TMI Blog2022 (7) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... , with the execution of the Assignment Agreement dated 27.09.2013, a fresh agreement for the payment of dues came into being and a period of three years began from the said date. There is no dispute about the fact that the debt has been acknowledged by the Corporate Debtor in its balance sheet for the year 2013-14. The first partial repayment of Rs. 75,00,000/- was made by the Corporate Debtor on 12.06.2015. The finding recorded by the Adjudicating Authority does not talk of this partial payment which acknowledges the debt and extends the period of limitation from the said date i.e. 12.06.2015 for another period of three years. It is needless to mention that the partial repayment of Rs. 75,00,000/- was made between 27.09.2013 to 27.09.2016 and because of said payment on 12.06.2015 the period of limitation had once again extended upto 12.06.2018. The Adjudicating Authority has further lost sight of the fact that another partial repayment of Rs. 50,00,000/- was made by the Corporate Debtor on 24.06.2018 which means that now the limitation would stand extended for a period of three years up to 24.06.2018. During the period of limitation i.e. 24.06.2014 to 24.06.2018 the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (in short SARFAESI Act ) against the Corporate Debtor by serving demand notice on 14.01.2003. However, TFCI assigned its debt of the Corporate Debtor on 27.09.2013 by executing an Assignment Agreement in favour of the present Appellant. The Corporate Debtor and Mr. Paresh Shah (as Mortgagor) were confirming parties to the Assignment Agreement. The Appellant had issued a demand notice under the SARFAESI Act on 13.12.2014 to the Corporate Debtor and its guarantor to pay the amount due and took possession of the Breach Candy Flat mortgaged by the Corporate Debtor, in terms of Rule 8(1) of the SARFAESI Rules. It is alleged that the Corporate Debtor had acknowledged the debt of Rs. 112,30,00,000/- vide letter dated 05.12.2016 and while filing the application under Section 7 of the Code, the Appellant has shown in Part IV of Form-I that the amount of Rs. 522,46,05,338/- was due on the date of default. 3. On the other hand, the case set up by the Corporate Debtor is that the default had occurred on 23.06.1998 (mentioned in the Petition as 1998). Whereas the application was filed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of default is concerned. This Argument may be appropriate in a recovery proceeding. This proceeding not being a recovery proceeding, this argument cannot be accepted. v. The date of default mentioned in the Petition relates to pre-assignment era and the said default cannot be related to post assignment proceedings. vii. Even assuming that Section 18 of the Limitation Act is applicable, the letter of acknowledgement dated 05.12.2016 is beyond three years from 27.09.2013, the date of Assignment Agreement. The sine qua non for application of Section 18 of Limitation Act is that the acknowledgement of liability in writing must be before the expiration of the prescribed period (of limitation) for a suit or application. Thus, viewed from any perspective Section 18 of the Limitation Act would have no application. In that view of the matter the Petitioner s contention that Section 25(3) of the Contract Act would apply as an exception to Section 18 of the Limitation Act would not come to the aid of the Petitioner as indicated supra. 7. Assailing the aforesaid findings of the Adjudicating Authority, Counsel for the Appellant has submitted that there is an error on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shall be made to the Assignee. 8. Counsel for the Appellant has argued that the Adjudicating Authority has failed to appreciate that though initially the default occurred in respect of the financial assistance in the year 1998 but the debt was subsequently revived by the Corporate Debtor in favour of the Appellant by becoming a confirming party and signatory to the Assignment Agreement with an express promise to pay, creating a fresh contractual liability to pay the entire debt from the effected date i.e. the date of the Assignment Agreement. The Appellant has placed reliance upon Section 25(3) of the Indian Contract Act, 1872 which is reproduced as under:- 25(3). It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. 9. Referring to the above provision, it is submitted that the unconditional acknowledgement to repay the debt by the Corporate Debtor to the Appellant is an express promise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars has since been expired and the limitation cannot be revived by the Assignment Agreement. It is also submitted that even though the debt has been assigned to the Appellant by the Assignment Agreement dated 27.09.2013, the application under Section 7 of the Code came to be filed on 04.03.2019 after a period of 6 years whereas the limitation, in terms of Article 137 of the Limitation Act, 1961 is three years from the date of default. It is submitted that even Section 18 of the Limitation Act, 1961 is of no help to the Appellant as it has been rightly held by the Adjudicating Authority that the letter of acknowledgement dated 05.12.2016 was beyond the period of three years from 27.09.2013. It is, therefore, argued that looking from any angle, the application filed under Section 7 of the Code by the Appellant is barred by limitation as has rightly been held by the Adjudicating Authority. 13. We have heard Counsel for the parties and perused the record with their able assistance. 14. There are two issues in this appeal. The first issue is as to what is the import of Section 25(3) of the Indian Contract Act, 1872 and the second issue is as to whether the period of limitation has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd registered under the law for the time being in force for registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless ash 10 crappln-2933.07-grp (2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. 9. Thus, Sub-section (3) of Section 25 of the Contract Act is an exception to the general rule that an agreement made without consideration is void. Sub-section (3) of Section 25 of the Contract Act applies to a case where there is a promise made in writing and signed by a person to be charged therewith to pay wholly or in part a debt which is barred by law of limitation. A promise covered by Sub-section (3) become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent reasons held that the suit was not barred by limitation. The said conclusion being in accordance with the settled principles of law warrants no interference by this Court. 19. The Hon ble Bombay High Court in the case of R. Suresh Chandra Co. (Supra) held that: 10. .I understand that after the expiry of the period of limitation nothing short of a clear promise can provide a fresh period of limitation. But such a promise can also be inferred by necessary implication. The Supreme Court in (Hiralal v. Badkulal)2, A.I.R. 1953 S.C. 225 quoted with approval a Privy Council decision in (Maniram v. Seth Rupchand)3, 33 Ind. Appeals 165 (P.C.)(C.), that an unconditional acknowledgement was sufficient to furnish a cause of action for it implied a promise to pay. A decision of the Allahabad High Court to the contrary (A.I.R. 1935 All. 129), was held as not laying down good law. There is nothing ambiguous about Ex. D. It says that as on 13-11-1974 defendant 1 is indebted to plaintiff to the extent of Rs. 3,40,652.26 ps. The balance sheet is signed by defendant 3 who is a partner of the firm. Her competence to bind the firm is not disputed. Being thus, clear, it amounts to a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e balance amount by the respondent/defendant. Any written acknowledgment after the confirmation of the balance amount can safely be treated as a promise to pay and not mere acknowledgement. 21. The Hon ble Madras High court in the case of Sri Kapaleeswara Temple (Supra) held that: 5. The question as to how far a contractual obligation created under Section 25(3) of the Indian Contract Act is enforceable in a Court of law has come up for consideration in several ways. In Kishen Lal v. Gohli, AIR 1938 Lah 757 it was held that when a promise falls under Sub-section (3) of Section 25. it constitutes a valid agreement for the purpose of suing, whether there is a fresh consideration for the promise or not and it is immaterial whether the debts covered thereby are within limitation or not. Niaz Ahmad Khan v. Parshotam Chandra, ILR 53 All 374 = (AIR 1931 All 154) holds that where a mortgage was executed in lieu of an amount due on an earlier bond, a suit on which bond had abated, the mortgage does not fall to the ground owing to the absence of consideration. In Varadaraja Appa Rau v. Suryaprakasa Rau, (1899) 9 Mad LJ 330 a Bench of this Court held: In order to satisfy the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity, the said obligation, if it satisfies the conditions laid down in Section 25(3) of the Indian Contract Act, will amount to a fresh contract in the eye of law and can certainly be made the basis of an action for recovering the amount promised and acknowledged therein by the debtor. While Section 18 of the Limitation Act (Section 19 of the old Act) deals with an acknowledgment made by a debtor within the period of limitation, the contractual obligation which a debtor enters into under the terms of Section 25(3) has no reference whatsoever to the acknowledged debt being within time or not. In that sense, the provision contained in Section 25(3) is far wider in scope than the acknowledgment contemplated in Section 18 of the Limitation Act. The contract entered into under Section 25(3) is an independent and enforceable contract and has no reference to the debt acknowledged under the contract being a live one in the sense that it had not become barred under the law of limitation. 22. The Hon ble Madras High Court in the case of ARM Nizmathuallah (Supra) held that: 6.Now, the question is whether the debt is legally enforceable one or not. In the complaint the date of the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay under section 25(3) of the Act. 23. The Hon ble High Court of Karanatatka in the case of Adivelu (Supra) held that: 5. Acknowledgment of liability is nothing but an admission of the truth of one's own liability. It is well settled that an unqualified, unequivocal and unconditional acknowledgment of a debt is a clear admission of the liability to pay it. Such an admission may be in any form and may be 'express' or 'implied', as held by the Supreme Court in the case of SHAPOOR FREEDOM MAZDA v. DURGA PRASAD CHAMARIA AND ORS., . But, whatever may be the form, regard must be had to the meaning of the writer by judging the acknowledgment as a whole and also such surrounding circumstances as the Court can take into consideration in construing the acknowledgment rather than to the literal meaning of the words used in it. And while doing so, such acknowledgment requires to be construed liberally, as held in the case of Shapoor Freedom Mazda (Supra). 6. An acknowledgment under Section 18 of the limitation Act and a promise under Section 25(3) of the Contract Act are required to be in writing and signed by the debtor or his authorised agent and both hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Bank Ltd., Civil Appeal No. 9198 of 2019 (decided on 22.03.2021), after setting out the issues that arose in that case in paragraph 57, and after referring to Section 238A of IBC, held: 66. Similarly under Section 18 of the Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgement is signed. However, the acknowledgement must be made before the period of limitation expires. 67. As observed above, Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible. 68. We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 18 of the Limitation Act reads thus: 18. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the financial creditor can initiate action under Section 7 of the Code. 27. The Hon ble Supreme Court in the case of Laxmi Pant Surana (Supra) held that: 35. The purport of such observation has been dealt with in the case of Babulal Vardharji Gurjar (II) (supra). Suffice it to observe that this Court had not ruled out the application of Section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case so warrants. Considering that the purport of Section 238A of the Code, as enacted, is clarificatory in nature and being a procedural law had been given retrospective effect; which included application of the provisions of the Limitation Act on casetocase basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time barred debts under the Limitation Act. At the same time, accrual of fresh period of limitation in terms of Section 18 of the Limitation Act is on its own under that Act. It will not be a case of giving new lease to time barred debts under the existing law (Limitation Act) as such. 36. Notably, the provisions of Limitation Act have been made applicable to the proceedings under the Code, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partial repayment of Rs. 75,00,000/- was made between 27.09.2013 to 27.09.2016 and because of said payment on 12.06.2015 the period of limitation had once again extended upto 12.06.2018. The Adjudicating Authority has further lost sight of the fact that another partial repayment of Rs. 50,00,000/- was made by the Corporate Debtor on 24.06.2018 which means that now the limitation would stand extended for a period of three years up to 24.06.2018. During the period of limitation i.e. 24.06.2014 to 24.06.2018 the Corporate Debtor vide letter dated 05.12.2016 confirmed and acknowledged its entire debt due and payable to the Appellant and as a result thereof, the limitation was extended from the said date i.e. 05.12.2016 to 05.12.2019. The Adjudicating Authority has only referred to the letter dated 05.12.2016 in Para VII of the impugned order to hold that Section 18 of the Limitation Act, shall not be applicable because the acknowledgement was made on 05.12.2016 which was beyond the period of three years from 27.09.2013. Thus, the Adjudicating Authority has committed error in appreciating the facts available on record in coming to the conclusion which is apparently contrary to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
