BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR.

Citation: [2020] 13 S.C.R. 368; 2020 INSC 490

Court: Supreme Court of India

Bench: A.M. KHANWILKAR , DINESH MAHESHWARI

Judgment date: 2020-08-14

Case summary

2020 INSC 490. Supreme Court of India judgment dated 2020-08-14. BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR. Read the...

Judgment text

368 SUPREME COURT REPORTS[2020] 13 S. C. R. 368 [2020] 13 S. C. R. A BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR. (Civil Appeal No. 6347 of 2019) B AUGUST 14, 2020 [A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ. ] Insolvency and Bankruptcy Code, 2016 – ss. 7 and 238-A – Limitation Act, 1963 – s. 18 and Art. 137 – On or about 22. 12. 2007, the Lender Banks sanctioned and extended various loans, advances C and facilities to the corporate debtor-respondent no. 1 – The respondent no. 1 defaulted in payment of the amount due against such loans, advances and facilities, its account was classified as Non-Performing Asset on 08. 07. 2011 – Recovery proceedings against the corporate debtor by the consortium of lenders u/s. 19 of D the Recovery of Debts due to the Banks and Financial Institution Act, 1993 before the DRT was started – On or about 21. 03. 2018, the respondent no.

2, while stating its capacity as the financial creditor, for being the assignee of the loans and advances disbursed by the creditor Bank to the corporate debtor, filed an application u/ s. 7 of the Code before the Adjudicating Authority and sought E initiation of Corporate Insolvency Resolution Process (CIRP) in respect of respondent no. 1 – The Adjudicating Authority (NCLT) admitted the said application and initiated CIRP u/s. 7 of the Code – Before the Appellate Tribunal (NCLAT), the appellant-the director of the respondent no. 1 company contended that the claim was barred F by time – However, the appeal was dismissed by the Appellate Tribunal – Aggrieved, the appellant filed appeal before the Supreme Court – The Supreme Court remanded the matter to the Appellate Tribunal for deciding the issue of limitation with respect to the application u/s. 7 of the Code – The Appellate Tribunal held that the right to apply u/s. 7 of the Code accrued only on 01. 12. 2016 i. e.

G when the Code came into force and hence, the application filed by the Financial creditor in the year 2018 is not barred by limitation; and that the period of limitation is 12 years for recovery of possession of the mortgaged property, therefore, the claim is not barred by limitation – On appeal, held: The period of limitation for an H 368 BABULAL VARDHARJI GURJAR v. VEER GURJAR 369 ALUMINIUM INDUSTRIES PVT. LTD. & ANR. application seeking initiation of CIRP u/s. 7 of the Code is governed A by Art. 137 of the Limitation Act and is, therefore, three years from the date when right to apply accrues – In the instant case, the application made by the respondent no. 2 u/s. 7 of the Code in the month of March 2018, seeking initiation of CIRP in respect of the corporate debtor with specific assertion to the date of default as B 08. 07.

2011 is clearly barred by limitation for having filed much later than the period of three years from the date of default as stated in the application – The NCLT had not even examined the question of limitation – Whereas, the NCLAT had decided the question of limitation on entirely irrelevant considerations – There is nothing in the Code to even remotely indicate if the period of limitation for the C purpose of an application u/s. 7 is to commence from the date of commencement of the Code itself – The NCLAT proceeded only on assumption, without any foundation and without any basis – Further, the reasoning of the NCLAT that property being mortgaged, the period of limitation is of twelve years is again erroneous and do D not stand in conformity with the dictum of the Supreme Court – As in the B. K. Educational Service, it was held in no uncertain terms that the limitation provided in Art. 137 governs the application u/s.

7 of the Code – Therefore, the impugned orders deserve to be set aside and the application filed by the respondent no. 2 is rejected as being barred by limitation. E Allowing the appeal, the Court HELD : 1. When Section 238-A of the Insolvency and Bankruptcy Code, 2016 is read with the consistent decisions of this Court in Innoventive Industries, B. K. Educational Services, F Swiss Ribbons, K. Sashidhar, Jignesh Shah, Vashdeo R.

Bhojwani, Gaurav Hargovindbhai Dave and Sagar Sharma respectively, the following basics undoubtedly come to the fore: (a) that the Code is a beneficial legislation intended to put the corporate debtor back on its feet and is not a mere money recovery legislation; (b) that CIRP is not intended to be adversarial to the corporate debtor G but is aimed at protecting the interests of the corporate debtor; (c) that intention of the Code is not to give a new lease of life to debts which are time-barred; (d) that the period of limitation for H 370 SUPREME COURT REPORTS [2020] 13 S. C. R.

A an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Limitation Act and is, therefore, three years from the date when right to apply accrues; (e) that the trigger for initiation of CIRP by a financial creditor is default on the part of the corporate debtor, that is to say, that the right to apply under the Code accrues on the date when default B occurs; (f) that default referred to in the Code is that of actual non-payment by the corporate debtor when a debt has become due and payable; and (g) that if default had occurred over three years prior to the date of filing of the application, the application would be time-barred save and except in those cases where, on C facts, the delay in filing may be condoned; and (h) an application under Section 7 of the Code is not for enforcement of mortgage liability and Article 62 of the Limitation Act does not apply to this application.

[Para 30][420-B-E] Whether Section 18 Limitation Act could be applied to the D present case. 2. On the admitted fact situation of the present case, where only the date of default as ‘08. 07. 2011’ has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgement or any other date of default, in E view of this Court, the submissions sought to be developed on behalf of the respondent No. 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or F enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, the respondent No. 2 never came out with any pleading other than stating the date of default as ‘08.

07. 2011’ in the application. That being the position, no case for extension of period of limitation is available to be G examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, H BABULAL VARDHARJI GURJAR v. VEER GURJAR 371 ALUMINIUM INDUSTRIES PVT. LTD. & ANR. looking to the very averment regarding default therein and for A want of any other averment in regard to acknowledgement. [Para 33. 1][422-D-G] The reasonings of NCLAT 3. Only two reasons essentially appear to have weighed B with NCLAT to hold that the application in question is within limitation: One, that the right to apply under Section 7 of the Code accrued to the respondent financial creditor on 01. 12. 2016 when the Code came into force; and second, that the period of limitation for recovery of possession of the mortgaged property is twelve years.

The reasonings so adopted by NCLAT do not C stand in conformity with the law declared by this Court and could only be disapproved. [Para 35][423-E-F] 4. The question as to whether date of enforcement of the Code (i. e. , 01. 12. 2016) provides the starting point of limitation for an application under Section 7 of the Code and hence, the D application in question, made in the year 2018, is within limitation, is not even worth devoting much time. A bare look at the impugned order leaves nothing to guess that such observations by the Appellate Tribunal had only been assumptive in nature without any foundation and without any basis. There is nothing in E the Code to even remotely indicate if the period of limitation for the purpose of an application under Section 7 is to commence from the date of commencement of the Code itself. Similarly, nothing provided in the Limitation Act could be taken as the basis to support the proposition so stated by the Appellate Tribunal.

In fact, such observations had been in the teeth of law declared F by this Court in the case of B. K. Educational Services. [Para 36][423-G-H; 424-A-B] 5. The other observations as made and the reasoning as adopted by the Appellate Tribunal in the impugned order, that the property having been mortgaged, the claim is not barred by G limitation because of the period of limitation of twelve years with regard to mortgaged property, had again been erroneous and do not stand in conformity with the dictum of this Court. [Para 37][424-E-F] H 372 SUPREME COURT REPORTS [2020] 13 S. C. R. A 6. The Appellate Tribunal was conscious of the decision of this Court in B. K. Educational Services wherein it had been held in no uncertain terms that the limitation provided in Article 137 governs the application under Section 7 of the Code.

When Article 137, being the residuary provision on the period of limitation for “other applications” is held applicable by this Court B for the purpose of reckoning the period of limitation for an application under Section 7 of the Code, it remains rather inexplicable as to how the Appellate Tribunal could have applied any other Article of Limitation Act (and that too relating to suits) for the purpose of such an application? [Para 37. 1][424-F-H] C 7. There remains nothing to doubt that the Appellate Tribunal had been in error in applying the period of limitation provided for mortgage liability for the purpose of limitation applicable to the application in question. The observations and findings in the impugned order are also required to be D disapproved. [Para 37. 4][425-E-F] 8. The discussion foregoing leads to the inescapable conclusion that the application made by the respondent No.

2 under Section 7 of the Code in the month of March 2018, seeking initiation of CIRP in respect of the corporate debtor with specific assertion of the date of default as 08. 07. 2011, is clearly barred by E limitation for having been filed much later than the period of three years from the date of default as stated in the application. The NCLT having not examined the question of limitation; the NCLAT having decided the question of limitation on entirely irrelevant considerations; and the attempt on the part of the respondents F to save the limitation with reference to the principles of acknowledgment having been found unsustainable, the impugned orders deserve to be set aside and the application filed by the respondent No. 2 deserves to be rejected as being barred by limitation. [Para 38][425-F-H; 426-A] G Innoventive Industries Ltd. v. ICICI Bank: (2018) 1 SCC 407 : [2017] 8 SCR 33; B. K. Educational Services Pvt. Ltd. v.

Paras Gupta & Associates: AIR 2018 SC H BABULAL VARDHARJI GURJAR v. VEER GURJAR 373 ALUMINIUM INDUSTRIES PVT. LTD. & ANR. 5601 : [2018] 12 SCR 794; Swiss Ribbons Private A Limited and Anr. v. Union of India and Ors. (2019) 4 SCC 17 : [2019] 3 SCR 535; K. Sashidhar v. Indian Overseas Bank: (2019) 12 SCC 150 : [2019] 3 SCR 845; Jignesh Shah and Anr. v. Union of India and Anr. (2019) 10 SCC 750 : [2019] 12 SCR 678; Vashdeo R. B Bhojwani v. Abhyudaya Co-operative Bank Ltd. & Anr. (2019) 9 SCC 158 : [2019] 12 SCR 75; Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. & Anr. (2019) 10 SCC 572 : [2019] 13 SCR 224; Sagar Sharma & Anr. v. Phoenix Arc Pvt. Ltd. & Anr (2019) 10 SCC 353: [2019] 14 SCR 974 – C relied on. M/s. Mahabir Cold Storage v. CIT, Patna 1991 Supp (1) SCC 402: [1990] 3 Suppl. SCR 469 N. Balakrishnan v. Krishnamurthy (1998) 7 SCC 123 : [1998] 1 Suppl. SCR 403; Anuj Jain v. Axis Bank Limited and Ors. D (2020) 8 SCC 401 – referred to.

Case Law Reference [2017] 8 SCR 33 relied on Para 7. 1 [2018] 12 SCR 794 relied on Para 9. 2 E [2019] 3 SCR 845 relied on Para 13. 3 [2019] 12 SCR 75 relied on Para 13. 3 [2019] 13 SCR 224 relied on Para 13. 3 [2019] 14 SCR 974 relied on Para 13. 4 F [2019] 12 SCR 678 relied on Para 13. 5 [2019] 3 SCR 535 relied on Para 13. 7 [1990] 3 Suppl. SCR 469 referred to Para 14. 3 [1998] 1 Suppl. SCR 403 referred to Para 14. 5 G (2020) 8 SCC 401 referred to Para 18. 1 H 374 SUPREME COURT REPORTS [2020] 13 S. C. R. A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6347 OF 2009. From the Judgment and Order dated 14. 05. 2019 of the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) Insolvency No. 549 of 2018. B Dr. Abhishek Manu Singhvi, P. S. Patwalia, Sr. Advs, Piyush Singh, Aditya Parolia, Nithin Chandran, Akshay Srivastava, Nidhiram Shrama, Gaurav Goel, Rajesh Kumar, Sonal Jain, Ms. Heena Sharma, Ishkaran Singh, Ms. Namrata Singh, Ms.

Kajal Sharma, Rajendra Beniwal, Divyanshu Srivastava, Kumar Sumit, Ms. Bano Deshwal, Vishal Thakur, C Shriram, Manish Rao, R. C. Kaushik, Advs. for the appearing parties. The Judgment of the Court was delivered by DINESH MAHESHWARI, J. Introductory with brief outline and issue involved D 1. This appeal under Section 62 of the Insolvency and Bankruptcy 1 Code, 2016 is directed against the judgment and order dated 14. 05. 2019 2 passed by the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) Insolvency No. 549 of 2018 whereby, the Appellate Tribunal has rejected the contention that the application made by respondent No. 2 under Section 7 of the Code, seeking initiation of E 3 Corporate Insolvency Resolution Process in respect of the debtor company (respondent No. 1 herein), is barred by limitation; and has declined to interfere with the order dated 09. 08.

2018, passed by the 4 National Company Law Tribunal, Mumbai Bench in CP(IB)-488/I&BP/ MB/2018, for commencement of CIRP as prayed for by the respondent F No. 2. 2. A brief introduction of the parties and the subject matter as also a thumbnail sketch of the relevant orders passed in this matter and the issue involved shall be apposite at the very outset. 2. 1. The appellant Shri Babulal Vardhaji Gurjar has been the director G of the respondent No. 1 company viz. , Veer Gurjar Aluminium Industries 1 Hereinafter also referred to as ‘the Code’ or ‘IBC’. 2 Hereinafter also referred to as ‘the Appellate Tribunal’ or ‘NCLAT’. 3 ‘CIRP’ for short. 4 Hereinafter also referred to as ‘the Adjudicating Authority’ or ‘the Tribunal’ or ‘NCLT’. H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 375 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] 5 Pvt. Ltd. On or about 21. 03. 2018, the respondent No. 2 JM Financial A 6 Assets Reconstruction Company Pvt. Ltd.

, while stating its capacity as the financial creditor, for being the assignee of the loans and advances disbursed by creditor bank to the corporate debtor, filed the said application under Section 7 of the Code before the Adjudicating Authority and sought initiation of CIRP in respect of the respondent No. 1. B 2. 2. After having considered the submissions on behalf of the financial creditor and the corporate debtor, the Adjudicating Authority, by its order dated 09. 08. 2018, admitted the application so made by the 7 financial creditor and appointed an interim resolution professional . Consequent to this order dated 09. 08. 2018, the corporate debtor C (respondent No. 1) is now represented by the interim resolution professional. 2. 3. Being aggrieved by the aforesaid order dated 09. 08. 2018, the appellant preferred an appeal before NCLAT and contended against maintainability of the application moved by the respondent No. 2.

The D appeal so filed by the appellant was summarily dismissed by the Appellate Tribunal by its order dated 17. 09. 2018. However, the order so passed by the Appellate Tribunal was not approved by this Court in the judgment dated 26. 02. 2019, passed in Civil Appeal No. 10710 of 2018, after finding that the issue relating to limitation, though raised, was not decided by the Appellate Tribunal. Hence, the matter was remanded to NCLAT for E specifically dealing with the issue of limitation. After such remand, the Appellate Tribunal, by its impugned order dated 14. 05. 2019, has held that neither the application under Section 7 as made in this case is barred by limitation nor the claim of the respondent No. 2 is so barred and has, therefore, again dismissed the appeal. Being aggrieved, the appellant F has approached this Court over again by way of the instant appeal. 3. In the impugned order dated 14. 05.

2019, the Appellate Tribunal has observed that the Code having come into force on 01. 12. 2016, the application made in the year 2018 is within limitation. The Appellate Tribunal has assigned another reason that mortgage security having been G provided by the corporate debtor, the limitation period of twelve years is available for the claim made by the financial creditor as per Article 61 5 Hereinafter also referred to as ‘the corporate debtor’. 6 Hereinafter also referred to as ‘the financial creditor’. 7 ‘IRP’ for short. H 376 SUPREME COURT REPORTS [2020] 13 S. C. R. 8-9 A (b) of the Limitation Act, 1963 and hence, the application is within limitation. 4. In this appeal, the order so passed by the Appellate Tribunal is in challenge.

The appellant would contend that limitation period for an application under Section 7 of the Code is three years as per Article 137 B of the Limitation Act, where the date of alleged “default” is the starting point of limitation; and in the present case, such date of default being specifically mentioned as 08. 07. 2011, the application filed by the respondent No. 2 in the month of March 2018 is barred by limitation. On the other hand, the respondents would argue that the liability in relation to the debt in question having been consistently acknowledged by the C corporate debtor in its balance sheets and annual reports, fresh period of limitation is available from the date of every such acknowledgment and hence, the application is within time. 4. 1. Thus, the basic issue involved in this matter is as to whether the application made by respondent No. 2 under Section 7 of the Code is D within limitation. 5. On 09. 08.

2019, after having heard learned counsel for the appellant and the respondent No. 2 preliminarily, we issued notice to the respondent No. 1 and by way of interim order, directed status quo in regard to the proceedings in question. E The relevant factual and background aspects: Application by the financial creditor 6. The substance of the relevant factual and background aspects, as emanating from the contents of the application under Section 7 moved by the respondent No. 2 and the observations made by NCLT and F NCLAT in the impugned orders as also those noticed from the submissions made by the respective parties, could now be summarised as infra. 8 Hereinafter, the Limitation Act, 1963 is also referred to as ‘the Limitation Act’. 9 Note: The Articles providing for different periods of limitation are contained in the G Schedule to the Limitation Act, 1963 that is divided in three major Divisions viz.

, First Division (relating to suits); Second Division (relating to appeals); and Third Division (relating to applications). Each Division is further divided in parts with reference to the subject matter. However, the Articles in the Schedule are arranged ad seriatim. Hence, for brevity and continuity, the Articles are mentioned with reference to ‘the Limitation Act’ only. The Schedule and particular Part/Division have been referred wherever required contextually. H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 377 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] 6. 1. On or about 22. 12. 2007, the lender banks viz. , Corporation A Bank, Indian Overseas Bank and Bank of India sanctioned and extended various loans, advances and facilities to the corporate debtor viz. , Veer Gurjar Aluminium Industries Pvt. Ltd. , who was engaged in manufacturing of aluminium ingots from aluminium scrap.

The corporate debtor executed various security documents in favour of the lender banks B in the years 2008 and 2009, including those of equitable mortgage against the facilities so obtained. The Corporation Bank proceeded to rephase/ enhance the facilities to the corporate debtor from time to time and lastly on 27. 08. 2010 wherefor, various additional security documents were executed by the corporate debtor. It has been asserted by the respondent No. 2 that the Corporation Bank had assigned to it the rights in relations C to debts of the corporate debtor by way of Assignment Agreement dated 30. 03. 2013; and a deed of modification of charge over the assets of the corporate debtor was also executed on 26. 04. 2013. 6. 2. The corporate debtor having defaulted in payment of the amount due against such loans, advances and facilities, its account with D 10 Corporation Bank was classified as Non-Performing Asset on 08. 07. 2011 and that with Indian Overseas Bank was classified as NPA on 05.

08. 2011. Then, on 15. 11. 2011, demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and 11 Enforcement of Securities Interest Act, 2002 was issued by Indian E Overseas Bank to the corporate debtor and its guarantors. These steps were followed up with recovery proceedings against the corporate debtor by the consortium of lenders and respondent No. 2 in OA No. 172/2013 12 before the Debts Recovery Tribunal, Aurangabad under Section 19 of the Recovery of Debts Due to the Banks and Financial Institution Act, 13 1993 . F 6. 3. Even when the aforesaid proceedings were pending before DRT, on or about 21. 03. 2018, the respondent No. 2 moved an application before the Adjudicating Authority under Section 7 of the Code, in Form 1 as provided in the Insolvency and Bankruptcy (Application to 14 Adjudicating Authority) Rules, 2016 , for initiation of CIRP in relation G 10 ‘NPA’ for short. 11 Hereinafter also referred to as ‘the SARFAESI Act’.

12 ‘DRT ’ for short. 13 Hereinafter also referred to as ‘the Act of 1993’. 14 Hereinafter also referred to as ‘the Rules of 2016’. H 378 SUPREME COURT REPORTS [2020] 13 S. C. R. A to the corporate debtor while stating its own capacity as the financial creditor, for being the assignee of loans and advances disbursed by 15 Corporation Bank to the corporate debtor . Several details and particulars stated in the said application need not be recounted but, the particulars of amount claimed to be in default and the date when such default occurred, as stated in point No. 2 of Part III of the application, are B relevant for the present purpose and could be usefully extracted as 16 under :- C D 6. 4. It may also be usefully indicated that Part-V of the application, E drawn as per the format in Form 1, required the applicant to state the “Particulars of Financial Debt [Documents, Records and Evidence of Default]”.

The applicant stated the particulars of various securities held, date of their creation etc. , as also the particulars relating to the said O. A. No. 172 of 2013 before DRT and notices issued thereunder. In F Point No. 5 of the said Part-V of the application, the applicant was required to attach “the latest and complete copy of the financial contract reflecting all amendments and waivers to date”. In this regard, again, various agreements for loan, promissory notes, tripartite agreements, 15 Note: In its written submissions, the respondent No. 2 has mentioned the date of G filing this applic ation as ‘28. 02. 2018 ’ but the copy of a pplication placed on record as Annexure A-5 (pp. 135-158) bears the date as ’21. 03. 2018’. 16 Note: this extraction is from the copy of application placed on record as Annexure A- 5 (at p. 140-142). The expression “DATES” marked with * in the second column is reproduced as found mentioned at p.

141 but, in the format appended to the Rules of 2016, this entry carries the expression “DAYS”. H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 379 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] consortium agreements and supplemental agreements were mentioned A by the applicant. In Point No. 8, the applicant was required to give out other documents “in order to prove the existence of financial debt, the amount and date of default”. The contents on this Point No. 8 of Part-V of the application could be reproduced as under:- “8. LIST OF OTHER DOCUMENTS ATTACHED TO THIS B APPLICATION IN ORDER TO PROVE THE EXISTENCE OF FINANCIAL DEBT, THE AMOUNT AND DATE OF DEFAULT i. Registered notice dated 05. 07. 2011 issued by Indian Overseas Bank to the corporate debtor to repay the overdue C amount. Hereto annexed and marked as Exhibit MM is the copy of said registered notice. ii. Demand notice dated 15. 11.

2011 issued under section 13 (2) of the Securitisation Act by Indian Overseas Bank being consortium leader. Hereto annexed and marked as Exhibit D NN is the copy of said Demand notice. iii. Publication of Demand Notice issued in two newspaper i. e Business Standard and Saamna under the SARFEASI Act dated 28. 12. 2011. Hereto annexed and marked Exhibit OO is the copy of said Paper Publication. E iii. (sic). Objection to the Demand Notice and the reply to the said Objections by IOB dated 14. 01. 2012 and 21. 01. 2012 respectively. Hereto annexed and marked as Exhibit PP and Exhibit QQ is the copy of said objection and reply letter. v. Registered Assignment Agreement dated 30. 03. 2013 F between Corporation Bank and (Financial Creditor thereby Corporation Bank assigned the debt due from Corporate debtor along with the underlying securities in favour of the Financial Creditor/ Applicant.

Hereto annexed and marked as Exhibit RR is the copy of said Registered Assignment G Agreement dated 30. 03. 2013 between Corporation Bank and Financial Creditor. ” 6. 5. The application so made by respondent no. 2 came to be registered as CP(IB)-488/I&BP/MB/2018 before the Adjudicating Authority (NCLT). On being noticed, the corporate debtor submitted its H 380 SUPREME COURT REPORTS [2020] 13 S. C. R. A reply in opposition and raised various objections on the contents and frame of the application. It was also contended that various proceedings had been initiated with the sole aim of browbeating the corporate debtor and forcing it to pay the unrealistic claim of the applicant. With specific reference to the proceedings under the SARFAESI Act, it was contended that as per the notice under Section 13 (2), the account of corporate B debtor with Indian Overseas Bank was classified as NPA on 05. 08.

2011 but, it was not mentioned as to when the loan account with Corporation Bank was classified as NPA. The corporate debtor also contended that its loan account had not been properly maintained by the respective banks due to the defect in accounting system and it was clear that the C claim was arbitrary, inflated and not recoverable. With reference to the proceedings pending before DRT in OA No. 172/2013, it was also contended that IBC would not apply to cases where the bank has approached DRT or has adopted the proceeding under the SARFAESI Act and, for this reason, the present proceedings were not maintainable before the Adjudicating Authority. D 6. 6. The applicant financial creditor filed a rejoinder and refuted all the objections of the corporate debtor while asserting, inter alia, that the Corporation Bank declared the account of the corporate debtor as NPA on 08. 07.

2011 and this fact was mentioned in the demand notice issued under Section 13(2) of SARFAESI Act, as sent by Indian Overseas E Bank on behalf of the consortium of banks. Initiation order dated 09. 08. 2018 7. The Adjudicating Authority, in its order dated 09. 08. 2018, dealt with the submissions of the parties and, while rejecting the objections of corporate debtor in relation to the frame of application and the correctness F of loan accounts, held that the applicant was entitled to initiate CIRP under Section 7 of the Code when there was a debt and there was default; and that being a statutory remedy available to the financial creditor, the corporate debtor cannot question its maintainability only for the applicant having adopted other proceedings under other enactments. G As regards the question of debt and default, the NCLT, inter alia, observed and held as under:- “16.

The Corporate Debtor contended that demand notice issued under the SARFAESI Act, by Indian Overseas Bank does not contain the date of NPA of the loan of Corporation Bank. The H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 381 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] petitioner in the rejoinder submitted that the date of NPA of A Corporation Bank was mentioned as 08. 07. 2011 in the SARFAESI Notice. This Bench has gone through the SARFAESI Notice and the date of NPA of Corporation Bank is mentioned as 08. 07. 2011 at pg. no. 579. Hence this contention of the Corporate Debtor fails. Further the explanation to Section 7(1) of IB Code provides B that a default includes a default in respect of a financial debt owed not only to the Applicant Financial Creditor but also to any other Financial Creditor of the Corporate Debtor.

In view of admission of date of NPA of Indian Overseas Bank by the Petitioner in the reply this case squarely falls under the ambit of explanation to Section 7(1) of the Code which is a proof of debt C and default of debt due to another Financial Creditor. This Petition can be admitted based on the reply filed by the Corporate Debtor. ” 7. 1. The Adjudicating Authority also referred to the decision of this Court in the case of Innoventive Industries Ltd. v. ICICI Bank: (2018) 1 SCC 407 as regards the scheme of the Code and the D requirements of Section 7 thereof and observed,- “21….. The rational and reasoning which can be drawn from the above lines of the citations clearly indicate mainly two aspects and that is existence of debt and the default which the present facts of the case clearly demonstrate.

So any amount of argument E that deals with issues which are not pertinent and trivial to the main issues concerned does not or cannot come in the way of adjudication of the lis in favour of the Petitioners. The present facts of the case are fully and comprehensively covered by the wordings of the above citations. F 22. The above discussion clearly shows that there is a debt owed by the Corporate Debtor in favour of Corporation Bank and subsequently on assignment of the debts by the said bank to the Petitioner, the Corporate Debtor is liable to make the payment to the Petitioner. Further there is ample proof to come to the G conclusion that the Corporate Debtor defaulted in making payment to Corporation Bank and thereafter to the assignor, the Petitioner herein. 23. This Adjudicating Authority, on perusal of the documents filed by the Creditor, is of the view that the Corporate Debtor defaulted H 382 SUPREME COURT REPORTS [2020] 13 S. C. R.

A in repaying the loan availed and also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of section 7 is taken as complete…. ” B 7. 2. Accordingly, the Adjudicating Authority (NCLT) admitted the application for consideration; passed necessary order of moratorium; and appointed the interim resolution professional. Previous round of proceedings in appeal C 8. Aggrieved by the aforesaid order dated 09. 08. 2018, the appellant, erstwhile director of the corporate debtor, approached the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 549 of 2018 under Section 61 of the Code, challenging admission of the application made by the respondent No. 2. D 8. 1.

The appeal so filed by the appellant was considered and summarily dismissed by the Appellate Tribunal by way of its order dated 17. 09. 2018. The Appellate Tribunal took note of the contention urged on behalf of the appellant that a petition under Section 19 of the Act of 1993 was pending before DRT wherein question had been raised as to whether the amount was payable to the assignee or not. As regards this, the E Appellate Tribunal observed that initiation of CIRP cannot be annulled merely for pendency of a petition under Section 19 of the Act of 1993; and in terms of Section 14 of the Code, all such pending matters cannot proceed during the period of moratorium. 8. 2. It was also contended on behalf of the appellant that there F was no debt payable. After noticing this contention, the Appellate Tribunal called upon the appellant to file an affidavit that no amount was received or the amount received had already been paid and therefore, there was no debt or default.

In response, learned counsel for the appellant expressed inability to file any such affidavit for the reason that the G corporate debtor had indeed availed the loan from the bank/s. After noticing this stand of the appellant, the Appellate Tribunal felt disinclined to interfere with the order passed by the Adjudicating Authority and hence, dismissed the appeal while observing as under:- “2. Learned counsel appearing on behalf of the Appellant submitted H that a petition under Section 19 of ‘The Recovery of Debts Due BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 383 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] to Banks and Financial Institutions Act, 1993’ is pending before A Debt Recovery Tribunal, Aurangabad. Wherein question has been raised is whether the amount is payable to the assignee or not. 3.

However, the initiation of Corporate Insolvency Resolution Process cannot be annulled merely on the ground of pendency of a petition under Section 19 of ‘The Recovery of Debts Due to B Banks and Financial Institutions Act, 1993’. In fact in terms of Section 14 of I&B Code all such pending proceeding cannot proceed during the period of moratorium. 4. Learned counsel appearing on behalf of the Appellant contended that there is no debt payable. However, when we asked the counsel C to file an addition affidavit signed by the Appellant making specific statement that they have not received any amount or amount received has already been paid and therefore there is no debt or there is no default, it is informed by the counsel for the Appellant that such affidavit cannot be filed by the Appellant as the Corporate D Debtor had taken loan from the Bank. 5. In view of the aforesaid stand taken by Appellant, we are not inclined to interfere with the impugned order dated 9th August, 2018.

In absence of any merit, the appeal is dismissed. No costs. ” 9. Aggrieved by the aforesaid order dated 17. 09. 2018, the appellant E approached this Court under Section 62 of the Code in Civil Appeal No. 10710 of 2018, which was considered and decided by way of the order dated 26. 02. 2019. 9. 1. In the order dated 26. 02. 2019, this Court took note of the fact that in appeal before the Appellate Tribunal, one of the grounds agitated F was that the claim of the respondent was barred by time for, admittedly, the default was committed on 08. 07. 2011 whereas the application was filed in the month of March, 2018. 9. 2. After noticing that the principal issue relating to limitation, though raised by the appellant, was not even decided by the Appellate G Tribunal; and after referring to the decision in B. K. Educational Services Pvt. Ltd. v.

Paras Gupta & Associates: AIR 2018 SC 5601, wherein it was held that the Limitation Act is applicable to application filed under Section 7 of the Code, this Court remanded the matter to the Appellate Tribunal for deciding the issue of limitation with respect to the application H 384 SUPREME COURT REPORTS [2020] 13 S. C. R. A in question in accordance with law while setting aside the impugned order dated 17. 09. 2018 and while granting liberty to the parties to submit additional affidavit/s in support of their respective contentions. This Court observed and ordered, inter alia, as under:- “Although, we find that the ground articulated in the appeal memo B is vague, but, as the objection regarding limitation goes to the root of the matter and touches upon the jurisdiction of the National Company Law Tribunal to proceed with the claim of the respondent; and since the recent decision of this Court in B. K. Educational Services Pvt. Ltd. Vs.

Paras Gupta & Associates – AIR 2018 SC 5601 has held that the question of limitation is C applicable even the applications filed under Section 7 of the I. & B. Code, it would be just and necessary to answer the said objection appropriately, in accordance with law. Indisputably, neither the National Company Law Tribunal nor the National Company Law Appellate Tribunal, in the present case, D has examined the said contention. Indeed, according to the respondent, the plea of claim being barred by limitation is unstatable and, to buttress this argument, the respondent has relied upon the entries in the books of account of the appellant and other related documents. However, that is a matter which ought to be agitated before the National Company Law Appellate Tribunal in the first E place.

Accordingly, we relegate the parties before the National Company Law Appellate Tribunal for fresh consideration of the objection raised by the appellant that the claim of the respondent is barred by limitation….. ” F The impugned order dated 14. 05. 2019 by NCLAT after remand 10. In compliance of the aforesaid order of this Court dated 26. 02. 2019, the Appellate Tribunal (NCLAT) took up the said appeal for G consideration afresh and proceeded to dismiss the same by way of its impugned order dated 14. 05. 2019 while holding that the application in question is not barred by limitation. 10. 1. In the introductory paragraphs 1 to 4 of the impugned order dated 14. 05. 2019, the Appellate Tribunal referred to the subject matter H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 385 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] of appeal as also the orders passed in the previous round of proceedings; A and in paragraphs 5 and 6, took note of the rival contentions.

Thereafter, in paragraphs 7 to 14, the Appellate Tribunal took note of the background facts including those pertaining to the loans taken by the corporate debtor and creation of securities by way of mortgage of immovable properties and hypothecation of stock-in-trade and plant and machinery; the B assignment in favour of respondent No. 2 by the lender bank; the loan having been shown by the corporate debtor in its annual reports; pendency of the petition under Section 19 of the Act of 1993 for recovery of the due amount of loan; and a letter dated 31. 07. 2018 said to have been sent on behalf of the corporate debtor to the respondent No. 2 for one time 17 settlement . C 10. 1. 1. In paragraph 15 of the impugned order, the Appellate Tribunal referred to the decision of this Court in the case of B. K. Educational Services (supra) as also Section 238-A of the Code to notice that law of limitation is applicable to the application under Section 7 of the Code.

However, in paragraph 16, the Appellate Tribunal made D the observation that ‘for filing the application under Section 7 of the I&B Code, Article 132 of Part 2 (other application) is applicable’; 18 and proceeded to reproduce the said Article 132 of the Limitation Act. Thereafter, in paragraphs 17 to 19, the Appellate Tribunal referred to the frame of Schedule to the Limitation Act and its Divisions, dealing with E suits, appeals and applications respectively. Coming to the crux of the matter, in paragraph 20 of the impugned order, the Appellate Tribunal referred to Article 137 dealing with ‘OTHER APPLICATIONS’, as occurring in Part II of Third Division of Schedule to the Limitation Act and reproduced the same while observing that this Article 137 is applicable to the application/s under Section 7 or Section 9 or Section 10 of the F Code. 10. 2.

After the aforementioned observations and overview of the facts and the law applicable, the Appellate Tribunal, in paragraph 21 of 17 ‘OTS’ for short. 18 G Such a reference by the Appellate Tribunal to Article 132 of the Limitation Act appears to be entirely inapt because that relates to the application to High Court for certificate of fitness to appeal to this Court and provides for the limitation of sixty days from the date of decree or order. Be that as it may, the observation with extraction of Article 132 appears to be a matter of accidental slip; and we would leave the said Paragraph 16 of the impugned order at that only. H 386 SUPREME COURT REPORTS [2020] 13 S. C. R. A the impugned order, stated the first reason for its conclusion that the application in question is not barred by limitation in the manner that the right to apply under Section 7 of the Code accrued to the respondent financial creditor only on 01. 12. 2016 when the Code came into existence.

The Appellate Tribunal said, - B “21. The I&B Code has come into existence on 1st December, 2016 and thereafter the right to apply accrued to respondent – ‘Financial Creditor’ under Section 7 of the I&B code only on 1st December, 2016. The application having filed in the year 2018, we hold that the application under Section 7 is not barred by limitation. ” C 10. 3.

Thereafter, in paragraph 22, the Appellate Tribunal extracted the relevant passages from the decision in Innoventive Industries (supra) wherein this Court has explained as to how the CIRP is triggered in the scheme of IBC; and has underscored the requirement of existence of “default” on the part of the corporate debtor wherefor and whereby D a financial creditor could maintain an action under Section 7 of the Code as also the essential elements of the process of such an action, including the form and manner of moving the application in conformity with the Rules of 2016 and initial enquiry by the Adjudicating Authority on the question as to whether a default has occurred.

Then, in paragraph 23 of the impugned order, the Appellate Tribunal also took note that in E Innoventive Industries, this Court has further held that during such consideration by the Adjudicating Authority, the corporate debtor is entitled to point out that default has not occurred in the sense that the “debt” is not due; and that a debt ‘may not be due if it is not payable in law or in fact’. F 10. 4. Thereafter, in paragraph 24, the Appellate Tribunal, with reference to its own decision in Company Appeal (AT) (Insolvency) No. 82 of 2018: Binani Industries Ltd. v. Bank of Baroda and Anr. , observed that the Code does not relate to litigation nor the proceedings were of suit or money suit; and the period of limitation prescribed in First G Division of the Limitation Act is not applicable to the proceedings under the Code.

However, thereafter in paragraph 25 of the impugned order, the Appellate Tribunal observed that though the law of limitation as prescribed in First Division, Second Division and Part I of Third Division of the Schedule to the Limitation Act is not applicable, the corporate debtor could take a plea that “debt” is not due, as it is not payable in law H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 387 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] being barred by limitation. These paragraphs 24 and 25 of the impugned A order read as under: - “24. In ‘Binani Industries Ltd. vs. Bank of Baroda & Anr. ’ – Company Appeal (AT) (Insolvency) NO. 82 of 2018’ this Appellate Tribunal held that ‘Insolvency & Bankruptcy Code’ does not relate to litigation nor it is a suit or money suit. In that B background the period of limitation prescribed in the First Division is not applicable through I&B Code proceedings. 25.

Though we have held that the law of limitation for filing a suit (First Division) or Appeals (Second Division) or application under Part I (Third division) are not applicable, the ‘Corporate Debtor’ C can take a plea that ‘debt’ is not due, as it is not payable in law being barred by limitation. ” 10. 5. After the aforementioned observations, the Appellate Tribunal indicated the question to be examined in the matter in paragraph 26 and proceeded to decide the same in the ensuing paragraphs. In paragraphs D 27 and 28 of the impugned order, the Appellate Tribunal referred to the undisputed fact that the financial creditor had already filed a petition under Section 19 of the Act of 1993 that was pending; and also observed that the appellant has suppressed the fact that on 31. 07. 2018, the corporate debtor approached the financial creditor for one time settlement.

E After these observations, the Appellate Tribunal referred to the facts that nine properties of the corporate debtor had been mortgaged with the financial creditor and that the financial creditor had adopted the proceedings for enforcement of mortgage security and had recovered possession pursuant to the order passed by DRT. Having thus referred to the other proceedings and particularly the enforcement of mortgage F security, the Appellate Tribunal referred to the limitation period of twelve years for recovery of possession of mortgaged property as per Article 61(b) of the Limitation Act in paragraphs 29 and 30 and concluded that the property having been mortgaged, the claim is not barred by limitation as the period of limitation is twelve years with regard to the mortgaged G property.

These considerations, observations and findings led the Appellate Tribunal to hold and conclude in paragraph 31 of the impugned order that the application under Section 7 of the Code is not barred by limitation. These paragraphs 26 to 31 of the impugned order read as under:- H 388 SUPREME COURT REPORTS [2020] 13 S. C. R. A “26. In the present case, it is to be noticed whether the ‘debt’ is not payable in law by the ‘Corporate Debtor’ and/or the ‘default’ being barred by limitation. 27. We have noticed that immediately on ‘default’, Respondent No. 2 – ‘Financial Creditor’ has already moved before the DRT B under Section 19 of the ‘The Recovery of Debts Due to the Banks and Financial Institution Act, 1993’ and O. A. No. 172 of 2017 which is still pending. This fact has also been accepted and pleaded by the Appellant. 28. The Appellant has suppressed the fact that recently the C ‘Corporate Debtor’ by letter dated 31st July, 2018 approached Respondent No.

2 (Financial Creditor) for one time settlement. There is a finding that there is a continuous cause of action. The appellant has not disputed that 9 properties i. e. land and building have been mortgaged by the ‘Corporate Debtor’ with Respondent No. 2 - ‘Financial Creditor’. Respondent No. 2 also preferred a D criminal proceeding on 27th June, 2017 as the enforcement mortgage of which possession was taken by 2nd Respondent after the order passed by the DRT, Aurangabad. 29. Part V (First Division) of Limitation Act relates to ‘Suits relating to immovable property’ to recover possession of the property E mortgaged and afterwards transferred by the mortgagee for a valuable consideration. The period of limitation is 12 years since the transfer becomes known to the plaintiff [Article 61(b)]. 30.

In view of the aforesaid position of law, the property having mortgaged, we also hold that the claim is not barred by limitation F as the period of limitation is 12 years with regard to mortgaged property and in terms of Section 5 (7) read with Section 5(8) as the property is mortgaged, Respondent No. 2 also comes within the meaning of ‘Financial Creditor’. 31. Therefore, we hold that the application under Section 7 is not G barred by limitation nor the claim of Respondent No. 2 is barred by limitation. We reject the plea that no ‘debt’ is payable by the ‘Corporate Debtor’ in the eyes of law. We find no merit in this appeal. It is accordingly dismissed. No costs” 11. For what has been noticed hereinabove, it could be reasonably H deciphered that the Appellate Tribunal has rejected the plea of bar of BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 389 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.

] limitation essentially on two major considerations: One, that the right to A apply under Section 7 of the Code accrued to the respondent financial 19 creditor only on 01. 12. 2016 when the Code came into force ; and second, that the period of limitation for recovery of possession of the mortgaged 20 property is twelve years . Noticeably, though the Appellate Tribunal has referred to the pendency of the application under Section 19 of the B Act of 1993 as also the fact that corporate debtor had made a prayer for OTS in the month of July, 2018 but, has not recorded any specific finding about the effect of these factors. Broad features of rival submissions 12. Assailing the orders so passed by NCLAT and asserting that C the application made by the respondent No. 2 is barred by limitation, the erstwhile director of the corporate debtor has preferred this appeal which has been duly opposed by the applicant financial creditor (respondent No.

2) as also the IRP for the corporate debtor (respondent No. 1). The broad features and substance of the rival submissions could be noticed D as infra. The Appellant 13. The learned senior counsel for the appellant has contended that in the impugned order dated 14. 05. 2019, the NCLAT has failed to apply the law declared by this Court in a series of decisions to the effect E that for an application under Section 7 of the Code, Article 137 of Limitation Act is applicable and not Article 61 (b); and the limitation for such an application is three years from the date of the alleged default. According to the learned senior counsel, neither Article 61 (b) of Limitation Act applies nor even Section 18 thereof and, therefore, on the admitted date of default as stated by the respondent No. 2, the application in F question remains hopelessly barred by limitation. 13. 1. The learned senior counsel has elaborated on the submissions with reference to the decision of this Court in the case of B. K.

Educational Services (supra) and has contended that therein, it is categorically held that Article 137 of the Limitation Act applies to the G application under Section 7 of the Code and hence, the limitation period is of three years, which is to be counted from the date of default. 19 Paragraph 21 of the impugned order ibid. 20 Paragraphs 29 and 30 of the impugned order ibid. H 390 SUPREME COURT REPORTS [2020] 13 S. C. R. A 13. 2. With reference to the process envisaged by the Code and the Rules of 2016, where the financial creditor is required to mention the date of default in the application and also to adduce evidence of default, the learned senior counsel has argued that in the application under consideration, which was filed on 21. 03. 2018, the respondent No. 2 mentioned the date of default as 08. 07. 2011 and, for the evidence of B default, only the documents pertaining to the NPA were attached i. e. , until the year 2011.

Hence, according to the learned counsel, on the averments as taken and evidence as adduced, the application so filed by the respondent No. 2 is clearly barred by limitation and deserves to be rejected outright. C 13. 3. The learned senior counsel has further referred to the decision in K. Sashidhar v. Indian Overseas Bank: 2019 SCC Online 21 SC 257 and has submitted that therein, this Court has reaffirmed the position that right to sue under the Code accrues on the date when default occurs and if the default had occurred three years prior to the date of D filing of the application, the same would not amount to debt due and payable under the Code. The learned counsel has yet further submitted that in Civil Appeal No. 11020 of 2018: Vashdeo R. Bhojwani v. 22 Abhyudaya Co-operative Bank Ltd. & Anr.

, where default had occurred in the year 2001 when the Recovery Certificate was issued and the NCLT and NCLAT held that the claim was not time-barred for E the cause of action being a continuing one, this Court has held that there was no doubt that the claim was due and payable, but the same was barred by limitation as applicable under IBC. Proceeding further, the learned senior counsel has referred to the decision rendered by a three- Judge Bench of this Court in Civil Appeal No. 4952 of 2019: Gaurav F Hargovindbhai Dave v. Asset Reconstruction Company (India) 23 Ltd. & Anr. to submit that therein, it is specifically held that the application under Section 7 of IBC would fall within the purview of Article 137 of the Limitation Act and the time of three years begins to run from the date of default and no new life would be given to the time-barred debts. The learned senior counsel has also referred to the order G of NCLAT dated 02. 05. 2019 in Company Appeal (AT)(Insolvency) No.

655 of 2018, which was in challenge before this Court in Gaurav Hargovindbhai Dave (supra), to point out that NCLAT had taken the 21 Now reported in (2019) 12 SCC 150 22 Now reported in (2019) 9 SCC 158 23 Now reported in (2019) 10 SCC 572 H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 391 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] application under Section 7 of IBC to be within limitation also because A of OTS offers made by the corporate debtor to the financial creditor and even this proposition did not meet with approval of this Court. The learned counsel would submit that in Vashdeo R.

Bhojwani (supra), this Court has taken the date of default to be that of issuance of Recovery Certificate and in Gaurav Hargovindbai Dave (supra), this Court has taken the B date of NPA to be the date of default; and this Court has construed the date of default to be the one when the debt became due and payable strictly as per Section 3(12) of IBC whereunder, default means ‘non-payment of debt when whole or any part of instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. ’ C 13. 4. The learned senior counsel has further submitted that the reasonings adopted by NCLAT stand thoroughly disapproved by this Court in the decisions above-referred as also that in Civil Appeal No. 7673 of 2019: Sagar Sharma & Anr. v. Phoenix Arc Pvt. Ltd. & 24 Anr. and, therefore, the impugned order cannot be sustained from any D angle. 13. 5.

The learned senior counsel has yet further referred to the three-Judge Bench decision in the case of Jignesh Shah and Anr. v. 25 Union of India and Anr. : 2019 SCC Online 1254 and has submitted that therein too, this Court has analysed in detail the applicability of the E Limitation Act to the applications of winding up being transferred to NCLT and has held that enforcement of IBC in 2016 will not give a new life to the time-barred debts; and if the application is filed beyond three years from the date of default, then the same will be barred by time. 13. 6.

The learned senior counsel has argued that the debt shown F in the balance sheet does not revive the limitation period of three years as applicable to the IBC under Article 137 of the Limitation Act for the reasons that the debt as shown in the balance sheet is not covered by Section 18 of the Limitation Act; and even otherwise, Section 18 of the Limitation Act cannot revive the “default” relevant for IBC and could G only revive limitation with respect to the cause of action. The learned senior counsel has emphasised on the submissions that Section 18 of the Limitation Act could revive limitation in some cases but not for every remedy which is separate and distinct; and when limitation period of 24 Now reported in (2019) 10 SCC 353 25 Now reported in (2019) 10 SCC 750 H 392 SUPREME COURT REPORTS [2020] 13 S. C. R.

A three years under Article 137 of the Limitation Act, in relation to the application under Section 7 of the Code, starts from the date of default, acknowledgment of the debt in the balance sheet will not give any fresh date of default because default occurs only once and cannot be continuing. The learned counsel has also submitted that the NCLAT has wrongly relied on the alleged proposal for OTS which was never filed before B NCLT and also was denied by the appellant herein; and in any case, the proposal for OTS, if at all made on 31. 07. 2018, cannot revive the date of default as per declaration of NPA on 08. 07. 2011 nor does it attract Section 18 of the Limitation Act. 13. 7. As regards relevant considerations and approach, the learned C senior counsel for the appellant has submitted, with reference to paragraph 64 of the decision in Swiss Ribbons Private Limited and Anr. v. Union of India and Ors.

: (2019) 4 SCC 17, that the legislative policy has moved from “cause of action” to determination of “default” and in the present case, default having occurred when the account became D NPA as on 08. 07. 2011, the application remains barred by limitation. Respondent No. 2 14. Per contra, the learned senior counsel appearing for the financial creditor (respondent No. 2) has contended that this appeal is devoid of substance and is liable to be dismissed on merits as also on E conduct of the appellant. 14. 1. The learned senior counsel would maintain that the debt of the corporate debtor, payable to the respondent No. 2, has neither been disputed nor denied by the appellant; rather it is stated in ground P in the memo of appeal (page 36 of paper-book) that the corporate debtor is F and has always been willing to settle the amount of outstanding loan in one time settlement with the respondent No. 2.

The learned counsel would submit that the late attempt on the part of the appellant to dispute the OTS letter issued by the respondent No. 1 is baseless and fallacious because such a contention has been raised for the first time in this second round of appeal in this Court; and that the appellant is rather guilty of G taking false pleadings and of perjury in his attempts to mislead. 14. 2. While refuting the submissions made on behalf of the appellant, it has been strenuously argued by the learned senior counsel for the respondent No. 2 that the application under Section 7 of the Code is not barred by limitation only because of initial date of default H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 393 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] being mentioned therein as 08. 07. 2011.

The learned counsel would submit A that the contentions on behalf of the appellant are unsustainable since the debt in question had been legally and unequivocally admitted to be due and payable in writing by the respondent No. 1 all throughout from the year 2011 until 2017 in its balance sheets filed along with annual returns before the Registrar of Companies; and the debt had been shown B as the loan amount outstanding to Corporation Bank, who had assigned the same to the respondent No. 2. 14. 3. While heavily relying on the observations in Jignesh Shah (supra), learned senior counsel has contended that as per the law declared by this Court, the provisions of Section 18 of the Limitation Act certainly C extend the period of limitation under the Code on any acknowledgment of debt by the corporate debtor. The learned counsel has referred to the 26 provisions of the Companies Act, 2013 , particularly Section 95 thereof, as also to the observations of this Court in M/s.

Mahabir Cold Storage v. CIT, Patna: 1991 Supp (1) SCC 402 to submit that the registers of a company are of prima facie evidence; and the balance sheet disclosing D loans and borrowings and forming part of annual returns, indeed constitute the admission and acknowledgment of the corporate debtor of its indebtedness. Therefore, according to the learned counsel, the loan amount acknowledged to be due and payable by the corporate debtor in the balance sheets and annual reports, continuously from the year 2011 E and until the year 2017, becomes an admitted fact of evidence and thereby, the period of limitation is extended by dint of applicability of Section 18 of the Limitation Act. 14. 4.

The learned senior counsel has re-emphasised on the submissions that the suggestions of the appellant, that no extension of F limitation period under Section 18 of the Limitation Act is permissible in the Code because date of default is sacrosanct and only three years period from that date is permissible, remain untenable in law. The learned counsel has contended that at the time of filing such application by the respondent No. 2, there was no provision in the Code importing any defined period of limitation and neither there was any mandatory legal G requirement of stating in the application format as to how the claim was within limitation nor there was any statutory requirement to furnish any specific evidence thereof and therefore, the Section 7 application as 26 Hereinafter also referred to as ‘the Companies Act’. H 394 SUPREME COURT REPORTS [2020] 13 S. C. R. A framed and filed by respondent No. 2 was well within the period of limitation. 14. 5.

As regards the requisite approach in applying the law of limitation to the application under Section 7 of the Code, the learned senior counsel has strenuously argued that the amendment applying the B provisions of the Limitation Act to the Code came into force with effect from 06. 06. 2018 but only after filing of the application by respondent No. 2; and testing a post facto applicable statutory provision of retrospective nature in a watertight stringent manner would result in a fatal flaw in equity and the same may also prejudice scores of legal recourse by many other banks and financial institutions currently in Courts/ C Tribunals on mere technicality that was unforeseen and unconceived in past and hence, the documents making out a case for extension of limitation period could not be filed.

Other way round, according to the learned counsel, the unrestrained applicability of Section 238-A of the Code in an anomalous manner suggested on behalf of the appellant would D compel all the financial institutions to immediately proceed and file the application under Section 7 before the expiry of three years exactly from the date of default, in spite of the fact that any borrower, in order to overcome its financial constraints to repay might be ready and willing to comply with the requirements of Section 18 of the Limitation Act for extension of period of limitation. The learned counsel has relied on the E decision of this Court in N. Balakrishnan v. Krishnamurthy : (1998) 7 SCC 123 to submit that the rules of limitation are not meant to destroy the rights of the parties. 14. 6. The learned senior counsel has, therefore, submitted that the application filed by respondent No.

2 under Section 7 of the Code as F financial creditor is within the period of limitation as prescribed and as extended legally by application of the relevant provisions of the Limitation Act. Thus, according to the learned counsel, the application has rightly been admitted by NCLT and the present appeal deserves to be dismissed. Respondent No. 1 G 15. The learned counsel appearing for the IRP (respondent No. 1) has more or less argued on the same lines and has submitted that the application in question is well within the period of limitation when examined in the light of the applicable provisions of the Code and the Limitation Act. H BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 395 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] 15. 1. According to the learned counsel, the application filed by A the respondent No.

2 remains within limitation for the reasons: (a) that the liability of loan is long standing and same is recorded in the balance sheets of corporate debtor for the Financial Years 2011-12, 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17; (b) that by way of letter dated 31. 07. 2018, request for OTS was made on behalf of the corporate debtor; B and (c) OA No. 172/2013 was filed before DRT well within the stipulated time period and the same is still pending. It has been contended that in view of these indisputable facts, the claim of the financial creditor cannot be said to be dead or stale claim and hence, is not barred by limitation, particularly when the financial creditor has been availing of another civil remedy available to it and had filed the application under Section 19 of C the Act of 1993 well within limitation. 15. 2.

The learned counsel has further contended that the impugned order of NCLAT is correct on facts and is in consonance with the intent and spirit of law laid down by this Court in B. K. Educational Services (supra) that the claim of the creditor should not be a dead or a stale D claim. The learned counsel has further contended that mere date of default or date of classification of an account as NPA does not put a full stop on ‘further cause of action’ or ‘continuing cause of action’ available to the financial creditor.

The learned counsel would submit that on the settled principle of law, the interpretation of statute should always be in E furtherance to its objective and to give effect to the intent of legislature; and if, for the sake of arguments, the contention of the appellant is accepted that an application under Section 7 of IBC could be filed only within three years from the date of NPA, it would frustrate the objective of IBC to restructure the stressed assets and ensure maximisation of the value of stressed assets. F 15. 3. The learned counsel has again relied on Section 18 of the Limitation Act and the aforesaid decisions in Jignesh Shah and Mahaveer Cold Storage to submit that the contention of the appellant that cause of action arose in 2011 and right to sue started ticking in the said year is baseless, as the corporate debtor had continuously admitted G its liability in its audited balance sheets until the year 2017 and further admitted its liability with an offer for OTS.

Therefore, according to the learned counsel, the contention that the debt is barred by limitation cannot be taken by the corporate debtor in the given facts and circumstances besides that such a contention is contrary to the undisputed facts and H admission of liability. 396 SUPREME COURT REPORTS [2020] 13 S. C. R. A 15. 4. The learned counsel for the respondent No. 1 has also attempted to refer to the proceedings already undertaken in this matter pursuant to the order of admission by NCLT, including the meetings of, and resolutions by, CoC; and consequent moving of application by IRP before NCLT for liquidation of the corporate debtor before passing of the interim order in this appeal. B 16.

In distillation of what has been noticed hereinabove, it is apparent that while not disputing the basics on the applicability of law of limitation to the application in question, the main plank of submissions of the learned counsel for respondents has been that the applicability of Section 18 of the Limitation Act, providing for extension of the period of C limitation upon making of acknowledgment by the party against whom a right is claimed, is not taken away and, for such acknowledgments (of liability) having been consistently and continuously made in the balance sheets and annual reports by the corporate debtor as also in its offer for OTS, the fresh period of limitation would be available from the date of D every such acknowledgment. Hence, with heavy reliance on the principles relating to “acknowledgment” under Section 18 of the Limitation Act, the learned counsel for the respondents would assert that the application in question is not barred by limitation.

On the other hand, the gravamen of submissions on behalf of the appellant has been that looking to the scheme of the Code and the decisions of this Court, the application in E question is governed by Article 137 of the Limitation Act; that three years’ time period prescribed therein commences from the date of default; and that acknowledgment of debt in the balance sheet or annual report does not give any fresh period of limitation because default occurs only once and does not furnish a continuing right to apply. F 16. 1. Apart from the aforesaid, as noticed, the Appellate Tribunal has concluded in favour of the respondents for different reasons viz. , that the right to apply under Section 7 of the Code accrued only on 01. 12.

2016 when the Code came into force and hence, the application filed by the financial creditor in the year 2018 is not barred by limitation; and that the period of limitation is twelve years for recovery of possession G of the mortgaged property and, therefore, the claim is not barred by limitation. The relevant provisions of the Code and the Limitation Act 17. For determination of the core issue as to whether the application H made by respondent No. 2 before NCLAT under Section 7 of the Code BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 397 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] is within limitation and for dealing with the submissions made by the A respective learned counsel as also the reasonings adopted by the Appellate Tribunal, at the first it would be appropriate to take note of the relevant statutory provisions in the Insolvency and Bankruptcy Code, 2016 and the Limitation Act, 1963. 17. 1.

The expressions generally used in the Insolvency and B Bankruptcy Code, 2016 are defined in Section 3 thereof. The relevant definitions occurring in Section 3 of the Code are as under: - “3. Definitions.

—In this Code, unless the context otherwise requires,— **** **** **** C (6) “claim” means— (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; D (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; (8) “corporate debtor” means a corporate person who owes a E debt to any person; **** **** **** (10): “creditor” means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; F (11) “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; (12) “default” means non-payment of debt when whole or any G part or instalment of the amount of debt has become due and 27 payable and is not [paid] by the debtor or the corporate debtor, as the case may be; **** **** **** 27 The expression in parenthesis was substituted for “repaid” by Amendment Act No.

26 of 2018 with retrospective effect from 06. 06. 2018. H 398 SUPREME COURT REPORTS [2020] 13 S. C. R. A (30): “secured creditor” means a creditor in favour of whom security interest is created; **** **** ****” 17. 2. Part II of the Code deals with insolvency resolution and liquidation of corporate persons and the extent of application of this Part B II is specified in Section 4 that reads as under:- “4. Application of this Part. - (1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees: Provided that the Central Government may, by notification, specify C the minimum amount of default of higher value which shall not be more than one crore rupees. ” 17. 3. The expressions employed in Part II of the Code are defined in Section 5 thereof. The relevant definitions are as under:- D “5. Definitions.

—In this Part, unless the context otherwise requires,— **** **** **** (6) “dispute” includes a suit or arbitration proceedings relating E (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty; (7): “financial creditor” means any person to whom a financial F debt is owed and includes a person to whom such debt has been legally assigned or transferred to; **** **** ****” 17. 4. The provisions relating to initiation of CIRP, with which we G are primarily concerned in this matter, are contained in Section 7 of the Code and read as under:- “7. Initiation of corporate insolvency resolution process by financial creditor. — (1) A financial creditor either by itself or jointly with [other financial creditors, or any other person on H behalf of the financial creditor, as may be notified by the Central BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM 399 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.

] 28 Government,] may file an application for initiating corporate A insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. Explanation. — For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor B of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. C (3) The financial creditor shall, along with the application furnish— (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and D (c) any other information as may be specified by the Board.

(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor E under sub-section (3).

(5) Where the Adjudicating Authority is satisfied that— (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending F against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such G application: Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice 28 The expressions in parenthesis were substituted for “other financial creditors” by Amendment Act No. 26 of 2018 with retrospec tive effect from 06. 06. 2018. H 400 SUPREME COURT REPORTS [2020] 13 S. C. R. A to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.

(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). B (7) The Adjudicating Authority shall communicate— (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such C application, as the case may be. ” 17. 5. Section 238-A, inserted in the Code by way Amendment Act No. 26 of 2018, is deemed to have come into effect from 06. 06. 2018. This Section 238-A, being directly relevant for the present purpose, could also be usefully reproduced as under:- D “238-A. Limitation. - The provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.

” E 17. 6. Section 18 of the Limitation Act, providing for the extension of period of limitation on acknowledgment of the liability, which is strongly relied upon by the respondents, reads as under:- “18. Effect of acknowledgment in writing. — F (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment 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 G derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. H BABULAL VARDHARJI GURJAR v.

VEER GURJAR ALUMINIUM 401 INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J. ] Explanation. —For the purposes of this section,— A (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is B coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) the word “signed” means signed either personally or by an agent duly authorised in this behalf; and C (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. ” 17. 7.

As regards the period of limitation for the application in question, Article 137, as contained in Part II of Third Division of the D Schedule to the Limitation Act (relating to the applications not otherwise provided for), shall have bearing in the matter and may be taken note of 29 as under 29 It may be usefully observed that the Appellate Tribunal has referred to Article 61(b) of the Limitation Act that relates to suits on mortgages. As shall be noticed hereafter E later, such a reference does not fit in the issue at hand from any angle. However, we may extract Articles 61(b) and 62 of the Limitation, just for the sake of reference, as under:- F G H 402 SUPREME COURT REPORTS [2020] 13 S. C. R. A B The relevant basics of the Insolvency and Bankruptcy Code, 2016 18.

Now, a brief insight into the expositions of this Court on the reasons, purport, meaning and effect of the provisions of IBC and changes C brought about by it to the then existing law, particularly those having bearing on the questions at hand, shall be useful. 18. 1. As noticed from Preamble, the Code came to be enacted to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons and even of partnership firms and D individuals in a time bound manner; the objectives, inter alia, being for maximisation of value of assets of such persons and balance of interest 30 of all the stakeholders. 18. 2. One of the earliest decisions, wherein this Court dealt with the provisions of IBC in sufficient detail while explaining the raison E d’être for this enactment and a paradigm shift in law, had been in the case of Innoventive Industries (supra) that was decided on 31. 08. 2017.

Therein, this Court, inter alia, pointed out that ‘one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process’. F 18. 2. 1. In the case of Innoventive Industries, this Court was essentially concerned with the question as to whether the proceedings under IBC could be stalled where there was a moratorium to the company concerned under the Maharashtra Relief Undertakings (Special Provisions) Act, 1958. Amongst other aspects, this Court ruled, with G reference to the non obstante clause contained in Section 238 of the Code that the same being of Parliamentary enactment, would prevail over the limited non obstante clause of the State enactment; and thus, 30 As observed by this Court

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