debtor was declared as non-performing asset. In the cases of B.K.
Educational Services Private Limited -vs- Parag Gupta & Associates
[(2019) 11 SCC 633] and Babulal (supra), date of default has been treated
to be the date on which the limitation period starts ticking. In Gaurav
Hargovindbhai Dave -vs- Asset Reconstruction Company (India)
Limited and Another [(2019) 10 SCC 572], the provision of Article 137
to the Limitation Act was applied for computing the period of limitation.
But these authorities do not lay down a proposition of law which is contrary
to that laid down by the three-Judge Bench judgment of this Court in the
506          SUPREME COURT REPORTS                          [2023] 14 S.C.R.


case of Kotak Mahindra I (supra). This Court, in the case of Vashdeo R.
Bhojwani -vs- Abhyudaya Co-operative Bank Limited and Another
[(2019) 9 SCC 158], on considering the facts involved in that case, came to
the finding that when the recovery certificate was issued, the said certificate
injured effectively and completely the appellant’s rights, as a result of
which limitation would have begun ticking. The recovery certificate there
was issued on 24.12.2001 and the financial creditor filed an application
under Section 7 of the IBC before the NCLT on 21.07.2017. But in the said
judgment also the date of recovery certificate was treated to be the date on
which the time of limitation began to tick.
      11. On behalf of the appellant, submissions have been made that the
banks having approached the DRT, were barred under the doctrine of election
from approaching the NCLT for recovery of same set of debts. This is a
doctrine embodied in the law of evidence, which bars prosecution of the
same right in two different fora based on the same cause of action. But so
far as the present appeal is concerned, the recovery proceedings before the
DRT had commenced in the year 2014. At that point of time, the IBC had
not come into existence. Moreover, it has been held by this Court in Kotak
Mahindra I (supra) that the recovery certificate itself would give rise to
a fresh cause of action entitling a financial creditor to initiate Corporate
Insolvency Resolution Process (CIRP). By this judgment, the right of the
financial creditor to invoke the mechanism under the IBC after issue of
recovery certificate stood acknowledged as a valid legal course. This Court,
in that case also dealt with the question of instituting a CIRP on the strength
of recovery certificate. Needless to add, such recovery certificate arose out
of a proceeding from the DRT. The enforcement mechanism for a recovery
certificate is an independent course, which a financial creditor may opt for
realisation of its dues crystalised under the 1993 Act, instead of chasing the
mechanism under the 1993 Act. The IBC itself is not really a debt recovery
mechanism but a mechanism for revival of a company fallen in debt, but the
procedure envisaged in the IBC substantially relates to ensuring recovery of
debts in the process of applying such mechanism. The question of election
between the fora for enforcement of debt under the 1993 Act and initiation
of CIRP under the IBC arises only after a recovery certificate is issued.
The reliefs under the two statutes are different and once CIRP results in
declaration of moratorium, the enforcement mechanism under the 1993 Act
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                            507
           ORS. [ANIRUDDHA BOSE, J.]

or the SARFAESI Act gets suspended. In such circumstances, after issue of
recovery certificate, the financial creditor ought to have option for enforcing
recovery through a new forum instead of sticking on to the mechanism
through which recovery certificate was issued. In the case of Transcore
-vs- Union of India and Another [(2008) 1 SCC 125], application of
SARFAESI mechanism was held permissible even though the subject-
proceeding was instituted under the 1993 Act. Thus, the doctrine of election
cannot be applied to prevent the financial creditors from approaching the
NCLT for initiation of CIRP.
      12. One factor which has come to our notice in course of hearing is that
one of the recovery certificates was issued on 08.09.2015. We have already
held that the letter dated 29.01.2020 cannot by itself revive the debt though
it could create an independent cause of action. A question that arises now is
as to whether the debts in connection with the recovery certificate issued in
the year 2015 could form subject matter of an application under Section 7
of the IBC filed on 06.09.2019. In the case of Kotak Mahindra I (supra),
it was held that CIRP could be brought within three years from the date of
issue of recovery certificate.
      13. What has been filed before the NCLT is a composite application
based on three recovery certificates, two of which have been instituted within
the three-year period as postulated in Article 137 of the Limitation Act. The
third recovery certificate was issued in the year 2015. Thus, there is more
than three years gap between the date of issue thereof and the date of filing
of the application before the NCLT. But a recovery certificate under the 1993
Act is also clothed with the character of a deemed decree. The provisions
of Section 19 (22A) of the 1993 Act specifies :-
     “Section 19 Application to the Tribunal: -
     ………..
     (22A) Any recovery certificate issued by the Presiding Officer under
     sub-section (22) shall be deemed to be decree or order of the Court
     for the purposes of initiation of winding up proceedings against a
     company registered under the Companies Act, 2013 (18 of 2013) or
     Limited Liability Partnership registered under the Limited Liability
     Partnership Act, 2008 (6 of 2009) or insolvency proceedings against
508          SUPREME COURT REPORTS                             [2023] 14 S.C.R.


      any individual or partnership firm under any law for the time being
      in force, as the case may be.]”
      Life of a decree is twelve years for enforcement as per Article 136 of
the schedule of Limitation Act. The said provision stipulates:-
       “Description of application   Period of    Time from which period begins
                                     limitation   to run
       136. For the execution of Twelve           [When] the decree or order
            any decree (other than years.         becomes enforceable or where
            a decree granting a                   the decree or any subsequent
            mandatory injunction)                 order directs any payment of
            or order of any civil                 money or the delivery of any
            court.                                property to be made at a certain
                                                  date or at recurring periods,
                                                  when default in making the
                                                  payment or delivery in respect
                                                  of which execution is sought,
                                                  takes place:
                                                  Provided that an application
                                                  f o r t h e e n f orc e m e n t o r
                                                  execution of a decree granting
                                                  a perpetual injunction shall
                                                  not be subject to any period
                                                  of limitation.”

      14. There is authority for the proposition that the time for computing
limitation period for filing an application under Section 7 of the IBC would
be guided by Article 137 of the Limitation Act. That is the ratio of this
Court in the case of Kotak Mahindra I (supra). The same authority has
also analysed the position of a recovery certificate as a deemed decree. It
has been, inter-alia, held in this judgment:-
      “79. From the plain and simple interpretation of the words used in
      sub-section (22-A) of Section 19 of the Debts Recovery Act, it would
      be amply clear that the legislature provided that for the purposes of
      winding-up proceedings against a company, etc. a recovery certificate
      issued by the Presiding Officer under sub-section (22) of Section 19
      of the Debts Recovery Act shall be deemed to be a decree or order of
  TOTTEMPUDI SALALITH v. STATE BANK OF INDIA &                            509
           ORS. [ANIRUDDHA BOSE, J.]

     the Court. It is thus clear that once a recovery certificate is issued by
     the Presiding Officer under sub-section (22) of Section 19 of the Debts
     Recovery Act, in view of sub-section (22-A) of Section 19 of the Debts
     Recovery Act it will be deemed to be a decree or order of the Court for
     the purposes of initiation of winding-up proceedings of a company, etc.
     However, there is nothing in sub-section (22-A) of Section 19 of the
     Debts Recovery Act to imply that the legislature intended to restrict
     the use of the recovery certificate limited for the purpose of winding-
     up proceedings. The contention of the respondents, if accepted, would
     be to provide something which is not there in sub-section (22-A) of
     Section 19 of the Debts Recovery Act.
     80. In any case, when the legislature itself has provided that any
     recovery certificate issued under sub-section (22) of Section 19 of
     the Debts Recovery Act will be deemed to be a decree or order of the
     court for initiation of winding-up proceedings, which proceedings are
     much severe in nature, it will be difficult to accept that the legislature
     intended that such a recovery certificate could not be used for initiation
     of CIRP, which would enable the corporate debtor to continue as an
     on-going concern and, at the same time, pay the dues of the creditors to
     the maximum. We, therefore, find no substance in the said submission.”
      15. We have already referred to the provision of Section 19(22A) of
the 1993 Act. This Court has construed the purpose of the said provision
to include bringing an action under the IBC on the strength of Section
19(22) and (22A) of the 1993 Act. In the said provision, however, so
far as bringing a winding-up action is concerned, the right of a recovery
certificate-holder as a deemed-decree holder has been confined to companies
registered under the Companies Act, 2013 and certain other entities with
which we are not concerned here. But in relation to initiating proceeding
under the IBC or making a claim under the said Code, the restriction does
not remain confined to the Companies Act, 2013. The corporate debtor in
this proceeding was incorporated under the Companies Act, 1956. In the
case of Kotak Mahindra I (supra), credit facilities were extended to the
borrower entities in the years 1993-94. It is obvious that the three corporate
entities involved in that case were incorporated under the Companies Act
that prevailed prior to coming into operation of 2013 Act. The position
510            SUPREME COURT REPORTS                       [2023] 14 S.C.R.


of law to guide the subject proceeding should be the same. In the event
a financial creditor wants to pursue a recovery certificate as a deemed
decree, he would get twelve years’ time. We are of this view as the extent
of operation of a recovery certificate has been construed by this Court in
Kotak Mahindra I (supra) to go beyond filing of winding-up petition
alone. It would retain the character of a decree to lodge a claim in an IBC
proceeding. But this point has not been examined by the Appellate Tribunal.
We have already expressed our opinion on the reasons that weighed with
the Appellate Tribunal as also the NCLT in entertaining the application.
But since the first two fora did not test the legality of the 2015 certificate
as a deemed decree, we are of the opinion that this question also ought to
be addressed by the Appellate Tribunal. We are otherwise not satisfied with
the argument of the appellant about maintainability of the application out
of which this appeal arises on the ground of the application being barred
under limitation. The application with respect to the two recovery certificates
issued in the year 2017 is maintainable. In the event the Appellate Tribunal
is of opinion that the CIRP could not lie so far as the recovery certificate
of 2015 is concerned, as the decree would be still alive, the claim based on
the said recovery certificate could be segregated from the composite claim
and the Committee of Creditors shall, in that event, treat the sum reflected
in the said recovery certificate as part of the claims made in pursuance of
the public announcement. This direction we are issuing in exercise of our
jurisdiction under Article 142 of the Constitution of India.
      16. With these observations and directions, the appeal is dismissed.
Interim orders, if any, shall stand dissolved.
      17. Pending application(s), if any, shall stand disposed of.
      18. There shall be no order as to costs.


Headnotes prepared by:                                         Appeal dismissed.
Nidhi Jain