2022 Supreme(SC) 653

SUPREME COURT OF INDIA
Indira Banerjee, J.K. Maheshwari, JJ.
Kotak Mahindra Bank Limited - Appellant
Versus
Kew Precision Parts Private Limited & Ors. - Respondents
Civil Appeal No. 2176 of 2020
Decided On : 05-08-2022

IMPORTANT POINTS
(1) In computing period of limitation for initiation of CIRP proceedings, time spent in pursuing remedy under SARFAESI Act or any other recovery law cannot be excluded.
(2) IBC 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.
(3) Period of limitation for making application under Section 7 or 9 of IBC is three years from date of accrual of right (Date of default) – Application under Section 7 of IBC in statutory form which requires filling in of particulars cannot be judged by same standards as a plaint or other pleadings in a court of law.
(4) Limitation – Court/Tribunal may exercise its discretion to condone delay, even in absence of a formal application.
(5) Entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to acknowledgment under Section 18 of Limitation Act, 1963.
(6) Intention of statute has to be found in words used by Legislature itself.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Sections 7 and 9 – Initiation of Corporate Insolvency Resolution Process (CIRP) – When an application is filed by a Financial Creditor under Section 7 of IBC for initiation of CIRP, all that Adjudicating Authority is required to see is, whether there is a financial debt owed by Corporate Debtor to Financial Creditor and whether amount of debt exceeded Rs.1,00,000/- on the date of filing of company petition, said amount being threshold limit for initiation of CIRP at material time – Adjudicating Authority also has to examine if application is barred by limitation – Pre-existing disputes between Corporate Debtor and Financial Creditor are of no consequence to an application of a Financial Creditor, under Section 7 of IBC for initiation of CIRP, unlike application of an Operational Creditor for initiation of CIRP under Section 9 of IBC which may have to be dismissed if there is a pre-existing dispute – In computing period of limitation for initiation of CIRP proceedings, time spent in pursuing remedy under SARFAESI Act or any other recovery law cannot be excluded – Initiation of proceedings under SARFEASI or any other recovery law does not affect right of a Financial Creditor to initiate CIRP unless its debt is repaid. (Paras 14, 15 and 16)

(B) Insolvency and Bankruptcy Code, 2016 – Sections 7 and 9 – Limitation Act, 1963 – Article 62 – Contract Act, 1872 – Section 25(3) – Initiation of Corporate Insolvency Resolution Process (CIRP) – Corporate Debtor defaulted in payment of Rs.24,55,00,000/- to appellant Financial Creditor as agreed – Any agreement to pay a time barred debt, would be enforceable in law, within three years from due date of payment, in terms of such agreement – IBC 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 – NCLT/NCLAT has discretion to entertain application/appeal after prescribed period of limitation – Condition precedent for exercise of such discretion is existence of sufficient cause for not preferring appeal and/or application within period prescribed by limitation – Period of limitation for making application under Section 7 or 9 of IBC is three years from date of accrual of right (Date of default) – Application under Section 7 of IBC in statutory form which requires filling in of particulars cannot be judged by same standards as a plaint or other pleadings in a court of law – Additional affidavits filed subsequent to filing of application, by way of additional affidavits or applications would have to be construed as pleadings, as also documents enclosed with or relied upon in application made in statutory format – Pleadings can be amended at any time during pendency of proceedings – NCLAT erred in closing CIRP proceedings without giving Appellant Financial Creditor opportunity to explain if there was sufficient cause for delay in approaching NCLT – Impugned Judgment set aside. (Paras 17, 45, 51, 56, 61, 64, 70 and 71)

(C) Limitation Act, 1963 – Section 18 – Contract Act, 1872 – Section 25(3) – Enforcement of time-barred debt – Under Section 25(3), a debtor can enter into an agreement in writing, to pay the whole or part of a debt, which creditor might have enforced, but for limitation of a suit in law – A written promise to pay the barred debt is a valid contract – Such a promise constitutes novation and can form basis of a suit independent of original debt since debt is not extinguished, remedy gets barred by passage of time – Section 25(3) applies only where debt is one which would be enforceable against defendants, but for law of limitation – Where a debt is not binding on defendant for other reasons, and consequentially not enforceable against him, there is no question of applicability of Section 25(3) – There is a distinction between acknowledgment under Section 18 of Limitation Act, 1963 and a promise within meaning of Section 25 of Contract Act – Both promise and acknowledgment in writing, signed by a party or its agent authorised in that behalf, have effect of creating a fresh starting of limitation. (Paras 31, 32 and 33)

(D) Interpretation of Statute – Legislative Intent – In construing and/or interpreting any statutory provision one must look into legislative intent of statute – Intention of statute has to be found in words used by Legislature itself – In case of doubt it is always safe to look into object and purpose of statute or reason and spirit behind it – Each word, phrase or sentence has to be construed in light of general purpose of the Act itself – When a question arises as to meaning of a certain provision in a statute, provision has to be read in its context – Statute has to be read as a whole – Previous state of law, general scope and ambit of statute and mischief that it was intended to remedy are relevant factors. (Paras 47 and 48)

(E) Limitation Act, 1963 – Section 5 – Limitation – Condonation of delay – Condition precedent for condonation of delay in filing application or appeal, is existence of sufficient cause – Whether explanation furnished for delay would constitute “sufficient cause” or not would be dependent upon facts of each case – Court/Tribunal may exercise its discretion to condone delay, even in absence of a formal application – Limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension in enlargement of period of limitation, relevant facts are required to be pleaded and requisite evidence is required to be adduced. (Paras 52, 53 and 60)

Facts of the case:

Corporate Debtor carries on business of manufacture of tempo and tractor components. Present appeal filed by the Appellant Financial Creditor, Kotak Mahindra Bank Limited under Section 62 of the Insolvency and Bankruptcy Code, 2016, is against the judgment and order dated 8th January, 2020 of National Company Law Appellate Tribunal, New Delhi (NCLAT) allowing Company Appeal (AT) Insolvency No. 1349 of 2019 filed by the Respondent-Corporate Debtor, against an order dated 6th September, 2019 passed by the Adjudicating Authority/National Company Law Tribunal (NCLT) admitting the application being Company Petition No.(IB) 672/ND/2019 filed by the Appellant Financial Creditor under Section 7 of the IBC for initiation of Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor.

Findings of Court:

Impugned judgment and order of the NCLAT is set aside to the extent that the CIRP proceedings have been closed. The Adjudicating Authority shall consider application for CIRP afresh, in accordance with law, in the light of observations made here, after giving Appellant and Respondent opportunity to file additional affidavits disclosing documents/additional affidavit in response.

Result : Appeal allowed.