TMI Blog2020 (2) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... tation from the date of last restructuring which was done on 21st March 2015, hence, this condition of Section 18 of the Limitation Act, 1963 is also met. The issue on hand can also be looked from other angle, i.e., whether such letter also constitutes a promise to pay within the meaning of Section 25(3) of Indian Contract Act, 1872. It is further to be noted that acknowledgement may not always be a promise to pay as to constitute such acknowledgement as promise to pay, there must be an express/explicit statement to pay. Thus, a promise to pay has element of acknowledgement and in addition to that, there must be an express confession to pay. Thus, considering this legal position as applicable to these letters, in our considered view, it is not merely an acknowledgement of debt but it also constitutes a promise to pay. It is also not in dispute that for the purpose of applicability of provisions of section 25(3) of Indian Contract Act, 1872, no condition of it being made within limitation period exists. Hence, for this reason also, the application filed under section 7 cannot be said to be barred by limitation. The corporate debtor has also taken technical pleas such as non-me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so made clear that right to take recourse of appropriate legal remedy was always with the financial creditor. The corporate debtor again, vide its letter dated 5th April, 2016, submitted a revised proposal for re schedulement of the outstanding dues. This proposal was again rejected by the financial creditor on 7th April, 2016. A notice of demand requiring settlement of dues was sent on 20th May, 2016. However, failing to get positive response from the corporate debtor, this application has been filed. 3. The Ld. Counsel for the financial creditor appeared and narrated the above mentioned facts. It was pleaded that there was a debt which was due and payable in law and in fact and a default had occurred in payment thereof, thus, application filed under Section 7 was admissible on the face of it. It was also claimed that applicant was eligible to file this application as financial creditor holding the debt as the legal assignee of the original lender. The Ld. Counsel placed strong reliance on the order of this Tribunal in the case of sister concern / associated concern in CP No. 393/KB/2019 of the corporate debtor whereby the proceedings U/S 7 had been admitted in the similar set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereunder, which would sufficiently help us in arriving at a conclusion as subsequent letters are more or less on the same lines. This is in regard to the term sheet dated March 21, 2013 executed between Asset Reconstruction Company (India) Limited ( ARCIL ), Mohan Jute Mills Ltd. ( MJML ) Raigarh Properties Pvt. Ltd. ( RPPL ), and our discussions in this regard. We would like to submit and request you for the following. 1) Present outstandina dues and related payments made till date. In line with the aforesaid term sheet we were supposed to pay the following till date: All figures in Rs. Lacs Due Date Interest Due Interest Due Interest Due Principal Due Principal Due Principal Due MJML RppL Total MJML RPPL Total 30 Jun 13 144.68 39.65 184.33 31 Jul 13 24.78 6.79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31 Dec 14 24.78 6.79 31.57 31 Jan 15 24.78 6.79 31.57 28 Feb 15 22.38 6.13 28.51 31 Mar 15 24.78 6.79 31.57 331.54 90.87 422.41 30 Apr 15 17.98 4.93 22.91 31 May 15 18.58 5.09 23.67 30 Jun 15 1198 4.93 22.91 331.54 90.87 422.41 Total 710 194.55 904.55 663.08 181.74 844.82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays We would like to submit that there were instances of irregularities in our loan repayments in the past due to the reasons given below. A) Labour Issues Please note that there were approx 875 workers in the erstwhile jute mill. We had settled their dues in line with their outstanding dues through appropriate channels including involvement of the Labour Unions and State Administration. This was the position at the time ARCIL had invested in the company. At that time we were confident of initiating and implementing the project development process soon. However, trouble started happening. Around 585 workers out of the total workers started claiming more amount over and above the settled amounts. They filed suits against the company for fresh settlement of their gratuity dues. We had to stall the project development process and had to divert our time and resources to settle this impending problem. We had to submit fight our cases with the department for each labour case. The problems got much publicized involving labour union and also becoming a bit of a political matter. There were numerous hearings for each case and it took a lot of effo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources and funds to manage these problems which would otherwise have gone into project development as also in making payment to ARCIL. We are hopeful that most of our problems have now been resolved and the balance matters will also be settled soon in the near future. Further, we are sure that the market conditions are going to improve by the middle of next year. We should be able to start seeing an improvement in the real estate market scenario and are quite confident that conditions are going to improve soon. We should be then able to expedite the process of project development and also clear your outstanding dues at the earliest. The Proposal We would, however, need your support in the current difficult situation. Hence we request you for the reschedulement of the outstanding dues as follows: a) The outstanding Interest dues upto July 31, 2015 is ₹ 655.56 lacs (Interest instalment for July 2015 of ₹ 15.79 lacs plus Unpaid Outstanding Interest Dues upto June, 2015 for ₹ 639.77 lacs). We request you to kindly capitalize the same as ofJuly 31, 2015 b) The outstanding principal payment (including present andfuture) is as follows: Rs. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : 15. As regard to the contention that it is time barred, both sides have cited decisions wherein opposite views have been expressed in respect of suit for recovery. Hence, in our considered view, this aspect has to be looked into in the context of IBC 2016. Further, the decision of the Hon'b/e NCLAT cited by the Corporate Debtor is not applicable as in that case, the issue was not whether Form C issued by Corporate Debtor amount to acknowledgement of liability or not but the issue was whether issuance of Form C amounted to settlement of dispute / claim. Hence, this decision does not come to the rescue of the Corporate Debtor. We are further of the view that in Form C name of the Operational Creditor is mentioned and supply of goods by Operational Creditor and receipt of goods by Corporate Debtor is acknowledged. If the stand of the Corporate Debtor is accepted, this will amount to unjust enrichment i.e., on one side the Corporate Debtor takes benefit of reduced rate of taxes and on the other side do not want to make payment of money which is due to the supplier of goods. Further, in the absence of the books of accounts/financial statements it cannot be said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it necessary to reproduce Section 18 of the Limitation Act, 1963 as under: Section 18(1): Where, before the expiration of the prescribed period 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, a fresh period of limitation shall be computedfrom time when the acknowledgement was so signed. Section 18(2): Where the writing containing the acknowledgement 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 (a of 1872), oral evidence of its contents shall not be received. Explanation: for the purpose of this section,- (a) an acknowledgement 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 coupled with a claim to set-off, or is addressed to a person oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these letters have been written by the corporate debtor regarding confirmation of outstanding balance of [CD as on 31/12/2017 and 30/6/2018 as per the books of account of Financial Creditor. The confirmation of outstanding balance is to be given to the statutory auditors of the corporate debtor. This exercise cannot be considered in a light manner because reliance on the accuracy of the books of account and financial statement is based upon such standard auditing practice. In the letter dated 29/1/2018 it has been clearly mentioned that such confirmation was in respect of amounts payable in respect ICD as on 31/12/2017 which by itself establishes the fact of acknowledgement of debt beyond any doubt. To deal with the contention of the corporate debtor that such emails do not constitute acknowledgement of debt within the meaning of provision of Sec.18 of the Limitation Act, 1963, we consider it necessary to reproduce the Sec.18 of the said Act as under: Effect of acknowledgement in writing. (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kruptcy Code, 2016. This is also so because Insolvency Bankruptcy Code, 2016 is not a recovery mechanism rather a comprehensive code for insolvency resolution old and stale claims cannot be considered as a source or detecting of signs impending insolvency at an early stage. Hence, for this reason also the necessity was felt to make provision of Limitation Act, 1963 applicable to Insolvency Bankruptcy Code, 2016. It has been settled judicially that Sec.238A is applicable since the implication of Insolvency Bankruptcy Code, 2016. It is evident that Sec.238A the word as far as may be have been used which means that the provisions of Limitation Act, 1963 would applv to the extent possible and any provision of Limitation Act, 1963 being inconsistent to the provisions of Insolvency Bankruptcy Code, 2016 will not be applicable. Further, the technicalities of Limitation Act, 1963 would not be applicable as Insolvency Bankruptcy Code, 2016 is an economic leqislation and functions on the principles of summary procedure. As discussed earlier that explanation (a) of Sec.18 of Limitation Act, 1963 provides much flexibility and takes into consideration various factors(situations for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , from the perusal of the above decisions, it is apparently clear that such letters constitute acknowledgement in terms of provisions of Explanation A to Section 18 of the Limitation Act, 1963. 10. As far as reliance placed by the corporate debtor on the decision of the Hon'ble NCLAT in the case of Dena Bank vs. Kavveri Telecom Infrastructure Ltd. is concerned, we find that in that case there is a clear finding that there was nothing on record to suggest that the corporate debtor had acknowledged the debt within 3 years and agreed to pay the debt, whereas in the present case, restructuring of the debt has already been done on 21st March 2013 and now the corporate debtor has acknowledged the fact of such restructuring with a further request to give the corporate debtor additional time and reschedulement of loan. Hence, in our view, this fact is different from the facts of the case relied on by the corporate debtor. In the present case, the aspect whether presentation in balance sheet constitutes acknowledgement of debt/ liability or not is not before us, hence, such observations of the Hon'ble NCLAT in that case do not help the cause of the corporate debtor. 11. We fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) thereof provides that where, before the expiration of the prescribed period for a suit or application in respect of any right, an acknowledgement of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgement was also signed. The explanation to the section provides that an acknowledgement may be sufficient though it omits to specify the exact nature of the right or avers that the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the right. Interpreting Section 19 of the Limitation Act, 1908 (corresponding to Section 18 of the Limitation Act, 1963) this Court in Shapoor Freedom Mazda v. Durga Prosad Chamaria [AIR 1961 SC 12361 held: (AIR p. 1238, paras 6-7). 6. ... acknowledgement as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgement of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t render any assistance to its cause. 14. A plea was also taken that such letter was without prejudice , hence, no significance could be attached thereto. In this regard, we find that this aspect was considered by the Hon'ble Supreme Court in the case of ITC Limited vs. Blue Coasts Hotel [Civil Appeal Nos. 2928-2930 of 2018]-MANU/SC/0263/2018. The relevant findings in paragraph 35 of the said decision are reproduced as under: Letter of Undertakinq Without Preludice 35. Much was sought to be made of the words without prejudice in the letter containing the undertaking that if the debt was not paid, the creditor could take over the secured assets. The submission on behalf of the debtor that the letter of undertaking was given in the course of negotiations and cannot be held to be an evidence of the acknowledgement of liability of the debtor, apart from being untenable in law, reiterates the attempt to evade liability and must be rejected. The submission that the letter was written without prejudice to the legal rights and remedies available under any law and therefore the acknowledgement or the undertaking has no legal effect must likewise be rejected. This lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said to be barred by limitation. 16. We are further of the view that explanation (a) to section 18 of Limitation Act is very wide in its scope as such, hence, an acknowledgement is to be construed in that spirit only. Further, no strait jacket formula or format can be prescribed. There have been instances where Sale Deeds, Mortgage Deeds or Gifts Deed have been construed as acknowledgement of debt/liability within the meaning of provisions of section 18 of Limitation Act, 1963. It is also noteworthy that provisions of section 238A further relax the rigours of explanation (a) as provisions of Limitation Act, 1963 are applicable to the extent possible to IBC, 2016. Thus, in our view, considering the scheme of IBC, 2016 and specific provisions of section 3(6), the term 'acknowledgement' is to be read and interpreted in a liberal manner. 17. The corporate debtor has also taken technical pleas such as non-mentioning of date of default in the form etc. which, in our opinion, are not fatal as regards the maintainability of this petition is concerned for the reason that such technicalities cannot be given an undue weightage and that too in respect of an economic legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. v) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated, suspended, or interrupted during moratorium period. vi) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. vii) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process. viii) Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. ix) Necessary public announcement as per Section 15 of the IBC, 2016 may be ma ..... 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