2022 Supreme(SC) 636

SUPREME COURT OF INDIA
INDIRA BANERJEE, J.K. MAHESHWARI, JJ.
Asset Reconstruction Company (India) Limited - Appellant
Versus
Tulip Star Hotels Limited & Ors. - Respondents
Civil Appeal Nos. 84-85 of 2020
Decided On : 01-08-2022

IMPORTANT POINTS
(1) Initiation of Corporate Insolvency Resolution Process (CIRP) – Period of limitation for making application under Section 7 or 9 of IBC is three years from the date of accrual of right to sue, that is, date of default.
(2) IBC is a beneficial legislation for equal treatment of all creditors of Corporate Debtor, as also protection of livelihoods of its employees/workers.
(3) Precedent – A Judgment is a precedent for issue of law that is raised and decided and not observations made in facts of any particular case.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Sections 7 and 9 – Limitation Act, 1963 – Article 137 – Initiation of Corporate Insolvency Resolution Process (CIRP) – Limitation – Period of limitation for making application under Section 7 or 9 of IBC is three years from the date of accrual of right to sue, that is, date of default – Under scheme of IBC, Insolvency Resolution Process begins, when a default takes place, in the sense that a debt becomes due and is not paid – Application under Section 7 of IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from date of declaration of loan account of Corporate Debtor as NPA, if there were acknowledgement of debt by Corporate Debtor before expiry of period of limitation of three years, in which case period of limitation would get extended by a further period of three years. (Paras 44, 53, 68, 69 and 97)

(B) Insolvency and Bankruptcy Code, 2016 – Section 7 – Initiation of Corporate Insolvency Resolution Process (CIRP) – IBC is not just a statute for recovery of debts – It is also not a statute which only prescribes modalities of liquidation of a corporate body, unable to pay its debts – It is essentially a statute which works towards revival of a corporate body, unable to pay its debts, by appointment of a Resolution Professional – Unlike coercive recovery litigation, Corporate Insolvency Resolution Process under IBC is not adversarial to interests of Corporate Debtor – IBC is a beneficial legislation for equal treatment of all creditors of Corporate Debtor, as also protection of livelihoods of its employees/workers, by revival of Corporate Debtor through entrepreneurial skills of persons other than those in its management, who failed to clear dues of Corporate Debtor to its creditors – It only segregates interests of Corporate Debtor from those of its promoters/persons in management – Relegation of creditors to remedy of coercive litigation against Corporate Debtors could be detrimental to interests of Corporate Debtor and its creditors alike. (Paras 55, 58, 59 and 60)

(C) Limitation Act, 1963 – Sections 5 and 18 – Limitation – Limitation is essentially a mixed question of law and facts – When a party seeks application of any particular provision for extension or enlargement of period of limitation, relevant facts are required to be pleaded and requisite evidence is required to be adduced – However, an application in a statutory form cannot be judged in the manner of a plaint in a suit – Documents filed along with application, or later, and subsequent affidavits and applications would have to be construed as part of pleadings – An acknowledgement of present subsisting liability, made in writing in respect of any right claimed by opposite party and signed by party against whom right is claimed, has effect of commencing a fresh period of limitation from date on which acknowledgement is signed – Such acknowledgement need not be accompanied by a promise to pay expressly or even by implication – However, acknowledgement must be made before relevant period of limitation has expired – Entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to acknowledgment under Section 18 of Limitation Act. (Paras 76, 83 and 85)

(D) Precedent – A Judgment is a precedent for issue of law that is raised and decided and not observations made in facts of any particular case – Judicial utterances/pronouncements are in setting of facts of a particular case – To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to explain not define – Judges interpret statutes, their words are not to be interpreted as statutes. (Para 79)

Facts of the case:

Present appeals under Section 62 of Insolvency and Bankruptcy Code, 2016 (IBC) filed by Financial Creditor, Asset Reconstruction Company (India) Limited are against a common judgment and final order dated 11th December 2019 passed by National Company 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 Resolution Process (CIRP) initiated by the Appellant against Corporate Debtor, V. Hotels Ltd. was barred by limitation.

Findings of Court:

Amount of the Corporate Debtor was declared NPA on 1st December 2008. By a letter dated 7th February, 2011, written well within three years, the Corporate Debtor acknowledged its liability and proposed a settlement. This was followed by several requests of extension of time to make payment and revised settlements. On 6th April, 2013, the Corporate Debtor sought extension of time to pay Rs.239,88,27,673 outstanding as on 31st March 2013. On 19th April, 2013, Corporate Debtor made payment of Rs.17,50,00,000/-. On 1st July, 2013, Corporate Debtor acknowledged its liability – this was after the Appellant Financial Creditor revoked the settlement invoking the default clause. Corporate Debtor acknowledged its liabilities in its financial statements from 2008-09 till 2016-17. The application under Section

7(2) of IBC was filed on 3rd April 2018, well within the extended period of limitation.

Result : Appeals allowed.