Sri Bijay Kumar Agarwal Suspended ... vs State Bank Of India And Anr on 27 April, 2022

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National Company Law Appellate Tribunal

Sri Bijay Kumar Agarwal Suspended ... vs State Bank Of India And Anr on 27 April, 2022

This Appeal has been filed against the order dated 14.12.2021 passed by the National Company Law Tribunal, Kolkata Bench, Kolkata in C.P.(IB) No.346/KB/2018 filed by the State Bank of India against the Company Appeal (AT) (Insolvency) No. 105 of 2022 1 Corporate Debtor - M/s Infra Tie-up Pvt. Ltd., by which order learned Adjudicating Authority admitted Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'IB Code'). The Appellant, Suspended Director of the Corporate Debtor aggrieved by the order dated 14.12.2021 has filed this Appeal.

2. Brief facts of the case and sequence of events necessary to be noticed for deciding this Appeal are:

(i) The Principal Borrower Gee Pee Infotech Pvt. Ltd. had was extended financial facility by State Bank of India on 1st April, 2006. The Corporate Debtor - M/s Infra Tie-up Pvt. Ltd.

executed a Deed of Guarantee for overall unit on 1st April, 2006. Supplemental Deed of Guarantee for increasing overall limit was executed by Corporate Debtor on 19th September, 2008, 5th October, 2009, 13th October, 2010.

(ii) On 10th January, 2014 the account of Principal Borrower was declared Non-Performing Asset (NPA). By a letter dated 20th August, 2014, State Bank of India invoked the Bank Guarantee against the Corporate Debtor and called upon the Corporate Debtor to make payment.

(iii) On 24th September, 2015, OA No.193/2015 was filed by the State Bank of India against the Principal Borrower, Corporate Debtor (Corporate Guarantor) etc. before the Debt Recovery Tribunal, Kolkata for recovery of amount.

Company Appeal (AT) (Insolvency) No. 105 of 2022 2

(iv) On 20th February, 2018 Company Petition (IB) No.355 of 2018 was filed by State Bank of India against the Principal Borrower M/s Gee Pee Infotech Private Limited for recovery of Rs.84,53,923.50/-. On 9th March, 2018, Company petition (IB) No.346/KB/2018 was filed by the State Bank of India against the Corporate Debtor (Appellant herein) before the NCLT, Kolkata. Section 7 Application against Principal Borrower was admitted on 2nd August, 2018 and the Principal Borrower went into liquidation by order dated 31st January, 2020 and was subsequently dissolved by an order dated 12th December, 2020.

(v) In the Application filed under Section 7 against the Appellant, the pleadings were exchanged, the parties were heard and the Adjudicating Authority by the impugned order dated 14th December, 2021 admitted the Section 7 Application, against which order this Appeal has been filed by the Suspended Director of the Corporate Debtor.

3. We have heard Shri Soumya Dutta, learned Counsel appearing for the Appellant and Shri Joy Saha, learned Senior Counsel for State Bank of India.

4. Learned Counsel for the Appellant submitted that the Application filed by the State Bank of India under Section 7 on 9th March, 2018 was barred by time. It is submitted that account of Principal Borrower was declared NPA on 10th January, 2014 and as per Article 137 of the Limitation Company Appeal (AT) (Insolvency) No. 105 of 2022 3 Act, 1963, the period for filing an Application under Section 7 being only three years, the Application filed on 9th March, 2018 was beyond time and ought to have been rejected. It is submitted that although objection was taken regarding maintainability of the Application on the ground of limitation, but the same has not been adverted to by the Adjudicating Authority in the impugned order.

5. Mr. Joy Saha, learned Senior Counsel appearing for Respondent No.1 State Bank of India, refuting the submission of learned Counsel for the Appellant contended that the Application filed on 9th March, 2018 was well within limitation. Shri Joy Saha raised two arguments to support his submission that petition was well within time, that are:

(i) The State Bank of India after the account of Principal Borrower declared NPA on 10th January, 2014 filed OA No.493 of 2015 on 24th September, 2015 before the Debts Recovery Tribunal, Kolkata, both against Principal Borrower and the Corporate Debtor and with effect from the date of filing of OA before the Debts Recovery Tribunal (DRT), period of limitation had stopped running. Hence, the Application under Section 7 filed by the State Bank of India on 9th March, 2018 is well within time. The Application filed before DRT was civil proceedings akin to a suit filed in a Civil Court.

(ii) That within the period of three years from declaring the account of Principal Borrower NPA, there has been acknowledgement of debt by the Principal Borrower by the Company Appeal (AT) (Insolvency) No. 105 of 2022 4 letters dated 19th February, 2016 and 29th March, 2016, which letters were brought before the Adjudicating Authority by means of Supplementary Affidavit filed on behalf of State Bank of India. The letters were for one-time settlement of account, which letters contained the acknowledgment of debt within the meaning of Section 18 of the Limitation Act. Hence, the Financial Creditor was entitled to file the Application under Section 7 within three years from the said acknowledgments.

Hence, the Application filed on 9th March, 2018 being within three years from the date of acknowledgement was well within time.

6. We have considered the submissions of learned Counsel for the parties and have perused the record.

7. There is no dispute between the parties that account of Principal Borrower was declared NPA on 10th January, 2014. The filing of OA No.493 of 2015 by the State Bank of India against the Principal Borrower and the Corporate Debtor on 24th September, 2015 is also not disputed. The OA No.493 of 2015 filed before the DRT is stated to be pending consideration as on date. The Application under Section 7 against the Corporate Debtor has been filed on 9th March, 2018 and the limitation for filing the Application under Section 7, under Article 137 of the Limitation Act, 1963 is three years from the date when right to sue accrue. Normally, period of three years' is to be counted from the date, the account is declared NPA, thus taking three years period from 10th January, 2014, the Application Company Appeal (AT) (Insolvency) No. 105 of 2022 5 ought to have been filed on or before 9th January, 2017. The Application under Section 7 filed by the State Bank of India is admittedly beyond the period of three years from the date of declaration of NPA and can be held to be barred by time, unless the State Bank of India is able to satisfy that the limitation for filing Section 7 Application stands extended by virtue of provision of Limitation Act, 1963. As noted above, twofold submissions have been made by Shri Joy Saha to save the Application under Section 7 by contending that the same was within time. We now proceed to consider the aforesaid submission by taking them one by one.

8. The first submission of Shri Joy Saha, learned Senior Counsel is that by filing OA No.493 of 2015 on 24th September, 2015, the limitation period shall stop running against the Financial Creditor, hence the Application under Section 7 filed on 9th March, 2018 was well within time. Shri Joy Saha submitted that proceedings initiated by State Bank of India before the DRT are civil proceedings as has been held by Hon'ble Supreme Court in Sheshnath Singh & Anr. vs. Baidyabati Sheoraphuli Cooperative Bank Limited & Anr. - (2021) 7 SCC 313 and Dena Bank vs. C. Shivakumar Reddy and Anr. - (2021) 10 SCC 330. It is submitted that by filing a civil suit, the time gets arrested and ceased to run and as the proceedings under DRT being civil proceedings, the running of limitation against State Bank of India shall be arrested with effect from 24th September, 2015. Shri Joy Saha has relied on paragraphs 94, 95, 96, 97 and 98 of the judgment of the Hon'ble Supreme Court. The Hon'ble Supreme Court in the aforesaid judgment has held that proceedings under Company Appeal (AT) (Insolvency) No. 105 of 2022 6 SARFAESI Act are undoubtedly civil proceedings. In paragraph 97 and 98 following has been laid down:

"97. The Chief Metropolitan Magistrate or the Judicial Magistrate, as the case may be, exercising powers under Section 14 of the SARFAESI Act, functions as a civil court/executing court. Proceedings under the SARFAESI Act would, therefore, be deemed to be civil proceedings in a court. Moreover, proceedings under the SARFAESI Act under Section 13(4) are appealable to the DRT under Section 18 of the SARFAESI Act. Mr Dave's argument that proceedings under the SARFAESI Act would not qualify for exclusion under Section 14 of the Limitation Act, because those proceedings were not conducted in a civil court, cannot be sustained.

98. Another civil proceeding whether in a court of first instance or of appeal or revision, against the party, for the same relief, would have to be construed to include any civil proceeding in a forum, whether of first instance, or appellate, or revisional, against the same party for similar relief, more so, having regard to the language and tenor of Section 238-A of the Limitation Act which applies the provisions of the Limitation Act "as far as may be", to proceedings in NCLT/NCLAT."

To the same effect is the judgment of the Hon'ble Supreme Court in Dena Bank (supra).

9. We, thus, proceed on the premises that the proceedings before DRT initiated by the State Bank of India against the Corporate Debtor by filing an OA No.493 of 2015 is civil proceedings. The question to be answered is as to what is the effect of proceedings under the DRT initiated by State Company Appeal (AT) (Insolvency) No. 105 of 2022 7 Bank of India on the period of limitation for filing an Application under Section 7 of the IB Code. To buttress this submission, Mr. Joy Saha has placed reliance on number of judgments of Hon'ble Supreme Court, Calcutta High Court and Bombay High Court, which we shall be referring hereinafter.

10. We may first notice the judgment of Hon'ble Supreme Court in this regard. The first judgment of Hon'ble Supreme Court relied by Mr. Joy Saha is (2008) 2 SCC 444 - J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. and Anr. The Hon'ble Supreme Court in the said judgment has held that limitation for suit is calculated as on the date of filing of the suit. In paragraph 25, following was laid down:

"25. ...... The limitation for a suit is calculated as on the date of filing of the suit. In the case of arbitration, limitation for the claim is to be calculated on the date on which the arbitration is deemed to have commenced."

11. There can be no dispute to the proposition that limitation for suit is to be calculated as on the date of filing of the suit, meaning thereby that date for filing of the suit is a crucial date to find out as to whether the suit is within the period of limitation or not. We fail to see as to how the above judgment of the Hon'ble Supreme Court comes to any aid of the learned Counsel for the Respondent.

12. Another judgment relied by Shri Joy Saha is (2014) 2 SCC 788 - Tribhuvanshankar vs. Amrutlal. The above was a case where Hon'ble Supreme Court laid down that after the institution of the suit, the time for acquiring title by adverse possession has been arrested. The observations Company Appeal (AT) (Insolvency) No. 105 of 2022 8 made by the Hon'ble Supreme Court in the above case namely in paragraph 40, 43 and 44 were to the following effect:

"40. Keeping in view the aforesaid principles it is required to be scrutinised whether the time spent in adjudication of the present suit and the appeal arrests the running of time for the purpose of adverse possession.

43. We have referred to the aforesaid pronouncements since they have been approved by this Court in Babu Khan v. Nazim Khan [(2001) 5 SCC 375 : AIR 2001 SC 1740] wherein after referring to the aforesaid two decisions and the decision in Ragho Prasad v. Pratap Narain Agarwal [1969 All LJ 975] , the two-Judge Bench ruled thus : (Babu Khan case [(2001) 5 SCC 375 : AIR 2001 SC 1740] , SCC p. 384, para 12) "12. ... The legal position that emerges out of the decisions extracted above is that once a suit for recovery of possession against the defendant who is in adverse possession is filed, the period of limitation for perfecting title by adverse possession comes to a grinding halt. We are in respectable agreement with the said statement of law. In the present case, as soon as the predecessor-in- interest of the applicant filed an application under Section 91 of the Act for restoration of possession of the land against the defendant in adverse possession, the defendant's adverse possession ceased to continue thereafter in view of the legal position that such adverse possession does not continue to run after filing of the suit. We are, therefore, of the view that the suit brought by the Company Appeal (AT) (Insolvency) No. 105 of 2022 9 plaintiffs for recovery of possession of the land was not barred by limitation."

44. Coming to the case at hand the appellant had filed the suit for eviction. The relief sought in the plaint was for delivery of possession. It was not a forum that lacked inherent jurisdiction to pass a decree for delivery of possession. It showed the intention of the plaintiff to act and to take back the possession. Under these circumstances, after the institution of the suit, the time for acquiring title by adverse possession has been arrested or remained in a state of suspension till the entire proceedings arising out of suit are terminated. Be it ingeminated that if by the date of present suit the defendant had already perfected title by adverse possession that would stand on a different footing."

13. The above observations were to the effect that when a suit is filed for eviction, the time for acquiring title by adverse possession stands arrested and shall remain in a state of suspension. The above observations were made in reference to a right of defendant to the suit, who was claiming right by adverse possession, which stood suspended by filing a suit for eviction. The above judgment in no manner helps the learned Senior Counsel for the Respondent.

14. Shri Joy Saha also relied on a judgment of the Calcutta High Court in AIR 2012 Cal 71 - Shridhar Issar vs. Bharnobari Tea & Industries Ltd., where the Calcutta High Court has held that limitation would stop running from the moment when the claim is filed in the centralized filing section. In the above case the claim was filed in the computer section of Company Appeal (AT) (Insolvency) No. 105 of 2022 10 the High Court on 15th June, 2007, but was placed before the Master on 19th June, 2007. The question in the above case was as to whether limitation would run from the date when claim was placed before the Master or the presentation of the claim in the computer section. In the above context, following was observed in paragraph 33:

"33. Limitation would stop running the moment a plaint is filed in the centralized filing section. Once the plaint is filed in the Computer Section, the plaintiff has no control over the same. A litigant cannot suffer for no fault of his own, just because of procedural delays in sending the plaint to the Master for the necessary endorsements in terms of Rule 4 of Chapter VII."

15. The above judgment of the Calcutta High Court has no relevance in the present case and was on its own fact.

16. The judgment of Bombay High Court relied by learned Senior Counsel for the Respondent needs to be noticed is (2013) SCC OnLine Bom 181 - State of Maharashtra vs. Hindustan Construction Company Ltd. & Anr. In paragraph 19 of the judgment, following observations have been made:

"19. In my view right to sue accrued when claim for depreciation made by Respondent was rejected on 31st March, 2004 and raising of demand by the Respondent by issuing debit note on 19th June, 2006 and refusal to pay the said demand by the Petitioner on 17th August 2006 would not commence fresh period of limitation, which had already commenced on 31st March, Company Appeal (AT) (Insolvency) No. 105 of 2022 11 2004. In view of Section 9 of the Limitation Act, 1963, once time is begun to run, no subsequent disability or inability to institute a suit or make an application stops it. Once time starts running, it does not stop. Limitation is not extended unless there is an acknowledgment of liability or part payment. It is not the case of the Respondent that the Petitioner acknowledged its alleged liability or there was any part payment made by the Petitioner after 31st March, 2004. In my view, correspondences does not extend the period of limitation.

19. Mr Kumbhakoni, the learned counsel also placed reliance upon the Judgment of Supreme Court in case of J.C. Budhraja v. Chairman, Orissa Minig Corporation Ltd. and more particularly paragraphs 25 and 26 in support of his plea that limitation for a suit is calculated as on the date of filing of suit, whereas in case of arbitration, limitation of the Claim is to be calculated on the date on which the arbitration is deemed to have been commenced."

17. The Court held that once time starts running, it does not stop and the limitation is not extended unless there is acknowledgement of liability or part payment. The Court further held that limitation for suit is calculated as on the date of filing of suit. The observations of the Court regarding calculation of the limitation as on the date of filing of the suit was relevant only with regard to computation of limitation of suit in question. The observation cannot be stretched to govern period of limitation for any subsequent proceedings, which is the question in the Company Appeal (AT) (Insolvency) No. 105 of 2022 12 present case. The above judgment is also in no manner helps the learned Counsel for the Respondent.

18. The next judgment relied by Shri Joy Saha is the judgment of the Bombay High Court (2017) SCC OnLine Bom 1806 - Holdings Limited vs. Bombay Oxygen Corporation Ltd. In paragraph 17 of the judgment, where the Bombay High Court accepted the submission of Counsel that limitation ceases running only in two situation- on the filing of a suit, or on the grant of an anti-suit injunction. The Court was examining the question as to whether the suit was filed by the Plaintiff was within limitation. Although Mr. Saha submitted that the said judgment was overruled on another point, but he relies observation that from the date of filing of the suit, the time stops running. The above judgment also has no application in the facts of the present case.

19. We may now notice the judgment of Hon'ble Supreme Court in (2019) 10 SCC 750 - Jignesh Shah and Anr. vs. Union of India and Anr., which was a case where the question of limitation qua filing of Section 7 petition came for consideration. In the above case, a winding-up petition under Section 433 of the Companies Act, 1956 was filed on 21.10.2016 in the Bombay High Court. After coming into force the IB Code on 01.12.2016, winding-up petition was transferred to the NCLT as Section 7 Application under the Code. The statutory form namely - Form-1 was filed by the Applicant indicting the date of default as 19.08.2012. On 28.08.2018, the winding-up petition was admitted by the NCLT. An appeal was filed challenging the admission of Application under Section 7. The Company Appeal (AT) (Insolvency) No. 105 of 2022 13 matter was taken before the Hon'ble Supreme Court and a submission was made that Application under Section 7 filed by IL&FS was barred by time. In paragraph 5 of the judgment, arguments raised before the Hon'ble Supreme Court was noticed in following words:

"5. Dr Abhishek Manu Singhvi, learned Senior Advocate appearing on behalf of the petitioner-appellants, did not go into the merits of the case, but has raised only the statutory bar of limitation against IL&FS. According to the learned Senior Advocate, after this Court's judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates [B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633] , it is clear that the Limitation Act, 1963 (hereinafter referred to as "the Limitation Act") would apply to all Section 7 applications that are filed under the Code and that the residuary article i.e. Article 137 of the Limitation Act would be attracted to the facts of this case. Inasmuch as the winding-up petition that has been transferred [IL&FS Financial Services Ltd. v. La-Fin Financial Services (P) Ltd., Company Petition No. 847 of 2016, order dated 1-2-2017 (Bom)] to the NCLT was filed on 21- 10-2016 i.e. beyond the period of three years prescribed (as the cause of action had arisen in August 2012), it is clear that a time-barred winding-up petition filed under Section 433 of the Companies Act, 1956 would not suddenly get resuscitated into a Section 7 petition under the Code filed within time, by virtue of the transfer of such petition. He relied heavily on B.K. Educational Services (P) Ltd. [B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633] which, according to him, covered this case on all Company Appeal (AT) (Insolvency) No. 105 of 2022 14 fours. In addition, he relied upon High Court judgments, judgments from the United States of America, and one English judgment to buttress the proposition that the mere filing of a suit for specific performance would not in any manner impact the limitation period for a winding-up petition, which as a separate and independent remedy, must fall or stand on its own legs. He also painstakingly took us through the statutory notice under Sections 433 and 434 sent by IL&FS, as well as the winding-up petition filed by IL&FS, and relied heavily on the fact that the Form 1 (which was filled by IL&FS in order to transfer the aforesaid winding-up petition to the NCLT) itself stated that the date of default was 19-8-2012, clearly indicating that the winding-up petition, being beyond three years of the cause of action, was time-barred."

The Hon'ble Supreme Court in the above context referred to and relied on various judgments of the different High Courts and approved the judgment of Calcutta High Court in Dipankar Chakraborty vs. Allahbad Bank. In paragraph 16 of the judgment, following has been noticed:

"16. In Dipankar Chakraborty v. Allahabad Bank [Dipankar Chakraborty v. Allahabad Bank, 2017 SCC OnLine Cal 8742 : AIR 2017 Cal 289] , the fact situation was that a suit had been filed by the petitioner in the City Court at Calcutta for damages against the Allahabad Bank. The Bank, in turn, filed a proceeding under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in 2001 before the Debt Recovery Tribunal, Calcutta. The civil suit was also transferred to the Debt Recovery Tribunal, Calcutta where both proceedings were pending adjudication.

Company Appeal (AT) (Insolvency) No. 105 of 2022 15 Meanwhile, under the Securitisation and Restructure of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act"), a notice dated 3-3-2016 was issued under Section 13(2) of the SARFAESI Act. The question which arose before the Court was whether the invocation of the Sarfaesi Act, being beyond limitation, would be saved because of the pending proceedings under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Court negatived the plea of the Bank, stating : (SCC OnLine Cal para 22) "22. Section 14 of the Limitation Act, 1963 permits exclusion of the time taken to proceed bona fide in a court without jurisdiction. Such section permits a plaintiff to present the same suit, if the court of the first instance, returns a plaint for defect of jurisdiction or other causes of like nature, being unable to entertain it. In the present case, a secured creditor is not withdrawing a proceeding pending before the Debts Recovery Tribunal under Section 19 of the Act of 1993 to invoke the provisions of the Act of 2002. Rather the secured creditor is proceeding, independent of its right to proceed under the Act of 1993, while invoking the provisions of the Act of 2002. This choice of the secured creditor to invoke the Act of 2002 is independent of and despite the pendency of the proceedings under the Act of 1993, has to be looked at from the perspective of whether or not such an action meets the requirement of Section 36 of the Act of 2002, when the secured creditor is proposing to take a measure under Section 13(4) of Company Appeal (AT) (Insolvency) No. 105 of 2022 16 the Act of 2002. Although, a secured creditor, as held in Transcore [Transcore v. Union of India, (2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116] , is entitled to take a remedy or a measure as available in the Act of 2002, despite the pendency of other proceedings, including a proceeding under Section 19 of the Act of 1993, in respect of the self-

same cause of action, in my view, the invocation of such independent right under the Act of 2002, has to be done within the period of limitation prescribed under the Limitation Act, 1963 in terms of Section 36 of the Act of 2002. The Act of 2002 gives an independent right to a secured creditor to proceed against its financial assets and in respect of which such asset the secured creditor has security interest. The right to proceed, however, is subject to the adherence to the provisions of limitation as enshrined in the Limitation Act, 1963. The provisions of the Limitation Act, 1963 are, therefore, attracted to a proceeding initiated under the Act of 2002. That being the legal position, the invocation of the provisions of the Act of 2002 in the facts of the present case, on 5-7-2011, without there being an extension of the period of limitation by the act of the parties cannot be sustained.

* * *

25. The issues raised are, therefore, answered by holding that, the initiation of the proceedings by the bank was barred by the laws of limitation on 5-7-2011 and all proceedings taken by the bank consequent upon and pursuant to the notice under Company Appeal (AT) (Insolvency) No. 105 of 2022 17 Section 13(2) of the Act of 2002 dated 5-7-2011 are quashed including such notice."

The question arose before the Calcutta High Court regarding limitation for filing a proceeding under SARFAESI Act, 2002 ("2002 Act"), when a proceeding under the Recovery of Debts Due to Bank and Financial Institutions Act, 1993 ("1993 Act") was pending. The Calcutta High Court in the above case had occasion to consider the limitation qua the proceedings under the 2002 Act, despite the pendency of other proceedings under the 1993 Act. It was held that right under 2002 Act has to be done within the period of limitation prescribed under the Limitation Act and without there being an extension of the period of limitation by act of the parties, the proceedings would be barred by time. The judgment of the Calcutta High Court was approved by the Hon'ble Supreme Court in the Jignesh Shah case (supra). In paragraph 21, the Hon'ble Supreme Court laid down following:

"21. 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 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 Company Appeal (AT) (Insolvency) No. 105 of 2022 18 somehow keeping the debt alive for the purpose of the winding-up proceeding."

20. Applying the ratio of Hon'ble Supreme Court in the facts of the present case, the proceedings under Section 7 of IB Code is separate and independent proceedings, distinct from the remedy under the 1993 Act and the fact that proceedings under the 1993 Act, that is, filing of OA 493 of 2015, which was well within limitation has no bearing on the question of limitation for filing the Application under Section 7 of the Code. We, thus, are of the considered opinion that mere fact that OA 493 of 2015 filed on 24th September, 2015, within the limitation period, shall have no bearing on the question of limitation for filing Application under Section 7, nor by filing Application under the 1993 Act by State Bank of India the period of limitation for filing Application under Section 7 shall remain under suspension. The limitation for proceedings under Section 7 are independent and separate from proceedings under the 1993 Act and it is now well settled that Section 7 Application has to be filed within a period of limitation as prescribed under Article 137 of the Limitation Act. It is also well settled that limitation for filing Application under Article 137, the provisions of Section 18 of the Limitation Act are also attracted and in event the parties are able to satisfy the Court that they are entitled for extension of limitation, the Application under Section 7 even filed beyond three years from the date of declaring of NPA, will be within limitation when acknowledgement was made within the period of limitation. We thus find no substance in the submission of Shri Joy Saha that by filing the OA 493 Company Appeal (AT) (Insolvency) No. 105 of 2022 19 of 2015 on 24th September, 2015, limitation shall stop running for Section 7 Application and Section 7 Application even filed beyond three years from the date of NPA is entertainable on this ground.

21. We now come to the second submission of Shri Joy Saha that is extension of limitation under Section 18 of the Limitation Act. The learned Senior Counsel for the Respondent rely on the acknowledgements, which were made by the Principal Borrower vide its letters dated 19th February, 2016 and 29th March, 2016. The letters have been brought on record as Annexure E to the reply, which letters were also brought on record before the Adjudicating Authority by means of Supplementary Affidavit. The law with regard to applicability of the Limitation Act is well settled by various judgments of the Hon'ble Supreme Court. In Dena Bank (supra), the Hon'ble Supreme Court in the context of the Application under Section 7 of the IB Code and Section 18 of the Limitation Act, has laid down following in paragraph 138, 139 and 140:

"138. 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 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 238-A 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, as observed above Sections 14 and 18 of the Limitation Act are also applicable to proceedings under the IBC.

Company Appeal (AT) (Insolvency) No. 105 of 2022 20

139. 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 [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1] cited by Mr Shivshankar, this Court had 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 acknowledgment 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 Bank in May 2017. The NCLT rightly admitted the application by its order dated 21-3-2019 [Dena Bank v. Kavveri Telecom Infrastructure Ltd., 2019 SCC OnLine NCLT 7881].

140. To sum up, in our considered opinion an application under Section 7 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 declaration of the loan account of the corporate debtor as NPA, if there were an acknowledgment 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."

22. The question to be answered is as to whether the letters on which reliance is being placed by the State Bank of India dated 19th February, Company Appeal (AT) (Insolvency) No. 105 of 2022 21 2016 and 29th March, 2016 contain an acknowledgement, which can be treated as acknowledgement within the meaning of Section 18 of the Limitation Act. We may first refer to the letter dated 19th February, 2016. It is a letter written on behalf of Principal Borrower - Gee Pee Infotech Pvt. Ltd. to the State Bank of India. There is a clear submission that account of Principal Borrower has become NPA and OA No.493 of 2015 has been initiated by the Bank, which proceedings are pending. The letter clearly expresses the willingness of the Principal Borrower to pay all the dues on the basis of one-time settlement. It is useful to extract the letter dated 19th February, 2016, which is to the following effect:

"Dear Sirs We write to you under instructions from and on behalf of our abovenamed two Clients.

Our Clients have been maintaining case credit account with your Bank as per following details Name of Client Cash Credit Account No. Gee Pee Infotech Pvt. Ltd. 30044323427 Ganpatilal Pawan Kumar 30157130517 Traders Pvt. Ltd.

The aforesaid two accounts having designated as Non- Performing Asset (NPA) since about 2014, and your Bank has also initiated recovery proceedings before the Debts Recovery Tribunal, Kolkata which is numbered as OA No.493 of 2015 (State Bank of India Vs. Gee Pee Infotech Pvt. Ltd. & Ors.) and OA No 492 of 2015 (State Bank of India Vs. Ganpatlal Pawan Kumar Traders Pvt. Ltd. & Ors.). The said two DRT proceedings are pending.

Company Appeal (AT) (Insolvency) No. 105 of 2022 22 Our Clients state and submit the above cash credit account have become irregular and overdrawn by reason of the unprecedented and unexpected business loss suffered, and despite the same only to show their bona fide our Clients also created additional securities in your Bank's favour covering the outstanding overdrawn amount.

Our Clients' business for lack of finance has come to a standstill and need pumping in of funds for which our Clients have been able to now locate a potential Funder ready and willing to pay- off the dues of your Bank on the basis of One Time Settlement (OTS) amount that could be arrived at by and between the Bank and our Clients in keeping with bank's policy and similar settlement offered to various other parties. With this intent, our Clients also caused the said Funder to issue a letter dated 12 February 2016 together with letter of consent addressed by each of the Clients to the said Funder to be deposited with your Bank. A copy each of the said letter dated 12 February 2016 issued by the said Funder, Mascot Charitable Trust, Bangalore, to your Bank together with the respective consent letter of our Clients is attached for your ready reference.

Our Clients have till date not received any proposal for the One Time Settlement (OTS) from your Bank and accordingly, our Clients hereby call upon your Bank to forthwith inform our Clients the possible OTS amount for their respective account so that the proceedings initiated by your Bank before the Debts Recovery Tribunal can be brought to an end and the entire account with your bank by our Clients can be closed in one single show with the funds which the said Funder has agreed to fund on the condition that your Bank shall forthwith release all securities and hand over the security documents to the said Funder.

Company Appeal (AT) (Insolvency) No. 105 of 2022 23 Our Clients, therefore, request for your considered response to their proposal for OTS for their respective accounts. Yours faithfully, For Khaitan & Co LLP Sd/-

Arvind Jhunjhunwala Enclo : As above"

23. Subsequent letter dated 29th March, 2015 also again expresses the willingness of the Principal Borrower to settle the dues by way of one-time settlement. The letter further mentions that alternate Fund Provider has also issued a letter in support of the commitment of the Principal Borrower. It is well settled that any request by Borrower for one-time settlement tantamount to acknowledgement under Section 18 of the Limitation Act. In Dena Bank itself Hon'ble Supreme Court has laid down that offer of one-time settlement contains an acknowledgement of debt. In paragraph 139, the following has been laid down:

"139. 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 [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1] cited by Mr Shivshankar, this Court had 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 acknowledgment of liability which extended the limitation by three years, apart from Company Appeal (AT) (Insolvency) No. 105 of 2022 24 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 21-3-2019 [Dena Bank v. Kavveri Telecom Infrastructure Ltd., 2019 SCC OnLine NCLT 7881]."

24. We may also notice the submission of learned Counsel for the Appellant on the aforesaid letters, which claimed to be an acknowledgement. It is submitted that the letters were issued by the Principal Borrower only and there is no acknowledgement by the Corporate Debtor, hence there shall be no extension of period of limitation under Section 18 of the Limitation Act.

25. The above question is no more res-integra. The Hon'ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India and Anr. - (2021) 8 SCC 481 has considered the above submission as advanced by the learned Counsel for the Appellant and held that acknowledgement made by the Principal Borrower is equally binding on the Corporate Guarantor. In Laxmi Pat Surana an Application under Section 7 was filed against the Corporate Guarantor M/s Surana Metals Ltd., who had offered a guarantee to the loan advanced to Principal Borrower M/s Mahaveer Construction. The loan was declared NPA on 30.01.2010 and Financial Creditor issued a recall notice on 19.02.2010 to the Principal Borrower as well as the Corporate Debtor. Application under Section 19 was also filed against the Principal Borrower before the Debt Recovery Tribunal. During the pendency under the Debt Recovery Tribunal, the Financial Creditor proceeded to file an Application under Section 7 of the IB Code against the Company Appeal (AT) (Insolvency) No. 105 of 2022 25 Corporate Debtor, that is, Corporate Guarantor. The Application was resisted on the ground that it is barred by limitation, since default was taken place on 30.01.2010 and Application was filed on 13.02.2019, that is, beyond the period of three years. The Adjudicating Authority admitted the Application holding that Principal Borrower and Corporate Debtor had admitted and acknowledged the debt time and again. An argument was raised before the Hon'ble Supreme Court that acknowledgement by Principal Borrower cannot be used against the Corporate Guarantor. In paragraph 43 and 44, following has been laid down:

"43. Ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the financial creditor to initiate action under Section 7 IBC. However, Section 7 comes into play when the corporate debtor commits "default".

Section 7, consciously uses the expression "default" -- not the date of notifying the loan account of the corporate person as NPA. Further, the expression "default" has been defined in Section 3(12) to mean non-payment of "debt" when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of Company Appeal (AT) (Insolvency) No. 105 of 2022 26 NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 IBC enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 IBC. Further, the acknowledgment must be of a liability in respect of which the financial creditor can initiate action under Section 7 IBC.

44. In the present case, NCLT as well as NCLAT have adverted to the acknowledgments by the principal borrower as well as the corporate guarantor-corporate debtor after declaration of NPA from time to time and lastly on 8-12-2018. The fact that acknowledgment within the limitation period was only by the principal borrower and not the guarantor, would not absolve the guarantor of its liability flowing from the letter of guarantee and memorandum of mortgage. The liability of the guarantor being coextensive with the principal borrower under Section 128 of the Contract Act, it triggers the moment principal borrower commits default in paying Company Appeal (AT) (Insolvency) No. 105 of 2022 27 the acknowledged debt. This is a legal fiction. Such liability of the guarantor would flow from the guarantee deed and memorandum of mortgage, unless it expressly provides to the contrary."

Further, relying on the acknowledgement, the Application filed against the Corporate Debtor was held to be within time. In paragraphs 49 and 50, following has been laid down:

"49. The appellant was at pains to persuade us that the intention behind the communication dated 8-12-2018 sent to the financial creditor by the corporate guarantor (corporate debtor) is a triable matter, as it was sent without prejudice. We are not impressed by this submission. The fact that the principal borrower had availed of credit/loan and committed default and that the (corporate) guarantor/corporate debtor had offered guarantee in respect of the loan account is not disputed.

What is urged by the appellant is that the acknowledgment of liability to pay the amount in question was by the principal borrower and that acknowledgment cannot be the basis to proceed against the corporate guarantor (corporate debtor). Section 18 of the Limitation Act, however, posits that a fresh period of limitation shall be computed from the time when the party against whom the right is claimed acknowledges its liability. The financial creditor has not only the right to recover the outstanding dues by filing a suit, but also has a right to initiate resolution process against the corporate person (being a corporate debtor) whose liability is coextensive with that of the principal borrower and more so when it activates from the written Company Appeal (AT) (Insolvency) No. 105 of 2022 28 acknowledgment of liability and failure of both to discharge that liability.

50. Suffice it to conclude that there is no substance even in the second ground urged by the appellant regarding the maintainability of the application filed by the respondent financial creditor under Section 7 IBC on the ground of being barred by limitation. Instead, we affirm the view taken by NCLT [Union Bank of India v. Surana Metals Ltd., 2019 SCC OnLine NCLT 9859] and which commended to NCLAT [Laxmi Pat Surana v. Union Bank of India, 2020 SCC OnLine NCLAT 217] -- that a fresh period of limitation is required to be computed from the date of acknowledgment of debt by the principal borrower from time to time and in particular the (corporate) guarantor/corporate debtor vide last communication dated 8-12-2018. Thus, the application under Section 7 IBC filed on 13-2-2019 is within limitation."

26. The pronouncement by the Hon'ble Supreme Court in the above case, i.e. Laxmi Pat Surana is complete answer to submission made by learned Counsel for the Appellant that acknowledgement made by the Principal Borrower cannot be read as acknowledgement against the Corporate Guarantor. It was held that liability of Corporate Debtor is coextensive with that of the Principal Borrower.

27. We, thus, are of the view that acknowledgement made by the Principal Borrower within three years' period from the date of account being declared NPA, there shall be fresh period of limitation available to the Financial Creditor and the Application under Section 7 having been filed Company Appeal (AT) (Insolvency) No. 105 of 2022 29 within three years from the date of acknowledgement, cannot be held to be barred by time. We, thus, are of the view that Application filed by the State Bank of India under Section 7 was within the period of limitation and has rightly been admitted by the Adjudicating Authority. We reject the submission of the learned Counsel for the Appellant that Application filed under Section 7 was barred by time.

28. In view of the foregoing discussions, we do not find any error in the judgment of the Adjudicating Authority admitting the Application. There is no merit in the Appeal. The Appeal is dismissed. No costs.

[Justice Ashok Bhushan] Chairperson [Dr. Alok Srivastava] Member (Technical) [Ms. Shreesha Merla] Member (Technical) NEW DELHI 27th April, 2022 Ash/NN Company Appeal (AT) (Insolvency) No. 105 of 2022 30

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