# DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR REDDY AND ANR

- **Citation:** [2021] 8 S.C.R. 1061
- **Court:** Supreme Court of India
- **Decided:** 2021-08-04
- **Case number:** Civil Appeal No.1650 of 2020
- **Bench:** Indira Banerjee, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dena-bank-now-bank-of-baroda-v-c-shivakumar-reddy-and-anr-35158
- **Pages:** 79

## Headnote

Insolvency and Bankruptcy Code, 2016:
s. 7 - Initiation of corporate insolvency resolution process
by financial creditor - Petition u/s. 7, if barred by limitation - On
facts, appellant Bank sanctioned term loan and letter of credit cum
buyer's credit in favour of corporate debtor - However, in 2013
the corporate debtor defaulted in repayment of its dues to the bank
and loan amount declared as non-performing asset-NPA -Issuance
of notice to corporate debtor in 2014, to clear its dues - Pursuant
thereto, in 2015 Bank filed application for recovery of the
outstanding dues - In 2017, Debt Recovery tribunal passed a
recovery order alongwith recovery certificate in favour of the Bank
- Thereafter, in 2018, Bank filed petition u/s. 7 of the IBC - Within
three months, Bank filed application to place on record additional
documents, recovery order and recovery certificate which was
allowed - Another application allowed to place on record letter of
the corporate debtor proposing one time settlement, and financial
statements of the corporate debtor - Thereafter, petition u/s. 7
admitted by the adjudicating authority-NCLT, however, the appellate
authority-NCLAT set aside the said order, holding the application
to be barred by limitation - On appeal, held: Application u/s. 7 not
barred by limitation, on the ground that it had been filed beyond a
period of three years from the date of declaration of the loan account
of the corporate debtor as NPA - There was an acknowledgement
of the debt by the corporate debtor before expiry of the period of
limitation of three years, in which case the period of limitation would
get extended by a further period of three years -Recovery order by
the DRT and the recovery certificate issued in favour of the Bank
in 2017 gave a fresh cause of action to the Bank to initiate a petition
u/s. 7 - Offer of one time settlement of a live claim made in 201, and
the balance sheets and financial statements of the corporate debtor
[2021] 8 S.C.R. 1061
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for 2016-2017, constitute acknowledgement of liability which
extended the limitation by three years - These documents were
brought on record before any final decision was taken in the petition
u/s. 7, thus, NCLT rightly admitted the application.
s. 7 - Application u/s. 7 for initiation of Corporate insolvency
resolution process (CIRP) - Limitation period of three years for
filing application - Final judgment and decree of the Debt Recovery
tribunal in favour of the financial creditor, as also issuance of
recovery certificate - Held: Would give rise to a fresh cause of
action to the Financial Creditor to initiate proceedings u/s. 7 for
initiation of CIRP, within three years from the date of the final
judgment and decree, and/or within three years from the date of
issuance of the recovery certificate.
s. 7 - Application under - Filing of additional documents -
Permissibility of - Held: There is no bar in law to the amendment of
pleadings, in a petition u/s. 7 or to the filing of additional documents,
apart from those filed initially, along with the petition u/s. 7 of the
IBC in Form-1 - In the absence of any express provision prohibiting
or setting a time limit for filing of additional documents, it cannot
be said that the Adjudicating Authority committed any illegality or
error in permitting the Bank to file additional documents - When
there is inordinate delay, the Adjudicating Authority might, at its
discretion, decline the request of an applicant to file additional
pleadings and/or documents, and proceed to pass a final order.
s. 3(12)- 'Default' -Definition of - Held: Is "non-payment'
of a debt which has become due and payable whether in whole or
any part and is not paid by the Corporate Debtor".
Object and scope of - Nature of construction - Held: IBC is
a beneficial legislation for equal treatment of all creditors of the
corporate debtor, as also the protection of the livelihoods of its
employees/workers,

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1061
DENA BANK (NOW BANK OF BARODA)
v.
C. SHIVAKUMAR REDDY AND ANR.
(Civil Appeal No.1650 of 2020)
AUGUST 04, 2021
[INDIRA BANERJEE AND V. RAMASUBRAMANIAN, JJ.]
Insolvency and Bankruptcy Code, 2016:
s. 7 - Initiation of corporate insolvency resolution process
by financial creditor - Petition u/s. 7, if barred by limitation - On
facts, appellant Bank sanctioned term loan and letter of credit cum
buyer's credit in favour of corporate debtor - However, in 2013
the corporate debtor defaulted in repayment of its dues to the bank
and loan amount declared as non-performing asset-NPA -Issuance
of notice to corporate debtor in 2014, to clear its dues - Pursuant
thereto, in 2015 Bank filed application for recovery of the
outstanding dues - In 2017, Debt Recovery tribunal passed a
recovery order alongwith recovery certificate in favour of the Bank
- Thereafter, in 2018, Bank filed petition u/s. 7 of the IBC - Within
three months, Bank filed application to place on record additional
documents, recovery order and recovery certificate which was
allowed - Another application allowed to place on record letter of
the corporate debtor proposing one time settlement, and financial
statements of the corporate debtor - Thereafter, petition u/s. 7
admitted by the adjudicating authority-NCLT, however, the appellate
authority-NCLAT set aside the said order, holding the application
to be barred by limitation - On appeal, held: Application u/s. 7 not
barred by limitation, on the ground that it had been filed beyond a
period of three years from the date of declaration of the loan account
of the corporate debtor as NPA - There was an acknowledgement
of the debt by the corporate debtor before expiry of the period of
limitation of three years, in which case the period of limitation would
get extended by a further period of three years -Recovery order by
the DRT and the recovery certificate issued in favour of the Bank
in 2017 gave a fresh cause of action to the Bank to initiate a petition
u/s. 7 - Offer of one time settlement of a live claim made in 201, and
the balance sheets and financial statements of the corporate debtor
[2021] 8 S.C.R. 1061
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for 2016-2017, constitute acknowledgement of liability which
extended the limitation by three years - These documents were
brought on record before any final decision was taken in the petition
u/s. 7, thus, NCLT rightly admitted the application.
s. 7 - Application u/s. 7 for initiation of Corporate insolvency
resolution process (CIRP) - Limitation period of three years for
filing application - Final judgment and decree of the Debt Recovery
tribunal in favour of the financial creditor, as also issuance of
recovery certificate - Held: Would give rise to a fresh cause of
action to the Financial Creditor to initiate proceedings u/s. 7 for
initiation of CIRP, within three years from the date of the final
judgment and decree, and/or within three years from the date of
issuance of the recovery certificate.
s. 7 - Application under - Filing of additional documents -
Permissibility of - Held: There is no bar in law to the amendment of
pleadings, in a petition u/s. 7 or to the filing of additional documents,
apart from those filed initially, along with the petition u/s. 7 of the
IBC in Form-1 - In the absence of any express provision prohibiting
or setting a time limit for filing of additional documents, it cannot
be said that the Adjudicating Authority committed any illegality or
error in permitting the Bank to file additional documents - When
there is inordinate delay, the Adjudicating Authority might, at its
discretion, decline the request of an applicant to file additional
pleadings and/or documents, and proceed to pass a final order.
s. 3(12)- 'Default' -Definition of - Held: Is "non-payment'
of a debt which has become due and payable whether in whole or
any part and is not paid by the Corporate Debtor".
Object and scope of - Nature of construction - Held: IBC is
a beneficial legislation for equal treatment of all creditors of the
corporate debtor, as also the protection of the livelihoods of its
employees/workers, by revival of the corporate debtor - It only
segregates the interests of the corporate debtor from those of its
promoters/persons in management - Relegation of creditors to the
remedy of coercive litigation against the corporate debtors could
be detrimental to the interests of the corporate debtor and its creditors
alike - Thus, the provisions of the IBC and the Rules and Regulations
framed thereunder to be construed liberally, in a purposive manner
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to further the objects of enactment of the statute, and not to be
given a narrow, pedantic interpretation which defeats the purposes
of the Act.
Limitation Act, 1963:
Art. 137 - Applicability of, to Insolvency and Bankruptcy
Code - Held: There is no specific period of limitation prescribed in
the Limitation Act, for an application under the IBC, before the
Adjudicating Authority (NCLT), thus, is governed by Art. 137 of the
Schedule wherein the period of limitation prescribed for such an
application is three years from the date of accrual of the right to
apply - Thus, the period of limitation for making an application u/
s. 7 or 9 of the IBC is three years from the date of accrual of the
right to sue, that is, the date of default.
s. 18 - Acknowledgment in writing - Effect of - Held: As per
s. 18, an acknowledgement of present subsisting liability, made in
writing in respect of any right claimed by the opposite party and
signed by the party against whom the right is claimed, has the effect
of commencing a fresh period of limitation from the date on which
the acknowledgement is signed - However, the acknowledgement
must be made before the relevant period of limitation has expired -
An offer of One Time Settlement of a live claim, made within the
period of limitation, can be construed as an acknowledgment to
attract s. 18 of the Act.
Interpretation of statutes: Construction/interpretation of
statutory provision - Held: Legislative intent of the statute is to be
seen from the words used by the legislature itself - In case of doubt
it is always safe to look into the object and purpose of the statute
or the reason and spirit behind it - Each word, phrase or sentence
has to be construed in the light of the general purpose of the Act
itself.
Allowing the appeal, the Court
HELD: 1.1 Under Section 7(2) of the Insolvency and
Bankruptcy Code, 2016 read with the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016 made in
exercise 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
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
REDDY AND ANR.
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10 of the IBC, a financial creditor is required to apply in the
prescribed Form 1 for initiation of the Corporate Insolvency
Resolution Process, against a Corporate Debtor under Section
7 of the IBC, accompanied with documents and records required
therein, and as specified in the Insolvency and Bankruptcy Board
of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016. [Para 71][1112-B-D]
1.2 Since a Financial Creditor is required to apply under
Section 7 of the IBC, in statutory Form 1, the Financial Creditor
can only fill in particulars as specified in the various columns of
the Form. There is no scope for elaborate pleadings. An
application to the Adjudicating Authority (NCLT) under Section
7 of the IBC in the prescribed form, cannot therefore, be
compared with the plaint in a suit. Such application cannot be
judged by the same standards, as a plaint in a suit, or any other
pleadings in a Court of law. [Para 73][1113-E-F]
1.3 The IBC is not just another statute for recovery of debts.
Nor is it a statute which merely prescribes the modalities of
liquidation of a Corporate body, unable to pay its debts. It is
essentially a statute which works towards the revival of a
Corporate body, unable to pay its debts, by appointment of a
Resolution Professional. [Para 79][1115-A-B]
Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC
407 : [2017] 8 SCR 33; P. Mohanraj & Ors. v. Shah
Brothers Ispat Private Limited (2021) SCC Online SC
152; Swiss Ribbons Private Limited & Anr. v. Union of
India and Ors. (2019) 4 SCC 17 : [2019] 3 SCR 535 -
referred to.
1.4 IBC has overriding effect over other laws. Section 238
of the IBC provides that the provisions of the IBC shall have
effect, notwithstanding anything inconsistent therewith contained
in any other law, for the time being in force, or any other
instrument, having effect by virtue of such law. Unlike coercive
recovery litigation, the Corporate Insolvency Resolution Process
under the IBC is not adversarial to the interests of the Corporate
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Debtor. On the other hand, the IBC is a beneficial legislation for
equal treatment of all creditors of the Corporate Debtor, as also
the protection of the livelihoods of its employees/workers, by
revival of the Corporate Debtor through the entrepreneurial skills
of persons other than those in its management, who failed to clear
the dues of the Corporate Debtor to its creditors. It only
segregates the interests of the Corporate Debtor from those of
its promoters/persons in management. [Para 84-86][1120-A-D]
1.5 Relegation of creditors to the remedy of Coercive
litigation against the Corporate Debtors could be detrimental to
the interests of the Corporate Debtor and its creditors alike.
While multiple coercive proceedings against a Corporate Debtor
in different forums could impede its commercial/business
activities, deplete its cash reserves, dissipate its assets,
moveable and immoveable and precipitate its commercial death,
such proceedings might not be economically viable for the
creditors as well, because of the length of time consumed in the
litigations, the expenses of litigation, and the uncertainties of
realisation of claims even after ultimate success in the litigation.It
is, therefore, imperative that the provisions of the IBC and the
Rules and Regulations framed thereunder be construed liberally,
in a purposive manner to further the objects of enactment of the
statute, and not be given a narrow, pedantic interpretation which
defeats the purposes of the Act. [Para 87, 88][1120-D-G]
1.6 In construing and/or interpreting any statutory provision
one must look into the legislative intent of the statute. The
intention of the statute has to be found in the words used by the
legislature itself. In case of doubt it is always safe to look into
the object and purpose of the statute or the reason and spirit
behind it. Each word, phrase or sentence has to be construed in
the light of the general purpose of the Act itself. The interpretative
effort "must be illumined by the goal, though guided by the
words". When a question arises as to the meaning of a certain
provision in a statute the provision has to be read in its context.
The statute has to be read as a whole. The previous state of the
law, the general scope and ambit of the statute and the mischief
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
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that it was intended to remedy are relevant factors. [Para 89,
90][1120-G-H; 1121-A-B]
Popatlal Shah v. State of Madras AIR 1953 SC 274 :
[1953] SCR 677 - relied on.
1.7 On a careful reading of the provisions of the IBC and in
particular the provisions of Section 7(2) to (5) of the IBC read
with the 2016 Adjudicating Authority Rules there is no bar to the
filing of documents at any time until a final order either admitting
or dismissing the application has been passed. The time
stipulation of fourteen days in Section 7(4) to ascertain the
existence of a default is apparently directory not mandatory. The
proviso inserted by amendment with effect from 28th December,
2019 provides that if the Adjudicating Authority has not
ascertained the default and passed an order under sub-section
(5) of Section 7 of the IBC within the aforesaid time, it shall record
its reasons in writing for the same. No other penalty is stipulated.
Furthermore, the proviso to Section 7(5)(b) of the IBC obliges
the Adjudicating Authority to give notice to an applicant, to rectify
the defect in its application within seven days of receipt of such
notice from the Adjudicating Authority, before rejecting its
application under Clause (b) of sub-section (5) of Section 7 of the
IBC. When the Adjudicating Authority calls upon the applicant
to cure some defects that defect has to be rectified within seven
days. There is no penalty prescribed for inability to cure the
defects in an application within seven days from the date of receipt
of notice, and in an appropriate case, the Adjudicating Authority
may accept the cured application, even after expiry of seven days,
for the ends of justice. Section 12 of the IBC imposes a time limit
for completion of the Corporate Insolvency Resolution Process.
This time limit starts running from the date of admission of an
application to initiate the Corporate Insolvency Resolution
Process. [Para 91-94][1121-C-H; 1122-A]
Arcelormittal (India) Pvt. Ltd. v. Satish Kumar Gupta
and Anr. (2019) 2 SCC 1 : [2018] 12 SCR 362 - referred
to.
1.8 The insolvency Committee of the Ministry of Corporate
Affairs, Government of India, in a report published in March 2018,
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stated that the intent of the IBC could not have been to give a
new lease of life to debts which were already time barred.
Thereafter, Section 238A was incorporated in the IBC by the
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
(Act 26 of 2018), with effect from 6th June 2018. [Para 97][1123G-H; 1124-A]
1.9 There is no specific period of limitation prescribed in
the Limitation Act, 1963, for an application under the IBC, before
the Adjudicating Authority (NCLT). An application for which no
period of limitation is provided anywhere else in the Schedule to
the Limitation Act, is governed by Article 137 of the Schedule to
the said Act. Under Article 137 of the Schedule to the Limitation
Act, the period of limitation prescribed for such an application is
three years from the date of accrual of the right to apply. The
period of limitation for making an application under Section 7 or
9 of the IBC is three years from the date of accrual of the right to
sue, that is, the date of default. [Para 100, 101][1125-A-D]
Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli
Cooperative Bank Ltd. and Anr. (2021) SCC Online
SC 244; Gaurav Hargovindbhai Dave v. Asset
Reconstruction Company (India) Ltd. and Anr. (2019)
SCC Online SC 1239 : (2019) 10 SCC 572 : [2019] 13
SCR 224; B. K. Educational Services Private Limited v.
Parag Gupta and Associates (2019) 11 SCC 633 :
[2018] 12 SCR 794; Jignesh Shah and Anr. v. Union of
India and Anr. (2019) SCC online SC 1254 : (2019)
10 SCC 750 : [2019] 12 SCR 678; 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. SCR 476 - referred
to.
1.10 Limitation is essentially a mixed question of law and
facts and when a party seeks application of any particular provision
for extension or enlargement of the period of limitation, the
relevant facts are required to be pleaded and requisite evidence
is required to be adduced. [Para 106][1126-E-F]
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
REDDY AND ANR.
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Babulal Vardharji Gurjar v. Veer Gurjar Aluminium
Industries Private Limited (2020) 15 SCC 1 - relied
on.
1.11 In the instant case, admittedly there were fresh
documents before the Adjudicating Authority (NCLT), including
a letter of offer dated 3.03.2017 for one time settlement of the
dues of the Corporate Debtor to the Financial Creditor, upon
payment of Rs.5.5 crores. The Appellant Bank has also relied
upon financial statements up to 31st March, 2018 apart from the
final judgment and order dated 27th March, 2017 in O.A.
16/2015 and the subsequent Recovery Certificate No. 2060/2017
dated 25th May, 2017 which constituted cause of action for
initiation of proceedings under Section 7 of the IBC. [Para
110][1127-D-E]
1.12 It is not necessary for this Court to examine the
relevance of all the documents filed by the Appellant Bank
pursuant to its interim applications being I.A. No. 27 of 2019 and
I.A. No. 131 of 2019. Suffice it to mention that the documents
enclosed with the applications being I.A. No. 27 of 2019 and I.A.
No. 131 of 2019 and the pleadings in the supporting affidavits,
made out a case for computation of limitation afresh from the
dates of the relevant documents. It would also be pertinent to
note that the reasons for the execution of the documents are
irrelevant. It is not the case of the respondents, that any of those
documents were extracted through coercion. [Para 112][1127-FH]
1.13 As per Section 18 of Limitation Act, an
acknowledgement of present subsisting liability, made in writing
in respect of any right claimed by the opposite party and signed
by the party against whom the right is claimed, has the effect of
commencing a fresh period of limitation from the date on which
the acknowledgement is signed. Such acknowledgement need
not be accompanied by a promise to pay expressly or even by
implication. However, the acknowledgement must be made before
the relevant period of limitation has expired. [Para 113][1128-AB]
1.14 IBC does not exclude the application of Section 14 or
18 or any other provision of the Limitation Act. There is therefore
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no reason to suppose that Sections 14 or 18 of the Limitation Act
do not apply to proceedings under Section 7 or Section 9 of the
IBC. [Para 114][1128-C-D]
Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli
Cooperative Bank Ltd. and Anr. (2021) SCC Online
SC 244; Laxmi Pat Surana v. Union Bank of India and
Ors. (2021) SCC Online SC 267; Asset Reconstruction
Company (India) Limited. v. Bishal Jaiswal and Ors.
(2021) SCC Online SC 321; Khan Bahadur Shapoor
Fredoom Mazda v. Durga Prasad Chamaria and Others
AIR 1961 SC 1236 : [1962] SCR 140 - referred to.
1.15 Entries in books of accounts and/or balance sheets of
a Corporate Debtor would amount to an acknowledgment under
Section 18 of the Limitation Act. [Para 118][1129-E-F]
Asset Reconstruction Company (India) Limited. v. Bishal
Jaiswal and Ors. (2021) SCC Online SC 321; Bengal
Silk Mills Co. v. Ismail Golam Hossain Ariff AIR 1962
Cal 115; Re Pandem Tea Co. Ltd. AIR 1974 Cal 170;
South Asia Industries (P) Ltd. v. General Krishna
Shamsher Jung Bahadur Rana ILR (1972) 2 Del 712;
Hegde & Golay Limited v. State Bank of India ILR 1987
Kar 2673; Reliance Asset Reconstruction Co. Ltd. v.
Hotel Poonja International Pvt. Ltd. (2021) 7 SCC
352 - referred to.
1.16 The finding of the NCLAT that there was nothing on
record to suggest that the 'Corporate Debtor' acknowledged the
debt within three years and agreed to pay debt is not sustainable
in law, in view of the Statement of Accounts/Balance sheets/
Financial Statements for the years 2016-2017 and 2017-2018 and
the offer of One Time Settlement referred to above including in
particular, the offer of One Time Settlement made on 3rd March,
2017. [Para 126][1134-F-G]
1.17 Section 18 of the Limitation Act speaks of an
acknowledgment in writing of liability, signed by the party against
whom such property or right is claimed. Even if the writing
containing the acknowledgment is undated, evidence might be
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given of the time when it was signed. The explanation clarifies
that an acknowledgment may be sufficient even though it is
accompanied by refusal to pay, deliver, perform or permit to enjoy
or is coupled with claim to set off, or is addressed to a person
other than a person entitled to the property or right. 'Signed' is
to be construed to mean signed personally or by an authorised
agent. [Para 127][1134-G-H; 1135-A]
1.18 In the instant case, Rs.111 lakhs had been paid towards
outstanding interest on 28th March, 2014 and the offer of One
Time Settlement was within three years thereafter. In any case,
NCLAT overlooked the fact that a Certificate of Recovery has
been issued in favour of Appellant Bank on 25th May 2017. The
Corporate Debtor did not pay dues in terms of the Certificate of
Recovery. The Certificate of Recovery in itself gives a fresh cause
of action to the Appellant Bank to institute a petition under
Section 7 of IBC. The petition under Section 7 IBC was well
within three years from 28th March 2014. [Para 128][1135-B-C]
Jignesh Shah and Anr. v. Union of India and Anr. (2019)
SCC online SC 1254 : (2019) 10 SCC 750 : [2019] 12
SCR 678; Ferro Alloys Corporation Limited v. Rajhans
Steel Limited (1999) SCC Online Pat 1196 - referred
to.
1.19 'Default' is defined in Section 3(12) to mean "nonpayment' of a debt which has become due and payable whether in
whole or any part and is not paid by the Corporate Debtor". [Para
133][1136-F]
1.20 It is true that, when the petition under Section 7 of
IBC was filed, the date of default was mentioned as 30.09.2013
and 31.12.2013 was stated to be the date of declaration of the
Account of the Corporate Debtor as NPA. However, it is not
correct to say that there was no averment in the petition of any
acknowledgment of debt. Such averments were duly incorporated
by way of amendment, and the Adjudicating Authority rightly
looked into the amended pleadings. [Para 134][1136-G-H]
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1.21 The Appellant Bank filed the Petition under Section 7
of the IBC on 12th October 2018. Within three months, the
Appellant Bank filed an application in the NCLT, for permission
to place additional documents on record including the final
judgment and order/decree dated 27.3.2017 and the Recovery
Certificate dated 25.5.2017, enabling the Appellant Bank to
recover Rs.52 crores odd. The judgment and order/decree of
the DRT and the Recovery Certificate gave a fresh cause of action
to the Appellant Bank to initiate a petition under Section 7 of the
IBC. [Para 135][1137-A-B]
1.22 On or about 5th March 2019, the Appellant Bank filed
another application for permission to place on record additional
documents including inter alia financial statements, Annual Report
etc. of the period from 1st April 2016 to 31st March 2017, and
again, from 1st April 2017 to 31st March 2018 and a letter dated
3rd March 2017 proposing a One Time Settlement. This
application was also allowed on 6th March 2021. The Adjudicating
Authority, took into consideration the new documents and
admitted the petition under Section 7 of the IBC.Even assuming
that documents were brought on record at a later stage, the
Adjudicating Authority was not precluded from considering the
same. The documents were brought on record before any final
decision was taken in the Petition under Section 7 of IBC. [Para
136, 137][1137-C-E]
1.23 A final judgment and order/decree is binding on the
judgment debtor. Once a claim fructifies into a final judgment
and order/decree, upon adjudication, and a certificate of Recovery
is also issued authorizing the creditor to realize its decretal dues,
a fresh right accrues to the creditor to recover the amount of the
final judgment and/or order/decree and/or the amount specified
in the Recovery Certificate.The Appellant Bank was thus entitled
to initiate proceedings u/s. 7 within three years from the date of
issuance of the Recovery Certificate. The Petition of the Appellant
Bank, would not be barred by limitation at least till 24th May,
2020. [Para 138, 139][1137-E-G]
1.24 While it is true that default in payment of a debt triggers
the right to initiate the Corporate Resolution Process, and a
Petition under Section 7 or 9 of the IBC is required to be filed
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
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within the period of limitation prescribed by law, which in this
case would be three years from the date of default by virtue of
Section 238A of the IBC read with Article 137 of the Schedule to
the Limitation Act, the delay in filing a Petition in the NCLT is
condonable under Section 5 of the Limitation Act unlike delay in
filing a suit. Furthermore, Section 14 and 18 of the Limitation
Act are also applicable to proceedings under the IBC. [Para
140][1137-G-H; 1138-A-B]
1.25 Section 18 of the Limitation Act cannot also be
construed with pedantic rigidity in relation to proceedings under
the IBC. This Court sees no reason why an offer of One Time
Settlement of a live claim, made within the period of limitation,
should not also be construed as an acknowledgment to attract
Section 18 of the Limitation Act. Be that as it may, the Balance
Sheets and Financial Statements of the Corporate Debtor for 20162017, constitute acknowledgement of liability which extended the
limitation by three years, apart from the fact that a Certificate of
Recovery was issued in favour of the Appellant Bank in May
2017. The NCLT rightly admitted the application by its order
dated 21st March, 2019. [Para 141][1138-B-D]
1.26 An application under Section 7 of the IBC would not
be barred by limitation, on the ground that it had been filed beyond
a period of three years from the date of declaration of the loan
account of the Corporate Debtor as NPA, if there were an
acknowledgement of the debt by the Corporate Debtor before
expiry of the period of limitation of three years, in which case the
period of limitation would get extended by a further period of
three years. Moreover, a judgment and/or decree for money in
favour of the Financial Creditor, passed by the DRT, or any other
Tribunal or Court, or the issuance of a Certificate of Recovery in
favour of the Financial Creditor, would give rise to a fresh cause
of action for the Financial Creditor, to initiate proceedings under
Section 7 for initiation of the Corporate Insolvency Resolution
Process, within three years from the date of the judgment and/or
decree or within three years from the date of issuance of the
Certificate of Recovery, if the dues of the Corporate Debtor to
the Financial Debtor, under the judgment and/or decree and/or
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in terms of the Certificate of Recovery, or any part thereof
remained unpaid. [Para 142, 143][1138-D-H]
1.27 There is no bar in law to the amendment of pleadings
in an application under Section 7 of the IBC, or to the filing of
additional documents, apart from those initially filed along with
application under Section 7 of the IBC in Form-1. In the absence
of any express provision which either prohibits or sets a time
limit for filing of additional documents, it cannot be said that the
Adjudicating Authority committed any illegality or error in
permitting the Appellant Bank to file additional documents.
Needless however, to mention that depending on the facts and
circumstances of the case, when there is inordinate delay, the
Adjudicating Authority might, at its discretion, decline the request
of an applicant to file additional pleadings and/or documents, and
proceed to pass a final order. The decision of the Adjudicating
Authority to entertain and/or to allow the request of the Appellant
Bank for the filing of additional documents with supporting
pleadings, and to consider such documents and pleadings did not
call for interference in appeal.The impugned judgment and order
is unsustainable in law and facts. [Para 144, 145][1138-H; 1139A-D]
Nazir Mohamed v. J. Kamala & Ors. (2020) SCC
OnLine SC 676 - referred to.
Case Law Reference
[2019] 13 SCR 224
referred to
Para 29
(2020) 15 SCC 1
relied on
Para 55
[2017] 8 SCR 33
referred to
Para 80
[2019] 3 SCR 535
referred to
Para 83
[1953] SCR 677
relied on
Para 89
[2018] 12 SCR 362
referred to
Para 95
[2018] 12 SCR 794
referred to
Para 102
[2019] 12 SCR 75
referred to
Para 104
[1959] 2 Suppl. SCR 476
referred to
Para 104
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
REDDY AND ANR.
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[1962] SCR 140
referred to
Para 117
AIR 1962 Cal
referred to
Para 118
AIR 1974 Cal 170
referred to
Para 118
ILR (1972) 2 Del 712
referred to
Para 118
ILR 1987 Kar 2673
referred to
Para 118
(2021) 7 SCC 352
referred to
Para 123
[2019] 12 SCR 678
referred to
Para 129
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1650
of 2020.
From the Judgment and Order dated 18.12.2019 of the Appellate
Tribunal (NCLAT) in Company Appeal (AT) (Insolvency) No. 407 of
2019.
Dhruv Mehta, Sr. Adv., Rajesh Kumar-I, Anant Gautam, Nipun
Sharma, Madhur Tewatia, Advs. for the Appellant.
Goutham Shivshankar, Adv. for the Respondents.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
1. This Appeal under Section 62 of the Insolvency and Bankruptcy
Code, 2016 (IBC) is against a judgment and final order dated
18th December 2019 passed by the National Company Law Appellate
Tribunal (NCLAT), allowing Company Appeal (AT) (Insolvency) No.407
of 2019, filed by the Respondents and setting aside an order dated
21st March 2019 passed by the Adjudicating Authority/National Company
Law Tribunal (NCLT), Bengaluru, whereby the Adjudicating Authority
had admitted the Petition being CP(IB) No.244/BB/2018 filed by the
Appellant Bank against the Respondent No.2 (Corporate Debtor) under
Section 7 of the IBC. The NCLAT held that the said Petition of the
Appellant Bank under Section 7 of the IBC, was barred by limitation.
The Respondent No.1 is a Director of the Corporate Debtor.
2. By a letter dated 23rd December, 2011 the Appellant Bank had
sanctioned Term Loan and Letter of Credit Cum Buyers' Credit in favour
of the Corporate Debtor, with an upper limit of Rs.45.00 Crores.
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3. The said Term Loan was to be repaid in 24 quarterly instalments
of Rs.187.50 lakhs, which were to commence two years after the date
of disbursement, and the entire Term Loan was to be repaid in eight
years, inclusive of the implementation period of one year and the
moratorium period.
4. The Corporate Debtor executed various documents including
Demand Promissory Notes, Letters of General Lien, etc. in favour of
the Appellant Bank and also mortgaged its lease hold rights in its
immovable property specified in the petition of appeal, by depositing the
Title of Deeds of the said immovable property with the Appellant Bank.
5. On 20th September, 2013 the Corporate Debtor defaulted in
repayment of its dues to the Appellant Bank. The Loan Account of the
Corporate was therefore declared Non Performing Asset (NPA) on
31st December 2013.
6. The Corporate Debtor addressed a letter dated 24th March
2014 to the Appellant Bank, making a request for restructuring the Term
Loan. The Appellant Bank did not accede to the request.
7. On 22nd December 2014, the Appellant Bank issued legal notice
to the Corporate Debtor as well as the Respondent No.2, calling upon
them to make payment of Rs.52.12 crores, claimed to be due from the
Corporate Debtor as on 22nd December 2014. The Corporate Debtor
did not make the payment.
8. On or about 1st January 2015, the Appellant Bank filed an
application being O.A. No.16/2015 under Section 19 of the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993, now known as
the Recovery of Debts and Bankruptcy Act, 1993 and hereinafter
referred to as 'the Debt Recovery Act' before the Debt Recovery Tribunal
(in short, DRT) Bangalore for recovery of its outstanding dues of
Rs.52,12,49,438.60 as on 22nd December 2014.
9. By a letter dated 5th January 2015, the Corporate Debtor replied
to the said notice dated 22nd December 2014, inter alia, requesting
once again, that the loan be restructured. Mr. Dhruv Mehta, Senior
Advocate, appearing on behalf of the Appellant Bank submitted that the
Corporate Debtor had accepted its liability to the Appellant Bank, by its
aforesaid letter dated 5th January 2015.
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
REDDY AND ANR. [INDIRA BANERJEE, J.]
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10. On or about 3rd March 2017, while proceedings were pending
in the DRT, the Corporate Debtor gave a proposal for one time settlement
of the Term Loan Account, upon payment of Rs.5.50 crores. The proposal
was, however, not accepted by the Appellant Bank.
11. On 27th March 2017, the Debt Recovery Tribunal, Bengaluru
passed a final judgment and order/decree against the Corporate Debtor
in the said O.A. No.16/2015, for recovery of Rs.52,12,49,438.60 with
future interest at the rate of 16.55% per annum, from the date of filing
the application till the date of realization.
12. On 25th May 2017, the Debt Recovery Tribunal issued a
Recovery Certificate No. 2060/2017, in favour of the Appellant Bank
for recovery of Rs.52,12,49,438.60 from the Corporate Debtor. Thereafter,
on 19th June 2017, Corporate Debtor once again gave the Appellant
Bank a proposal for One Time Settlement to mutually settle the loan
amount.
13. Mr. Mehta appearing for the Appellant Bank pointed out, that
the Corporate Debtor had, in its Annual Reports for the financial years
2016-2017 and 2017-2018, acknowledged its liability in respect of the
loan taken by it from the Appellant Bank.
14. On 1st October 2018, the Appellant Bank issued a Demand
Notice to the Corporate Debtor in Form-3 contained in the Insolvency
and Bankruptcy (Application to Adjudicating Authority) Rules, 2016,
hereinafter referred to as the '2016 Adjudicating Authority Rules', and
on 12th October 2018, the Appellant Bank filed the Petition being CP(IB)
No.244/BB/2018 before the Adjudicating Authority under Section 7 of
the IBC in Form-1 given in the Annexure to the 2016 Adjudicating
Authority Rules.
15. About three months thereafter, by a Notification being GSR
No.2(e) dated 2nd January 2019 the Department of Financial Services,
Ministry of Finance, Government of India amalgamated Vijaya Bank,
Dena Bank and Bank of Baroda.
16. On 9th January 2019, the Appellant Bank filed an application
before Adjudicating Authority under Rule 11 of the National Company
Law Tribunal Rules 2016 hereinafter referred to as the 'NCLT Rules',
read with Rule 4 of the 2016 Adjudicating Authority Rules, being I.A.
No.27/2019 dated 9th January 2019 in CP(IB) No.244/BB/2018, for
permission to place on record additional documents, including the final
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judgment and order dated 27.03.2017 of the DRT in OA No.16/2015
and the Recovery Certificate No.2060/2017 dated 25.05.2017 issued by
the DRT.
17. On 2nd February 2019, the Corporate Debtor filed its preliminary
objection to the Petition filed by the Appellant Bank under Section 7 of
the IBC, inter alia, contending that the said Petition was barred by
limitation.
18. By an order dated 4th February 2019, the Adjudicating Authority
allowed the application of the Appellant Bank being I.A No. 27/2019 in
CP (IB) No.244/BB/2018, and directed the Appellant Bank to file an
amended petition enclosing the documents referred to in the Application
being I.A. No.27/2019. The Registry was directed to permit the Counsel
for the Appellant Bank to amend the Company Petition accordingly.
19. On or about 5th March 2019, the Appellant Bank filed another
application under Rule 11 of the NCLT Rules, being I.A. No.131 of
2019 in CP(IB) No.244/BB/2018, before the Adjudicating Authority for
permission to place on record additional documents, including the letter
dated 03.03.2017 of the Corporate Debtor to the Appellant Bank
proposing a One Time Settlement, the Annual Report of the Corporate
Debtor for the years 2016-2017, the Financial Statement of the Corporate
Debtor for the period from 1st April 2016 to 31st March 2017 and the
Financial Statement of the Corporate Debtor, for the period from 1st
April 2017 to 31st March 2018. By an order dated 6.03.2019 in I.A.
No.131 of 2019, the Appellant Bank was permitted to file the documents
in the Registry.
20. By an order dated 21st March 2019 the Adjudicating Authority
admitted the Petition under Section 7 of the IBC, being CP(IB) No.244/
BB/2018, and appointed an Interim Resolution Professional. The objection
of the bar of limitation, raised on behalf of the Corporate Debtor was
considered at length, but rejected by the Adjudicating Authority (NCLT).
21. On 6th April 2019, the Respondent No.1, filed an appeal being
CA(AT) (Ins) No.407/2019 before the NCLAT under Section 61 of the
IBC. The Appellant Bank filed its written statement supporting the order
of the Adjudicating Authority dated 21st March 2019 admitting the Petition
of the Appellant Bank under Section 7 of the IBC.
22. After hearing the Appellant Bank, the Respondent No.1 and
the Corporate Debtor, the NCLAT set aside the order dated 21st March
DENA BANK (NOW BANK OF BARODA) v. C. SHIVAKUMAR
REDDY AND ANR. [INDIRA BANERJEE, J.]
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2019 passed by the Adjudicating Authority (NCLT) Bengaluru and
dismissed the Petition filed by the Appellant Bank under Section 7 of the
IBC, holding that the said application was barred by limitation.
23. The issue which arises for consideration of this Court, in this
appeal is, whether the NCLAT has erred in law in arriving at the
conclusion that, the Petition filed by the Appellant Bank under Section 7
of the IBC was barred by limitation, and setting aside the order dated
21st March 2019 passed by the Adjudicating Authority, admitting the said
Petition.
24. In other words, the main question involved in this appeal is,
whether a Petition under Section 7 of the IBC would be barred by
limitation, on the sole ground that it had been filed beyond a period of 3
years from the date of declaration of the loan account of the Corporate
Debtor as NPA, even though the Corporate Debtor might subsequently
have acknowledged its liability to the Appellant Bank, within a period of
three years prior to the date of filing of the Petition under Section 7 of
the IBC, by making a proposal for a One Time Settlement, or by
acknowledging the debt in its statutory Balance Sheets and Books of
Accounts.
25. Another question which arises for the consideration of this
Court is, whether a final judgment and decree of the DRT in favour of
the Financial Creditor, or the issuance of a Certificate of Recovery in
favour of the Financial Creditor, would give rise to a fresh cause of
action to the Financial Creditor to initiate proceedings under Section 7 of
the IBC within three years from the date of the final judgment and decree,
and/or within three years from the date of issuance of the Certificate of
Recovery.
26. A third issue which arises for adjudication of this Court is,
whether there is any bar in law to the amendment of pleadings, in a
Petition under Section 7 of the IBC, or to the filing of additional documents,
apart from those filed initially, along with the Petition under Section 7 of
the IBC in Form-1.
27. Mr. Mehta appearing on behalf of the Appellant Banksubmitted
that the Adjudicating Authority had passed its order dated 21st March
2019, admitting the Petition of the Appellant Bank under Section 7 of the
IBC, after taking into consideration the documents filed by the Appellant
Bank along with its interim applications being I.A. No. 27 of 2019 and
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I.A. No.131 of 2019, and arriving at the finding that the Petition filed by
the Appellant Bank under Section 7 of the IBC was not barred by
limitation.
28. Mr.