# STATE BANK OF INDIA v. KRISHIDHAN SEEDS PRIVATE LIMITED

- **Citation:** [2022] 2 S.C.R. 1155
- **Court:** Supreme Court of India
- **Decided:** 2022-04-18
- **Case number:** Civil Appeal No. 910 of 2021
- **Bench:** Dr. Dhananjaya Y Chandrachud, Surya Kant
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-bank-of-india-v-krishidhan-seeds-private-limited-35823
- **Pages:** 9

## Headnote

Insolvency and Bankruptcy Code 2016 - s.7 - Limitation Act,
1963 - s.18 - Applicability of - Default, acknowledgment in balance
sheet of company - Proceedings under IBC - Limitation - Appellant
filed application for initiation of Corporate Insolvency Resolution
Process (CIRP) on the ground that the respondent defaulted in paying
the financial debt - Date of default was mentioned as 10.06.14,
when the respondent's account was declared as a Non-Performing
Asset (NPA) - Application rejected by NCLT on ground of limitation
observing that the account was declared an NPA on 10.06.14, while
the proceeding u/s.7 was instituted on 19.09.18, beyond three years
from the date on which the right to apply accrued - Order upheld
by NCLAT- On appeal, held: Judgment of NCLAT in V Padmakumar
v. Stressed Assets Stabilisation Fund and Another which was relied on
by NCLT has been overruled by a three-Judge Bench judgment of
Supreme Court in Asset Reconstruction Company (India) Limited v
Bishal Jaiswal and Anr.-An acknowledgment in a balance sheet
without a qualification can be relied upon for the purpose of the
proceedings under the IBC so long as the acknowledgment was
within a period of three years from the original date of default -
Provisions of s.18, Limitation Act are not alien to and are applicable
to proceedings under the IBC - However, in the present case since
proceedings are being restored back to NCLT for afresh adjudication
in view of decisions of Supreme Court, the factual dispute on whether
the application filed u/s.7 of the IBC would result in an initiation of
the CIRP is not being entered upon - Order of NCLAT and NCLT
set aside - All rights and contentions of the parties left open on the
factual aspects, to be adjudicated upon before the NCLT.
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1156
SUPREME COURT REPORTS
[2022] 2 S.C.R.
Asset Reconstruction Company (India) Limited v Bishal
Jaiswal and Another (2021) 6 SCC 366; Laxmi Pat
Surana v Union Bank of India and Another (2021) 8
SCC 481; Rajendra Narottamdas Sheth and Another v
Chandra Prakash Jain and Another 2021 SCC OnLine
SC 843 - relied on.
Sesh Nath Singh v Baidyabati Sheoraphuli Coop. Bank
Ltd. (2021) 7 SCC 313; Dena Bank v C. Shivakumar
Reddy (2021) 10 SCC 330; State Bank of India v Vibha
Agro Tech Limited 2021 SCC OnLine SC 1297; Devas
Multimedia Private Ltd. v Antrix Corporation Ltd. and
Another 2022 SCC OnLine SC 46; SVG Fashions Pvt.
Ltd. (Earlier Known As SVG Fashions Ltd.) v Ritu Murli
Manohar Goyal and Another 2022 SCC OnLine SC
373 - referred to.
V Padmakumar v Stressed Assets Stabilisation Fund and
Another 2020 SCC Online NCLAT 417 - referred to.
Case Law Reference
(2021) 6 SCC 366
relied on
Para 8
(2021) 7 SCC 313
referred to
Para 9
(2021) 8 SCC 481
relied on
Para 10
(2021) 10 SCC 330
referred to
Para 12 (i)

## Text

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1155
[2022] 2 S.C.R. 1155
1155
STATE BANK OF INDIA
v.
KRISHIDHAN SEEDS PRIVATE LIMITED
(Civil Appeal No. 910 of 2021)
APRIL 18, 2022
[DR. DHANANJAYA Y CHANDRACHUD AND
SURYA KANT, JJ.]
Insolvency and Bankruptcy Code 2016 - s.7 - Limitation Act,
1963 - s.18 - Applicability of - Default, acknowledgment in balance
sheet of company - Proceedings under IBC - Limitation - Appellant
filed application for initiation of Corporate Insolvency Resolution
Process (CIRP) on the ground that the respondent defaulted in paying
the financial debt - Date of default was mentioned as 10.06.14,
when the respondent's account was declared as a Non-Performing
Asset (NPA) - Application rejected by NCLT on ground of limitation
observing that the account was declared an NPA on 10.06.14, while
the proceeding u/s.7 was instituted on 19.09.18, beyond three years
from the date on which the right to apply accrued - Order upheld
by NCLAT- On appeal, held: Judgment of NCLAT in V Padmakumar
v. Stressed Assets Stabilisation Fund and Another which was relied on
by NCLT has been overruled by a three-Judge Bench judgment of
Supreme Court in Asset Reconstruction Company (India) Limited v
Bishal Jaiswal and Anr.-An acknowledgment in a balance sheet
without a qualification can be relied upon for the purpose of the
proceedings under the IBC so long as the acknowledgment was
within a period of three years from the original date of default -
Provisions of s.18, Limitation Act are not alien to and are applicable
to proceedings under the IBC - However, in the present case since
proceedings are being restored back to NCLT for afresh adjudication
in view of decisions of Supreme Court, the factual dispute on whether
the application filed u/s.7 of the IBC would result in an initiation of
the CIRP is not being entered upon - Order of NCLAT and NCLT
set aside - All rights and contentions of the parties left open on the
factual aspects, to be adjudicated upon before the NCLT.
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1156
SUPREME COURT REPORTS
[2022] 2 S.C.R.
Asset Reconstruction Company (India) Limited v Bishal
Jaiswal and Another (2021) 6 SCC 366; Laxmi Pat
Surana v Union Bank of India and Another (2021) 8
SCC 481; Rajendra Narottamdas Sheth and Another v
Chandra Prakash Jain and Another 2021 SCC OnLine
SC 843 - relied on.
Sesh Nath Singh v Baidyabati Sheoraphuli Coop. Bank
Ltd. (2021) 7 SCC 313; Dena Bank v C. Shivakumar
Reddy (2021) 10 SCC 330; State Bank of India v Vibha
Agro Tech Limited 2021 SCC OnLine SC 1297; Devas
Multimedia Private Ltd. v Antrix Corporation Ltd. and
Another 2022 SCC OnLine SC 46; SVG Fashions Pvt.
Ltd. (Earlier Known As SVG Fashions Ltd.) v Ritu Murli
Manohar Goyal and Another 2022 SCC OnLine SC
373 - referred to.
V Padmakumar v Stressed Assets Stabilisation Fund and
Another 2020 SCC Online NCLAT 417 - referred to.
Case Law Reference
(2021) 6 SCC 366
relied on
Para 8
(2021) 7 SCC 313
referred to
Para 9
(2021) 8 SCC 481
relied on
Para 10
(2021) 10 SCC 330
referred to
Para 12 (i)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 910 of
2021.
From the Judgment and Order dated 17.11.2020 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No.972 of 2020.
Niranjan Reddy, Sr. Adv., Divyam Agarwal, Ms. Fatema
Kachwalla, Ms. Pallavi Kumar, Karan Singh, Varghese Thomas, Advs.
for the Appellant.
Shyam Divan, Sr. Adv., Manu Agarwal, Vinayak Bhandari, Mrs.
Pragya Baghel, Advs. for the Respondent.
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The following Order of the Court was passed:
ORDER
1. The National Company Law Tribunal1, by its judgment dated
16 September 2020, rejected the application dated 19 September 20182
filed by the State Bank of India, the appellant, under Section 7 of the
Insolvency and Bankruptcy Code 20163 against the respondent, the
alleged Corporate Debtor, for initiation of the Corporate Insolvency
Resolution Process4.
2. The respondent received credit facilities from the appellant
commencing from 30 November 2006. According to the appellant, as on
24 June 2013, the outstanding under the credit facilities extended to the
respondent totaled to Rs 102.4 crores. In lieu of these credit facilities,
the respondent (along with other persons) provided securities in favor of
the appellant. The respondent allegedly failed to honor the terms of these
credit facilities and defaulted on their repayments. Hence, the respondent's
account with the appellant was classified as a Non-Performing Asset5 on
10 June 2014.
3. Thereafter, at various junctures, the appellant aimed to seek
recourse to Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 and Recovery of Debts Due
to Banks and Financial Institutions Act 1993, while continuing to engage
in negotiations with the respondent. Thereafter, the respondent issued
letter dated 19 January 2016 to the appellant offering a one-time
settlement6 of Rs 61 crores in lieu of its debts, which was conditionally
accepted by the appellant. However, by a letter dated 18 September
2017, the respondent unilaterally revised the OTS to Rs 40.6 crores,
which was refused by the appellant.
4. The application for initiation of the CIRP was then filed by the
appellanton the ground that there was a default on the part of the
respondent in paying a financial debt in the amount of approximately Rs
189 crores (calculated with interest as on 30 June 2018). The date of
default was mentioned as 10 June 2014, when the respondent's account
was declared as an NPA.
1 "NCLT"
2 TP No 82/2019 in CP (IB) No 500/7/NCLT/AHM/2018
3 "IBC"
4 "CIRP"
5 "NPA"
6 "OTS"
STATE BANK OF INDIA v. KRISHIDHAN SEEDS PRIVATE LIMITED
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1158
SUPREME COURT REPORTS
[2022] 2 S.C.R.
5. While rejecting the application under Section 7 of the IBC on
the ground of limitation, the NCLT observed that:
(i)
The respondent's loan account was declared to be an NPA
on 10 June 2014, while the proceeding under Section 7 was
instituted on 19 September 2018 beyond a period of three
years from the date on which the right to apply accrued;
(ii)
In the decision in the case of V Padmakumar v Stressed
Assets Stabilisation Fund and Another7, the NCLAT
has held that a statement contained in the balance sheet
cannot be treated as an acknowledgement of liability under
Section 18 of the Limitation Act 19638; and
(iii)
The proposal for OTS which was submitted by the
respondent on 18 September 2017 was also beyond three
years from the date of default.
6. The order of the NCLT has been upheld in appeal9 by the
National Company Law Appellate Tribunal10 on 17 November 2020. In
appeal, the NCLAT held that limitation will be calculated in accordance
with Article 137 of the Limitation Act. Presently in the appellant's
application filed before the NCLT in the prescribed format, the date of
default was recorded as 10 June 2014. The NCLAT held that such a
date could neither be shifted nor extended once the default occurred.
Hence, the application under Section 7, which was instituted on 19
September 2018, was held to be barred by limitation since it was filed
beyond four years from the date of default. The NCLAT further noted
that it was on the basis of such a default that the Financial Creditor had
moved the Debt Recovery Tribunal11 on 20 October 2015 and there
could not be two defaults in respect of the same debt; one for the purpose
of the DRT and another for the purpose of adjudication under the IBC.
Finally, the NCLAT held that recourse to Section 18 of the Limitation
Act was not available to the appellant.
7. In the present appeal, the appellant has appeared through Mr
Niranjan Reddy, senior counsel, while Mr Shyam Divan, senior counsel,
has appeared on behalf of the respondent.
7 2020 SCC Online NCLAT 417 ("V Padmakumar")
8 "Limitation Act"
9 Company Appeal (AT) (Insolvency) No 972 of 2020
10 "NCLAT"
11 "DRT"
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8. The NCLT placed reliance on the judgment in V Padmakumar
(supra). The decision in the above case has been specifically overruled
in a judgment of a three-Judge Bench of this Court in Asset
Reconstruction Company (India) Limited v Bishal Jaiswal and
Another12, where Justice R F Nariman, speaking for the Bench, held:
"46. It is, therefore, clear that the majority decision of the Full
Bench in V. Padmakumar is contrary to the aforesaid catena of
judgments. The minority judgment of Justice (Retd.) A.I.S.
Cheema, Member (Judicial), after considering most of these
judgments, has reached the correct conclusion. We, therefore,
set aside the majority judgment of the Full Bench of Nclat dated
12-3-2020"
9. Apart from the above decision, it is also necessary to note that
the provisions of Section 18 of the Limitation Act were held applicable
to IBC proceedings by a two-Judge Bench of this Court in Sesh Nath
Singh v Baidyabati Sheoraphuli Coop. Bank Ltd.13.
10. While the observation in Sesh Nath Singh (supra) was obiter
dicta, the matter has been set at rest in a decision of a three-Judge
Bench of this Court in Laxmi Pat Surana v Union Bank of India and
Another14, where, speaking for the Bench, Justice A M Khanwilkar
has held:
"42. Notably, the provisions of the Limitation Act have been made
applicable to the proceedings under the Code, as far as may be
applicable. For, Section 238-A predicates that the provisions of
the Limitation Act shall, as far as may be, apply to the proceedings
or appeals before the adjudicating authority, NCLAT, the DRT or
the Debt Recovery Appellate Tribunal, as the case may be. After
enactment of Section 238-A IBC on 6-6-2018, validity whereof
has been upheld by this Court, it is not open to contend that the
limitation for filing application under Section 7 IBC would be limited
to Article 137 of the Limitation Act and extension of prescribed
period in certain cases could be only under Section 5 of the
Limitation Act. There is no reason to exclude the effect of
Section 18 of the Limitation Act to the proceedings initiated
under the Code.
12 (2021) 6 SCC 366 ("Asset Reconstruction Company")
13 (2021) 7 SCC 313 ("Sesh Nath Singh")
14 (2021) 8 SCC 481 ("Laxmi Pat Surana")
STATE BANK OF INDIA v. KRISHIDHAN SEEDS PRIVATE LIMITED
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1160
SUPREME COURT REPORTS
[2022] 2 S.C.R.
43. Ordinarily, upon declaration of the loan account/debt as NPA
that date can be reckoned as the date of default to enable the
financial creditor to initiate action under Section 7 IBC. However,
Section 7 comes into play when the corporate debtor commits
"default". Section 7, consciously uses the expression "default"
- not the date of notifying the loan account of the corporate
person as NPA. Further, the expression "default" has been defined
in Section 3(12) to mean non-payment of "debt" when whole or
any part or instalment of the amount of debt has become due and
payable and is not paid by the debtor or the corporate debtor, as
the case may be. In cases where the corporate person had offered
guarantee in respect of loan transaction, the right of the financial
creditor to initiate action against such entity being a corporate
debtor (corporate guarantor), would get triggered the moment the
principal borrower commits default due to non-payment of debt.
Thus, when the principal borrower and/or the (corporate) guarantor
admit and acknowledge their liability after declaration of NPA but
before the expiration of three years therefrom including the fresh
period of limitation due to (successive) acknowledgments, it is not
possible to extricate them from the renewed limitation accruing
due to the effect of Section 18 of the Limitation Act. Section 18
of the Limitation Act gets attracted the moment acknowledgment
in writing signed by the party against whom such right to initiate
resolution process under Section 7 IBC enures. Section 18 of
the Limitation Act would come into play every time when
the principal borrower and/or the corporate guarantor
(corporate debtor), as the case may be, acknowledge their
liability to pay the debt. Such acknowledgment, however,
must be before the expiration of the prescribed period of
limitation including the fresh period of limitation due to
acknowledgment of the debt, from time to time, for
institution of the proceedings under Section 7 IBC. Further,
the acknowledgment must be of a liability in respect of which
the financial creditor can initiate action under Section 7
IBC."
(emphasis supplied)
11. An acknowledgement in a balance sheet without a qualification
can be relied upon for the purpose of the proceedings under the IBC.
This principle also emerges from the decision in Asset Reconstruction
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1161
Company (supra), which noted the decisions in Sesh Nath Singh (supra)
and Laxmi Pat Surana (supra). This Court held:
"35. A perusal of the aforesaid sections would show that there is
no doubt that the filing of a balance sheet in accordance with the
provisions of the Companies Act is mandatory, any transgression
of the same being punishable by law. However, what is of
importance is that notes that are annexed to or forming part of
such financial statements are expressly recognised by Section
134(7). Equally, the auditor's report may also enter caveats with
regard to acknowledgments made in the books of accounts
including the balance sheet. A perusal of the aforesaid would show
that the statement of law contained in Bengal Silk Mills, that
there is a compulsion in law to prepare a balance sheet but no
compulsion to make any particular admission, is correct in law as
it would depend on the facts of each case as to whether an entry
made in a balance sheet qua any particular creditor is unequivocal
or has been entered into with caveats, which then has to be
examined on a case by case basis to establish whether an
acknowledgment of liability has, in fact, been made, thereby
extending limitation under Section 18 of the Limitation Act."
12. The decisions in Sesh Nath Singh (supra), Laxmi Pat Surana
(supra) and Asset Reconstruction Company (supra) have subsequently
been followed in numerous decisions of this Court delivered by two-Judge
Benches, namely: (i) Dena Bank v C. Shivakumar Reddy15; (ii) State
Bank of India v Vibha Agro Tech Limited16; (iii) Devas Multimedia
Private Ltd. v Antrix Corporation Ltd. and Another17; and (iv) SVG
Fashions Pvt. Ltd. (Earlier Known As SVG Fashions Ltd.) v Ritu
Murli Manohar Goyal and Another18. Besides the above decisions,
there is a more recent decision of a three-Judge Bench of this Court in
Rajendra Narottamdas Sheth and Another v Chandra Prakash Jain
and Another19, where, speaking for the Bench, Justice L Nageswara
Rao held:
15 (2021) 10 SCC 330
16 2021 SCC OnLine SC 1297
17 2022 SCC OnLine SC 46
18 2022 SCC OnLine SC 373
19 2021 SCC OnLine SC 843
STATE BANK OF INDIA v. KRISHIDHAN SEEDS PRIVATE LIMITED
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SUPREME COURT REPORTS
[2022] 2 S.C.R.
"25. We have already held that the burden of prima facie proving
occurrence of the default and that the application filed under
Section 7 of the Code is within the period of limitation, is entirely
on the financial creditor. While the decision to admit an application
under Section 7 is typically made on the basis of material furnished
by the financial creditor, the Adjudicating Authority is not barred
from examining the material that is placed on record by the
corporate debtor to determine that such application is not beyond
the period of limitation. Undoubtedly, there is sufficient material
in the present case to justify enlargement of the extension period
in accordance with Section 18 of the Limitation Act and such
material has also been considered by the Adjudicating Authority
before admitting the application under Section 7 of the Code. The
plea of Section 18 of the Limitation Act not having been raised by
the Financial Creditor in the application filed under Section 7 cannot
come to the rescue of the Appellants in the facts of this case. It is
clarified that the onus on the financial creditor, at the time of filing
an application under Section 7, to prima facie demonstrate default
with respect to a debt, which is not time-barred, is not sought to
be diluted herein. In the present case, if the documents constituting
acknowledgement of the debt beyond April, 2016 had not been
brought on record by the Corporate Debtor, the application would
have been fit for dismissal on the ground of lack of any plea by
the Financial Creditor before the Adjudicating Authority with
respect to extension of the limitation period and application of
Section 18 of the Limitation Act."
13. In view of the above decisions, the position of law has been
set at rest. Neither the NCLT nor the NCLAT had the benefit of
adjudicating upon the factual controversy in the context of the decisions
of this Court. The principles which emerge are that:
(i)
The provisions of Section 18 of the Limitation Act are not
alien to and are applicable to proceedings under the IBC;
and
(ii)
An acknowledgement in a balance sheet without a
qualification can furnish a legitimate basis for determining
as to whether the period of limitation would stand extended,
so long as the acknowledgement was within a period of
three years from the original date of default.
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14. At this stage, we may also note that Mr Niranjan Reddy has
relied upon documentary material to indicate that the acknowledgements
of liability were within a period of three years from the date of default
and, hence, the applicant filed by the appellant under Section 7 of the
IBC was within limitation. Reliance has also been placed on the letter of
revival dated 26 April 2015 and the offer of OTS on 6 November 2015.
15. Since we are inclined to restore the proceedings back to the
NCLT for fresh adjudication in view of the decisions of this Court noted
above, we are not entering upon the factual dispute on whether the
application filed under Section 7 of the IBC would result in an initiation
of the CIRP in the present case. The appropriate course of action would
be to keep open all rights and contentions of the parties on merits to be
adjudicated upon before the NCLT.
16. With the above clarification, we allow the appeal and set aside
the impugned judgment and order of the NCLAT dated 17 November
2020 and of the NCLT dated 16 September 2020. The proceedings shall
stand restored to the file of the NCLT for adjudication afresh, keeping
all rights and contentions of the parties open on the factual aspects of
the controversy.
17. As the application under Section 7 of the IBC was instituted
before the NCLT on 19 September 2018, the NCLT shall expeditiously
dispose it, no later than within three months from the date of this order.
18. Pending application(s), if any, stand disposed of.
Divya Pandey
Appeal allowed.
(Assisted by : Deepak Panwar, LCRA)
STATE BANK OF INDIA v. KRISHIDHAN SEEDS PRIVATE LIMITED