TMI Blog2023 (3) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ia declared the loan account of the corporate debtor as NPA on 6.8.2012 and quite clearly the declaration of NPA has not been declared as illegal or incorrect. Therefore, the limitation for section 7 application starts from 6.8.2012. As per Article 137 of the Limitation Act, 1963 the period of limitation prescribed for an application under section 7 of IBC is three years. Therefore, the limitation of section 7 application would be valid upto 5.8.2015. Before the expiry of the limitation period, the balance sheet for FY 2014-15 filed by the corporate debtor (attached at pp.86-100 of the appeal paperbook Vol.I) mentions the amount of long-term borrowings as Rs.33,49,92,064/- and the balance sheet very clearly mentions in Textual Information 23 that the company has defaulted in repayment of dues to the Bank - It is noted that while this limitation period was running, another acknowledgment was made by corporate debtor in its balance sheet for the FY 2015-16, wherein again the long-term borrowings for the year ended 31.3.2016 has been shown as Rs.33,49,92,064/-. Further, since no caveat by way of any textual information is shown by the corporate debtor in its appeal with the balance-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority in CP (IB) No.1111/KB/2018. 2. It is the Appellant s case that on an application under section 7 of IBC filed by State Bank of India (Respondent No.1), it was admitted by the Adjudicating Authority vide Impugned Order I and this order was challenged by way of Revision Petition under Article 227 of the Constitution of India being CO No. 1257 of 2020 before the Hon ble High Court of Calcutta, wherein the Hon ble High Court vide order dated 15.10.2020 allowed the Revision Petition thereby setting aside the initiation of Corporate Insolvency Resolution Process (in short CIRP ) against the corporate debtor. The Appellant has further stated that Respondent No. 1 State Bank of India thereafter challenged the said order of the Hon ble High Court of Calcutta through a Special Leave Petition Civil Appeal No. 323 of 2021, wherein the Hon ble Supreme Court set aside the order of Hon ble High Court of Calcutta and granted liberty to the Appellant to prefer an appeal before NCLT within four weeks of the order of the Hon ble Supreme court. The present appeal has been filed by the Appellant in pursuance of the liberty granted by Hon ble Supreme Court, wherein the Impugned Order-I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng dues. He has further argued that the financial creditor State Bank of India filed OA No. 392 of 2014 before the Debt Recovery Tribunal, Kolkata, which is presently pending, but the corporate debtor disputing the debt and declaration of its account as NPA to be illegal filed Civil Suit being CS No. 191 of 2014 before the High Court of Calcutta and the Respondent Bank has entered appearance in the said civil suit. He has further claimed that in response to the order of Hon ble Supreme Court in SLP (Civil No. 1168 of 2021 dated 23.12.2020) the Appellant has filed the instant appeal challenging the section 7 admission order (impugned Order-I) and liquidation order (Impugned Order-II) passed by the Adjudicating Authority. 7. The Learned Counsel for Appellant has explained that even if it is admitted that account of the corporate debtor was declared as NPA on 6.8.2012, in the light of Civil Suit being CS No. 191 of 2014 filed by the corporate debtor before the Hon ble High Court of Calcutta in 2014, the debt was disputed and the declaration of account of the corporate debtor s account as NPA was also alleged to be illegal. He has further claimed that the primary challenge that he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil Suit was filed by the corporate debtor in the year 2014 and the Respondent State Bank of India which appeared in the civil suit as is evident from the order date 21.7.2014, had complete knowledge of the civil suit. Further, he has added that in the balance sheets for the financial years 2014-15 and 2015-16, the existence of a civil suit which disputed the declaration of NPA have not been added due to oversight, but in the balance sheet for the financial year 2016-17, the Auditor s report categorically mentions the said debt is disputed in civil suit pending the Hon ble High Court of Calcutta. He has further contended that the existence of the legality of NPA and therefore, the existence of default is contingent on the outcome of the said civil suit and therefore, the default in respect of the debt can only be established once the civil suit is decided in favour of the Respondent. 11. The Learned Counsel for Respondent No. 1 State Bank of India has argued that the debt is not disputed by the corporate debtor and the declaration of NPA with respect to the debt was made on 6.8.2012, which fact is stated in the section 7 application. He has further argued that the SBI filed an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rs.33,49,92,064 as on 31.3.2016. 14. The Learned Counsel for Respondent No.-1 State Bank of India has referred to Part IV of the section 7 application, wherein a total amount of Rs.173,85,76,484.56 has been shown as due from the corporate debtor and also stated that the said debt account of the corporate debtor was classified as NPA on 6.8.2012. 15. The Learned Counsel for Respondent-1 State Bank of India has further argued that the Adjudicating Authority has correctly admitted the application under section 7 of the IBC in as much as the debt stated in the application was within the prescribed period of limitation and furthermore, the corporate debtor acknowledged the amount of debt it owed to the bank in the balance sheets for the financial years 2014-15, 2015-16 and 2016-17 and thus, the period of limitation for filing the application under section 7 of the IBC would get extended from the date of NPA i.e. 6.8.2012 under section 18 of the Limitation Act, 1963. He has also claimed that any dispute raised qua a financial debt would not be of any consequence in a proceeding under section 7 of IBC, and further the corporate debtor raised no demur or any objection regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claration of the loan account as NPA on 6.8.2012, the corporate debtor did not dispute the legality of the declaration of NPA before the competent authority of the State Bank of India and the bank filed OA No. 392 of 2014 under section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 on 25.3.2014 within the period of limitation before Debt Recovery Tribunal, Kolkata. This suit is still pending before the Debt Recovery Tribunal. The corporate debtor filed civil suit being CS No. 191 of 2014 before the Hon ble High Court of Calcutta contesting the legality of declaration of NPA and also inter alia seeking damages to the tune of Rs.100 crores from the State Bank of India. This civil suit is pending before the Hon ble High Court of Calcutta. In the facts of the case, it is quite clear that neither the corporate debtor raised the issue of illegality of declaration of NPA of its loan account before the bank authorities and also participated in the proceedings before Debt Recovery Tribunal, Kolkata. 20. The Hon ble Supreme Court in the matter of Asset Reconstruction Company (India) Limited (supra) considered the question whether an entry made in a balance-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding any particular creditor, which has to be examined on case by case to decide whether an acknowledgment of liability has in fact been made which would qualify for extension of limitation under the Limitation Act. 23. Section 18 of the Limitation Act, 1963 is as follows:- 18. Effect of acknowledgment in writing. (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 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. Explanation. For the purposes of this section, (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will thereafter be decided on its merits, keeping in view the statement of the law laid down in Civil Appeal No. 323 of 20212. 26. Thus, it is clear that there is no stay order operative on the order of NCLT dated 19.8.2019, whereby the application under section 7 was admitted. 27. In the light of the above judgment of Hon ble Supreme Court in the matter of Asset Reconstruction Company (India) Ltd. (supra) and its judgment with respect to SLP (Civil) No. 1168 of 2021, we now examine the balance-sheets and the entries made therein to decide whether they provide an extension of limitation to the debt of State Bank of India with regard to section 18 of the Limitation Act, 1963. 28. The State Bank of India declared the loan account of the corporate debtor as NPA on 6.8.2012 and quite clearly the declaration of NPA has not been declared as illegal or incorrect. Therefore, the limitation for section 7 application starts from 6.8.2012. As per Article 137 of the Limitation Act, 1963 the period of limitation prescribed for an application under section 7 of IBC is three years. Therefore, the limitation of section 7 application would be valid upto 5.8.2015. Before the expiry of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uit is still pending before the Hon ble High Court of Calcutta and therefore, even if there is an alleged dispute, merely the existence of such a dispute cannot be taken to negate the legality of the declaration of NPA. Therefore, the balance-sheets on which the section 7 application is based are considered as valid acknowledgments of the debt of the corporate debtor without any caveat of dispute. 31. In the light of the above discussion, we are convinced that the loan account of corporate debtor declared by State Bank of India as NPA on 6.8.2012 the date of default and the balance-sheets for the financial years 2014-15 and 2015-16 provide an unequivocal and clear extension of limitation of the debt by virtue of section 18 of the Limitation Act, 1963. Such a limitation is validly extended through acknowledgment of liability of the said debt upto 31.3.2019 and the section 7 application, which was filed on 8.8.2018, is clearly within limitation. 32. We thus hold that the admission order passed by the Adjudicating Authority admitting the section 7 application to be correct, and therefore, Impugned Order-I does not need to be interfered with. Further, in view the fact that the Im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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