Saurav Mukherjee and Ors. Vs. Oriental Bank of Commerce and Ors. - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (14 Feb 2020)

If acknowledgement is made before expiry of period of limitation, then a fresh period of limitation shall be computed from time, when acknowledgement was signed

MANU/NL/0116/2020

Insolvency

Present two Appeals emanates from the common order passed by the Adjudicating Authority/National Company Law Tribunal, whereby the Application filed by the Oriental Bank of Commerce - Financial Creditors under Section 7 of the Insolvency and Bankruptcy Code ("I&B Code') for initiation of Corporate Insolvency Resolution Process ('CIRP') against the 'Corporate Debtor' - RDH Technologies Private Limited is admitted. Being aggrieved by the said order, the Appellants have filed present Appeal.

The Appeal has been filed mainly on the ground that Adjudicating Authority erred in admitting the Application of the Respondent, even though no debt was payable in law. It is further contended that the alleged default was hopelessly barred by time and no right accrued in favour of the Respondent.

Therefore, it is clear that, a limitation can be extended based on acknowledgement in writing, provided the said acknowledgement is made before the expiration of the prescribed period of limitation for a suit or application in respect of any property or right. An acknowledgement of liability in respect of such property or right has been made in writing, signed by the party, against whom such property or right is claimed, or by any person through whom he derives his title or liability, if the acknowledgement is made before the expiry of the period of limitation, then a fresh period of limitation shall be computed, from the time, when the acknowledgement was so signed.

Admittedly, in present case, the account of the Corporate Debtor was classified as NPA on 15th December 2012. The Financial Creditor has also admitted that, date of default of the Corporate Debtor account is on 16th September 2012. Therefore, any acknowledgement of liability could only be made within a period of limitation; i.e. three years.

Hon'ble Supreme Court has laid down the law that, Article 137 of Limitation Act, 1963 providing three years limitation period, while Article 62 of the Limitation Act, for recovery of debts secured with immovable property, provides 12 years period for limitation, but Article 137 will apply to the Application filed under Section 7 of the I&B Code, even when the debt is secured by mortgaged or otherwise charged upon movable property.

On perusal of the above document, it is clear that the Financial Creditor entered into an agreement stipulating liquidation of claims whereby the Financial Creditor revised the original sanction plan of Rs. 23 crores at the request of the Corporate Debtor, and it was agreed to release the residual portion of the term loan sanctioned to the Respondent herein. It is stated in the said agreement that, the Corporate Debtor RDH Technologies (P) Limited has utilized the loan only to the extent of Rs. 7,38,61,086, against the sanctioned limit of Rs. 23 crores. After the modification revised sanctioned plan is being approved and the bank has agreed to release the residual portion of the term loan. It is also stated in the said agreement that the lending bank has agreed to release 1 to 9 floors in favour of the borrower to repay the lending bank proportionately from the outcome of the sale proceeds thereof and complete the unfinished portion of the building. This agreement has been executed by both parties.

The acknowledgement mentioned above has been signed by the Financial Creditor and the Corporate Debtor on 04th March 2015. Therefore, the limitation period to claim its right, was up to 14th December 2015 as per provision of Article 137 of Limitation Act. But by implication of Section 18 of the Limitation Act, and by acknowledgement signed by the Corporate Debtor on 04th March 2015, a fresh period of limitation started from 04th March 2015. Therefore, the limitation period was available up to 03rd March 2018 to claim its right.

By implication of Section 18 of the Limitation Act, a fresh period of limitation of three years started from 01st August 2017 and this petition has been filed on 08th December 2018, which is within limitation. The Corporate Debtor has also filed the certified copy of the bank statement with a certificate of the bank under Bankers Book of Evidence Act, 1891. On perusal of the bank relating to the loan account to the Corporate Debtor, it is clear that the Corporate Debtor made the part payment against the said loan on different dates.

In this case, it is clear that on the day of filing the petition under Section 7 of the Code, there was a subsisting liability on the corporate debtor, and due to the acknowledgement of debt in writing, though the account of the corporate debtor which was classified as NPA on 15th Dec 2012, its validity got extended from time to time by acknowledgement of debt in writing and a fresh period of limitation started after the acknowledgement of debt as per provision of Sec 18 of the Limitation Act. The petition filed by the Respondent Oriental Bank of Commerce is not barred by limitation. Hence Appeals are rejected.

Tags : APPLICATION MAINTAINABILITY TIME EXTENSION