State Bank of India Vs. Kamper Concast Limited - The Hon’ble Supreme Court in Tottempudi Salalith (supra) further clarified that a Recovery Certificate gives rise to a fresh and independent cause of action for initiating proceedings under the Code. However, it was specifically held that such proceedings are governed by Article 137 of the Limitation Act, 1963, which provides a limitation period of three years for any application for which no period of limitation is expressly provided elsewhere.

  NCLT Chennai-I (2025.06.05) in State Bank of India Vs. Kamper Concast Limited [ (2025) ibclaw.in 725 NCLT, CP(IB)/156(CHE)/2022 Along with IA(IBC)/403/CHE/2024 in CP(IB)/156/(CHE)/2022] held that;

• Hon'ble Supreme Court has held that the clock on limitation starts ticking from the date of issue of recovery certificate which in the present case is 09.08.2012. At best, the limitation period on the Petitioner’s claim may begin from 02.09.2012. It is stated that by virtue of Section 238-A of the Code, the Limitation Act is applicable to the proceedings under the IBC.

• The Hon’ble Supreme Court in Tottempudi Salalith (supra) further clarified that a Recovery Certificate gives rise to a fresh and independent cause of action for initiating proceedings under the Code. However, it was specifically held that such proceedings are governed by Article 137 of the Limitation Act, 1963, which provides a limitation period of three years for any application for which no period of limitation is expressly provided elsewhere.

• The Hon’ble Supreme Court in Laxmi Pat Surana v. Union Bank of India [(2021) 8 SCC 481] has clearly reiterated that acknowledgments made after the limitation period has lapsed, cannot revive or extend limitation.

• the demand was made on 12.11.2010 itself thereby invoking the personal guarantee and from that date, the deed of guarantee loses its character of being a continuing guarantee which could be invoked at any time by the Financial Creditor.

Excerpts of the order;

# 1. This Petition has been filed u/s. 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016") r/w Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for In solvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 by State Bank of India, Stressed Assets Management Branch (“Financial Creditor”) for initiating insolvency resolution process against Mr. K. Padmanbhan (“Personal Guarantor”) in respect to Default Amount of Rs. Rs.265,79,48,953.31/- (Rupees Two Hundred Sixty-Five Crore Seventy-Nine Lakh Forty-Eight Thousand Nine Hundred Fifty-Three and Thirty-One Paise Only) including interest and penalties. The Date of Default, as specified in Part-III of the present Petition, is 02.09.2012. The Petition has placed the Deed of Personal Guarantee executed by both K. Padmanabhan and his wife Mrs. Gayathri Padmanabhan in favour of the Creditor, Letter Renewing Credit Facilities to the Corporate Debtor, Supplemental Deed of Guarantee for increase in Overall Limit executed by Mrs. Gayathri Padmanabhan and Mortgage of Deposit of Title Deeds. This Petition has been filed before this Tribunal on 29.06.2022. 

# 2. Part – I of the Petition sets out the details of the Petitioner / Financial Creditor. It has its registered office in State Bank Bhavan, Corporate Centre, Madame Carma Road, Mumbai-400 021 Maharashtra and is represented by its Assistant General Manager Representative, Mr. T. Adithya Varma. Part-II of the petition sets out the details of the Personal Guarantor namely Mr. K. Padmanabhan. The address of the Respondent is stated as New No.227. Old No. 110, Ramakrishna Mutt Road, Raja Annamalai Puram, Chennai-600 028. 

# 3. It is stated that the Respondent stood as a Personal guarantor in respect of the loans availed by Teledata Marine Solutions Limited, the Corporate Debtor, from State Bank of India. The Personal Guarantor executed a Deed of Guarantee dated 20.03.2008, in favour of State Bank of India ("Guarantee Deed"), providing an irrevocable and continuing guarantee for the repayment of the facilities availed by the Corporate Debtor. 

# 4. It is stated that the Winding up/ Liquidation proceedings under the Section 433 Companies Act, 1956 against the Corporate Debtor (Teledata Marine Solutions Limited) was ordered by the Hon'ble Madras High Court vide the order dated 18.06.2014 in CP/276/2010. 

# 5. It is stated that a Demand Notice was issued on 12.11.2010 to both the Corporate Debtor and the Personal Guarantors, including Mr. K. Padmanabhan, seeking repayment of the outstanding debt. Consequently, the Applicant invoked the Personal Guarantee furnished by Mr. K. Padmanabhan and called upon him to repay the outstanding dues along with applicable interest and other charges. 

# 6. It is stated that a proposal for One Time Settlement (OTS) were made by the Corporate debtor on 07.04.2012 and on 21.03.2013 respectively, which were rejected by the financial creditor. 

# 7. It is stated that a Recovery Certificate bearing No. 100/2012 for a sum of ₹265,79,48,953/- (Rupees Two Hundred Sixty-Five Crores Seventy-Nine Lakhs Forty-Eight Thousand Nine Hundred and Fifty-Three Only) was issued pursuant to the order dated 04.07.2012 in O.A. No. 48 of 2012 by the Debt Recovery Tribunal-III, Chennai. 

# 8. It is stated that the Financial Creditor/ State Bank of India sent a Demand Notice dated 02.05.2022 to the Personal Guarantor, Mr. K. Padmanabhan under Rule 7 (1) of the Insolvency Resolution process of the Personal Guarantor to Corporate Debtor invoking the bank guarantee, however, the Guarantor did not make the payment. Following that, on 29.06.2022, the Financial Creditor filed the captioned Petition before this Tribunal. 

# 9. This Tribunal vide order dated 20.12.2023 in CP(IBC)/156(CHE)/2022 appointed Mr. N. Veerapandian, as Insolvency Resolution Professional and directed the Insolvency Resolution Professional to collate all the facts relevant to the examination of the Petition for the commencement of the Insolvency Resolution Process in respect of the Personal Guarantor. He in terms of the Order of this Tribunal filed his report vide SR No.81 on 09.01.2024 

# 10. The IRP in his Report, after due examination of the application, documents filed along with the Petition, and the Reply filed by the Respondent, in addition to the requirements as mandated under clauses (1), (2), (3), (4), (5), (6), (7), (8), (9) and (10) of Section 99 of the IBC, 2016, he has recommended for the admission of the present application against the Personal Guarantor u/s. 95 of IBC, 2016. The Report of the IRP is taken on record. The Application IA(IBC)/403/CHE/2024 is accordingly disposed of. 

# 11. SUBMISSIONS BY THE RESPONDENT/ PERSONAL GUARANTOR 

11.1 The Personal guarantor has filed objection to the report vide SR No. 738 dated 12.02.2024 and written synopsis vide SR No. 1620 dated 24.04.2025. It is submitted that in the present case, the debt became due on 09.08.2012 on the basis of the recovery certificate issued by the Recovery Officer, DRT against the Respondent. The Form-C placed with the petition shows the date of default as 02.09.2012. The guarantee deed dated 20.03.2008 and 31.12.2008 were invoked vide notice dated 12.11.2010. It is stated that the petition has been filed on 29.06.2022 and is barred by limitation. It is stated that Article 137 of Limitation Act stipulates the limitation period as three years from the date of default which in the present case was on 02.09.2012. 

11.2 Reference is made of the case of Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank (2019) 9 SCC 158, where Hon'ble Supreme Court has held that the clock on limitation starts ticking from the date of issue of recovery certificate which in the present case is 09.08.2012. At best, the limitation period on the Petitioner’s claim may begin from 02.09.2012. It is stated that by virtue of Section 238-A of the Code, the Limitation Act is applicable to the proceedings under the IBC. Reliance is also placed on the order of the National Company Law Tribunal, Mumbai in the case of Bank of Baroda v. Mrs. Zulekha Amir Dodhia in CP (IB) NO. 1275/MB/2021. 

11.3 It is stated that Article 136 of the Limitation Act has no application as it pertains only to execution and this petition under Section 95 is not one for recovery or execution and only Article 137 of Limitation Act will apply. It is stated that based on the revocation of personal guarantee on 12.11.2010 and the recovery certificate dated 09.08.2012, the continuing nature of the guarantee ceased to exist. In the present case, the account of the Corporate Debtor was declared NPA on 30.09.2009 and the personal guarantee was invoked on 12.11.2010. It is stated that the Petitioner has fully recovered the debt through the sale of principal borrower’s properties leaving no valid claim against the Personal Guarantor. The Respondent vide email dated 29.12.2023 has also denied existence of any debt owed to him by the Principal Borrower. It is also stated that the Petitioner did not prefer any claim before the Official Liquidator appointed by the Hon'ble High Court. 

# 12. SUBMISSIONS BY THE PETITIONER 

12.1 Per contra, it is argued on behalf of the Petitioner that the limitation for enforcing debt on the basis of the recovery certificate is 12 years and as such the petition is within the prescribed limitation period. The debt recovery certificate is deemed to have the effect of a decree carrying a 12 years limitation period from the date of issuance. It is stated that the deed of guarantee is a continuing and irrevocable guarantee in which the Respondent had guaranteed to the Bank for repayment of all monies which shall at any time be due to the Bank by the Company. In the case of a continuing guarantee, so long as the account is live and is not settled and there is no refusal on the part of the Guarantor to carry out the obligation, the limitation would run from the date of breach under Article 115 of the Schedule to the Limitation Act. It is stated that though in the present case, the recovery certificate was issued in 2012, but the Respondent / Personal Guarantor had furnished a letter to the Petitioner admitting the liability towards the outstanding dues as recent as 27.12.2021. The last acknowledgment from the Respondent is on 27.12.2021 and therefore the petition filed on 29.05.2022 is well within the period stipulated under the Limitation Act, 1963. 

12.2 The Petitioner have placed reliance on the judgment of the Hon’ble Supreme Court in Tottempudi Salalith vs. State Bank of India & Ors., (2023) ibclaw.in 123 SC wherein it was held that the enforcement of a deemed decree in the form of a Debt Recovery Certificate (DRC) is governed by a limitation period of twelve years from the date of its issuance. Therefore, the present application is within the limitation period and is maintainable. It was further submitted that the guarantee executed by the Personal Guarantor is a continuing guarantee, and any unsettled debt owed by the Corporate Debtor can be recovered from the Personal Guarantor. 

FINDINGS OF THIS TRIBUNAL:

# 13. We have heard Ld. Counsels for the parties, perused the documents, report of the IRP and the written synopsis of arguments. 

# 14. In the present case, the Corporate Debtor had availed the loan from the Financial Creditor i.e. the Petitioner on 20.03.2008 for Rs. 412.40 Crores. The Respondent and his wife Mrs. Gayathri Padmanabhan had executed the deed of guarantee on 20.03.2008 in favour of the Financial Creditor as regards repayment of loan amount. The Corporate Debtor thereafter issued a letter renewing the credit facilities on 27.12.2008 to the Financial Creditor. The Respondent also signed the supplemental deed of guarantee for overall limit dated 31.12.2008. The Respondent has given a Memorandum for deposit of Title Deeds on all the piece and parcel of land in the name of the Personal Guarantor to the extent of 26,57 Acres, situated at No.25, Easwaren Koil Vattam, Ennai Village, Kulathur Taluk, Pudukottai District, situated within the Registration Sub District of Iluppur and the Registration District of Pudukottai. He also signed an agreement to pledge shares held in the Corporate Debtor by him on 09.11.2009. 

# 15. As seen from the record, the Corporate Debtor defaulted in repayment of loan which made the Financial Creditor send a demand notice on 12.11.2010 to the Corporate Debtor and the Guarantors including the Respondent. It was stated in the notice that they apart from being the Directors also executed necessary deeds of guarantee for the above said facilities assuring prompt repayment and operations of their accounts which was declared as NPA on 30.09.2009. It was alleged that the Respondent had not taken any concrete step to regularize the accounts or to clear the outstanding dues and thereby committed default in repayment / regularizing the account, vide the above notice the Corporate Debtor as well as the Guarantors were called upon jointly or severally to pay the sum due as on 31.03.2010 along with interest within 15 days of the receipt of the notice. The demand notice clearly shows that the Bank / Financial Creditor had invoked the bank guarantee calling upon the Guarantors including the Respondent to make the payments. The Bank also initiated the recovery proceedings against the Corporate Debtor and the Guarantors before the DRT. The suit was decreed in favour of the Financial Creditor / State Bank of India and a debt recovery certificate was issued on 27.07.2012 pursuant to the order in O.A. No. 48 of 2012 dated 04.07.2012 passed by the DRT which was intimated to the Petitioner on 09.08.2012. 

# 16. In the petition, the amount of default has been stated as Rs. 265,79,48,953.31 as on 27.07.2012 and the date on which the debt became due as 09.08.2012 i.e. the demand date under debt recovery certificate No. 100/2012. The date of default has been stated as 02.09.2012. 

# 17. ANALYSIS 

17.1 In Tottempudi Salalith v. State Bank of India & Ors. [(2023) ibclaw.in 123 SC], the Hon’ble Supreme Court considered the issue of limitation in the context of three Recovery Certificates issued by the Debt Recovery Tribunal—one dated 8th September 2015 and two others issued in 2017. The contention before the Hon’ble Court was that the Section 7 application filed under the Insolvency and Bankruptcy Code, 2016, was barred by limitation with respect to the 2015 certificate, as more than three years had elapsed from its date of issuance. To address this contention, the Hon’ble Supreme Court relied upon the earlier decision in Kotak Mahindra Bank Limited v. A. Balakrishnan [(2022) 9 SCC 186]. 

17.2 In Kotak Mahindra (supra), a Three-Judge Bench of the Hon’ble Supreme Court authoritatively held that an application under Section 7 of the Code may be based upon a Recovery Certificate issued by the Debt Recovery Tribunal. The Court referred to Section 19(22A) of the Recovery of Debts and Bankruptcy Act, 1993, which deems a Recovery Certificate issued under Section 19(22) as a “decree or order of the Court” for the purpose of initiating insolvency proceedings under any prevailing law. Accordingly, the Hon’ble Court concluded that such a certificate may be treated as a decree for initiating proceedings under the Code. In line with the judgment in Dena Bank v. C. Shivakumar Reddy & Anr. [2021 SCC OnLine SC 543], it was held that the limitation for filing such applications is three years from the date of issuance of the Recovery Certificate. 

17.3 The Hon’ble Supreme Court in Tottempudi Salalith (supra) further clarified that a Recovery Certificate gives rise to a fresh and independent cause of action for initiating proceedings under the Code. However, it was specifically held that such proceedings are governed by Article 137 of the Limitation Act, 1963, which provides a limitation period of three years for any application for which no period of limitation is expressly provided elsewhere. This period begins from the date of issuance of the Recovery Certificate. 

17.4 The Hon’ble Supreme Court held that the application in respect of the two Recovery Certificates issued in the year 2017 was maintainable, having been filed within the prescribed limitation period of three years under Article 137. However, in respect of the Recovery Certificate dated 8th September 2015, the Court observed that if the Appellate Tribunal were to conclude that initiation of CIRP based on said certificate is barred by limitation, then such claim could be segregated from the composite application. 

17.5 The Hon’ble Supreme Court further directed that, in such an eventuality, the Committee of Creditors shall treat the amount reflected in the Recovery Certificate dated 8th September 2015 as part of the claims submitted in response to the public announcement under the IBC. 

# 18. It was contended that the Personal Guarantor namely had given an OTS letter dated 27.12.2021. On a perusal, we find that said letter was given in reference to his visit to the office of the Financial Creditor on 23.12.2021. In the letter, he explained how the investment did not produce the desired results and the Company was cheated by one Vikas Goel. This letter has a reference of an offer for an OTS sent on 07.04.2012 and finally on 21.03.2013 amounting to Rs. 400.0 Crores with a deposit of Rs. 4.0 Crores which was rejected. He explained the problems which he faced thereafter and stated that in the statement of affairs filed with the Official Liquidator, he had clearly mentioned the amounts due to the Company and in his view an amount of Rs. 350.0 Crores could be recovered if they put their concerted efforts. He was willing to disclose the details. In the said letter, there is no unequivocal acknowledgment of debt or undertaking to pay the amount by the Personal Guarantor. He had rather stated that he has not resisted a single action of SBI till date in the sale of the Company assets. 

# 19. Extracts of the letter dated 27.12.2021,  . . . .

# 20. From the said letter, it cannot be construed that there was an acknowledgment of debt by the Personal Guarantors including the Respondent herein. It is also pertinent to mention that the said letter was issued on 27.12.2021 and the debt recovery certificate was issued on 27.12.2012. 

# 21. For the sake of arguments, even if it is presumed that there was an acknowledgment of debt in the form of an OTS, but the said letter is not within the period of three years from the date the debt became due as provided under Section 18 of the Limitation Act, 1963. The Hon’ble Supreme Court in Laxmi Pat Surana v. Union Bank of India [(2021) 8 SCC 481] has clearly reiterated that acknowledgments made after the limitation period has lapsed, cannot revive or extend limitation. 

# 22. It is true that the deed of guarantee signed by the Respondent is a continuing guarantee and the amount as per the deed was payable on demand, but in this case, as seen from the notice, the demand was made on 12.11.2010 itself thereby invoking the personal guarantee and from that date, the deed of guarantee loses its character of being a continuing guarantee which could be invoked at any time by the Financial Creditor. 

# 23. In the light of above discussions, we are of the view that this petition filed by the Financial Creditor is barred by limitation. 

# 24. CP(IB)/156(CHE)/2022 is accordingly dismissed with no orders as to cost. File be consigned to records. 

--------------------------------------------------------- 

 

 

Kotak Mahindra Bank Ltd. Vs. A. Balakrishnan & Anr. - We hold that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the meaning of clause (8) of Section 5 of the IBC. Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC.

Supreme Court (30.05.2022) in Kotak Mahindra Bank Ltd. Vs. A. Balakrishnan & Anr.   [Civil Appeal No. 689 of 2021] held that;

• Having held that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the ambit of its definition under clause (8) of Section 5 of the IBC, as a natural corollary thereof, the holder of such Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC.

• That a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the meaning of clause (8) of Section 5 of the IBC and a holder of the Recovery Certificate would be a “financial creditor” within the meaning of clause (7) of Section 5 of the IBC.

• We hold that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the meaning of clause (8) of Section 5 of the IBC.

• Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC.

• As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the Recovery Certificate.

Excerpts of the order;  

1. The present appeal challenges the judgment and order dated 24th November, 2020 passed by the learned National Company Law Appellate Tribunal, New Delhi (hereinafter referred to as “NCLAT”) in Company Appeal (AT) (Insolvency) No. 1406 of 2019, thereby allowing the appeal filed by the respondent no. 1 – Director and reversing the order dated 20th September, 2019 passed by the learned National Company Law Tribunal, Chennai (hereinafter referred to as “NCLT”), whereby the application filed by the appellant under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC” for short) was admitted. The learned NCLAT while allowing the appeal held that the application filed by the appellant was time­-barred and that issuance of Recovery Certificate would not trigger the right to sue.

 

24. Though all these issues have been elaborately considered by this Court in the case of Dena Bank (supra), we would only be concerned with the issue, as to whether the issuance of the Recovery Certificate in favour of the “financial creditor” would give rise to a fresh cause of action to initiate proceedings under Section 7 of the IBC. This Court in the said case after considering various provisions of the IBC as well as the earlier judgments of this Court has observed thus:

• “99. There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 IBC is three years from the date of accrual of the right to sue, that is, the date of default. In GauravHargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd. [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572 : (2020) 1 SCC (Civ) 1] authored by Nariman, J. this Court held : (SCC p. 574, para 6)

• “6. … The present case being “an application” which is filed under Section 7, would fall only within the residuary Article 137.”

• 100. In B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates [B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633 : (2018) 5 SCC (Civ) 528] , this Court speaking through Nariman, J. held : (SCC p. 664, para 42)

• “42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condonethe delay in filing such application.”

• 101. In Jignesh Shah v. Union of India [Jignesh Shah v. Union of India, (2019) 10 SCC 750 : (2020) 1 SCC (Civ) 48] this Court speaking through Nariman, J. reiterated the proposition that the period of limitation for making an application under Section 7 or 9 IBC was three years from the date of accrual of the right to sue, that is, the date of default.

• 102. In Vashdeo R. Bhojwani v. Abhyudaya Coop. Bank Ltd. [Vashdeo R. Bhojwani v. Abhyudaya Coop. Bank Ltd., (2019) 9 SCC 158 : (2019) 4 SCC (Civ) 308] this Court rejected the contention that the default was a continuing wrong and Section 23 of the Limitation Act, 1963 would apply, relying upon Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan [Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan, 1959 Supp (2) SCR 476 : AIR 1959 SC 798].”

 

25. This Court further went on to observe thus:

• “136. A final judgment and order/decree is binding on the judgment debtor. Once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of recovery is also issued authorising the creditor to realise its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the recovery certificate.

• *** **** ***

• 141. Moreover, a judgment and/or decree for money in favour of the financial creditor, passed by the DRT, or any other tribunal or court, or the issuance of a certificate of recovery in favour of the financial creditor, would give rise to a fresh cause of action for the financial creditor, to initiate proceedings under Section 7 IBC for initiation of the corporate insolvency resolution process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the certificate of recovery, if the dues of the corporate debtor to the financial debtor, under the judgment and/or decree and/or in terms of the certificate of recovery, or any part thereof remained unpaid.”    [emphasis supplied]

 

26. It could thus be seen that this Court in the case of Dena Bank (supra) in paragraphs 136 and 141, has in unequivocal terms held that once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate. It has further been held that issuance of a certificate of recovery in favour of the financial creditor would give rise to a fresh cause of action to the financial creditor, to initiate proceedings under Section 7 of the IBC for initiation of the CIRP, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the certificate of recovery, if the dues of the corporate debtor to the financial debtor, under the judgment and/or decree and/or in terms of the certificate of recovery, or any part thereof remained unpaid.

 

27. With these findings, we could have very well allowed the present appeal and set aside the judgment and order of the learned NCLAT. Undisputedly, the application for initiation of CIRP under Section 7 of the IBC has been filed by KMBL within a period of three years from the date of issuance of the Recovery Certificate. However, since it has been argued by Shri K.V. Viswanathan, learned Senior Counsel that the judgment rendered by the two-­Judge Bench of this Court in the case of Dena Bank (supra) is per incuriam the provisions of the relevant statutes and the judgments of the three-­Judge Bench of this Court in the cases of Jignesh Shah (supra) and Gaurav Hargovindbhai Dave (supra) and since the issue is of seminal importance, we would proceed to consider the rival submissions.

42. In this background, we will have to consider, as to whether a person, who holds a Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC.

44. It will be pertinent to note that in clause (8) of Section 5 of the IBC, i.e, the definition clause of the term “financial debt”, the words used are “means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes”.

47. It is thus clear that it is a settled position of law that when the word “include” is used in interpretation clauses, the effect would be to enlarge the meaning of the words or phrases occurring in the body of the statute. Such interpretation clause is to be so used that those words or phrases must be construed as comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. In such a situation, there would be no warrant or justification in giving the restricted meaning to the provision.

51. Applying these principles to clause (8) of Section 5 of the IBC, it could clearly be seen that the words “means a debt along with interest, if any, which is disbursed against the consideration for the time value of money” are followed by the words “and includes”. Thereafter various categories (a) to (i) have been mentioned. It is clear that by employing the words “and includes”, the Legislature has only given instances, which could be included in the term “financial debt”. However, the list is not exhaustive but inclusive. The legislative intent could not have been to exclude a liability in respect of a “claim” arising out of a Recovery Certificate from the definition of the term “financial debt”, when such a liability in respect of a “claim” simpliciter would be included in the definition of the term “financial debt”

52. In any case, we have already discussed hereinabove that the trigger point for initiation of CIRP is default of claim. “Default” is non-­payment of debt by the debtor or the Corporate Debtor, which has become due and payable, as the case may be, a “debt” is a liability or obligation in respect of a claim which is due from any person, and a “claim” means a right to payment, whether such a right is reduced to judgment or not. It could thus be seen that unless there is a “claim”, which may or may not be reduced to any judgment, there would be no “debt” and consequently no “default” on non-­payment of such a “debt”. When the “claim” itself means a right to payment, whether such a right is reduced to a judgment or not, we find that if the contention of the respondents, that merely on a “claim” being fructified in a decree, the same would be outside the ambit of clause (8) of Section 5 of the IBC, is accepted, then it would be inconsistent with the plain language used in the IBC. As already discussed hereinabove, the definition is inclusive and not exhaustive. Taking into consideration the object and purpose of the IBC, the legislature could never have intended to keep a debt, which is crystallized in the form of a decree, outside the ambit of clause (8) of Section 5 of the IBC.

 

53. Having held that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the ambit of its definition under clause (8) of Section 5 of the IBC, as a natural corollary thereof, the holder of such Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, such a “person” would be a “person” as provided under Section 6 of the IBC who would be entitled to initiate the CIRP.

54. Insofar as the contention of the respondents with regard to clause (a) of sub-­section (1) of Section 14 of the IBC is concerned, we do not find that the words used in clause (a) of sub­-section (1) of Section 14 of the IBC could be read to mean that the decree­-holder is not entitled to invoke the provisions of the IBC for initiation of CIRP. A plain reading of said Section would clearly provide that once CIRP is initiated, there shall be prohibition for institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority. The prohibition to institution of suit or continuation of pending suits or proceedings including execution of decree would not mean that a decree-­holder is also prohibited from initiating CIRP, if he is otherwise entitled to in law. The effect would be that the applicant, who is a decree­-holder, would himself be prohibited from executing the decree in his favour.

55. That leaves us to consider the contention, as to whether the judgment of this Court in the case of Dena Bank (supra) is contrary to the judgments of three­-Judge Bench of this Court in the cases of Jignesh Shah (supra) and Gaurav Hargovindbhai Dave (supra), as contended by the respondents, and therefore, per incuriam.

68. A perusal of the judgment of this Court in the case of Dena Bank (supra) would reveal that this Court considered all the relevant provisions of the IBC and the earlier judgments of this court. As already discussed hereinabove, we do not find any inconsistency in the judgment of this Court in the case of Dena Bank (supra) with the earlier judgments of this Court on which reliance is placed by Shri Viswanathan. We find that the contention that the judgment of this Court in the case of Dena Bank (supra) being per incuriam to the statutory provisions and earlier judgments of this Court, is wholly unsustainable.

 

69. We have already hereinabove, done the exercise of considering the relevant provisions of the IBC afresh and come to a conclusion that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the meaning of clause (8) of Section 5 of the IBC and a holder of the Recovery Certificate would be a “financial creditor” within the meaning of clause (7) of Section 5 of the IBC. We have also held that a person would be entitled to initiate CIRP within a period of three years from the date on which the Recovery Certificate is issued. We are of the considered view that the view taken by the two­-Judge Bench of this Court in the case of Dena Bank (supra) is correct in law and we affirm the same.

75. It is more than well settled that when the language of a statutory provision is plain and unambiguous, it is not permissible for the Court to add or subtract words to a statute or read something into it which is not there. It cannot rewrite or recast legislation. At the cost of repetition, we observe that if the argument as advanced by Shri Viswanathan is to be accepted, it will completely change the texture of the fabric of sub-­section (22A) of Section 19 of the Debt Recovery Act.

77. From the plain and simple interpretation of the words used in sub­-section (22A) of Section 19 of the Debt Recovery Act, it would be amply clear that the Legislature provided that for the purposes of winding-­up proceedings against a Company, etc., a Recovery Certificate issued by the Presiding Officer under sub­-section (22) of Section 19 of the Debt Recovery Act shall be deemed to be a decree or order of the Court. It is thus clear that once a Recovery Certificate is issued by the Presiding Officer under sub-­section (22) of Section 19 of the Debt Recovery Act, in view of sub-­section (22A) of Section 19 of the Debt Recovery Act it will be deemed to be a decree or order of the Court for the purposes of initiation of winding­-up proceedings of a Company, etc. However, there is nothing in sub­-section (22A) of Section 19 of the Debt Recovery Act to imply that the Legislature intended to restrict the use of the Recovery Certificate limited for the purpose of winding-­up proceedings. The contention of the respondents, if accepted, would be to provide something which is not there in sub-section (22A) of Section 19 of the Debt Recovery Act.

84. To conclude, we hold that a liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the meaning of clause (8) of Section 5 of the IBC. Consequently, the holder of the Recovery Certificate would be a financial creditor within the meaning of clause (7) of Section 5 of the IBC. As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the Recovery Certificate.

 

85. We further find that the view taken by the two-­Judge Bench of this Court in the case of Dena Bank (supra) is correct in law and we affirm the same. We further find that in the facts of the present case, the application under Section 7 of the IBC was filed within a period of three years from the date on which the Recovery Certificate was issued. As such, the application under Section 7 of the IBC was within limitation and the learned NCLAT has erred in holding that it is barred by limitation.

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