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TMI Blog2020 (10) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... pearing on behalf of the Financial Creditor after narrating the facts as stated above, submitted that the moot question in this application was to see whether the debt was barred by limitation or not as question of debt being due and default was not at all in dispute. In support of his claim that debt was not barred by limitation, he stated that Financial Creditor had submitted various proposals from time to time and gave particular reference to letters dated 05/03/2018, dated 17/03/2018, dated 26/07/2018. Thereafter, a query was raised by the Bench that all these letters pertain to a period after expiry of a period of three years from the date of declaration of account as NPA, hence, the requirements of section 18 of the Limitation Act, 1963 were not met. To counter this point, the Ld. Counsel drew our specific attention to letter dated 5th March 2018, wherein Corporate Debtor had referred to its earlier letter dated 11th January 2016, wherein the same proposal had been made. Hence, it was contended that on this basis the requirements of Section of Limitation Act stood satisfied. 4. The Ld. Counsel for the Corporate Debtor, on the other hand, submitted that all the letters were m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 that liability to pay has not been disclosed either in financial statements or as contingent liability which should be there because Form "C"s have been issued. It has been further brought to our notice that the Operational Creditor has been awarded work subsequently as well. Hence, considering this fact that in real life situation, small entrepreneurs wait for an amicable settlement of issues so that they can continue to work with the entity of the size of Corporate Debtor as it gives them continuity of business with the said entity and on this basis they also get empanelled for work with other business entities that are as large as the Corporate Debtor and to the extent possible do not take any legal action unless compelled to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2), 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 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) 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. 9. From the perusal of Section 18(1), it is apparent that acknowledgement of liability must be made before expiry of limitation period for filing the suit. If limitation has already expired, it would not revive under section 18. In the present case, last payment has been made in July, 2015 and e-mail has been sent in April, 2016, which is well before the expiry period of three years. Hence, first hurdle is crossed. Now, we have to look whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 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 computed from the time when the acknowledgement was so signed. (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 (1 of 1872), oral evidence of its contents shall not be received. Explanation: For the purposes 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istent 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 legislation 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 explaining as to what would constitute acknowledgement and in view of Sec. 238 and 238A of the Insolvency & Bankruptcy Code, 2016, such provision has to be read further in conjunction with the wider meaning given to the term "claim" in Sec. 3(6) of the Insolvency & Bankruptcy Code, 2016 which includes right to payment even on equitable ground. (Emphasis supplied) 10. In view of above discussion, we hold that there is no merit in the claim of the corporate debtor that the said emails cannot be said to be an acknowledgement within the meaning of provision of Sec. 18 of Limitation Act, 1963. Accordingly, we reject the same." In the case of Asset Reconstruction Company (India) Ltd. vs. Dagcon (India) Private Limited, Order dated 20/11/2019 in CP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 further find that in a subsequent decision in the case of Anubhav Anilkumar Agarwal vs. Bank of India, in CP(AT) (Insolvency) No. 1504 of 2019, Order dated 07.02.2020, Hon'ble NCLAT itself has held as under: "If Corporate Debtor has written the letter for due debt, the period of limitation stands shifted to the date on which the Corporate Debtor agreed to pay. Bank of India moved an Application under Section 7 of the I Code, pursuant to which, by impugned order dated 26th November, 2019 the Adjudicating Authority (NCLT), Mumbai Bench initiated CIRP against RNA Corp. Pvt. Ltd. (Corporate Debtor), who was the Guarantor. The Appellant has challenged the impugned order on main ground that the Application under Section 7 of the Code was barred by limitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponding to Section 18 of the Limitation Act, 1963) this Court in Shapoor Freedom Mazda v. Durga Prosad Chamaria [ AIR 1961 SC 1236] 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 even by implication. The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgement must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 letter is reminiscent of a letter that feel for consideration in Spencer's case as pointed out by Mr. Harish Salve, "as a rule the debtor who writes such letters has no intention to bind himself further than is bound already, no intention of paying so long as he can avoid payment, and nothing before his mind but a desire, somehow or other, to gain time and avert pressure." It was argued in a subsequent case that an acknowledgement made "without prejudice" in the case of negotiations cannot be used as evidence of anything expressly or impliedly admitted. The House of Lords observed as follows: "But when a statement is used as acknowledgement for the purpose of s. 29(5), it is not being used as evidence of anything. The statement is not an evidence of an acknowledgement. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledgement' is to be read and interpreted in a liberal manner. " 6. The name of the IRP has been proposed which we approve. The application is otherwise complete and free from defect. We order as under: ORDER (i) The application filed by the financial creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating corporate insolvency resolution process against the corporate debtor, Shree Ram Saw Mill Private Limited, is hereby admitted. (ii) We declare a moratorium and cause public announcement in accordance with Sections 13 and 15 of the IBC, 2016. (iii) Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of Insolvency & Bankruptcy Code, 2016 shall be made immediately. (iv) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following: a) The institution of suits or continuation of pending suits or proceedings against the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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