2021 Supreme(SC) 531

SUPREME COURT OF INDIA
L. NAGESWARA RAO, B.R. GAVAI, B.V. NAGARATHNA, JJ.
Rajendra Narottamdas Sheth & Anr. – Appellants
Versus
Chandra Prakash Jain & Anr. – Respondents
Civil Appeal No. 4222 of 2020
Decided On : 30-09-2021

IMPORTANT POINTS
(1) Power of attorney holder’ is not competent to file application under Section 7 of IBC on behalf of financial creditor – However, general authorisation given to an officer of financial creditor by means of a power of attorney, would not disentitle such officer to act as authorised representative of financial creditor while filing an application under Section 7 of IBC, merely because authorisation was granted through a power of attorney.
(2) Section 18 of Limitation Act is applicable to applications filed under Section 7 of Code – While decision to admit an application under Section 7 of IBC is typically made on the basis of material furnished by financial creditor, Adjudicating Authority is not barred from examining material that is placed on record by corporate debtor to determine that such application is not beyond period of limitation.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Section 7 – Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 – Rule 4 – Maintainability of application under Section 7 of Code filed by a power of attorney holder – Power of attorney holder’ is not competent to file application under Section 7 on behalf of financial creditor – However, general authorisation given to an officer of financial creditor by means of a power of attorney, would not disentitle such officer to act as authorised representative of financial creditor while filing an application under Section 7 of Code, merely because authorisation was granted through a power of attorney – If officer was authorised to sanction loans and had done so, application filed under Section 7 of Code cannot be rejected on the ground that no separate specific authorisation letter has been issued by financial creditor in favour of such officer – In such cases, corporate debtor cannot take the plea that while officer has power to sanction loan, such officer has no power to recover loan amount or to initiate corporate insolvency resolution process, in spite of default in repayment – Application has been filed by an authorised person on behalf of Financial Creditor and objection of Appellants on maintainability of application on this ground is untenable. (Paras 10, 11 and 12)

(B) Insolvency and Bankruptcy Code, 2016 – Sections 7 and 238A – Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 – Rule 4 – Limitation Act, 1963 – Sections 17 and 18 – Initiation of Corporate Insolvency Resolution Process – Limitation – Any suit, appeal or application filed after prescribed period of limitation shall be dismissed in spite of limitation not being set up as a defence – Section 238A of Code makes provisions of Limitation Act applicable to proceedings before Adjudicating Authority, as far as may be – Adjudicating Authority is duty-bound to scrutinise application filed under Section 7 of Code and come to a conclusion on whether such application is barred by limitation, even in absence of any plea with respect to limitation – Primary obligation of making out a prima facie case of default is on financial creditor – There is no necessity for corporate debtor to provide any information at stage of admission of application under Section 7 of Code, as burden of showing non-payment of a legally recoverable debt, which is not time-barred, is on financial creditor – Non-furnishing of information by financial creditor at the time of filing an application under Section 7 of Code need not necessarily entail in dismissal of application – An opportunity can be provided to financial creditor to provide additional information required for satisfaction of Adjudicating Authority with respect to occurrence of default. (Paras 19 and 20)

(C) Limitation Act, 1963 – Sections 17 and 18 – Insolvency and Bankruptcy Code, 2016 – Sections 7 and 238A – Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 – Rule 4 – Initiation of Corporate Insolvency Resolution Process – Limitation – Section 18 of Limitation Act is applicable to applications filed under Section 7 of Code – In case application under Section 7 is filed beyond period of three years from date of default and financial creditor furnishes required information relating to acknowledgement of debt, in writing by corporate debtor, before Adjudicating Authority, with such acknowledgement having taken place within initial period of three years from date of default, a fresh period of limitation commences and application can be entertained, if filed within this extended period – While decision to admit an application under Section 7 is typically made on the basis of material furnished by financial creditor, Adjudicating Authority is not barred from examining material that is placed on record by corporate debtor to determine that such application is not beyond period of limitation – There is sufficient material in present case to justify enlargement of extension period in accordance with Section 18 of Limitation Act and such material has also been considered by Adjudicating Authority before admitting application under Section 7 of Code – Plea of Section 18 of Limitation Act not having been raised by Financial Creditor in application filed under Section 7 cannot come to rescue of Appellants in facts of this case – Appeal dismissed. (Paras 21, 23 and 24)

Facts of the case:

Respondent No. 2 filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 which was admitted by the National Company Law Tribunal, Ahmedabad bench (NCLT or Adjudicating Authority) on 01.06.2020. The Appellants, who are the suspended directors of the board of R.K. Infratel Ltd. (Corporate Debtor), filed an appeal which was rejected by the National Company Law Appellate Tribunal, Delhi (NCLAT). Therefore, this Appeal. Essentially, there are two issues that arise for consideration in this Appeal. The first pertains to maintainability of the application under Section 7 of the Code filed by a power of attorney holder. The second relates to question of limitation.

Findings of Court:

Date of default in this case is 30.09.2014, as mentioned by the financial creditor in its application under Section 7. A copy of the debit balance confirmation letter dated 07.04.2016 was filed along with application. As the application was filed only on 25.04.2019, which is beyond a period of three years even after taking into account the debit balance confirmation letter dated 07.04.2016, the application was barred by limitation.

Result : Appeal dismissed.