The provisions of Section 18 of the Limitation Act are applicable to proceedings under the Insolvency and Bankruptcy Code, and an acknowledgement in a balance sheet without a qualification can extend the period of limitation, provided it is made within three years from the original date of default.

ORDER :

1. The National Company Law Tribunal, [“NCLT”] by its judgment dated 16 September 2020, rejected the application dated 19 September 2018 [TP No 82/2019 in CP (IB) No 500/7/NCLT/AHM/2018] filed by the State Bank of India, the appellant, under Section 7 of the Insolvency and Bankruptcy Code 2016 [“IBC”] against the respondent, the alleged Corporate Debtor, for initiation of the Corporate Insolvency Resolution Process [“CIRP”].

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 Asset [“NPA”] 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 settlement [“OTS”] 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 appellant on 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.

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 Another [2020 SCC Online NCLAT 417 (“V Padmakumar”)], 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 1963 [“Limitation Act”]; 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 appeal [Company Appeal (AT) (Insolvency) No 972 of 2020] by the National Company Law Appellate Tribunal [“NCLAT”] 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 Tribunal [“DRT] 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 availab