IBC Laws Blog

One Page #8 – In matter of M/s Saptarishi Hotels Pvt Ltd

One Page #8 – In matter of M/s Saptarishi Hotels Pvt Ltd
Challenging the admission of Section 7 Application-Debt barred by Limitation
Court: NCLT, Hyderabad; NCLAT, Chennai. (AT#1 Dt 12.05.2021)

1. Facts of the Case:

  1. Appellant is Promoter Director of CD, Respondents are Punjab National Bank & IRP.
  2. Bank avers that the total outstanding as on 30.06.2019 is Rs.144.03 Crores and that the Guarantor gave Balance security confirmation letters on 20.02.2018 and CD paid Rs.15,262/- to the credit of loan account on 15.10.2018; which establishes acknowledgment of debt; as contemplated u/s 18 & 19 of the Limitation Act.
  3. But, according to the Appellant CIRP is a proceeding for resolution of insolvency and not for repayment of Debt and therefore acknowledgement of debt will not help the cause of the Bank. Date of Default is 30.03.2016 (*29.03.2019) & Date of NPA is 30.06.2016 (*29.06.2019) & hence Sec 7 Application filed on 18.07.2019 is barred by limitation as limitation ended on (*).

2. Points of Laws discussed:

  1. Under IBC: Definitions – Section 3(6)(a)-Claim; Section 3(10)-Creditor; Section 3(11)-Debt; Section 3(12)-Default.
  2. Under Limitation Act:
    1. Section 18: Effect of acknowledgment in writing. It does not enjoin that an acknowledgement has to be in a particular form or to be express. It has to be examined upon circumstances & unconditional acknowledgement of debt. Person acknowledging must be conscious of his liability & commitment ought to be made in respect of that liability. Sec 18 is applicable both for “Suit” & “Application”.

3. Case Laws:

  1. Both Appellant and Bank have discussed several case laws in support of their arguments, but let us discuss only the case relied on by NCLAT.
  2. Asset Reconstruction Company India Ltd V Bihsal Jaiswal & Anr:SC set aside full bench judgment of NCLAT in V Padmakumar V Stressed Assets Stabilization Fund case and Full Bench Judgement of NCLT in Bihsal Jaiswal V Asset Reconstruction Company (I) Ltd and allowed the Appeal by remanding the matter to NCLAT to be decided in accordance with the law laid down in this judgment ie entries in books of account of a company, including a balance sheet, can amount to acknowledgement of debt & accordingly the limitation period u/s 18 will be reset.

4. Discussions:

  1. Guarantor executed the Balance and Security confirmation letters dt 20.02.2018 for Rs.78.75 crores & Paid Rs.15,262/- on 15.10.2018 to CD which comes to irresistible, inevitable and inescapable conclusion, that in respect of loan account of CD, there is acknowledgement of debt as per Section 18 & 19 of Limitation Act.

5. Judgement:

  1. NCLT rightly admitted the Section 7 application. NCLT’s Order is free from legal infirmities and hence the appeal fails and is dismissed without costs.

MS Mano Ranjani

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All about Indian Insolvency Laws.

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