ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED versus TULIP STAR HOTELS LIMITED & ORS. on 1 August 2022

[2022] 5 S.C.R.

AASSET RECONSTRUCTION COMPANY (INDIA) LIMITED

v.

TULIP STAR HOTELS LIMITED & ORS.

(Civil Appeal Nos. 84-85 of 2020)

AUGUST 01, 2022

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[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]

Insolvency and Bankruptcy Code, 2016 – ss. 7(2), 62 & 238A– Limitation Act, 1963 – s. 18 – Corporate Insolvency ResolutionProcess (CIRP) – Extension of period of limitation –CAcknowledgement in books of account – A loan agreement wasexecuted between the consortium of banks and the corporate debtor– Pursuant to which, a loan amount of Rs.129 crore was sanctionedto corporate debtor – Corporate debtor was classified as non-performing asset (NPA) – Thereafter, parties entered into a settlementagreement – There were extensions of time and revised settlements –DUltimately, the appellant revoked the settlement – Corporate debtoracknowledged its liabilities towards the appellant in its financialstatement from 2008-09 to 2016-17 – Application was filed by theappellant u/s 7(2) of IBC before the NCLT for initiation of CIRPagainst the corporate debtor – Corporate debtor filed a applicationEseeking dismissal of application u/s 7(2) as time barred – NCLTdismissed the application of corporate debtor and admitted theapplication for initiation of CIRP – NCLAT held that CIRP wasbarred by limitation and the books of account cannot be treated asan acknowledgement of liability in respect of debt – On appeal,held: IBC has overriding effect over other laws – There is no specificFperiod of limitation prescribed in the Limitation Act, 1963, for anapplication under the IBC – Therefore, it is to be governed by theArticle 137 of 1963 Act which prescribes period of limitation as 3years – It is well settled that entries in books of accounts and/orbalance sheets of a corporate debtor would amount to anGacknowledgment u/s. 18 of the Limitation Act – Hence, an applicationu/s. 7 of the IBC would not be barred by limitation, if there were anacknowledgement of the debt by the corporate debtor before expiryof the period of limitation of 3 years – NCLAT erred in law in holdingthat the books of account of a company could not be treated asacknowledgement – In the present case, corporate debtorH

acknowledge its liability in its financial statement from 2008-09 to2016-17 and the application u/s. 7(2) was filed on 03.04.2018 –Hence, the application was well within the extended period oflimitation – Impugned Judgment and order of NCLAT set aside.

Allowing the appeals, the Court

HELD:1.Under the scheme of the IBC, the InsolvencyResolution Process begins, when a default takes place, in thesense that a debt becomes due and is not paid. Where anyCorporate Debtor commits default, a Financial Creditor, anOperational Creditor or the Corporate Debtor itself may initiateCorporate Insolvency Resolution Process in respect of suchCorporate Debtor, in the manner as provided in Chapter II of theIBC. The provisions of the IBC are designed to ensure that thebusiness and/or commercial activities of the Corporate Debtorare continued by a Resolution Professional, upon imposition of amoratorium, to give the Corporate Debtor some reprieve fromcoercive litigation, which could drain the Corporate Debtor of itsfinancial resources. The IBC is not just a statute for recovery ofdebts. It is also not a statute which only prescribes the modalitiesof liquidation of a corporate body, unable to pay its debts. It isessentially a statute which works towards the revival of a corporatebody, unable to pay its debts, by appointment of a ResolutionProfessional [Paras 44-46, 55][1130-B; 1146-C-E; 1149-D]

2. IBC has overriding effect over other laws. Section 238of the IBC provides that the provisions of the IBC shall haveeffect, notwithstanding anything inconsistent therewith containedin any other law, for the time being in force, or any otherinstrument, having effect by virtue of such law. The IBC is abeneficial legislation for equal treatment of all creditors of theCorporate Debtor, as also the protection of the livelihoods of itsemployees/workers, by revival of the Corporate Debtor throughthe entrepreneurial skills of persons other than those in itsmanagement, who failed to clear the dues of the Corporate Debtorto its creditors. It only segregates the interests of the CorporateDebtor from those of its promoters/persons in management.Relegation of creditors to the remedy of coercive litigation againstthe Corporate Debtors could be detrimental to the interests of A

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Athe Corporate Debtor and its creditors alike. While multiplecoercive proceedings against a Corporate Debtor in differentforums could impede its commercial/business activities, depleteits cash reserves, dissipate its assets, moveable and immoveableand precipitate its commercial death, such proceedings might notbe economically viable for the creditors as well, because of theBlength of time consumed in the litigations, the expenses oflitigation, and the uncertainties of realisation of claims even afterultimate success in the litigation. It is, therefore, imperative thatthe provisions of the IBC and the Rules and Regulations framedthereunder be construed liberally, in a purposive manner toCfurther the objects of enactment of the statute. [Paras 57, 59-61][1150-B-G]

3. There is no specific period of limitation prescribed in theLimitation Act, 1963, for an application under the IBC, beforethe Adjudicating Authority (NCLT). An application for which noDperiod of limitation is provided anywhere else in the Schedule tothe Limitation Act, is governed by Article 137 of the Schedule tothe said Act. Under Article 137 of the Schedule to the LimitationAct, the period of limitation prescribed for such an application isthree years from the date of accrual of the right to apply. Therecan be no dispute with the proposition that the period of limitationEfor making an application under Section 7 or 9 of the IBC is threeyears from the date of accrual of the right to sue, that is, the dateof default. [Paras 68 & 69][1152-F-H; 1153-A]

4. As per Section 18 of Limitation Act, an acknowledgementof present subsisting liability, made in writing in respect of anyFright claimed by the opposite party and signed by the party againstwhom the right is claimed, has the effect of commencing a freshperiod of limitation from the date on which the acknowledgementis signed. Such acknowledgement need not be accompanied by apromise to pay expressly or even by implication. However, theGacknowledgement must be made before the relevant period oflimitation has expired. It is well settled that entries in books ofaccounts and/or balance sheets of a Corporate Debtor wouldamount to an acknowledgment under Section 18 of the LimitationAct. [Paras 83 & 85][1139-E-F; 1160-G]

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5. To sum up, in considered opinion of this Court anapplication under Section 7 of the IBC would not be barred bylimitation, on the ground that it had been filed beyond a period ofthree years from the date of declaration of the loan account of theCorporate Debtor as NPA, if there were an acknowledgement ofthe debt by the Corporate Debtor before expiry of the period oflimitation of three years, in which case the period of limitationwould get extended by a further period of three years. In thiscase, the amount of the Corporate Debtor was declared NPA on1[st] December 2008. By a letter dated 7[th] February, 2011, writtenwell within three years, the Corporate Debtor acknowledged itsliability and proposed a settlement. This was followed by severalrequests of extension of time to make payment and revisedsettlements. On 6[th] April, 2013, the Corporate Debtor soughtextension of time to pay Rs.239,88,27,673 outstanding as on 31[st]March 2013. On 19[th] April, 2013, the Corporate Debtor madepayment of Rs.17,50,00,000/-. On 1[st] July, 2013, the CorporateDebtor acknowledged its liability – this was after the AppellantFinancial Creditor revoked the settlement invoking the defaultclause. The Corporate Debtor acknowledged its liabilities in itsfinancial statements from 2008-09 till 2016-17. The applicationunder Section 7(2) of the IBC was filed on 3[rd] April 2018, wellwithin the extended period of limitation. [Paras 97 & 98][1169-F-H; 1170-A-B]

Sesh Nath Singh & Anr. v. Baidyabati SheoraphuliCooperative Bank Ltd. 2021 SCC Online SC 244;Babulal Vardharji Gurjar v. Veer Gurjar AluminiumIndustries (P) Ltd. (2020) 15 SCC 1; B. K. EducationalServices Private Limited v. Parag Gupta and Associates(2019) 11 SCC 633 : [2018] 12 SCR 794; SwissRibbons Private Limited & Anr. v. Union of India andOrs. (2019) 4 SCC 17: [2019] 3 SCR 535; InnoventiveIndustries Ltd. v. ICICI Bank and Anr. (2018) 1 SCC407 : [2017] 8 SCR 33; Dena Bank (Now Bank ofBaroda) v. C. Shivakumar Reddy and Another (2021)10 SCC 330 - relied on.

Asset Reconstruction Company (India) Limited. v. BishalJaiswal and Anr. (2021) 6 SCC 366; Credit &

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SUPREME COURT REPORTS[2022] 5 S.C.R.

ADevelopment Syndicate Now Called I.C.D.S. Ltd. v.Smithaben H. Patel (Smt.) and Others (1999) 3 SCC 80: [1999] 1 SCR 555; Gaurav Hargovindbhai Dave v.Asset Reconstruction Company (India) Ltd. (2019) 10SCC 572 : [2019] 13 SCR 224; Jignesh Shah v. Unionof India (2019) 10 SCC 750 : [2019] 12 SCR 678;BRadha Exports (India) (P) Ltd. v. K.P. Jayaram (2020)10 SCC 538; Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd. & Ors. (2019) 9 SCC 158 : [2019]12 SCR 75; Balkrishna Savalram Pujari Waghmare v.Shree Dhyaneshwar Maharaj Sansthan [1959] 2 Suppl.C2 SCR 476; Laxmi Pat Surana v. Union Bank of India(2021) 8 SCC 481; Khan Bahadur Shapoor FredoomMazda v. Durga Prasad Chamaria and Others AIR 1961SC 1236 : [1962] 1 SCR 140; Reliance AssetReconstruction Co. Ltd. v. Hotel Poonja InternationalPvt. Ltd. 2021 SCC Online SC 289; LakshmirattanDCotton Mills Co. Ltd. v. Aluminium Corpn. of India Ltd.(1971) 1 SCC 67 : [1971] 2 SCR 623 – referred to.Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff1961 SCC Cal 128 : AIR 1962 Cal 115; South AsiaIndustries (P) Ltd. v. General Krishna Shamsher JungEBahadur Rana ILR (1972) 2 Del 712; Hegde GolayLtd. v. State Bank of India 1985 SCC Kar 290 : ILR1987 Kar 2673; Ferro Alloys Corporation Limited v.Rajhans Steel Limited (1999) SCC Online Pat 1196 –referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 84-85of 2020.

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From the Judgment and Order dated 11.12.2019 of the NationalCompany Law Appellate Tribunal, New Delhi in Company Appeal (AT)(Insolvency) No.525 of 2019 with Company Appeal (AT) (Insolvency)No. 627 of 2019.

Neeraj Kishan Kaul, Sr. Adv., Ms. Prerna Priyadarshini, SiddharthRanade, Vividh Tandon, Ms. Priyashree Sharma PH, Deepak Joshi,Ms. Rushali Agarwal, Ms. Samrudhi Chotani, Pakashal Jain, Ms. SaloniGupta, Shankh Sengupta, Ms. Tina Abraham, Advs. for the Appellant.

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Nakul Dewan, Sr. Adv., Mrs. Shally Bhasin, Mahesh Agarwal,Ankur Saigal, Himanshu Satija, Rohan Talwar, E. C. Agrawala, Advs.for the Respondents.

The Judgment of the Court was delivered by INDIRA BANERJEE, J.

1. These appeals under Section 62 of the Insolvency andBankruptcy Code 2016 (IBC) filed by the Financial Creditor, AssetReconstruction Company (India) Limited are against a common judgmentand final order dated 11[th] December 2019 passed by the NationalCompany Law Appellate Tribunal (NCLAT), allowing Company Appeal(AT)(Insolvency) No.525 of 2019 and Company Appeal(AT) (Insolvency)No.627 of 2019 and holding that the Corporate Insolvency ResolutionProcess (CIRP) initiated by the Appellant against the Corporate Debtor,V. Hotels Ltd. was barred by limitation.

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2. The Respondent No.1, Tulip Star Hotels Limited and theRespondent No.2 Tulip Hotels Private Limited are the shareholders ofthe Corporate Debtor, V. Hotels Limited. The Respondent Nos. 1 and 2

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Aeach hold 50% share in the Corporate Debtor. Mr. Ajit B. Kerkar is theManaging Director of the Respondent No.1, Tulip Star Hotel Limited,Chairman of the Respondent No.2, Tulip Hotels Private Limited andalso the Chairman of the Corporate Debtor.

3. On or about 8[th] March 2002, a loan agreement was executedBby and between a consortium of banks consisting of Bank of India, PunjabNational Bank, Union Bank of India, Vijaya Bank, Canara Bank andIndian Bank, led by Bank of India (hereinafter referred to collectively asthe Consortium) and the Corporate Debtor, pursuant to which theConsortium collectively sanctioned loan to the extent of Rs.129,00,00,000/- (Rupees One Hundred and Twenty-Nine Crore Only) to the CorporateCDebtor.

4. On 5[th] June 2003, the Corporate Debtor entered into anarrangement with Abu Dhabi Commercial Bank (ADCB) wherebyADCB agreed to advance USD 29,000,000/- to the Corporate Debtorfor repayment of the loan taken by the Corporate Debtor from theDConsortium under the loan agreement executed on 8[th] March 2002. It isstated that the Corporate Debtor repaid the amount disbursed by Bankof India to the Corporate Debtor under the said loan agreement from outof funds disbursed to the Corporate Debtor by ADCB, between Augustand December 2003.

E5. In August/ September 2008, a bank guarantee issued by Bankof India in favour of ADCB, on behalf of the Corporate Debtor wasinvoked by ADCB and Bank of India paid Rs.24,49,59,208/- (TwentyFour Crores Forty Nine Lakhs Fifty Nine Thousand Two Hundred andEight) to ADCB under the Bank Guarantee.

6. Around the same time, Bank of India, Punjab National BankFand Union Bank of India also converted their facility under the loanagreement into a non-fund-based bank guarantee.

7. On 1[st] December 2008, the account of the Corporate Debtor inthe Bank of India was classified as non-performing asset (NPA) and on31[st] December 2008, an assignment agreement was executed by BankGof India assigning its receivables to the Appellant Financial Creditor.

8. By a letter dated 7[th] February 2011 addressed to the Appellant,the Corporate Debtor proposed a settlement which is as follows:-

(i) The Corporate Debtor would pay interest to the AppellantFinancial Creditor at an average rate of 21% per annum atHquarterly rests.

(ii) The Corporate Debtor would pay a sum of Rs.9,02,00,000/- being 10% of the aggregate assigned debt to the AppellantFinancial Creditor immediately on acceptance of thesettlement.

(iii) The Corporate Debtor proposed that the balanceaggregate assigned debt of Rs.154,13,00,000/- along withinterest accrued thereon from the date of the payment of theinitial amount up to 30[th] September 2011 would be repaid inthree equated monthly instalments beginning from 15[th] October2011.

9. On or about 10[th] February 2011, the Corporate Debtor submitteda revised proposal offering to pay interest on its outstanding dues to theAppellant at the rate of 22% per annum with monthly rests with effectfrom 1[st] July 2010. The Corporate Debtor also offered to payRs.10,00,00,000/- to the Appellant immediately upon acceptance of therevised proposal.

10. The Corporate Debtor also agreed to pay the settlement amountof Rs.150,75,83,970/- being the aggregate assigned debt as on 30[th] June2010 along with interest at the rate of 22% per annum compounded atmonthly rests from 1[st] July 2010 till 30[th] September 2011.

11. On or about 28[th] February 2011 the parties entered into aSettlement Agreement, the key terms whereof were as follows:-

(i) The Corporate Debtor agreed to pay the settlement amountof Rs.150,75,83,970/- (Rupees One Hundred Fifty CroresSeventy-Five Lakhs Eighty-three Thousand Nine Hundred andSeventy Only) being the Aggregate amount in default as on30[th] June 2010 along with the accrued interest at the rate of22% per annum to be compounded at monthly rests from 1[st]July 2010 till 30[th] September 2011.

(ii) Rs. 10,00,00,000/- (Rupees Ten Crore Only) would be paidas upfront payment upon execution of the SettlementAgreement.

(iii) The balance amount after adjusting the upfront paymentof Rs.10,00,00,000/- (Rupees Ten Crore Only) would be repaidon or before 30[th] September 2011.

12. On 12[th] September 2011, the Corporate Debtor addressed aletter to the Appellant, seeking an extension of time till 30[th] September A

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A2012 to pay its balance outstanding dues towards principal and interest.The Corporate Debtor acknowledged that its aggregate outstandingliability towards principal and interest to the Appellant wasRs.176,83,00,000/-. The Corporate Debtor offered to make an interimpayment of Rs.15,00,00,000/- (Rupees Fifteen Crores Only) by31[st] December 2011. On 29[th] September 2011, the agreement betweenBthe Corporate Debtor and the Appellant was modified.

13. On 30[th] December 2011, the Appellant accepted the requestof the Corporate Debtor for extension, subject to the condition that theCorporate Debtor would pay Rs.15,00,00,000/- (Rupees Fifteen CroresOnly) by 31[st] December 2011, and the balance portion of the aggregateCassigned debt totalling Rs.150,75,83,970/-, outstanding as on 30[th] June2010, along with accrued interest at the rate of 22% per annum, to becompounded at monthly rests from 1[st] July 2010 till the date of payment,that is, 31[st] March 2012.

14. On 17[th] March 2012, the Corporate Debtor confirmed that theDaggregate assigned debt outstanding as on 31[st ]March 2012 wasRs.192,89,46,697/- and requested for a further extension of time from31[st] March 2012 to 31[st] December 2012 to pay the outstanding amounts.

15. On 6[th] August 2012, the Appellant accepted the aforesaidextension request and agreed to the extension for repayment of theEaggregate assigned debt outstanding as on 30[th] September 2012.

16. On 10[th] September 2012, the Corporate Debtor sought furtherextension till 31[st] March 2013 for payment of outstanding principal andinterest aggregating to Rs.211,35,16,073/-. On 5[th] December 2012, theAppellant accepted the extension subject to payment of processing feeFof Rs.25,00,000/-.

17. On 6[th] April 2013, the Corporate Debtor again sought extensionof the date for repayment of the then outstanding amount. The CorporateDebtor acknowledged the outstanding aggregate assigned debt (inclusiveof principal and interest) which had increased to Rs.239,88,27,673/- asGon 31[st] March 2013. The Corporate Debtor offered to make an interimpayment of Rs.91,00,00,000/- (Indian Rupees Ninety One Crores Only)by 31[st] August 2013 and the balance outstanding amounts by30[th] September 2013.

18. On 19[th] April 2013, the Corporate Debtor paid Rs.17,50,00,000/- to the Appellant, towards part repayment of the aggregate assignedH

debt. On 29[th] May 2013, the Appellant again accepted the request of theCorporate Debtor for extension of time.

19. Ultimately, on 17[th] June 2013, the Appellant revoked thesettlement and in terms of the default obligations under the SettlementAgreement, the rate of interest under the Deed of Variation was revisedto 22%. By its letter dated 1[st] July 2013, the Corporate Debtoracknowledged its obligation to repay the aggregate assigned debt inclusiveof interest.

20. On 10[th] July 2013, the Appellant sent the Corporate Debtor anotice under Section 13(2) of the Securitisation and Reconstruction ofFinancial Assets and Enforcement of Security Interest Act, 2002(SARFAESI Act) in order to enforce security interests against theCorporate Debtor. On 14[th] October 2013, the Appellant, through itsauthorized officer, issued a possession notice under Section 13(4) of theSARFAESI Act.

21. On 6[th] May 2014, the Appellant invoked the personal guaranteeof Mr. Ajit Kerkar, Managing Director of the Corporate Debtor. Theaggregate assigned debt as on 6[th] May 2014 of principal and interest at22% per annum was Rs.235,46,34,381/-.

22. The Corporate Debtor apparently acknowledged its liabilitiestowards the Appellant in its Financial Statements from 2008-09 to 2016-17.

23. The Appellant has filed an application to bring on recordadditional documents which were part of the records below includingthe copies of the financial statements.

24. Mr. Neeraj Kishan Kaul, Senior Advocate appearing on behalfof the Appellant, rightly submitted that the Financial Statements providea true and fair view of the state of affairs of a company in view ofSections 128 and 129 read with Section 134 of the Companies Act 2013as also Sections 210, 211, 215, 216 and 217 of the Companies Act, 1956.

25. On 3[rd] April 2018, the Appellant, as Financial Creditor, filed anapplication under Section 7(2) of the IBC in the National Company LawTribunal (NCLT), Mumbai for initiation of the Corporate InsolvencyResolution Process (CIRP) against the Corporate Debtor which wasregistered and numbered CP(IB) No.532 of 2018.

26. The Corporate Debtor filed a Miscellaneous Application beingMisc. App. No.693 of 2018 in CP (IB) No.532 of 2018 before the NCLT, A

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AMumbai praying for dismissal of the application of the Appellant underSection 7(2) of the IBC, inter alia, contending that the application wasbarred by limitation. By an order dated 1[st] May 2019, the AdjudicatingAuthority (NCLT), Mumbai dismissed the said Miscellaneous Applicationfiled by the Corporate Debtor.B27. By an order dated 31[st] May 2019, the Adjudicating Authority(NCLT) admitted the said application under Section 7(2) of the IBC andappointed one Mr. Anish Nanavaty as the Interim Resolution Professional(IRP). The Committee of Creditors confirmed the appointment of Mr.Anish Nanavaty as the Resolution Professional of the Corporate Debtor.

C28. The Corporate Debtor filed an appeal being Company Appeal(AT) (Insolvency) No.525 of 2019 before NCLAT against the orderdated 1[st] May 2019, dismissing the Miscellaneous Application filed bythe Corporate Debtor, seeking dismissal of the application of the AppellantFinancial Creditor under Section 7(2) of the IBC.

29. The shareholders of the Corporate Debtor, that is, theDRespondent No.1, Tulip Star Hotels Limited and the Respondent No.2,Tulip Hotels Private Limited, filed an appeal being Company Appeal(AT) (Insolvency) No.627 of 2019 in the NCLAT against the order dated31[st] May of the Adjudicating Authority, admitting the application of theAppellant under Section 7(5)(a) of the IBC.E30. Both the appeals have been allowed by the common judgmentof the Appellate Tribunal (NCLAT) dated 11[th] December 2019, impugnedin these appeals.

31. On behalf of the Corporate Debtor, it has been argued:

(i) There is no debt due and payable from the Corporate DebtorFto the Appellant. The amounts advanced by the Consortium to theCorporate Debtor have been repaid.

(ii) In the statutory notice issued by the Appellant to the CorporateDebtor under Section 13(2) of the SARFAESI Act, the Appellanthad claimed that principal amount of Rs.90.35 Crores was dueGfrom the Corporate Debtor to the Appellant.

(iii) The Corporate Debtor has paid the Appellant much morethan the Principal amount claimed by the Appellant, as per thetable set out below:- H

(iv) Even though the principal amount had been paid in the full, inthe Application under Section 7 of the IBC, the Appellant claimedthat principal amount of Rs.35,43,72,852/- andtowards interest.

(v) There is no amount outstanding towards principal, and there isa long standing dispute in respect of the amount of interest payableby the Corporate Debtor to the Appellant.

(vi) In the Application under Section 7 of the IBC, the Appellanthas claimed a principal amount of Rs.35,43,72,852/- and interestof Rs.149,91,24,581/- on the basis of the settlement agreementdated 28.02.2011 which was later revoked by the Appellant on A

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17.06.2013. The amount of principal claimed in the Applicationunder Section 7 of the IBC is at complete variance with theprincipal amount claimed in the statutory Notice under Section13(2) of the SARFAESI Act.

(vii) By an order dated 19.10.2018, passed in relation toBproceedings between the Appellant and the Corporate Debtor inthe Debt Recovery Tribunal, the High Court had held that theAppellant was not entitled to claim 22% interest since it hadrevoked the settlement agreement on the basis of which suchinterest had been claimed.

(viii) The High Court had, by its aforesaid order dated 19.10.2018,directed DRT to determine the interest payable by the CorporateDebtor to the Appellant. Since no determination has been done bythe DRT, the interest amount has not become due and payable.

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(ix) The Appellant could not have appropriated the amounts paidby the Corporate Debtor towards interest.

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(x) The principal having been paid and the interest not being due,there is no financial debt payable by the Corporate Debtor to theAppellant.

(xi) The Application of the Appellant under Section 7 of the IBCEis hopelessly barred by limitation, the same having been filed abouteight/nine years after the account of the Corporate Debtor wasdeclared NPA on 01.12.2008.

(xii) Even assuming the Corporate Debtor had acknowledgedliability, the last letter of acknowledgment was written in April2013. The period of limitation still expired in April 2016.

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(xiii) The Corporate Debtor has not acknowledged any debt in itsfinancial statements.

(xiv) The Corporate Debtor and/or its Promoters have paid itsentire Principal dues to the CoC (Committee of Creditors)consisting of the Appellant and Pegasus.

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32. The NCLAT held:

“23. In the present case, ‘Asset Reconstruction Company(India) Ltd.’- (‘Financial Creditor’) has failed to bring onrecord any acknowledgment in writing by the ‘CorporateHDebtor’ or its authorised person acknowledging the liability in respect of debt. The Books of Account cannot be treated asan acknowledgement of liability in respect of debt payable tothe ‘Asset Reconstruction Company (India) Ltd.’- (‘FinancialCreditor’) signed by the ‘Corporate Debtor’ or its authorisedsignatory.

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25. In fact, the case of ‘Asset Reconstruction Company (India)Ltd.’- (‘Financial Creditor’) is covered by its own decision in“Gaurav Hargovindbhai Dave v. Asset ReconstructionCompany (India) Ltd. And Another” (supra)

26. The Adjudicating Authority having failed to appreciatethe aforesaid fact, the impugned order dated 1[st] May, 2019rejecting the objections of the ‘Corporate Debtor’ and theimpugned order dated 31[st] May, 2019 passed by theAdjudicating Authority admitting the application underSection 7 are set aside. ‘V. Hotels Limited’- (‘CorporateDebtor’) is released from all the rigours of law and is allowedto function independently through its Board of Directors fromimmediate effect. The ‘Interim Resolution Professional’/‘Resolution Professional’ will submit its fees and costs of‘Corporate Insolvency Resolution Process’ before theAdjudicating Authority who will determine the same andamount as is payable is to be paid by ‘Asset ReconstructionCompany (India) Ltd.’ who moved application under Section7 which was not maintainable. The ‘Interim ResolutionProfessional’ will hand over the management, assets andrecords to the Board of Directors.

Both the appeals are allowed. No costs.”

33. Citing Asset Reconstruction Company (India) Limited. v.

Bishal Jaiswal and Anr[ 1]Mr. Nakul Dewan, Senior Advocate arguedthat all financial statements issued by a company would not amount toacknowledgment for the purpose of Section 18 of the Limitation Act andthereby extend the period of limitation under the Code.

34. In Bishal Jaiswal (supra) this Court:

“21. Importantly, this judgment in Bengal Silk Mills [BengalSilk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine 1 (2021) 6 SCC 366

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ACal 128 : AIR 1962 Cal 115] holds that though the filing of abalance sheet is by compulsion of law, the acknowledgmentof a debt is not necessarily so. In fact, it is not uncommon tohave an entry in a balance sheet with notes annexed to orforming part of such balance sheet, or in the auditor’s report,which must be read along with the balance sheet, indicatingBthat such entry would not amount to an acknowledgment ofdebt for reasons given in the said note.

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35. A perusal of the aforesaid sections would show that thereCis no doubt that the filing of a balance sheet in accordancewith the provisions of the Companies Act is mandatory, anytransgression of the same being punishable by law. However,what is of importance is that notes that are annexed to orforming part of such financial statements are expresslyrecognised by Section 134(7). Equally, the auditor’s reportDmay also enter caveats with regard to acknowledgments madein the books of accounts including the balance sheet. Aperusal of the aforesaid would show that the statement of lawcontained in Bengal Silk Mills [Bengal Silk Mills Co. v. IsmailGolam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962ECal 115] , that there is a compulsion in law to prepare abalance sheet but no compulsion to make any particularadmission, is correct in law as it would depend on the facts ofeach case as to whether an entry made in a balance sheetqua any particular creditor is unequivocal or has been enteredinto with caveats, which then has to be examined on a caseFby case basis to establish whether an acknowledgment ofliability has, in fact, been made, thereby extending limitationunder Section 18 of the Limitation Act.”

35. The Respondents argued that the Appellant was relying onthe Financial Statements from 2014-15 onwards as acknowledgmentsGto save limitation. It was argued that the said Financial Statements wouldnot constitute acknowledgement for the reasons as demonstrated in theWritten Notes of submissions of the Corporate Debtor reproducedhereinbelow:

(i) Financial Statement for 2014-15 (Pages 6-18 of IA 125766)wherein:H

(a) At page 8 of IA 125776, it is stated that ‘indebtness’ is to beread with Note No.5 in the notes of Accounts.

(b) At page 15-16 of IA, in the Notes of Accounts, the RespondentNo.3 has clearly stated that pursuant to the Orders of this Court,the parties entered into a Settlement which was unilaterally revokedby the Appellant on 17.06.2013 and thus the Respondent No.3had been legally advised that the interest for the loans cannot be22% as stated in the revoked settlement but 12.85% and that therate of interest will be subject to the decision of the DRT, Mumbai.

(ii) Financial Statement for 2015-2016 (Pages 19-30 of IA 125766),wherein similar disputes are raised in the notes (at page 21, 29-30 ofIA).

(iii) Financial Statement for 2016-17 (pages 31-42 of IA 125766)where a similar statement is made as stated above in the Notes to theFinancial Statement for 2015-16 (at page 33, 41-42 of IA).

36. Counsel argued that a perusal of the above Statements from2014-2015 to 2016-2017 shows that the Corporate Debtor has not madeany unequivocal acknowledgment of debt and has further questionedthe interest sought to be recovered by the Appellant. Thus, it is submittedthat the present case falls within the category provided in the judgmentin Bishal Jaiswal (supra), where this Court noted that “it would dependon the facts of each case as to whether an entry made in a balancesheet qua any particular creditor is unequivocal or has been enteredinto with caveats, which then has to be examined on a case by casebasis to establish whether an acknowledgment of liability has, infact, been made, thereby extending limitation under Section 18 ofthe Limitation Act.”

37. It was also argued that contrary to the claims of the Appellant,the recovery in the present case is not of “public monies”. Nor is therecovery beneficial to the public. There is no public funding in the formof holdings by any Public Sector Banks in the subject transaction. Sucharguments are irrelevant to the issue in this appeal of whether theApplication of the Appellant Financial Creditor under Section 7 of theIBC should have been rejected, and that too on the sole ground of thesame being barred by limitation.

38. For the purpose of computing limitation, the most relevantbalance-sheet is the balance-sheet for the financial year 2014-15, which, AB

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Aas pointed out by Mr. Kaul, was signed on 14.5.2015. The balance-sheetacknowledged the continuance of the jural relationship of debtor andcreditor between the Appellant and the Corporate Debtor and the existenceof financial liability of the Corporate Debtor to the Appellant. The onlyremark made by the Corporate Debtor related to the rate of interestwhich, according to the Corporate Debtor, would be 12.85% and notB22% in view of the revocation of the Settlement Agreement by theAppellant. The application of the Appellant under Section 7 of the IBCwas filed on 3.4.2018, well within three years from 14.5.2015, being thedate on which the balance-sheet was signed. Similarly, the balance-sheetfor the following financial year signed on 29.8.2016 also acknowledgedCthe existence of jural relationship of debtor and creditor between theAppellant and the Corporate Debtor and the existence of financial liabilityof the Corporate Debtor to the Appellant. The balance-sheet onlycontained a similar additional remark with regard to the rate of interest.

39. As held by this Court in Innoventive Industries Ltd. v. ICICIDBank and Anr[2]., the Adjudicating Authority, considering an applicationunder Section 7 of the IBC, is only required to see if there is the existenceof a debt and default. Any dispute with regard to the quantum of debt isimmaterial. The relevant part of the judgment of this Court in InnoventiveIndustries Ltd. (supra) is set out hereinbelow:- E“29. The scheme of Section 7 stands in contrast with the schemeunder Section 8 where an operational creditor is, on theoccurrence of a default, to first deliver a demand notice ofthe unpaid debt to the operational debtor in the mannerprovided in Section 8(1) of the Code. Under Section 8(2), thecorporate debtor can, within a period of 10 days of receiptFof the demand notice or copy of the invoice mentioned insub-section (1), bring to the notice of the operational creditorthe existence of a dispute or the record of the pendency of asuit or arbitration proceedings, which is pre-existing—i.e.before such notice or invoice was received by the corporateGdebtor. The moment there is existence of such a dispute, theoperational creditor gets out of the clutches of the Code.30. On the other hand, as we have seen, in the case of acorporate debtor who commits a default of a financial debt,the adjudicating authority has merely to see the records of H2 (2018) 1 SCC 407

the information utility or other evidence produced by thefinancial creditor to satisfy itself that a default has occurred.It is of no matter that the debt is disputed so long as the debtis “due” i.e. payable unless interdicted by some law or hasnot yet become due in the sense that it is payable at somefuture date. It is only when this is proved to the satisfaction ofthe adjudicating authority that the adjudicating authority mayreject an application and not otherwise.”

40. As argued by Mr. Kaul appearing on behalf of the Appellant,any part payments made by the Respondent would first be appropriatedtowards the interest amount due, as held by this Court in IndustrialCredit & Development Syndicate Now Called I.C.D.S. Ltd. v.Smithaben H. Patel (Smt.) and Others[3].

41. In Industrial Credit & Development Syndicate (supra), thisCourt held :-

6. In Venkatadri Appa Row v. Parthasarathi AppaRow [(1920-21) 48 IA 150 : AIR 1922 PC 233] the JudicialCommittee of the Privy Council had held that upon taking anaccount of principal and interest due, the ordinary rule withregard to payments by the debtor unappropriated either toprincipal or interest is that they are first to be applied to thedischarge of the interest. This Court in Meghraj v. Bayabai[(1969) 2 SCC 274: (1970) 1 SCR 523] reiterated the positionof law and held that the normal rule was that in the case of adebt due with interest, any payment made by the debtor wasin the first instance to be applied towards satisfaction ofinterest and thereafter to the principal. It was for the debtorto plead and prove the agreement, if any, that the amountspaid or deposited in the Court by him were accepted by thecreditor/decree-holder subject to the condition imposed byhim. …”

42. Even otherwise, in this case, the quantum of debt was well inexcess of Rs. 1 crore and many times in excess of Rs.1 lakh, being thethreshold amount under the IBC for initiation of CIRP proceedings atthe material time. Subsequently, in 2020, the threshold limit was enhancedto Rs.1 crore.

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43. In our view, the NCLAT erred in law in holding that the Booksof Account of a company could not be treated as acknowledgement ofliability in respect of debt payable to a financial creditor.

44. Under the scheme of the IBC, the Insolvency ResolutionProcess begins, when a default takes place, in the sense that a debtBbecomes due and is not paid. Some of the relevant provisions of theIBC, are set out hereinbelow for convenience:- “3 Definitions..—In this Code, unless the context otherwiserequires,—

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C(6) “claim” means—

(a) a right to payment, whether or not such right is reducedto judgment, fixed, disputed, undisputed, legal,equitable, secured or unsecured; (b)right to remedy for breach of contract under any lawfor the time being in force, if such breach gives rise toa right to payment, whether or not such right is reducedto judgment, fixed, matured, unmatured, disputed,undisputed, secured or unsecured; D

(7) “corporate person” means a company as defined in clauseE(20) of Section 2 of the Companies Act, 2013 (18 of 2013), alimited liability partnership, as defined in clause (n) of sub-section (1) of Section 2 of the Limited Liability PartnershipAct, 2008 (6 of 2009), or any other person incorporated withlimited liability under any law for the time being in force butFshall not include any financial service provider; E

(8) “corporate debtor” means a corporate person who owesa debt to any person;

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(10) “creditor” means any person to whom a debt is owedand includes a financial creditor, an operational creditor, asecured creditor, an unsecured creditor and a decree-holder; G

(11) “debt” means a liability or obligation in respect of aclaim which is due from any person and includes a financialdebt and operational debt; H

(12) “default” means non-payment of debt when whole orany part or instalment of the amount of debt has become dueand payable and is not paid by the debtor or the corporatedebtor, as the case may be;

4. Application of this Part.—(1) This Part shall apply tomatters relating to the insolvency and liquidation of corporatedebtors where the minimum amount of the default is one lakhrupees:

Provided that the Central Government may, by notification,specify the minimum amount of default of higher value whichshall not be more than one crore rupees.

5. Definitions.—In this Part, unless the context otherwiserequires—

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(7) “financial creditor” means any person to whom a financialdebt is owed and includes a person to whom such debt hasbeen legally assigned or transferred to;

(8) “financial debt” means a debt along with interest, if any,which is disbursed against the consideration for the time valueof money and includes—

(a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptancecredit facility or its dematerialised equivalent;

(c) any amount raised pursuant to any note purchasefacility or the issue of bonds, notes, debentures, loan stockor any similar instrument; (d) the amount of any liability in respect of any lease orhire-purchase contract which is deemed as a finance orcapital lease under the Indian Accounting Standards orsuch other accounting standards as may be prescribed; (e) receivables sold or discounted other than anyreceivables sold on non-recourse basis; (f) any amount raised under any other transaction,including any forward sale or purchase agreement, havingthe commercial effect of a borrowing; A

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(g) any derivative transaction entered into in connectionwith protection against or benefit from fluctuation in anyrate or price and for calculating the value of any derivativetransaction, only the market value of such transaction shallbe taken into account; (h) any counter-indemnity obligation in respect of aguarantee, indemnity, bond, documentary letter of creditor any other instrument issued by a bank or financialinstitution;

(i) the amount of any liability in respect of any of theguarantee or indemnity for any of the items referred to insub-clauses (a) to (h) of this clause;

6. Persons who may initiate corporate insolvency resolutionprocess.—Where any corporate debtor commits a default,a financial creditor, an operational creditor or thecorporate debtor itself may initiate corporate insolvencyresolution process in respect of such corporate debtor inthe manner as provided under this Chapter.

7. Initiation of corporate insolvency resolution process byfinancial creditor.—(1) A financial creditor either by itselfor jointly with other financial creditors, or any otherperson on behalf of the financial creditor, as may benotified by the Central Government, may file an applicationfor initiating corporate insolvency resolution processagainst a corporate debtor before the AdjudicatingAuthority when a default has occurred.

Provided that for the financial creditors, referred to inclauses (a) and (b) of sub-section (6-A) of Section 21, anapplication for initiating corporate insolvency resolutionprocess against the corporate debtor shall be filed jointlyby not less than one hundred of such creditors in the sameclass or not less than ten per cent. of the total number ofsuch creditors in the same class, whichever is less:

Provided further that for financial creditors who areallottees under a real estate project, an application forinitiating corporate insolvency resolution process againstthe corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estateproject or not less than ten per cent. of the total number ofsuch allottees under the same real estate project, whicheveris less:

Provided also that where an application for initiating thecorporate insolvency resolution process against acorporate debtor has been filed by a financial creditorreferred to in the first and second provisos and has notbeen admitted by the Adjudicating Authority before thecommencement of the Insolvency and Bankruptcy Code(Amendment) Act, 2020, such application shall be modifiedto comply with the requirements of the first or secondproviso within thirty days of the commencement of the saidAct, failing which the application shall be deemed to bewithdrawn before its admission.

Explanation.—For the purposes of this sub-section, adefault includes a default in respect of a financial debtowed not only to the applicant financial creditor but toany other financial creditor of the corporate debtor.

(2) The financial creditor shall make an application undersub-section (1) in such form and manner and accompaniedwith such fee as may be prescribed.

(3) The financial creditor shall, along with the applicationfurnish—

(a) record of the default recorded with the informationutility or such other record or evidence of default asmay be specified; (b) the name of the resolution professional proposed toact as an interim resolution professional; and

(c) any other information as may be specified by theBoard.

(4) The Adjudicating Authority shall, within fourteen days ofthe receipt of the application under sub-section (2), ascertainthe existence of a default from the records of an informationutility or on the basis of other evidence furnished by thefinancial creditor under sub-section (3):

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Provided that if the Adjudicating Authority has not ascertainedthe existence of default and passed an order under sub-section(5) within such time, it shall record its reasons in writing forthe same.]

(5) Where the Adjudicating Authority is satisfied that—(a) aBdefault has occurred and the application under sub-section(2) is complete, and there is no disciplinary proceedingspending 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 disciplinaryproceeding is pending against the proposed resolutionprofessional, it may, by order, reject such application:

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Provided that the Adjudicating Authority shall, beforerejecting the application under clause (b) of sub-section (5),give a notice to the applicant to rectify the defect in hisDapplication within seven days of receipt of such notice fromthe Adjudicating Authority.

(6) The corporate insolvency resolution process shallcommence from the date of admission of the application undersub-section (5).

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(7) The Adjudicating Authority shall communicate—

(a) the order under clause (a) of sub-section (5) to thefinancial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to thefinancial creditor, within seven days of admission orrejection of such application, as the case may be.

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12. Time-limit for completion of insolvency resolution process.—(1) Subject to sub-section (2), the corporateinsolvency resolution process shall be completed within aperiod of one hundred and eighty days from the date ofadmission of the application to initiate such process.

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(2) The resolution professional shall file an application tothe Adjudicating Authority to extend the period of thecorporate insolvency resolution process beyond one hundred H

and eighty days, if instructed to do so by a resolution passedat a meeting of the committee of creditors by a vote of sixty-six per cent of the voting shares.

(3) On receipt of an application under sub-section (2), if theAdjudicating Authority is satisfied that the subject-matter ofthe case is such that corporate insolvency resolution processcannot be completed within one hundred and eighty days, itmay by order extend the duration of such process beyondone hundred and eighty days by such further period as itthinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporateinsolvency resolution process under this section shall not begranted more than once:

Provided further that the corporate insolvency resolutionprocess shall mandatorily be completed within a period ofthree hundred and thirty days from the insolvencycommencement date, including any extension of the periodof corporate insolvency resolution process granted under thissection and the time taken in legal proceedings in relation tosuch resolution process of the corporate debtor:

Provided also that where the insolvency resolution process ofa corporate debtor is pending and has not been completedwithin the period referred to in the second proviso, suchresolution process shall be completed within a period of ninetydays from the date of commencement of the Insolvency andBankruptcy Code (Amendment) Act, 2019.

12-A. Withdrawal of application admitted under Section 7, 9or 10.—The Adjudicating Authority may allow the withdrawalof application admitted under Section 7 or Section 9 orSection 10, on an application made by the applicant with theapproval of ninety per cent. voting share of the committee ofcreditors, in such manner as may be specified.

13. Declaration of moratorium and public announcement.—(1) The Adjudicating Authority, after admission of theapplication under Section 7 or Section 9 or Section 10, shall,by an order—

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(a) declare a moratorium for the purposes referred to inSection 14; (b) cause a public announcement of the initiation ofcorporate insolvency resolution process and call for thesubmission of claims under Section 15; and

(c) appoint an interim resolution professional in the manneras laid down in Section 16.

(2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediately after the appointmentof the interim resolution professional.

14. Moratorium.—(1) Subject to provisions of sub-sections(2) and (3), on the insolvency commencement date, theAdjudicating Authority shall by order declare moratorium forprohibiting all of the following, namely—

(a) the institution of suits or continuation of pending suitsor proceedings against the corporate debtor includingexecution of any judgment, decree or order in any courtof law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing ofby the corporate debtor any of its assets or any legal rightor beneficial interest therein;

(c) any action to foreclose, recover or enforce any securityinterest created by the corporate debtor in respect of itsproperty including any action under the Securitisation andReconstruction of Financial Assets and Enforcement ofSecurity Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessorwhere such property is occupied by or in the possession ofthe corporate debtor.

Explanation.—For the purposes of this sub-section, it is herebyclarified that notwithstanding anything contained in any otherlaw for the time being in force, a license, permit, registration,quota, concession, clearances or a similar grant or right givenby the Central Government, State Government, local authority,sectoral regulator or any other authority constituted underany other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subjectto the condition that there is no default in payment of currentdues arising for the use or continuation of the license, permit,registration, quota, concession, clearances or a similar grantor right during the moratorium period.

(2) The supply of essential goods or services to the corporatedebtor as may be specified shall not be terminated orsuspended or interrupted during moratorium period.

(2-A) Where the interim resolution professional or resolutionprofessional, as the case may be, considers the supply of goodsor services critical to protect and preserve the value of thecorporate debtor and manage the operations of suchcorporate debtor as a going concern, then the supply of suchgoods or services shall not be terminated, suspended orinterrupted during the period of moratorium, except wheresuch corporate debtor has not paid dues arising from suchsupply during the moratorium period or in such circumstancesas may be specified.

(3) The provisions of sub-section (1) shall not apply to—

(a) such transactions, agreements or other arrangements asmay be notified by the Central Government in consultationwith any financial sector regulator or any other authority; (b) a surety in a contract of guarantee to a corporate debtor.

(4) The order of moratorium shall have effect from the dateof such order till the completion of the corporate insolvencyresolution process:

Provided that where at any time during the corporateinsolvency resolution process period, if the AdjudicatingAuthority approves the resolution plan under sub-section (1)of Section 31 or passes an order for liquidation of corporatedebtor under Section 33, the moratorium shall cease to haveeffect from the date of such approval or liquidation order, asthe case may be.

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16. Appointment and tenure of interim resolutionprofessional.—(1) The Adjudicating Authority shall appoint A

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[2022] 5 S.C.R.

an interim resolution professional on the insolvencycommencement date.

(2) Where the application for corporate insolvency resolutionprocess is made by a financial creditor or the corporate debtor,as the case may be, the resolution professional, as proposedrespectively in the application under Section 7 or Section 10,shall be appointed as the interim resolution professional, ifno disciplinary proceedings are pending against him.

(3) Where the application for corporate insolvency resolutionprocess is made by an operational creditor and—

(a) no proposal for an interim resolution professional ismade, the Adjudicating Authority shall make a referenceto the Board for the recommendation of an insolvencyprofessional who may act as an interim resolutionprofessional; (b) a proposal for an interim resolution professional is madeunder sub-section (4) of Section 9, the resolutionprofessional as proposed, shall be appointed as the interimresolution professional, if no disciplinary proceedings arepending against him.

(4) The Board shall, within ten days of the receipt of areference from the Adjudicating Authority under sub-section (3), recommend the name of an insolvencyprofessional to the Adjudicating Authority against whomno disciplinary proceedings are pending.

(5) The term of the interim resolution professional shallcontinue till the date of appointment of the resolutionprofessional under Section 22.

17. Management of affairs of corporate debtor by interimresolution professional.—(1) From the date of appointment ofthe interim resolution professional,—

(a) the management of the affairs of the corporate debtorshall vest in the interim resolution professional; (b) the powers of the board of directors or the partners ofthe corporate debtor, as the case may be, shall standsuspended and be exercised by the interim resolutionprofessional;

(c) the officers and managers of the corporate debtor shallreport to the interim resolution professional and provideaccess to such documents and records of the corporatedebtor as may be required by the interim resolutionprofessional; (d) the financial institutions maintaining accounts of thecorporate debtor shall act on the instructions of the interimresolution professional in relation to such accounts andfurnish all information relating to the corporate debtoravailable with them to the interim resolution professional.

18. Duties of interim resolution professional.—(1) The interimresolution professional shall perform the following duties,namely—

(a) collect all information relating to the assets, finances andoperations of the corporate debtor for determining thefinancial position of the corporate debtor, includinginformation relating to—

(i) business operations for the previous two years;

(ii) financial and operational payments for the previoustwo years;

(iii) list of assets and liabilities as on the initiation date;and

(iv) such other matters as may be specified; (b) receive and collate all the claims submitted by creditors tohim, pursuant to the public announcement made underSections 13 and 15;

(c) constitute a committee of creditors; (d) monitor the assets of the corporate debtor and manage itsoperations until a resolution professional is appointed by thecommittee of creditors; (e) file information collected with the information utility, ifnecessary; and (f) take control and custody of any asset over which thecorporate debtor has ownership rights as recorded in thebalance sheet of the corporate debtor, or with information A

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Autility or the depository of securities or any other registrythat records the ownership of assets including—

(i) assets over which the corporate debtor has ownershiprights which may be located in a foreign country;

(ii) assets that may or may not be in possession of theBcorporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary ofCthe corporate debtor, financial instruments, insurancepolicies;

(vi) assets subject to the determination of ownership by acourt or authority; (g) to perform such other duties as may be specified by theDBoard.

Explanation.— For the purposes of this section, the term“assets” shall not include the following, namely—

(a) assets owned by a third party in possession of thecorporate debtor held under trust or under contractualEarrangements including bailment; (b) assets of any Indian or foreign subsidiary of thecorporate debtor; and

(c) such other assets as may be notified by the CentralGovernment in consultation with any financial sectorFregulator.

20. Management of operations of corporate debtor as goingconcern.—(1) The interim resolution professional shall makeevery endeavour to protect and preserve the value of theproperty of the corporate debtor and manage the operationsGof the corporate debtor as a going concern.

21. Committee of creditors.—(1) The interim resolutionprofessional shall after collation of all claims received againstthe corporate debtor and determination of the financialposition of the corporate debtor, constitute a committee ofcreditors.

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(2) The committee of creditors shall comprise all financialcreditors of the corporate debtor:

Provided that a financial creditor or the authorisedrepresentative of the financial creditor referred to in sub-section (6) or sub-section (6-A) or sub-section (5) of Section24, if it is a related party of the corporate debtor, shall nothave any right of representation, participation or voting in ameeting of the committee of creditors:

Provided further that the first proviso shall not apply to afinancial creditor, regulated by a financial sector regulator,if it is a related party of the corporate debtor solely on accountof conversion or substitution of debt into equity shares orinstruments convertible into equity shares or completion ofsuch transactions as may be prescribed, prior to theinsolvency commencement date.

22. Appointment of resolution professional.—(1) The firstmeeting of the committee of creditors shall be held within sevendays of the constitution of the committee of creditors.

(2) The committee of creditors, may, in the first meeting, by amajority vote of not less than sixty-six per cent of the votingshare of the financial creditors, either resolve to appoint theinterim resolution professional as a resolution professionalor to replace the interim resolution professional by anotherresolution professional.

(3) Where the committee of creditors resolves under sub-section(2)—

(a) to continue the interim resolution professional asresolution professional subject to a written consent fromthe interim resolution professional in the specified form, itshall communicate its decision to the interim resolutionprofessional, the corporate debtor and the AdjudicatingAuthority; or (b) to replace the interim resolution professional, it shallfile an application before the Adjudicating Authority forthe appointment of the proposed resolutionprofessional along with a written consent from the proposedresolution professional in the specified form.

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(4) The Adjudicating Authority shall forward the name of theresolution professional proposed under clause (b) of sub-section (3) to the Board for its confirmation and shall makesuch appointment after confirmation by the Board.

(5) Where the Board does not confirm the name of the proposedresolution professional within ten days of the receipt of thename of the proposed resolution professional, theAdjudicating Authority shall, by order, direct the interimresolution professional to continue to function as the resolutionprofessional until such time as the Board confirms theappointment of the proposed resolution professional.

23. Resolution professional to conduct corporate insolvencyresolution process.—(1) Subject to Section 27, the resolutionprofessional shall conduct the entire corporate insolvencyresolution process and manage the operations of the corporatedebtor during the corporate insolvency resolution processperiod:

Provided that the resolution professional shall continue tomanage the operations of the corporate debtor after the expiryof the corporate insolvency resolution process period, untilan order approving the resolution plan under sub-section (1)of Section 31 or appointing a liquidator under Section 34 ispassed by the Adjudicating Authority.

(2) The resolution professional shall exercise powers andperform duties as are vested or conferred on the interimresolution professional under this Chapter.

(3) In case of any appointment of a resolution professionalunder sub-sections (4) of Section 22, the interim resolutionprofessional shall provide all the information, documents andrecords pertaining to the corporate debtor in his possessionand knowledge to the resolution professional.

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25. Duties of resolution professional.—(1) It shall be the duty of the resolution professional to preserve and protect the assetsof the corporate debtor, including the continued businessoperations of the corporate debtor.

(2) For the purposes of sub-section (1), the resolutionprofessional shall undertake the following actions, namely—

(a) take immediate custody and control of all the assets ofthe corporate debtor, including the business records of thecorporate debtor; (b) represent and act on behalf of the corporate debtorwith third parties, exercise rights for the benefit of thecorporate debtor in judicial, quasi-judicial or arbitrationproceedings;

(c) raise interim finances subject to the approval of thecommittee of creditors under Section 28; ***

27. Replacement of resolution professional by committee ofcreditors.-

(1) Where, at any time during the corporate insolvencyresolution process, the committee of creditors is of theopinion that a resolution professional appointed underSection 22 is required to be replaced, it may replace himwith another resolution professional in the manner providedunder this section.

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30. Submission of resolution plan.—(1) A resolution applicantmay submit a resolution plan along with an affidavit statingthat he is eligible under Section 29-A to the resolutionprofessional prepared on the basis of the informationmemorandum.

(2) The resolution professional shall examine each resolutionplan received by him to confirm that each resolution plan—

(a) provides for the payment of insolvency resolutionprocess costs in a manner specified by the Board in priorityto the payment of other debts of the corporate debtor;(b) provides for the payment of debts of operationalcreditors in such manner as may be specified by the Boardwhich shall not be less than—

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(i) the amount to be paid to such creditors in the event of aliquidation of the corporate debtor under Section 53; or

(ii) the amount that would have been paid to such creditors,if the amount to be distributed under the resolution planhad been distributed in accordance with the order ofpriority in sub-section (1) of Section 53, whichever ishigher, and provides for the payment of debts of financialcreditors, who do not vote in favour of the resolution plan,in such manner as may be specified by the Board, whichshall not be less than the amount to be paid to suchcreditors in accordance with sub-section (1) of Section 53in the event of a liquidation of the corporate debtor.

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Explanation 1.—For the removal of doubts, it is herebyclarified that a distribution in accordance with theprovisions of this clause shall be fair and equitable to suchcreditors.

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31. Approval of resolution plan.—(1) If the AdjudicatingAuthority is satisfied that the resolution plan as approved bythe committee of creditors under sub-section (4) of Section30 meets the requirements as referred to in sub-section (2) ofSection 30, it shall by order approve the resolution plan whichEshall be binding on the corporate debtor and its employees,members, creditors, including the Central Government, anyState Government or any local authority to whom a debt inrespect of the payment of dues arising under any law for thetime being in force, such as authorities to whom statutorydues are owed, guarantors and other stakeholders involvedFin the resolution plan:

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Provided that the Adjudicating Authority shall, before passingan order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for itseffective implementation.

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33. Initiation of liquidation.—(1) Where the Adjudicating Authority,—

(a) before the expiry of the insolvency resolution processperiod or the maximum period permitted for completion of H

the corporate insolvency resolution process under Section12 or the fast track corporate insolvency resolution processunder Section 56, as the case may be, does not receive aresolution plan under sub-section (6) of Section 30; or (b) rejects the resolution plan under Section 31 for thenon-compliance of the requirements specified therein, it shall—

(i) pass an order requiring the corporate debtor to beliquidated in the manner as laid down in this Chapter;(ii) issue a public announcement stating that the corporatedebtor is in liquidation; and

(iii) require such order to be sent to the authority with whichthe corporate debtor is registered.

(2) Where the resolution professional, at any time during thecorporate insolvency resolution process but beforeconfirmation of resolution plan, intimates the AdjudicatingAuthority of the decision of the committee ofcreditors approved by not less than sixty-six per cent of thevoting share] to liquidate the corporate debtor, theAdjudicating Authority shall pass a liquidation order asreferred to in sub-clauses (i), (ii) and (iii) of clause (b) ofsub-section (1).

Explanation.—For the purposes of this sub-section, it is herebydeclared that the committee of creditors may take the decisionto liquidate the corporate debtor, any time after its constitutionunder sub-section (1) of Section 21 and before theconfirmation of the resolution plan, including at any timebefore the preparation of the information memorandum.

(3) Where the resolution plan approved by the AdjudicatingAuthority is contravened by the concerned corporate debtor,any person other than the corporate debtor, whose interestsare prejudicially affected by such contravention, may makean application to the Adjudicating Authority for a liquidationorder as referred to in sub-clauses (i), (ii) and (iii) of clause(b) of sub-section (1).

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(4) On receipt of an application under sub-section (3), if theAdjudicating Authority determines that the corporate debtorhas contravened the provisions of the resolution plan, it shallpass a liquidation order as referred to in sub-clauses (i), (ii)and (iii) of clause (b) of sub-section (1).

B(5) Subject to Section 52, when a liquidation order has beenpassed, no suit or other legal proceeding shall be institutedby or against the corporate debtor:

Provided that a suit or other legal proceeding may be institutedby the liquidator, on behalf of the corporate debtor, with theCprior approval of the Adjudicating Authority.”

45. Where any Corporate Debtor commits default, a FinancialCreditor, an Operational Creditor or the Corporate Debtor itself mayinitiate Corporate Insolvency Resolution Process in respect of suchCorporate Debtor, in the manner as provided in Chapter II of the IBC.

D46. The provisions of the IBC are designed to ensure that thebusiness and/or commercial activities of the Corporate Debtor arecontinued by a Resolution Professional, upon imposition of a moratorium,to give the Corporate Debtor some reprieve from coercive litigation,which could drain the Corporate Debtor of its financial resources.

E47. Under Section 7(2) of the IBC, read with the Insolvency andBankruptcy (Application to Adjudicating Authority) Rules, 2016,hereinafter referred to as “2016 Adjudicating Authority Rules” made inexercise of powers conferred, inter alia, by clauses (c) (d) (e) and (f)of sub-section (1) of Section 239 read with Sections 7, 8, 9 and 10 of theIBC, a financial creditor is required to apply in the prescribed Form 1 forFinitiation of the Corporate Insolvency Resolution Process, against aCorporate Debtor under Section 7 of the IBC, accompanied withdocuments and records required therein, and as specified in the Insolvencyand Bankruptcy Board of India (Insolvency Resolution Process forCorporate Persons) Regulations, 2016, hereinafter referred to as theG“2016 IB Board of India Regulations”.

48. Statutory Form 1 under Rule 4(1) of the 2016 AdjudicatingAuthority Rules comprises Parts I to V, of which Part I pertains toparticulars of the Applicant, Part II pertains to particulars of the CorporateDebtor and Part III pertains to particulars of the proposed InterimResolution Professional. Parts IV and V which require particulars ofH

Financial Debt with Documents, Records and Evidence of default, isextracted hereinbelow:- PART IV

PART V

49. Since a Financial Creditor is required to apply under Section 7of the IBC, in Statutory Form 1, the Financial Creditor can only fill inparticulars as specified in the various columns of the Form. There is noscope for elaborate pleadings. An application to the Adjudicating Authority A

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A(NCLT) under Section 7 of the IBC, in the prescribed form, cannottherefore, be compared with the plaint in a suit, and cannot be judged bythe same standards, as a plaint in a suit, or any other pleadings in a Courtof law.

50. Section 7(3) requires a financial creditor making an applicationBunder Section 7(1) to furnish records of the default recorded with theinformation utility or such other record or evidence of default as may bespecified; the name of the resolution professional proposed to act as anInterim Resolution Professional and any other information as may bespecified by the Insolvency and Bankruptcy Board of India.

C51. Section 7(4) of the IBC casts an obligation on the AdjudicatingAuthority to ascertain the existence of a default from the records of aninformation utility or on the basis of other evidence furnished by thefinancial creditor within fourteen days of the receipt of the applicationunder Section 7. As per the proviso to Section 7(4) of the IBC, insertedby amendment, by Act 26 of 2019, if the Adjudicating Authority has notDascertained the existence of default and passed an order, within thestipulated period of time of fourteen days, it shall record its reasons fornot doing so in writing. The application does not lapse for non-complianceof the time schedule. Nor is the Adjudicating Authority obliged to dismissthe application. On the other hand, the application cannot be dismissed,Ewithout compliance with the requisites of the Proviso to Section 7(5) ofthe IBC.

52. Section 7(5)(a) provides that when the Adjudicating Authorityis satisfied that a default has occurred, and the application under sub-section (2) of Section 7 is complete and there is no disciplinary proceedingpending against the proposed resolution professional, it may by orderFadmit such application. As per Section 7(5)(b), if the AdjudicatingAuthority is satisfied that default has not occurred or the applicationunder sub-Section (2) of Section 7 is incomplete or any disciplinaryproceeding is pending against the proposed resolution professional, itmay, by order, reject such application, provided that the AdjudicatingGAuthority shall, before rejecting the application under sub-section (b) ofSection 5, give notice to the applicant, to rectify the defects in hisapplication, within 7 days of receipt of such notice from the AdjudicatingAuthority.

53. The Corporate Insolvency Resolution Process commencesHon the date of admission of the application under sub-section (5) of Section 7 of the IBC. Section 7(7) casts an obligation on the Adjudicating Authorityto communicate an order under clause (a) of sub-section (5) of Section7 to the Financial Creditor and the Corporate Debtor and to communicatean order under clause (b) of sub-section (5) of Section 7 to the financialcreditor within seven days of admission or rejection of such application,as the case may be. Sections 8 and 9 of IBC pertain to InsolvencyResolution by an Operational Creditor and are not attracted in the factsand circumstances of this case. Section 10 pertains to initiation ofCorporate Insolvency Resolution Process by the Corporate Debtor itself,and is also not attracted in the facts and circumstances of the case.

54. Section 12(1) of the IBC requires the Corporate InsolvencyProcess to be completed within a period of 180 days from the date ofadmission of the application to initiate such process. The period of 180days is not extendable more than once.

55. The IBC is not just a statute for recovery of debts. It is alsonot a statute which only prescribes the modalities of liquidation of acorporate body, unable to pay its debts. It is essentially a statute whichworks towards the revival of a corporate body, unable to pay its debts,by appointment of a Resolution Professional.

56. In Swiss Ribbons Private Limited & Anr. v. Union of Indiaand Ors.[4], authored by Nariman, J. this Court observed: -

“28. It can thus be seen that the primary focus of thelegislation is to ensure revival and continuation of thecorporate debtor by protecting the corporate debtor from itsown management and from a corporate death by liquidation.The Code is thus a beneficial legislation which puts thecorporate debtor back on its feet, not being a mere recoverylegislation for creditors. The interests of the corporate debtorhave, therefore, been bifurcated and separated from that ofits promoters/those who are in management. Thus, theresolution process is not adversarial to the corporate debtorbut, in fact, protective of its interests. The moratorium imposedby Section 14 is in the interest of the corporate debtor itself,thereby preserving the assets of the corporate debtor duringthe resolution process. The timelines within which theresolution process is to take place again protects the corporatedebtor’s assets from further dilution, and also protects all its 4 (2019) 4 SCC 17

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Acreditors and workers by seeing that the resolution processgoes through as fast as possible so that another managementcan, through its entrepreneurial skills, resuscitate thecorporate debtor to achieve all these ends.”

57. IBC has overriding effect over other laws. Section 238 of theBIBC provides that the provisions of the IBC shall have effect,notwithstanding anything inconsistent therewith contained in any otherlaw, for the time being in force, or any other instrument, having effect byvirtue of such law.

58. Unlike coercive recovery litigation, the Corporate InsolvencyResolution Process under the IBC is not adversarial to the interests ofCthe Corporate Debtor, as observed by this Court in Swiss Ribbons PrivateLimited v. Union of India (supra).

59. On the other hand, the IBC is a beneficial legislation for equaltreatment of all creditors of the Corporate Debtor, as also the protectionof the livelihoods of its employees/workers, by revival of the CorporateDDebtor through the entrepreneurial skills of persons other than those inits management, who failed to clear the dues of the Corporate Debtor toits creditors. It only segregates the interests of the Corporate Debtorfrom those of its promoters/persons in management.

60. Relegation of creditors to the remedy of coercive litigationEagainst the Corporate Debtors could be detrimental to the interests ofthe Corporate Debtor and its creditors alike. While multiple coerciveproceedings against a Corporate Debtor in different forums could impedeits commercial/business activities, deplete its cash reserves, dissipate itsassets, moveable and immoveable and precipitate its commercial death,Fsuch proceedings might not be economically viable for the creditors aswell, because of the length of time consumed in the litigations, theexpenses of litigation, and the uncertainties of realisation of claims evenafter ultimate success in the litigation.

61. It is, therefore, imperative that the provisions of the IBC andGthe Rules and Regulations framed thereunder be construed liberally, in apurposive manner to further the objects of enactment of the statute.

62. On a careful reading of the provisions of the IBC and inparticular the provisions of Section 7(2) to (5) of the IBC read with the2016 Adjudicating Authority Rules, there is no bar to the filing of H

documents at any time until a final order either admitting or dismissingthe application has been passed.

63. The time stipulation of fourteen days in Section 7(4) toascertain the existence of a default is apparently directory not mandatory.The proviso inserted by amendment with effect from 16[th] August 2019provides that if the Adjudicating Authority has not ascertained the defaultand passed an order under sub-section (5) of Section 7 of the IBC withinthe aforesaid time, it shall record its reasons in writing for not doing so.No other penalty is stipulated.

64. Furthermore, the proviso to Section 7(5)(b) of the IBC requiresthe Adjudicating Authority to give notice to an applicant, to rectify thedefect in its application within seven days of receipt of such notice fromthe Adjudicating Authority, before rejecting its application under Clause(b) of sub-section (5) of Section 7 of the IBC. When the AdjudicatingAuthority calls upon the applicant to cure some defects, that defect hasto be rectified within seven days. However, in the absence of anyprescribed penalty in the IBC for inability to cure the defects in anapplication within seven days from the date of receipt of notice, in anappropriate case, the Adjudicating Authority may accept the curedapplication, even after expiry of seven days, for the ends of justice.

65. The Insolvency Committee of the Ministry of CorporateAffairs, Government of India, in a report published in March 2018, statedthat the intent of the IBC could not have been to give a new lease of lifeto debts which were already time barred. Thereafter Section 238A wasincorporated in the IBC by the Insolvency and Bankruptcy Code (SecondAmendment) Act, 2018 (Act 26 of 2018), with effect from 6[th] June2018.

66. 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 appealsbefore the Adjudicating Authority, the National Company LawAppellate Tribunal, the Debt Recovery Tribunal or the DebtRecovery Appellate Tribunal, as the case may be.”

67. In Sesh Nath Singh & Anr. v. Baidyabati SheoraphuliCooperative Bank Ltd.[5], authored by one of us (Indira Banerjee, J.),this Court held:- 5 2021 SCC Online SC 244

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A“91. Legislature has in its wisdom chosen not to make theprovisions of the Limitation Act verbatim applicable toproceedings in NCLT/NCLAT, but consciously used the words‘as far as may be’. The words ‘as far as may be’ are not meantto be otiose. Those words are to be understood in the sense inwhich they best harmonise with the subject matter of theBlegislation and the object which the Legislature has in view.The Courts would not give an interpretation to those wordswhich would frustrate the purposes of making the LimitationAct applicable to proceedings in the NCLT/NCLAT ‘as far asmay be’.

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94. The use of words ‘as far as may be’, occurring in Section238A of the IBC tones down the rigour of the words ‘shall’ inthe aforesaid Section which is normally considered asmandatory. The expression ‘as far as may be’ is indicative ofDthe fact that all or any of the provisions of the Limitation Actmay not apply to proceedings before the AdjudicatingAuthority (NCLT) or the Appellate authority (NCLAT) if theyare patently inconsistent with some provisions of the IBC. Atthe same time, the words ‘as far as may be’ cannot be construedEas a total exclusion of the requirements of the basic principlesof Section 14 of the Limitation Act, but permits a wider, moreliberal, contextual and purposive interpretation by necessarymodification, which is in harmony with the principles of thesaid Section.”

68. There is no specific period of limitation prescribed in theFLimitation Act, 1963, for an application under the IBC, before theAdjudicating Authority (NCLT). An application for which no period oflimitation is provided anywhere else in the Schedule to the LimitationAct, is governed by Article 137 of the Schedule to the said Act. UnderArticle 137 of the Schedule to the Limitation Act, the period of limitationGprescribed for such an application is three years from the date of accrualof the right to apply.

69. There can be no dispute with the proposition that the period oflimitation for making an application under Section 7 or 9 of the IBC isthree years from the date of accrual of the right to sue, that is, the date H

of default. In Gaurav Hargovindbhai Dave v. Asset ReconstructionCompany (India) Ltd.[6 ]authored by Nariman, J. this Court held:- “6. …...The present case being “an application” which is filedunder Section 7, would fall only within the residuary Article137.”

70. In B. K. Educational Services Private Limited v. ParagGupta and Associates[7], this Court speaking through Nariman, J. held:- “42. It is thus clear that since the Limitation Act is applicableto applications filed under Sections 7 and 9 of the Code fromthe inception of the Code, Article 137 of the Limitation Actgets attracted. “The right to sue”, therefore, accrues when adefault occurs. If the default has occurred over three yearsprior to the date of filing of the application, the applicationwould be barred under Article 137 of the Limitation Act, saveand except in those cases where, in the facts of the case,Section 5 of the Limitation Act may be applied to condone thedelay in filing such application.”

71. In Jignesh Shah v. Union of India[8] this Court speakingthrough Nariman, J. reiterated the proposition that the period of limitationfor making an application under Section 7 or 9 of the IBC was threeyears from the date of accrual of the right to sue, that is, the date ofdefault.

72. In Radha Exports (India) (P) Ltd. v. K.P. Jayaram[9], thisCourt held:- “32. The proposition of law which emerges from InnoventiveIndustries Ltd. [Innoventive Industries Ltd. v. Icici Bank,(2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356] is that theinsolvency resolution process begins when a default takesplace. In other words, once a debt or even part thereofbecomes due and payable, the resolution process begins.Section 3(11) defines “debt” as a liability or obligation inrespect of a claim and the claim means a right to paymenteven if it is disputed. The Code gets triggered the moment 6 (2019) 10 SCC 5727 (2019) 11 SCC 633

8 (2019) 10 SCC 750

9 (2020) 10 SCC 538

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Adefault is of Rs 1,00,000 or more. Once the adjudicatingauthority is satisfied that a default has occurred, theapplication must be admitted, unless it is otherwise incompleteand not in accordance with the rules. The judgment is however,not an authority for the proposition that a petition underSection 7 IBC has to be admitted, even if the claim is ex facieBbarred by limitation.

33. On the other hand, in B.K. Educational Services (P)Ltd. v. Parag Gupta & Associates [B.K. Educational Services(P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633 :(2018) 5 SCC (Civ) 528] , this Court held : (SCC p. 664,Cpara 42)

“42. It is thus clear that since the Limitation Act isapplicable to applications filed under Sections 7 and 9 ofthe Code from the inception of the Code, Article 137 of theLimitation Act gets attracted. “The right to sue”, therefore,Daccrues when a default occurs. If the default has occurredover three years prior to the date of filing of theapplication, the application would be barred under Article137 of the Limitation Act, save and except in those caseswhere, in the facts of the case, Section 5 of the LimitationEAct may be applied to condone the delay in filing suchapplication.”

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35. It was for the applicant invoking the corporate insolvencyresolution process, to prima facie show the existence in hisFfavour, of a legally recoverable debt. In other words, therespondent had to show that the debt is not barred bylimitation, which they failed to do.”

73. In Babulal Vardharji Gurjar v. Veer Gurjar AluminiumIndustries (P) Ltd.[10], relied upon by the Respondents, this Court, speakingGthrough Dinesh Maheshwari, J., reiterated that the period of limitationfor an application seeking initiation of CIRP under Section 7 of the IBC,was governed by Article 137 of the Limitation Act, 1963 and was,therefore, three years from the date when the right to apply accrued,

i.e., the date when default occurred. In Babulal Vardharji Gurjar(supra), this Court observed and held:- “35. Apart from the above and even if it be assumed that theprinciples relating to acknowledgment as per Section 18 ofthe Limitation Act are applicable for extension of time for thepurpose of the application under Section 7 of the Code, inour view, neither the said provision and principles come inoperation in the present case nor do they enure to the benefitof Respondent 2 for the fundamental reason that in theapplication made before NCLT, Respondent 2 specificallystated the date of default as “8-7-2011 being the date of NPA”.It remains indisputable that neither has any other date ofdefault been stated in the application nor has any suggestionabout any acknowledgment been made. As noticed, even inPart V of the application, Respondent 2 was required to statethe particulars of financial debt with documents and evidenceon record. In the variety of descriptions which could havebeen given by the applicant in the said Part V of theapplication and even in residuary Point 8 therein, nothingwas at all stated at any place about the so-calledacknowledgment or any other date of default.

35.1. Therefore, on the admitted fact situation of the presentcase, where only the date of default as “8-7-2011” has beenstated for the purpose of maintaining the application underSection 7 of the Code, and not even a foundation is laid inthe application for suggesting any acknowledgment or anyother date of default, in our view, the submissions sought tobe developed on behalf of Respondent 2 at the later stagecannot be permitted. It remains trite that the question oflimitation is essentially a mixed question of law and facts andwhen a party seeks application of any particular provisionfor extension or enlargement of the period of limitation, therelevant facts are required to be pleaded and requisite evidenceis required to be adduced. Indisputably, in the present case,Respondent 2 never came out with any pleading other thanstating the date of default as “8-7-2011” in the application.That being the position, no case for extension of period oflimitation is available to be examined. In other words, even ifSection 18 of the Limitation Act and principles thereof were A

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applicable, the same would not apply to the application underconsideration in the present case, looking to the very avermentregarding default therein and for want of any other avermentin regard to acknowledgment. In this view of the matter,reliance on the decision in Mahabir Cold Storage[11] does notadvance the cause of Respondent 2.

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36. The submissions made on behalf of the respondents thatthe rules of limitation are not meant to destroy the rights ofthe parties and reference to the decision in N. Balakrishnan[12]are also misplaced. Application of the rules of limitation toCIRP (by virtue of Section 238-A of the Code read with theabove referred consistent decisions of this Court) does not,in any manner, deal with any of the rights of Respondent 2; itonly bars recourse to the particular remedy of initiation ofCIRP under the Code. Equally, the other submissions madeon behalf of the respondents about any stringent applicationof the law of limitation which was introduced to the Codeonly after filing of the application by Respondent 2; or aboutthe so-called prejudice likely to be caused to other banksand financial institutions are also of no substance, particularlyin the light of the principles laid down and consistentlyfollowed by this Court right from the decision in B.K.Educational Services[13]. These contentions have only beennoted to be rejected. Needless to add that when the applicationmade by Respondent 2 for CIRP is barred by limitation, noproceedings undertaken therein after the order of admissioncould be of any effect. All such proceedings remain non estand could only be annulled.”

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74. In Vashdeo R. Bhojwani v. Abhyudaya Co-operative BankLtd. & Ors.[14]this Court rejected the contention that the default was acontinuing wrong and Section 23 of the Limitation Act 1963 would apply,relying upon Balkrishna Savalram Pujari Waghmare v. ShreeDhyaneshwar Maharaj Sansthan[15].

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11 1991 Supp (1) SCC 40212 (1998) 7 SCC 12313 (2019) 11 SCC 63314 (2019) 9 SCC 158H15 1959 Supp (2) SCR 476

75. To quote P.B. Gajendragadkar, J. in Balkrishna SavalramPujari Wagmare (supra):- “......Section 23 refers not to a continuing right but to acontinuing wrong. It is the very essence of a continuing wrongthat it is an act which creates a continuing source of injuryand renders the doer of the act responsible and liable for thecontinuance of the said injury. If the wrongful act causes aninjury which is complete, there is no continuing wrong eventhough the damage resulting from the act may continue. If,however, a wrongful act is of such a character that the injurycaused by it itself continues, then the act constitutes acontinuing wrong. In this connection it is necessary to drawa distinction between the injury caused by the wrongful actand what may be described as the effect of the said injury. Itis only in regard to acts which can be properly characterisedas continuing wrongs that Section 23 can be invoked. .....”

76. There can be no dispute with the proposition of law laid downin Babulal Vardharji Gurjar (supra) that limitation is essentially a mixedquestion of law and facts and when a party seeks application of anyparticular provision for extension or enlargement of the period of limitation,the relevant facts are required to be pleaded and requisite evidence isrequired to be adduced. However, as observed above, an application ina statutory form cannot be judged in the manner of a plaint in a suit.Documents filed along with the application, or later, and subsequentaffidavits and applications would have to be construed as part of thepleadings.

77. The judgment of this Court in Babulal Vardharji Gurjar(supra) was rendered in the facts of the aforesaid case, where the dateof default had been mentioned as 8.7.2011 being the date of N.P.A. andit remained undisputed that there had neither been any other date ofdefault stated in the application nor had any suggestion about anyacknowledgement been made.

78. In the backdrop of the aforesaid facts, this court observedthat even if Section 18 of the Limitation Act and principles thereof wereapplicable, the same would not apply to the application under consideration,in view of the averments regarding default therein and for want of anyother averment with regard to acknowledgment.

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A79. It is well settled, that a judgment is a precedent for the issueof law that is raised and decided and not observations made in the factsof any particular case. To quote V. Sudhish Pai in “ConstitutionalSupremacy-A Revisit”, “Judicial utterances/pronouncements are inthe setting of the facts of a particular case. To interpret words andprovisions of a statute it may become necessary for judges to embarkBupon lengthy discussions, but such discussion is meant to explainnot define. Judges interpret statutes, their words are not to beinterpreted as statutes.” The aforesaid passage was extracted andincorporated as part of the judgment of this Court in Sesh Nath Singh(supra).C

80. Babulal Vardharji Gurjar (supra) is not an authority for theproposition that the Books of Accounts of a Corporate Debtor could notbe treated as acknowledgement of liability to a Financial Creditor. Nordoes the judgment lay down the proposition that any affidavits ordocuments filed during the pendency of the proceedings cannot be takenDinto consideration.

81. In Sesh Nath Singh (supra) this Court held that the IBC doesnot exclude the application of Section 14 or 18 or any other provision ofthe Limitation Act. There is, therefore, no reason to suppose that Sections14 or 18 of the Limitation Act do not apply to proceedings under SectionE7 or Section 9 of the IBC. In Laxmi Pat Surana v. Union Bank ofIndia[16] this Court speaking through Khanwilkar J. held that there wasno reason to exclude the effect of Section 18 of the Limitation Act toproceedings initiated under the IBC. In Bishal Jaiswal (supra), thisCourt, speaking through Nariman J. relied, inter alia, on Sesh NathSingh (supra) and Laxmi Pat Surana (supra) and held that the questionFof applicability of Section 18 of the Limitation Act to proceedings underthe IBC was no longer res integra.

82. Section 18 of the Limitation Act is set out hereinunder:- “18. Effect of acknowledgment in writing.—(1) Where, beforethe expiration of the prescribed period for a suit or applicationGin respect of any property or right, an acknowledgment ofliability in respect of such property or right has been made inwriting signed by the party against whom such property orright is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall becomputed from the time when the acknowledgment was sosigned.

(2) Where the writing containing the acknowledgment isundated, oral evidence may be given of the time when it wassigned; but subject to the provisions of the Indian EvidenceAct, 1872 (1 of 1872), oral evidence of its contents shall notbe received.

Explanation.—For the purposes of this section,—

(a) an acknowledgment may be sufficient though it omits tospecify the exact nature of the property or right, or avers thatthe time for payment, delivery, performance or enjoyment hasnot yet come or is accompanied by refusal to pay, deliver,perform or permit to enjoy, or is coupled with a claim to setoff, or is addressed to a person other than a person entitledto the property or right, (b) the word “signed” means signed either personally or byan agent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shallnot be deemed to be an application in respect of any propertyor right.”

83. As per Section 18 of Limitation Act, an acknowledgement ofpresent subsisting liability, made in writing in respect of any right claimedby the opposite party and signed by the party against whom the right isclaimed, has the effect of commencing a fresh period of limitation fromthe date on which the acknowledgement is signed. Such acknowledgementneed not be accompanied by a promise to pay expressly or even byimplication. However, the acknowledgement must be made before therelevant period of limitation has expired.

84. In Khan Bahadur Shapoor Fredoom Mazda v. DurgaPrasad Chamaria and Others[17], this Court held:- “6. It is thus clear that acknowledgment as prescribed bySection 19 merely renews debt; it does not create a new rightof action. It is a mere acknowledgment of the liability in respectof the right in question; it need not be accompanied by a A

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Apromise to pay either expressly or even by implication. Thestatement on which a plea of acknowledgment is based mustrelate to a present subsisting liability though the exact natureor the specific character of the said liability may not beindicated in words. Words used in the acknowledgment must,however, indicate the existence of jural relationship betweenBthe parties such as that of debtor and creditor, and it mustappear that the statement is made with the intention to admitsuch jural relationship. Such intention can be inferred byimplication from the nature of the admission, and need not beexpressed in words. If the statement is fairly clear then theCintention to admit jural relationship may be implied from it.The admission in question need not be express but must bemade in circumstances and in words from which the courtcan reasonably infer that the person making the admissionintended to refer to a subsisting liability as at the date of thestatement. In construing words used in the statements madeDin writing on which a plea of acknowledgment rests oralevidence has been expressly excluded but surroundingcircumstances can always be considered. Stated generallycourts lean in favour of a liberal construction of suchstatements though it does not mean that where no admissionEis made one should be inferred, or where a statement wasmade clearly without intending to admit the existence of juralrelationship such intention could be fastened on the makerof the statement by an involved or far-fetched process ofreasoning. Broadly stated that is the effect of the relevantprovisions contained in Section 19, and there is really noFsubstantial difference between the parties as to the true legalposition in this matter.”

85. It is well settled that entries in books of accounts and/or balancesheets of a Corporate Debtor would amount to an acknowledgment underSection 18 of the Limitation Act. In Bishal Jaiswal (supra) authored byGNariman, J. this Court quoted with approval the judgments, inter alia, ofCalcutta High Court in Bengal Silk Mills Co. v. Ismail Golam HossainAriff,[18] and Pandem Tea Co.[19]Ltd., the judgment of the Delhi HighCourt in South Asia Industries (P) Ltd. v. General Krishna Shamsher 18 1961 SCC Cal 128: AIR 1962 Cal 115H19 AIR 1974 Cal 170

Jung Bahadur Rana[20]and the judgment of Karnataka High Court inHegde Golay Ltd. v. State Bank of India[21]and held that anacknowledgement of liability that is made in a balance sheet can amountto an acknowledgement of debt.

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“9. ….. I am unable to agree with the reasoning of the Nagpurdecision that a balance-sheet does not save limitation becauseit is drawn up under a duty to set out the claims made on thecompany and not with the intention of acknowledging liability.The balance-sheet contains admissions of liability; the agentCof the company who makes and signs it intends to make thoseadmissions. The admissions do not cease to beacknowledgements of liability merely on the ground that theywere made in discharge of a statutory duty. I notice that inthe Nagpur case the balance-sheet had been signed by adirector and had not been passed either by the Board ofDDirectors or by the company at its annual general meetingand it seems that the actual decision may be distinguished onthe ground that the balance-sheet was not made or signed bya duly authorized agent of the company.

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11. To come under section 19 an acknowledgement of a debtneed not be made to the creditor nor need it amount to apromise to pay the debt. In England it has been held that abalance-sheet of a company stating the amount of itsindebtedness to the creditor is a sufficient acknowledgementin respect of a specialty debt under section 5 of the CivilProcedure Act, 1833 (3 and 4 Will — 4c. 42), see Re : Atlanticand Pacific Fibre Importing and Manufacturing Co. Ltd.,[1928] Ch. 836…….”

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liabilities side indicating the liability of the petitioning creditoralong with the statement of the Directors made to theshareholders as Directors’ report should be read together andif so whether reading these two statements together theseamount to an acknowledgement as contemplated underSection 18 of the Limitation Act, 1963, or Section 19 of theLimitation Act, 1908. In my opinion, both these statementshave to be read together. The balance-sheet is meant to bepresented and passed by the shareholders and is generallyaccompanied by the Directors’ report to the shareholders.Therefore, in understanding the balance-sheets and inexplaining the statements in the balance-sheets, the balance-sheets together with the Directors’ report must be takentogether to find out the true meaning and purport of thestatements. Counsel appearing for petitioning creditorcontended that under the statute the balance-sheet was aseparate document and as such if there was unequivocalacknowledgement on the balance-sheet the statement of theDirectors’ report should not be taken into consideration. It istrue the balance-sheet is a statutory document and perhapsis a separate document but the balance-sheet not confirmedor passed by the shareholders cannot be accepted as correct.Therefore, in order to validate the balance-sheet, it must beduly passed by the shareholders at the appropriate meetingand in order to do so it must be accompanied by a report, ifany, made by the Directors. Therefore, even though thebalance-sheet may be a separate document these twodocuments in the facts and circumstances of the case shouldbe read together and should be construed together. It washeld by the Supreme Court in the case of L.C.Mills v. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67 : AIR1971 SC 1482, that it was clear that the statement on whichthe plea of acknowledgement was founded should relate to asubsisting liability as the section required and it should bemade before the expiration of the period prescribed underthe Act. It need not, however, amount to a promise to pay foran acknowledgement did not create a new right of action butmerely extended the period of limitation. The statement neednot indicate the exact nature or the specific character of the liability. The words used in the statement in question must,however, relate to a present subsisting liability and indicatethe existence of a jural relationship between the parties suchas, for instance, that of a debtor and a creditor and theintention to admit such jural relationship. Such an intentionneed not, however, be in express terms and could be inferredby implication from the nature of the admission and thesurrounding circumstances. Generally speaking, a liberalconstruction of the statement in question should be given.That of course did not mean that where a statement was madewithout intending to admit the existence of jural relationship,such intention should be fastened on the person making thestatement by an involved and far-fetched reasoning. In orderto find out the intention of the document by whichacknowledgement was to be construed the document as awhole must be read and the intention of the parties must befound out from the total effect of the document read as awhole. …”

88. In South Asia Industries (P) Ltd. v. General KrishnaShamsher Jung Bahadur Rana (supra), the Delhi High Court observed:-

“46. Shri Rameshwar Dial argued that statements in thebalance-sheet of a company cannot amount toacknowledgement of liability because the balance-sheet ismade under compulsion of the provisions in the CompaniesAct. There is no force in this argument. In the first place, section18 of the Limitation Act, 1963, requires only that theacknowledgement of liability must have been made in writing,but it does not prescribe that the writing should be in anyparticular kind of document. So, the fact that the writing iscontained in a balance-sheet is immaterial. In the secondplace, it is true that section 131 of the Companies Act, 1913(section 210 of the Companies Act, 1956) makes it compulsorythat an annual balance sheet should be prepared and placedbefore the Company by the Directors, and section 132 (section211 of the Companies Act, 1956) requires that the balance-sheet should contain a summary, inter alia, of the currentliabilities of the company. But, as pointed out by Bachawat J.in Bengal Silk Mills v. Ismail Golam Hossain Ariff, AIR 1962

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ACal 115 although there was statutory compulsion to preparethe annual balance-sheet, there was no compulsion to makeany particular admission, and a document is not taken out ofthe purview of section 18 of the Indian Limitation Act, 1963(section 19 of the Indian Limitation Act, 1908) merely on theground that it is prepared under compulsion of law or inBdischarge of statutory duty. Reference may also be made tothe decisions in Raja of Vizianagram v. Vizianagram MiningCo. Ltd., AIR 1952 Mad 136, Jones v. Bellgrove PropertiesLtd., (1949) 1 All ER 498; and Lahore Enamelling andStamping Co. v. A.K. Bhalla, AIR 1958 Punj 341, in whichCstatements in balance-sheets of companies were held to amountto acknowledgements of liability of the companies.

47. Shri Rameshwar Dial referred to the decision of the PrivyCouncil in Consolidated Agencies Ltd. v. Bertram Ltd., (1964)3 All ER 282. We shall advert to this decision presently whenDwe deal with another argument of Shri Rameshwar Dial, andit is sufficient to state so far as the argument underconsideration is concerned that even in this decision of thePrivy Council it has been recognised that balance-sheets couldin certain circumstances amount to acknowledgements ofliability. It cannot, therefore, be said as a general propositionEof law that statements in balance-sheets of a company cannotoperate at all as acknowledgements of liability as contendedby Shri Rameshwar Dial.”

89. In Hegde & Golay Limited v. State Bank of India (supra)the Karnataka High Court held:F“

“43. The acknowledgement of liability contained in thebalance-sheet of a company furnishes a fresh starting pointof limitation. It is not necessary, as the law stands in India,that the acknowledgement should be addressed andcommunicated to the creditor.”

G90. In Reliance Asset Reconstruction Co. Ltd. v. Hotel PoonjaInternational Pvt. Ltd.[22], the Appellant had relied on two documents inthe Paper Book, that is, (i) the Balance Sheet of the Corporate Debtordated 16[th] August, 2017 and (ii) a letter dated 23[rd] April, 2019 issued by the Corporate Debtor to contend that the proceedings under Section 7of the IBC were not barred by limitation, as limitation would start runningafresh for a period of three years from the respective dates of thosedocuments in acknowledgment of liability.

91. This Court, however, did not accept the balance sheet dated16[th] August, 2017 and the letter dated 23[rd] April, 2019 in the special factsand circumstances of the case where it could not be ascertained if thedocuments had been signed before the expiry of the prescribed periodof limitation. This Court also found that the two documents could not beconstrued as admission that amounted to acknowledgement of the juralrelationship and the existence of liability, since the balance sheet dated16[th] August, 2017 did not acknowledge or admit any liability. Rather theCorporate Debtor had disputed and denied its liability. Similarly, the letterdated 23[rd] April, 2019 was also found not be an acknowledgment oradmission of liability. On the other hand, the language of the letter madeit absolutely clear that the liability had in fact been denied.

92. Significantly, in Reliance Asset Reconstruction (supra), theloan had been sanctioned by Vijaya Bank in May 1986. The loan amountwas declared NPA on 1[st] April 1993, an original application moved underthe Debt Recovery Act was compromised in 2001 and the DRT hadissued a Recovery Certificate in May 2003. Vijaya Bank assigned itsReliance Asset Reconstruction in May 2011 after which amendedRecovery Certificate was issued in December 2012. The petition underSection 7 of the IBC was, however filed on 27[th] July 2018.

93. Section 18 of the Limitation Act speaks of an Acknowledgmentin writing of liability, signed by the party against whom such property orright is claimed. Even if the writing containing the acknowledgment isundated, evidence might be given of the time when it was signed. Theexplanation clarifies that an acknowledgment may be sufficient eventhough it is accompanied by refusal to pay, deliver, perform or permit toenjoy or is coupled with claim to set off, or is addressed to a personother than a person entitled to the property or right. ‘Signed’ is to beconstrued to mean signed personally or by an authorised agent.

94. In Lakshmirattan Cotton Mills Co. Ltd. v. Aluminium Corpn.of India Ltd.[23], this Court held:- A

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“8. Section 19(1) of the Limitation Act, 1908, provides thatwhere, before the expiration of the period prescribed for asuit in respect of any property or right, an acknowledgmentof liability in respect of such property or right has been madein writing signed by the party against whom such property orright is claimed, a fresh period of limitation shall be computedfrom the time when the acknowledgment was so signed. Theexpression ‘signed’ here means not only signed personally bysuch a party, but also by an agent duly authorised in thatbehalf. Explanation 1 to the section then provides that anacknowledgment would be sufficient though it omits to specifythe exact nature of the property or right, or avers that thetime for payment has not yet come, or is accompanied by arefusal to pay or is coupled with a claim to a set-off, or isaddressed to a person other than the person entitled to theproperty or right. The new Act of 1963, contains in Section18 substantially similar provisions.

9. It is clear that the statement on which the plea ofacknowledgment is founded must relate to a subsisting liabilityas the section requires that it must be made before theexpiration of the period prescribed under the Act. It neednot, however, amount to a promise to pay, for, anacknowledgment does not create a new right of action butmerely extends the period of limitation. The statement neednot indicate the exact nature or the specific character of theliability. The words used in the statement in question, however,must relate to a present subsisting liability and indicate theexistence of jural relationship between the parties, such as,for instance, that of a debtor and a creditor and the intentionto admit such jural relationship. Such an intention need notbe in express terms and can be inferred by implication fromthe nature of the admission and the surroundingcircumstances. Generally speaking, a liberal construction ofthe statement in question should be given. That of course doesnot mean that where a statement is made without intending toadmit the existence of jural relationship, such intention shouldbe fastened on the person making the statement by an involvedand far-fetched reasoning. (See Khan Bahadur ShapoorFredoom Mazda v. Durga Prasad Chamaria [1962 (1) SCR

140] and Tilak Ram v. Nathu [AIR 1967 SC 935 at 938, 939]). As Fry, L.J., Green v. Humphreys [(1884) 26 Ch D 474 at481] said “an acknowledgment is an admission by the writerthat there is a debt owing by him, either to the receiver of theletter or to some other person on whose behalf the letter isreceived but it is not enough that he refers to a debt as beingdue from somebody. In order to take the case out of the statutethere must upon the fair construction of the letter, read in thelight of the surrounding circumstances, be an admission thatthe writer owes the debt”. As already stated, the person makingthe acknowledgment can be both the debtor himself as also aperson duly authorised by him to make the admission. In KhanBahadur Shapoor Fredoom Mazda case the Court accepteda statement in a letter by a mortgagor to a second mortgageeto save the mortgaged property from being sold away at acheap price at the instance of the prior mortgagee by himselfpurchasing it as one amounting to an admission of the juralrelationship of a mortgagor and mortgagee, and therefore,to an acknowledgment within Section 19. Also, an agreementof reference to arbitration containing an unqualifiedadmission that whoever on account should be proved to bethe debtor would pay to the other has been held to amount toan acknowledgment. Such an admission is not subject to thecondition that before the agreement should operate as anacknowledgment, the liability must be ascertained by thearbitrator. The acknowledgment operates whether thearbitrator acts or not. (See Tejpal Saraogi v. Lallanjee Jain [CA No. 766 of 1962, decided on February, 8, 1965],approving Abdul Rahim Oosman & Co. v. OjamsheePrushottamdas & Co. [1928 ILR 56 Cal 639].”

95. In Jignesh Shah and Another v. Union of India (supra),this Court relied upon a judgment of the Patna High Court in FerroAlloys Corporation Limited v. Rajhans Steel Limited[24], and held ineffect that an application under Section 7 or 9 of the IBC may be timebarred, even though some other recovery proceedings might have beeninstituted earlier, well within the period of limitation, in respect of thesame debt. However, it would be a different matter, if the applicant had ABC

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Aapproached the Adjudicating Authority after obtaining a final order and/or decree in the recovery proceedings, if the decree remained unsatisfied.This Court held that a decree and/or final adjudication would give rise toa fresh period of limitation for initiation of the Corporate InsolvencyResolution Process.

B96. In Dena Bank (Now Bank of Baroda) v. C. ShivakumarReddy and Another[25], this Court held:-

“138. While it is true that default in payment of a debt triggersthe right to initiate the corporate resolution process, and apetition under Section 7 or 9 IBC is required to be filed withinCthe period of limitation prescribed by law, which in this casewould be three years from the date of default by virtue ofSection 238-A IBC read with Article 137 of the Schedule tothe Limitation Act, the delay in filing a petition in the NCLT iscondonable under Section 5 of the Limitation Act unlike delayin filing a suit. Furthermore, as observed above Sections 14Dand 18 of the Limitation Act are also applicable to proceedingsunder the IBC.

139. Section 18 of the Limitation Act cannot also be construedwith pedantic rigidity in relation to proceedings under theIBC. This Court sees no reason why an offer of one-timeEsettlement of a live claim, made within the period of limitation,should not also be construed as an acknowledgment to attractSection 18 of the Limitation Act. In Gaurav HargovindbhaiDave [Gaurav Hargovindbhai Dave v. Asset ReconstructionCo. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1]cited by Mr Shivshankar, this Court had no occasion toFconsider any proposal for one-time settlement. Be that as itmay, the balance sheets and financial statements of thecorporate debtor for 2016-2017, as observed above,constitute acknowledgment of liability which extended thelimitation by three years, apart from the fact that a certificateGof recovery was issued in favour of the appellant Bank inMay 2017. The NCLT rightly admitted the application by itsorder dated 21-3-2019 [Dena Bank v. Kavveri TelecomInfrastructure Ltd., 2019 SCC OnLine NCLT 7881] .

140. To sum up, in our considered opinion an applicationunder Section 7 IBC would not be barred by limitation, onthe ground that it had been filed beyond a period of threeyears from the date of declaration of the loan account of thecorporate debtor as NPA, if there were an acknowledgmentof the debt by the corporate debtor before expiry of the periodof limitation of three years, in which case the period oflimitation would get extended by a further period of threeyears.

142. There is no bar in law to the amendment of pleadings inan application under Section 7 IBC, or to the filing ofadditional documents, apart from those initially filed alongwith application under Section 7 IBC in Form 1. In theabsence of any express provision which either prohibits orsets a time-limit for filing of additional documents, it cannotbe said that the adjudicating authority committed any illegalityor error in permitting the appellant Bank to file additionaldocuments. Needless however, to mention that depending onthe facts and circumstances of the case, when there isinordinate delay, the adjudicating authority might, at itsdiscretion, decline the request of an applicant to file additionalpleadings and/or documents, and proceed to pass a finalorder. In our considered view, the decision of the adjudicatingauthority to entertain and/or to allow the request of theappellant Bank for the filing of additional documents withsupporting pleadings, and to consider such documents andpleadings did not call for interference in appeal.”

97. To sum up, in our considered opinion an application underSection 7 of the IBC would not be barred by limitation, on the groundthat it had been filed beyond a period of three years from the date ofdeclaration of the loan account of the Corporate Debtor as NPA, ifthere were an acknowledgement of the debt by the Corporate Debtorbefore expiry of the period of limitation of three years, in which case theperiod of limitation would get extended by a further period of three years.

98. In this case, the amount of the Corporate Debtor was declaredNPA on 1[st] December 2008. By a letter dated 7[th] February, 2011, writtenwell within three years, the Corporate Debtor acknowledged its liabilityand proposed a settlement. This was followed by several requests ofextension of time to make payment and revised settlements. On 6[th] April, AB

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A2013, the Corporate Debtor sought extension of time to payRs.239,88,27,673 outstanding as on 31[st] March 2013. On 19[th] April, 2013,the Corporate Debtor made payment of Rs.17,50,00,000/-. On 1[st] July,2013, the Corporate Debtor acknowledged its liability – this was afterthe Appellant Financial Creditor revoked the settlement invoking thedefault clause. The Corporate Debtor acknowledged its liabilities in itsBfinancial statements from 2008-09 till 2016-17. The application underSection 7(2) of the IBC was filed on 3[rd] April 2018, well within theextended period of limitation.

99. For the reasons discussed above, the impugned judgment andorder is unsustainable in law and facts. The appeals are, accordinglyCallowed, and the impugned judgment and order of the NCLAT is setaside.

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Ankit Gyan

(Assisted by : Rahul Rathi, LCRA)

Appeals allowed.

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