Reliance Asset Reconstruction Company ... vs Narendra Plastics Private Limited on 22 February, 2022

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National Company Law Appellate Tribunal

Reliance Asset Reconstruction Company ... vs Narendra Plastics Private Limited on 22 February, 2022

1. The appeal has been filed by the 'Appellant' - 'Reliance Asset Reconstruction Company Limited' under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in short 'Code') against the 'impugned order' dated 13.08.2021 passed by the 'Adjudicating Company Appeal (AT) (Ins) No.779 of 2021 Page 1 of 25 Authority' (National Company Law Tribunal), Mumbai Bench - (C-III) in CP (IB)- 1864/MB/2019 .

2. The Appellant Company is registered as a 'Securitization Company' and 'Reconstruction Company' pursuant to Section 3 of 'The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002' (for short SARFAESI Act) and acting in its capacity as a 'Trustee' of the 'Reliance ARC 001'. It is the case of the 'Appellant Company' that the CD / Respondent in the year 2012 had approached ING Vyasya Bank Limited (Bank) for grant and sanction of cash credit facilities for an amount of Rs.10 crore. The Bank had sanctioned a cash credit facility for Rs. 2 crores to the CD. The CD had created 'Security Interest' on movable properties of the CD/its guarantors /mortgagors to secure the said financial facilities. The CD again approached the bank for grant of additional ad hoc credit facilities of Rs. 10 Crore and working capital demand loan of Rs. 50 lakhs in the year 2013 over and above the said cash credit facilities as stated above. The additional facilities were also secured by the interest on moveable properties of the CD/its guarantors /mortgagors to secure the said additional financial facilities.

3. The Ld. Sr. Counsel for the Appellant has also stated that the above said loan facilities was disbursed, availed and utilized by the CD /Respondent . The CD failed to pay the 'dues' and have 'defaulted' and it was also stated that they failed to observe other terms and conditions of the said sanction loans/security documents executed and accordingly the ING Vyasya Bank Limited (Bank) as per 'RBI Regulations' declared 'Non-performing Asset' (NPA) on 30.06.2014. it was also stated by him that as per the audited Balance Sheet as on 31.03.2014, the CD was referred to BIFR to seek declaration as 'sick unit' and the same was registered on 15.07.2014. They have also stated that once a reference of filing before BIFR has been made under the provisions of Section 22 of SICA it gets into operation Company Appeal (AT) (Ins) No.779 of 2021 Page 2 of 25 and all legal proceedings gets suspended as per the provisions of SICA. It is also revealed from the pleadings that the Bank has assigned the 'Debt' of the CD to the present Appellant Company vide 'Assignment Agreement' dated 19.09.2014 . The Bank subscribed 85% of the security receipt issued under the said assignment. It was also stated that through this assignment all the 'Debt' of the CD alongwith underlying assets / securities mortgaged to the 'Assigner' was assigned to the Appellant and the said Appellant was empowered to take all the measures prescribed under law for recovery of 'Debt' from the CD. It was also mentioned that the Bank, as stated above, merged with the 'Kotak Mahindra Bank' w.e.f. 01.04.2015 pursuant to an order of RBI dated 31.03.2014, as a result of which all incidental rights of bank vested with 'Kotak Mahindra Bank'. The Appellant Company acting on behalf of Reliance ARC 001 Trust had issued notice dated 25.05.2015 u/s 13 of the 'SARFAESI Act' to the CD and Guarantors raising a demand of Rs. 13,55,26,323/- together with further interest thereon @13.73% p.a. till realization of full payment from the CD and its Guarantor. It was also stated that the CD has never disputed its liability in any of the replies sent to the Appellant by the CD. On getting the SICA repealed, the CD came out of BIFR on 01.12.2016 and accordingly as per provisions of SICA, particularly, Section 22(1) of SICA computation of Limitation which got halted, was again started running from 02.12.2016. As per the Appellant, the CD was before BIFR from 15.07.2014 to 01.12.2016 requires to be excluded in computation of Limitation period for filing application under Section 7 of the Code before the Adjudicating Authority. It was also stated that the CD has issued one more letter dated 30.07.2016 (appearing at page 68 of the Reply on behalf of the Respondent Volume -I) acknowledging its outstanding liabilities / dues payable to the Appellant Company and, thereafter, the CD has submitted a 'Settlement Proposal' to the Appellant Company vide letter dated 02.03.2017 (appearing Company Appeal (AT) (Ins) No.779 of 2021 Page 3 of 25 at page no. 71 of the Reply on behalf of Respondent Volume -I). No doubt, it was rejected by the Bank for being at a lower side. The CD has, thereafter, sent another revised settlement proposal vide letter dated 08.03.2018 (appearing at page 75 of the Reply on behalf of the Respondent), 26.06.2018 (appearing at page 77 of the Reply on behalf of the Respondent) and Letter dated 04.12.2018 (appearing at page 81 of the Reply on behalf of the Respondent).

4. It was also stated by the Ld. Sr. Counsel for the Appellant that the Bank/Financial Creditor had rejected the said 'Settlement Proposals' vide letter dated 12.02.2019. The 'Settlement Proposals' are construed as fresh acknowledgment of liability and from each of such 'Settlement Proposals' , time to file application under Section 7 of the Code was extended from time to time and they are entitled to file application under Section 7 within three years from 04.12.2018 as per Section 18 of the Limitation Act, 1963 R/w Article 137 of the Limitation Act, 1963. It is sated by the Ld. Sr. Counsel for the Appellant that the Appellant Company initiated the 'Corporate Insolvency Resolution Process' (CIRP) process on 07.05.2019 which is within three years from last of such acknowledgment of liabilities i.e. 04.12.2018.

5. The Appellant while asserting that the present appeal is not barred by limitation has cited hon'ble Supreme Court Judgment in case of Gaurav Hargovindbhai Dave Vs. Asset reconstruction Company (India) Limited & Anr. (2019) 10 SCC 572 para 3 & 6 wherein it has been held "period of limitation commences from the date of NPA". The Appellant has further cited the judgment as given below to amplify that the fresh period of limitation is computed from the Debt of acknowledgment of Debt by the borrower from time to time based on last communications:

A. State Bank of India Vs. Kaushuv Ray & Anr. (Civil Appeal No. 979/2021) Company Appeal (AT) (Ins) No.779 of 2021 Page 4 of 25 Para 3 - Before this Court, the Appellant has relied upon certain material in the form of correspondences during the years 2014 to 2017 and balance sheets for the Financial Years ending 2015, 2016, 2017, 2018 and 2019 to show that the application filed under Section 7, IBC was within the period of limitation. Admittedly, the material relied upon by the Appellant was not before the Adjudicating Authority. The Appellant placed reliance upon the judgment of this court in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr. reported in (2021) 6 SCC 366, to submit that the matter be remanded back to the NCLAT, after the Appellant is granted permission to place additional material on record. Para 5 - An Interlocutory Application has been filed on behalf of the Appellant seeking permission to amend the application under Section 7, IBC, along with all the relevant annexures. Significant amount of money is due to the Appellant which is disputed by the Corporate Debtor. We grant permission to the Appellant to amend the application under Section 7, IBC, subject to payment of cost of Rs. 1,00,000/- by the Appellant to the Corporate Debtor. The appropriate forum to consider the amended application is the NCLT. Accordingly, we set aside the order of the NCLAT and remand the matter back to the NCLT to consider the amended application under Section 7, IBC afresh. All questions are left open. We make it clear Company Appeal (AT) (Ins) No.779 of 2021 Page 5 of 25 that we have not expressed any view on the merits of the matter."

B. Laxmi Surana Vs. Union bank of India & ors. Manu/SC/0221/2021 "42. 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 of the Code on the ground of being barred by limitation.

Instead, we affirm the view taken by the NCLT and which commended to the NCLAT -- 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 08.12.2018. Thus, the application under Section 7 of the Code filed on 13.02.2019 is within limitation."

C. Bank of India Vs. Multi ARC Coating and Straps Limited - MANU/NL/0135/2020 "10. We have gone through the matter and having heard learned Counsel for both the sides it appears that keeping in view of provision of Section 18 of the Limitation Act and reading the same with the contents of letter dated 09.06.2016, the same needs to be construed as an acknowledgement of the debt outstanding and merely because in the document the Corporate Debtor mention that the proposal was given was without prejudice to the rights and contentions in pending Court proceedings, will not make any difference. In this view of the matter, when NPA was declared on 30.6.2009, the documents pointed out by the Company Appeal (AT) (Ins) No.779 of 2021 Page 6 of 25 learned Counsel for the Appellant dated 24.04.2012 (page 277), 12.03.2014 (page-419) and 09.06.2016 (page-420) calculated from the date of NPA, give fresh periods of limitation and filing of Section 7 Application on 11.7.18 was not barred."

6. As far as issue of settlement proposals marked as 'without prejudice' and the same constitute admission and acknowledgement of liabilities and are liable to be so considered by this Appellate Tribunal when both Debt and Default is admitted by the parties. They have citied the judgment of Hon'ble Supreme Court ITC Limited Vs Blue Coast Hotels Limited (2018) 15 SCC 99 para 33) and Hon'ble Bombay High Court in case of CG Power & Industrial Solutions Limited Vs. Gactel Turnkey Products Limited at para 3 to 5.

7. The Ld. Sr. Counsel for the Respondent has submitted that the instant appeal is devoid of merit including on the ground of same being barred by limitation. It is also stated that the resultant position of facilities extended by 'original lender' (ING Vyasya Bank) sanctioned in the year 2012 and 2013 are as follows:

                         SL       Nature of facility               Limits (Rs.)
                         No.
                         1.       PCL/PSL/PCFC/ERBD                10,00,00,000/-
                         1.1      Cash Credit (sub limit to PCL/ (10,00,00,000/-)
                                  PCFC/ PSL/ERBD/AACB)
                         1.2      WCDL/FCNR (sub limit to (10,00,00,000/-)
                                  PCL/                   PCFC/
                                  PSL/ERBD/AACB)
                         2        ILC/FLC/LUT(sub      limit    to (10,00,00,000/-)
                                  PCL/                   PCFC/
                                  PSL/ERBD/AACB)
                         3.       Ad hoc Cash Credit Facility      1,00,00,000/-
                         Total                                     11,00,00,000/-

Company Appeal (AT) (Ins) No.779 of 2021
                                                                                         Page 7 of 25

8. It was also submitted by the Ld. Sr. Counsel for the Respondent that the facilities sanctioned by the Original Lender had been exhausted and no further disbursal under working capital demand loan had been made to the Respondent thereafter. On 30.06.2014, the CD was classified as NPA under RBI Norms . On 15.07.2014 , the Respondent was constrained to mandatorily register itself as a sick Industrial company with BIFR and SICA. On 19.09.2014, the Original Lender/Bank handed over the 'Debts' ought to it to the Appellant vide an 'Assignment Agreement'. The Cutoff date under the said 'Assignment Agreement' was 31.08.2014 from which all economic benefits pertaining to the loans availed by the Respondent including all realizations and recovery, if any, made on and after of the cutoff date were to be for the benefit to the Appellant. On 25.05.2015, the Appellant issued a notice under Section 13(2) of the SARFAESI Act. The Respondent issued its response to the notices. On 08.06.2016, the Appellant filed an application under Section 22(1) of the SICA seeking permission of the BIFR to enable it to initiate recovery proceedings against the CD. However, the said Application was not persuaded / moved and no such permission was granted till the repeal of the SICA. On 01.12.2016, SICA was repealed by the provisions of the 'SICA Repeal Act' which came into force on 01.12.2016. The Appellant filed an 'Original Application' No. 97 of 2017 with the DRT on 02.12.2016 alleging that the Respondent alongwith its 'Directors' were liable to pay the dues.

9. The Ld. Sr. Counsel for the Respondent has also made a submission that on 02.03.2017 'without prejudice' offer for settlement was made. However, this offer was again rejected by the Appellant on 02.11.2017 and so further 'Settlement Proposal' was made on March, 2018 which was also not accepted by the Appellant. The Appellant declined 'without prejudice' settlement offer (dated 04.12.2018) made by the Respondent on 12.02.2019. Company Appeal (AT) (Ins) No.779 of 2021 Page 8 of 25 Thereafter, on 07.05.2019, the Appellant filed the Petition under Section 7 of Code before the Adjudicating Authority seeking to initiate CIRP against the Respondent. The Respondent has categorically stated that the 'Debt' is barred by limitation. It is a settled law that the provisions of the Limitation Act, 1963 are applicable to the proceedings under Section 7 of the Code. The Respondent has submitted that section 7 petition be filed within a period of three years from the 'Date of Default'. Section 5 of the Limitation Act, 1963 may be applied to condone the delay till filing such application. It was stated by the Ld. Sr. Counsel for the Respondent that as per petition filed under Section 7 of the Code, the CD was declared NPA on 30.06.2014. Since, NPA occurs 90 days after 'Date of Default'. So 'Debt of Default' was 01.04.2014. They have also sated that the automatic suspension as per Section 22 (5) of SICA for computing the extended period of limitation is limited to suits for recovery of money or for enforcement of security and not for insolvency proceedings and they have cited the judgment of Mazda Agencies (Partnership Firm) Vs. Hemant Plastics & Chemicals Ltd (2021 SCC OnLine NCLAT 691). The contentions of the Appellant to exclude the period for which Respondent was before BIFR between 15.07.2014 till 30.12.2016 is not tenable. They have also stated that 'without prejudice' settlement letters do not amount to admission of liability and extension of limitation. They have also stated that the Code can only be invoked for the purpose of resolution of 'Debt' and, particularly, in cases where case is fit for initiation of 'Insolvency'. As 'Insolvency' is the ultimate steps and death nail for the going concern. They have cited the judgment of Hon'ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India and ORs. (2019) 4 SCC 17). The case of the Respondent is not at all fit for initiation of 'Insolvency'. On the issue of limitation, they have cited the following Hon'ble Apex Court Judgment:

Company Appeal (AT) (Ins) No.779 of 2021 Page 9 of 25 • B.K.Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates in Civil Appeal No.23988 of 2017

10. The Adjudicating Authority in its impugned order dated 13.08.2021 has observed as followings:

Para 11. Further, this Company Petition has been filed by the Financial Creditor u/s.7 on 08.05.2019. In Part-IV of the Petition the Financial Creditor has put the date of NPA as 30.06.2014. Therefore, the issue relating to limitation arises in the Petition as the Petition prima facie has been filed after more than 5 years. In the Petition no pleadings relating to extension/ exclusion of time to compute the period of limitation has been made. The bench notes that subsequently also no amendments in the Petition relating to extension of limitation or exclusion to compute the period of limitation has been made. It is well settled that the plea of limitation must be specifically pleaded by the Petitioner in their pleadings. In the instant case, the Financial Creditor has not specifically pleaded in its Application that it is within limitation and/ or sought condonation of delay in any respect. The Company Petition "" which has been filed on 07.05.2019 mentions the date of NPA as 30.06.2014. In this regard the Financial Creditor has not pleaded in the Company Petition to exclude any period of time. In this regard the bench would like to refer to the case of Kattinokkula Murali Krishna V s. Veeramalla Koteshwara Rao (2010)1 SCC 466 wherein at paragraph 24, the Hon'ble Supreme Court has held that "it is a settled principle of law that evidence beyond pleadings can never be permitted to be adduced nor can such evidence be taken into consideration". In view of this, since there is no averment or seeking condonation of delay Company Appeal (AT) (Ins) No.779 of 2021 Page 10 of 25 in the Company Petition, therefore, this bench is of the view that since there is no averment or pleading by the Petitioner explaining the issue of limitation seeking condonation of delay, this Petition is barred by limitation and the bench is inclined to "dismiss" it."

11. We have carefully gone through the submissions made by the Ld. Sr. Counsels for the parties /pleadings available on record and the law laid down on the subject and are having the following observations:

a. What we are observing in this case that the issue of 'Limitation' is critically involved in this case. Another minor issue involved is issuance of 'Statement of Account' by 'Kotak Mahindra Bank'. b. List of dates as available on record are as follows:

Company Appeal (AT) (Ins) No.779 of 2021 Page 11 of 25 Company Appeal (AT) (Ins) No.779 of 2021 Page 12 of 25 c. Period of Limitation following from date of NPA (30.06.2014) is 30.06.2019. The Petition has been filed on 07.05.2019 before the Adjudicating Authority.

d. What has generally been considered , the date of default under Section 7 of the Code, particular, in case of Banks date of NPA is considered as Date of Default. As it is amply clear as per the RBI Circular, the Banks are required to declare the Date of NPA clearly and categorically without any ambiguity. In the present case of the Appellant, they were assigned the 'Debt' from the Bank and the Bank has clearly defined the Date of NPA as 30.06.2014 and the date of assignment by ING Vyasya Bank Limited / Bank has been done on 19.09.2014. So clearly it is after the Date of NPA for amplifying. It is further mentioned that merger of ING Vyasya Bank Limited was made with Company Appeal (AT) (Ins) No.779 of 2021 Page 13 of 25 Kotak Mahindra Bank from 01.04.2015 by the order of RBI. Accordingly, the 'Statement of Account' provided to the Adjudicating Authority was from the books of Kotak Mahindra Bank. In any case, ARC cannot submit any Statement of Account for any date which is prior to the date of assignment i.e 19.09.2014 as the account was not in the books of ARC/Appellant. It is the Kotak Mahindra Bank which has come in place of assigner, ING Vyasya Bank Limited. Hence, the Statement of Account is that of Kotak Mahindra Bank. Being the Application filed on 07.05.2019 with the Adjudicating Authority. ING Vyasya bank was no longer in existence and was merged with Kotak Mahindra Bank.

e. Section 7 of the Code is concerned with only two factors. There must be a 'debt' and it must be 'due' and 'payable' in the law and there is a 'default'. The Respondent is not refuting the 'Debt' nor they are refusing that it was not due and payable in law except the Limitation issue and computation of default. For brevity and clarity, the provision of Section 7 of the Code is depicted below:

"Section 7: Initiation of corporate insolvency resolution process by financial creditor.

7. (1) A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Company Appeal (AT) (Ins) No.779 of 2021 Page 14 of 25 Authority when a default has occurred. [Provided that for the financial creditors, referred to in clauses (a) and

(b) of sub-section (6A) of section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less: Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within Company Appeal (AT) (Ins) No.779 of 2021 Page 15 of 25 thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission.] Explanation.--For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.

(2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish--

(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;

(b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under subsection (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).

Company Appeal (AT) (Ins) No.779 of 2021 Page 16 of 25 [Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the same.] (5) Where the Adjudicating Authority is satisfied that--

(a) a default has occurred and the application under sub- section (2) is complete, and there is no disciplinary proceedings pending5 against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:

Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of subsection (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.

(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).

(7) The Adjudicating Authority shall communicate-- (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order Company Appeal (AT) (Ins) No.779 of 2021 Page 17 of 25 under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be."

f. In order to bring clarity on the limitation issue, we are also depicting the provisions of Section 18 of the Limitation Act, 1963 and Article 137 of the Limitation Act:-

"18. Effect of acknowledgment in writing.--

(1) Where, before the expiration of the prescribed period for a suit of application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. Explanation.--For the purposes of this section,--

Company Appeal (AT) (Ins) No.779 of 2021 Page 18 of 25

(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."

Article 137 -

                                           Description of      Period of       Time from which
                                           Application         limitation      period begins to run
                                           137. Any other      Three           When the right to
                                           application for     year            apply accrues
                                           which         no
                                           period        of
                                           limitations
                                           provided
                                           elsewhere in
                                           this division

Apart from the above reference may be made Judgment of Hon'ble Apex Court in Dena bank (Now bank of Baroda) vs C. Shivakumar Reddy on 4 August, 2021 in Civil Appeal No.1650 of 2020 para 96, 97, 99, 105, 106, 107, 108,110,111,112 & 113 Company Appeal (AT) (Ins) No.779 of 2021 Page 19 of 25 "96. Section 238A of the IBC provides as follows:-

"238A. 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."

97. As observed by this Court in Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli (supra), authored by one of us (Indira Banerjee, J.), this Court held:-

"91. Legislature has in its wisdom chosen not to make the provisions of the Limitation Act verbatim applicable to proceedings in NCLT/NCLAT, but consciously used the words 'as far as may be'. The words 'as far as may be' are not meant to be otiose. Those words are to be understood in the sense in which they best harmonise with the subject matter of the legislation and the object which the Legislature has in view. The Courts would not give an interpretation to those words which would frustrate the purposes of making the Limitation Act applicable to proceedings in the NCLT/NCLAT 'as far as may be'.

xxx xxx xxx

94. The use of words 'as far as may be', occurring in Section 238A of the IBC tones down the rigour of the words 'shall' in the Company Appeal (AT) (Ins) No.779 of 2021 Page 20 of 25 aforesaid Section which is normally considered as mandatory. The expression 'as far as may be' is indicative of the fact that all or any of the provisions of the Limitation Act may not apply to proceedings before the Adjudicating Authority (NCLT) or the Appellate authority (NCLAT) if they are patently inconsistent with some provisions of the IBC. At the same time, the words 'as far as may be' cannot be construed as a total exclusion of the requirements of the basic principles of Section 14 of the Limitation Act, but permits a wider, more liberal, contextual and purposive interpretation by necessary modification, which is in harmony with the principles of the said Section."

99.There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. In Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. (supra) authored by Nariman, J. this Court held:-

"6. ......The present case being "an application" which is filed under Section 7, would fall only within the residuary Article 137."

105.The judgment of this Court in Babulal Vardharji Gurjar (supra) was rendered in the facts of the aforesaid case, where the date of default had been mentioned as 8.7.2011 being the date of Company Appeal (AT) (Ins) No.779 of 2021 Page 21 of 25 N.P.A. and it remained undisputed that there had neither been any other date of default stated in the application nor had any suggestion about any acknowledgement been made.

106. In the backdrop of the aforesaid facts, this court observed that even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration, in view of the averments regarding default therein and for want of any other averment with regard to acknowledgment.

107.It is well settled, that a judgment is a precedent for the issue of law that is raised and decided and not any observations made in the facts of the case. As very aptly penned by V. Sudhish Pai in "Constitutional Supremacy-A Revisit", "Judicial utterances/pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to explain not define. Judges interpret statutes, their words are not to be interpreted as statutes." The aforesaid passage was extracted and incorporated as part of the judgment of this Court in Sesh Nath Singh (supra).

108. In this case, admittedly there were fresh documents before the Adjudicating Authority (NCLT), including a letter of offer dated Company Appeal (AT) (Ins) No.779 of 2021 Page 22 of 25 3.03.2017 for one time settlement of the dues of the Corporate Debtor to the Financial Creditor, upon payment of Rs.5.5 crores. The Appellant Bank has also relied upon financial statements up to 31 st March, 2018 apart from the final judgment and order dated 27 th March, 2017 in O.A. 16/2015 and the subsequent Recovery Certificate No.2060/2017 dated 25th May, 2017 which constituted cause of action for initiation of proceedings under Section 7 of the IBC.

110. It is not necessary for this Court to examine the relevance of all the documents filed by the Appellant Bank pursuant to its interim applications being I.A. No.27 of 2019 and I.A. No.131 of 2019. Suffice it to mention that the documents enclosed with the applications being I.A. No.27 of 2019 and I.A. No.131 of 2019 and the pleadings in the supporting affidavits, made out a case for computation of limitation afresh from the dates of the relevant documents. It would also be pertinent to note that the reasons for the execution of the documents are irrelevant. It is not the case of the Respondents, that any of those documents were extracted through coercion.

111. As per Section 18 of Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing a fresh period of limitation from the date on which the acknowledgement is signed. Such Company Appeal (AT) (Ins) No.779 of 2021 Page 23 of 25 acknowledgement need not be accompanied by a promise to pay expressly or even by implication. However, the acknowledgement must be made before the relevant period of limitation has expired.

112.In Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. (supra) this Court, speaking through one of us (Indira Banerjee J.) held that the IBC does not exclude the application of Section 14 or 18 or any other provision of the Limitation Act. There is therefore no reason to suppose that Sections 14 or 18 of the Limitation Act do not apply to proceedings under Section 7 or Section 9 of the IBC.

113. In Laxmi Pat Surana v. Union Bank of India (supra) this Court speaking through Khanwilkar J. held that there was no reason to exclude the effect of Section 18 of the Limitation Act to proceedings initiated under the IBC."

The citations have referred above also makes it amply clear that if Settlement offer or other way of acknowledgement of Debt has been done within the first period of limitation then Limitation gets extended again for the next three years.

From the above, it is very much clear that the provisions of Limitation Act, 1963 which includes extension of limitation due to acknowledgment in writing, apply to the present case, the petition filed before the Adjudicating Authority is within the limitation Company Appeal (AT) (Ins) No.779 of 2021 Page 24 of 25 period and both 'Debt' and 'Defaults' are not disputed and hence, provisions of Section 7 of the Code is applicable to the case and requires positive consideration towards its admission under the provision of the Code R/w the Limitation Act, 1963. g. In view of the above law laid down and facts and circumstances as explained above, the petition has been filed within the limitation period and hence Section 7 of the Code petition can be initiation against the Corporate Debtor. h. The appeal deserves to be allowed and is accordingly allowed. We set aside the impugned order dated 13.08.2021 of the Adjudicating Authority. The Adjudicating Authority is directed to initiate the CIRP proceedings. However, in the intervening period, the parties are free to settle the matter, if so advised. We accordingly, dispose of the Appeal. No order as to costs.

(Justice Ashok Bhushan) Chairperson (Dr. Ashok Kumar Mishra) Member(Technical) (Dr. Alok Srivastava) Member (Technical) 22nd February, 2022 New Delhi Raushan.K Company Appeal (AT) (Ins) No.779 of 2021 Page 25 of 25

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