NCLAT (30.06.2021) in Vivek Malik, Vs. Punjab National Bank & Anr (Company Appeal (AT) (Insolvency) No. 224 of 2021) held that;
……..now it is quite clear that Sections 18 & 19 of the Limitation Act, 1963 and the other provisions of the Limitation Act, as far as may be apply to the proceedings under the ‘I&B Code’.
Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible.
To quote Shah J. in New India Sugar Mill Limited v. Commissioner of Sales Tax, Bihar, “It is a recognised rule of interpretation of statutes that expression used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature”
What is clear from the above is that if there was deficiency in pleading, the same could be corrected by giving opportunity before this Appellate Tribunal to amend the pleadings. In Appeal naturally pleadings could be by filing Application and reply supported by documents.
Now keeping in view the different orders passed by the Hon’ble Supreme Court while disposing the matter with regard to “Asset Reconstruction Company (India) Ltd. vs. Bishal Jaiswal & Anr” it shows that the pleadings can be brought on record or amended even at the NCLAT stage.
Excerpts of the order;
# 1. The Appellant, Suspended Director of Corporate Debtor- ‘Amzen Machines Pvt. Ltd.’ has filed this Appeal against the impugned order dated 11th March, 2021 passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench, New Delhi, Court-III) in CP (IB)- 2058(ND)/2019. By the Impugned Order, the Adjudicating Authority admitted the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) filed by the Respondent No.1- ‘Punjab National Bank’ against the Corporate Debtor.
# 2. The Respondent No.1- ‘Punjab National Bank’ (hereinafter referred to as “Bank”) filed the Application under Section 7 of the ‘I&B Code’ on 11th September, 2019. The Bank claimed that it advanced a term loan of Rs. 200 Crores on 17th March, 2011 to the Corporate Debtor. The Bank referred to further documents including common Loan Agreement executed on 5th April, 2014 and another Working Capital Consortium Agreement and Deed of Hypothecation dated 20th August, 2014. The Bank claimed that the account of the Corporate Debtor became NPA on 15th March, 2016. On 10th May, 2016, Notice under Section 13(2) of the SARFAESI Act, 2002 was issued to the Corporate Debtor demanding Rs. 173,80,62,160/- as on 31st March, 2016 plus interest. On 10th July, 2018, the Corporate Debtor acknowledged debt outstanding by a letter sent to the Bank. The Application was thus filed on 11th September, 2019 before the Adjudicating Authority claiming debt due and in default of Rs. 268,37,90,311/-. The date of default was intimated in Form is 15th March, 2016.
# 4. The Adjudicating Authority, after hearing the parties, observed in Para- 8 of the impugned order as under:-
“8. Heard the parties and perused the records. The documents are sufficient to ascertain the default on the part of the Corporate Debtor. It is pertinent to note that the Applicant/ Financial Creditor can be categorized as a financial creditor as provided under Section 5(7) of IBC, 2016 and the loan disbursed as a financial debt as provided under Section 5(8) of IBC, 2016. Further, the Corporate Debtor vide its letter dated 10.07.2018 has acknowledged its liability in favour of the Applicant/ Financial Creditor which proves that the debt is due and payable therefore; the application filed is within the period of limitation as it gives fresh lease of limitation from the date of such acknowledgement and the Corporate Debtor has failed/ defaulted in repaying the loan as per agreed terms and conditions. The objection(s) of the Corporate Debtor is nothing but mere bluster therefore stand rejected.”
# 5. Aggrieved by such impugned order, the Appeal has been filed claiming that Section 7 Application was clearly beyond three years’ period of limitation in accordance with Section 3 read with Article 137 of the Limitation Act, 1963. The Appeal refers to the Judgment in the matter of “Babulal Vardharji Gurjar vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr.- [2020 SCC Online 647]”. Referring to the Judgment, it has been claimed in the Appeal that the judgment had referred to the earlier Judgments of the Hon’ble Supreme Court on the question of limitation in matters of ‘I&B Code’ and then reiterated the position that the limitation began to run from the date of NPA and Application filed under Section 7 of the ‘I&B Code’ after expiry of the period of three years from the date of NPA was barred by law of limitation. Relying on the Judgment in the matter of “Babulal Vardharji Gurjar” (supra), it is claimed in the Appeal that the Judgment in the case of “Jignesh Shah & Anr. vs. Union of India- (2019) 10 SCC 750” held that Section 18 of the Limitation Act, 1963 is not applicable to an Application under Section 7 of the ‘I&B Code’. Thus, according to Appeal, the Adjudicating Authority could not have relied on the acknowledgment dated 10th July, 2018. It is claimed that the date of default cannot be shifted and that Section 7 of the ‘I&B Code’ was not a recovery proceeding.
# 6. We have heard Learned Counsel for the Appellant and the Bank. It may be mentioned that the question with regard to applicability or non applicability of Section 18 of the Limitation Act, 1963 is now settled by the Hon’ble Supreme Court in recent judgments such as in the matter of “Sesh Nath Singh & Anr. vs. Baidyabati Sheoraphuli Co-Operative Bank Ltd. & Anr.”- [Civil Appeal No. 9198 of 2019] passed on 22nd March, 2021 and then in Judgement in the matter of “Laxmi Pat Surana vs. Union Bank of India & Anr.”- [Civil Appeal No.2734 of 2020] dated 26th March, 2021 and in “Asset Reconstruction Company (India) Ltd. vs. Bishal Jaiswal & Anr”- [Civil Appeal No. 323 of 2021] (with other Appeals) dated 15th April, 2021. The Hon’ble Supreme Court has dealt with its earlier judgments, and now it is quite clear that Sections 18 & 19 of the Limitation Act, 1963 and the other provisions of the Limitation Act, as far as may be apply to the proceedings under the ‘I&B Code’.
# 7. In the matter of “Sesh Nath Singh & Anr.” (supra), the Hon’ble Supreme Court mentioned, as under:-
66. Similarly under Section 18 of the Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires.
67. As observed above, Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible.
68. We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or Section 9 of the IBC. Of course, Section 18 of the Limitation Act is not attracted in this case, since the impugned order of the NCLAT does not proceed on the basis of any acknowledgment.
88. An Adjudicating Authority under the IBC is not a substitute forum for a collection of debt in the sense it cannot reopen debts which are barred by law, or debts, recovery whereof have become time barred. The Adjudicating Authority does not resolve disputes, in the manner of suits, arbitrations and similar proceedings. However, the ultimate object of an application under Section 7 or 9 of the IBC is the realization of a ‘debt’ by invocation of the Insolvency Resolution Process. In any case, since the cause of action for initiation of an application, whether under Section 7 or under Section 9 of the IBC, is default on the part of the Corporate Debtor, and the provisions of the Limitation Act 1963, as far as may be, have been applied to proceedings under the IBC, there is no reason why Section 14 or 18 of the Limitation Act would not apply for the purpose of computation of the period of limitation.
92. In other words, the provisions of the Limitation Act would apply mutatis mutandis to proceedings under the IBC in the NCLT/NCLAT. To quote Shah J. in New India Sugar Mill Limited v. Commissioner of Sales Tax, Bihar, “It is a recognised rule of interpretation of statutes that expression used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature”.”
Thus, it is clear that Section 18 of the Limitation Act applies.
# 8. In the matter of “Laxmi Pat Surana” (supra), the Hon’ble Supreme Court in para 35 of the Judgment mentioned, as under:-
“35. The purport of such observation has been dealt with in the case of Babulal Vardharji Gurjar (II) (supra). Suffice it to observe that this Court had not ruled out the application of Section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case so warrants. Considering that the purport of Section 238A of the Code, as enacted, is clarificatory in nature and being a procedural law had been given retrospective effect; which included application of the provisions of the Limitation Act on case-to-case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time barred debts under the Limitation Act. At the same time, accrual of fresh period of limitation in terms of Section 18 of the Limitation Act is on its own under that Act. It will not be a case of giving new lease to time barred debts under the existing law (Limitation Act) as such.”
# 9. Thus, the claim made in the Appeal that in judgment in the matter of “Babulal Vardharji Gurjar” (supra), the Hon’ble Supreme Court has held that Section 18 of the Limitation Act, 1963 is not applicable to an Application under Section 7 of the ‘I&B Code’ is misconceived.
# 10. In the judgment in the matter of “Asset Reconstruction Company (India) Ltd. vs. Bishal Jaiswal & Anr” (supra) also, the Hon’ble Supreme Court mentioned in Para 8, as under:-
“7. From the above, it is clear that the principle of Section 9 of the Limitation Act is to be strictly adhered to, namely, that when time begins to run, it cannot be halted, except by a process known to law. One question that arises before this Court is whether Section 18 of the Limitation Act, which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the corporate debtor, is also applicable under Section 238A, given the expression “as far as may be” governing the applicability of the Limitation Act to the IBC.
8. The aforesaid question is no longer res integra as two recent judgments of this Court have applied the provisions of Section 14 and Section 18 of the Limitation Act to the IBC…..”
After observations made as above, the Hon’ble Supreme Court referred to the Judgment passed in the matter of “Sesh Nath Singh & Anr.” (supra).
# 11. Thus, now it is quite clear that Section 18 of the Limitation Act, 1963 applies.
# 15. What is clear from the above is that if there was deficiency in pleading, the same could be corrected by giving opportunity before this Appellate Tribunal to amend the pleadings. In Appeal naturally pleadings could be by filing Application and reply supported by documents. Thus, we do not agree with the Learned Counsel for the Appellant that the Appeal should be
remanded back to NCLT.
# 17. Now keeping in view the different orders passed by the Hon’ble Supreme Court while disposing the matter with regard to “Asset Reconstruction Company (India) Ltd. vs. Bishal Jaiswal & Anr” it shows that the pleadings can be brought on record or amended even at the NCLAT stage.
# 18. ‘Law of Pleadings in India’ by Mogha (18th Edition) shows that the pleadings are statements in writing drawn up and filed by each party to a case, stating what his contentions will be at the trial/ hearing and giving all such details as his opponent needs to know in order to prepare his case in answer. According to learned Author, in pleadings, material facts should be stated ‘in a concise form’. The pleadings should be concise as well as precise. Pleadings would include contentions raised in Application, Counter, Appeal, Reply, Rejoinder.
# 23. Term loan granted on 17th March, 2011 and other financial services were referred to the Corporate Debtor as per other agreements referred above. When the account become NPA on 15th March, 2016 and there was default, the Corporate Debtor acknowledged liability on 10th July, 2018 as per the document at page 309 and thus, the application filed in 2019 could not be said to be time barred.
# 24. There is no substance in the Appeal. The Appeal is dismissed. No order as to costs.
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