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TMI Blog2023 (9) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Submissions of the Appellant : 2. Mr. D. Srinivasa Rao, the Promoter and Suspended Vice Chairman and Director of the Corporate Debtor Company, preferred this Appeal and also argued in person. It is submitted by Mr. D. Srinivasa Rao that the Application dated 19/08/2019 is barred by limitation since admittedly the default was committed on 01/04/1997 and it is argued that no acknowledgements were made before the expiry of the limitation of three years and therefore, Section 18 of the Limitation Act, 1963 is not attracted; that the decision of this Tribunal in the matter of 'Ramdas Dutta Vs. IDBI Bank Limited & Anr.' dated 26/04/2023 in Company Appeal No. 1286/2022, is applicable to the facts of the case, in which matter this Tribunal has observed that 'Thus, the limitation counted from the date of default i.e. 30.06.2011 had expired on 30.06.2014 and there is no acknowledgement of debt during this period in terms of Section 18 of the Act. The Bank did not place on record the balance sheet prior to 2014 and the only balance sheets placed on record are from 31.03.2015 to 31.03.2018 and the OTS also took place on 21st January, 2019 much beyond the period of three years'. A thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/Corporate Debtor was classified as NPA on 29th August, 2012 thereafter, demand notice under Section 13(2) of the SARFAESI Act, was issued on 03rd October, 2012. In view of the law laid down by Hon'ble Supreme Court in case of Jignesh Shah (supra), it is clear that period of limitation will be computed from the date when the account of the Corporate Debtor was classified as NPA. Thus, the limitation available for initiation of CIRP under Section 7 or 9 of the I&B Code was available up to 02nd October, 2015...' 5. It is also strenuously argued by Mr. Srinivasa Rao that the letters of acknowledgement cannot be considered as acknowledgement under Section 18 of the Limitation Act, 1963, because they are not 'concluded contracts' as the 'offer' made by the Corporate Debtor Company was not accepted by the Financial Creditor and vice versa. Therefore, the additional offer / proposals sent between 2008 and 2022, specifically on 22/11/2008, 17/12/2008, 25/12/2008, 27/12/2008, 12/04/2010, 15/11/2012, 02/04/2013, 03/07/2017, 08/09/2017, 27/10/2017, 11/12/2017, 17/02/2018, 28/04/2018, 06/04/2019, 02/07/2019, 16/08/2019, 26/08/2019, 17/09/2019, 21/09/2019, 11/10/2019, 18/12/2019, 20/02/2021, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that '...This was thus, a conditional offer and not an unconditional promise to pay. In terms of this offer, if the plaintiff had accepted the terms only then the same would result into a concluded contract. In any case, the offer for payment was not unconditional and therefore, could not be seen as a promise...' and also referred to the decision of the Hon'ble Andhra Pradesh High Court in 'MNMR Cotton Industries Vs. Jyothi Chit Fund Company', dated 04/05/2022 reported in Appeal Suit No. 742/2006 in which it is observed that '...There is no separate agreement between the parties in connection with payment of balance amount. Thus, even the 'part payment' made under Ex A-9 without any specific agreement may not be useful to the plaintiff in saving limitation'. It is the case of the Appellant that even a 'part payment' cannot be construed as acknowledgment of debt in the light of the aforenoted Judgment of the Hon'ble Andhra Pradesh High Court. It is also the case of the Appellant that the OTS proposals were signed by unauthorised personnel of the Company who are not the Directors of the Company and therefore no jural relationship can be attributed between the Corporate Debtor and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference therefore the deemed date of abatement of reference relates back to 13.08.2015. Section 22(5) of SICA, 1968 is not attracted to the present case since the period of limitation i.e. 3 years had already expired before the BIFR reference was made by the Corporate Debtor. Any reference before the BFIR is abated, if secured creditors have taken measures under Section 13(4) of the SARFAESI Act, 2002 as provided for under Section 41 of the SARFAESI Act, 2002. The period between 25.04.2006 when the Corporate Debtor was declared sick by BIFR under SICA and 04.05.2016 when the reference was dismissed cannot be excluded form computing the limitation period." 9. This was upheld by the Hon'ble Supreme Court vide Order dated 25/04/2022 in Civil Appeal No. 3033/2022, in which the Hon'ble Apex Court has held as follows:- "The Appellate Tribunal has inter alia, pointed out that as per the averments and allegations, right to sue accrued when the default occurred way back on 28.02.2002; and that the material on record does not evidence any acknowledgment of liability in terms of Section 18 of the Limitation Act, 1963." Submissions of the Respondents : 10. The Learned Counsel for the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of action accrued to the Financial Creditor on 19/11/2009 during the SICA Moratorium, the Limitation commenced afresh from 01/12/2016. There was a continuous acknowledgement of debt by way of OTS proposals on 10/01/2017, 03/07/2017, 08/09/2017, 27/10/2017. On 10/11/2017, the Financial Creditor rejected the OTS proposal offered by the Corporate Debtor. On 11/12/2017, once again, Executive Vice Chairman acknowledged the payment and sought for granting of 3 months time and on 17/02/2018, once again a letter was addressed requesting the Financial Creditor to accept the OTS offer of Rs. 5,00,000/-. On 07/05/2018, the Financial Creditor had rejected the OTS offer. On 06/04/2019, a letter was addressed by the Appellant suggesting Rs. 9,00,00,000/- as the OTS amount. It is submitted by the Learned Counsel Mr. Ravichandran that the Company Petition was filed by the Respondent on 19/08/2019 and is therefore, within the Limitation period considering the ex-chequered history of the Appellant and the continuous letters on OTS proposals which even continued after the expiry of the Section 7 Application, right up to 26/09/2022 Assessment : 11. It is not in dispute that the default was commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority." Section 22 (5) SICA is also to be seen for excluding a certain period for limitation. "22. Suspension of legal proceedings, contracts, etc.- (1)-(4) (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded. 17. Thus, Section 22(1) SICA as extracted abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bovementioned dues along with interest; that the said application was disposed of only on 9-9-2015, as per Annexure A-40 proceedings, that too, only with a direction to the respondent company to incorporate the dues of the applicant in the DRS and that as per Annexure A-40, Case No. 13 of 2010 and MA No. 292 of 2014 filed thereon, were then, posted for hearing. 24. In short, Case No. 13 of 2010 was pending before BIFR when SICA was repealed w.e.f. 1-12-2016 and Sections 8 and 9 IBC took its effect from 1-12-12016. Thus, obviously, proceedings under SICA were then pending before BIFR when the default from the part of the respondent allegedly occurred and by virtue of Section 22(1) SICA and the decisions referred above, the appellant could not have, then, resorted to any legal proceedings for enforcing any right which may result in recovery from the properties of the respondent company. For the same reasons, the contention of the respondent that pending the proceedings before BIFR the appellant could have resorted to arbitration proceedings also has to fail. 25. Now, we will have to consider the purported intent of Section 22(5) SICA. The intention appears to be to protect the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l proceedings is excludable in computing the period of limitation for the enforcement of such right in terms of Section 22(5) SICA. In the absence of provisions for exclusion of such period in respect of an application under Section 9 IBC, despite the combined reading of Section 238-A IBC and the provisions under the Limitation Act what is legally available to such a party is to assign the same as a sufficient cause for condoning the delay under Section 5 of the Limitation Act. In such eventuality, in accordance with the factual position obtained in any particular case viz. the period of delay and the period covered by suspension of right under Section 22(1) SICA, etc. the question of condonation of delay has to be considered lest it will result in injustice as the party was statutorily prevented from initiating action against the industrial company concerned. The first question formulated hereinbefore is accordingly answered." (Emphasis Supplied) 15. In the instant case, BIFR, vide Order dated 22/12/2004 had permitted the Appellant herein, to continue the Recovery proceedings before DRT, Chennai and ordered that 'decree, if any, in favour of the Application shall not be execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant that the OTS proposals being 'conditional' cannot be taken into consideration and also that they do not extend the period of limitation as they were given beyond three years from the date of default. The question of applicability of Section 8 of the Limitation Act, 1963 under IBC, 2016 is to be examined on the touch stone of the ratio laid down by the Hon'ble Apex Court in the matter of 'Dena Bank Vs. C. ShivaKumar Reddy' reported in [(2021) 10 SCC 330] wherein it was held that issuance of a Recovery Certificate in favour of a Financial Creditor would rise to a fresh cause of action to initiate proceedings under Section 7 of the Code. The Hon'ble Court thus observed in paras 136 and 141 as follows: "27. This Court further went on to observe thus: (Dena Bank case, SCC pp. 387-88, paras 136 & 141) "136. A final judgment and order/decree is binding on the judgment debtor. Once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of recovery is also issued authorising the creditor to realise its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the Letter dated 27/12/2008 written by the Corporate Debtor to the Financial Creditor discussing the OTS Proposal given on 04/11/2008 and the payments to be made thereof, is detailed as hereunder:- 20. From the aforenoted letter, it is clear that there is a clear acknowledgement of the Debt together with the terms of payment. Even on 16/02/2010 an amount of Rs. 37,50,000/- was remitted to the bank in pursuance of the OTS settlement proposal. The said Letter is detailed as hereunder: 21. For the sake of brevity only those OTS letters are being reproduced here where there is a 'promise' to pay and there is also a reference to a part payment made. The next letter dated 15/11/2012 refers in paragraph 2, the earlier OTS letters dated 27/06/2007, 31/08/2007, 02/01/2008 and 19/03/2008, thereby establishing that even prior to the issuance of Debt Recovery Certificate there were several attempts made to discharge the loan, thereby acknowledging the Debt. The letter dated 15/11/2012 reads as follows : 22. Letter addressed by the Corporate Debtor on 20/04/2013 specifies part payments of Rs. 10 lakhs made on 18/04/2013 and 20/04/2013 respectively. The letter dated 27/10/2017 addressed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... W Precision Parts Pvt. Ltd. And Ors.' reported in [(2022) 9 SCC 364] in which the Hon'ble Apex Court addressed to the validity and effect of Section 25 (3) of the Contract Act, 1872 and the acknowledgement under Section 18 of the Limitation Act, 1963 and held as follows: "31. Under Section 25(3), a debtor can enter into an agreement in writing, to pay the whole or part of a debt, which the creditor might have enforced, but for the limitation of a suit in law. A written promise to pay the barred debt is a valid contract. Such a promise constitutes novation and can form the basis of a suit independent of the original debt, for it is well settled that the debt is not extinguished, the remedy gets barred by passage of time as held by this Court in Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay [Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay, AIR 1958 SC 328] . 32. Section 25(3) applies only where the debt is one which would be enforceable against the defendants, but for the law of limitation. Where a debt is not binding on the defendant for other reasons, and consequentially not enforceable against him, there is no question of applicability of Section 25(3). 33. There is a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of 'Kotak Mahindra Bank Ltd. Vs. KEW Precision Parts Pvt. Ltd. And Ors.' (Supra) which is detailed as hereunder: "62. As per Section 18 of the Limitation Act, an acknowledgment 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 a fresh period of limitation from the date on which the acknowledgment is signed. Such acknowledgment need not be accompanied by a promise to pay expressly or even by implication. However, the acknowledgment must be made before the relevant period of limitation has expired. 63. In Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria [Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria, AIR 1961 SC 1236] , this Court held : (AIR p. 1238, para 6) "6. It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment 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 acknowledgment is based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana [South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana, 1972 SCC OnLine Del 185 : ILR (1972) 2 Del 712] and the judgment of Karnataka High Court in Hegde & Golay Ltd. v. SBI [Hegde & Golay Ltd. v. SBI, 1985 SCC OnLine Kar 428 : ILR 1987 Kar 2673] and held that an acknowledgment of liability that is made in a balance sheet can amount to an acknowledgment of debt. In this case, the appellant financial creditor has not relied on any books of accounts or balance sheets of the corporate debtor. 65. Section 18 of the Limitation Act speaks of an acknowledgment in writing of liability, signed by the party against whom such property or right is claimed. Even if the writing containing the acknowledgment is undated, evidence might be given of the time when it was signed. The Explanation clarifies that an acknowledgment may be sufficient even though it is accompanied by refusal to pay, deliver, perform or permit to enjoy or is coupled with claim to set off, or is addressed to a person other than a person entitled to the property or right. "Signed" is to be construed to mean signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12/2008, 27/12/2008, 12/04/2010, 15/11/2012, 02/04/2013, 03/07/2017, 06/04/2019, 02/07/2019, 16/08/2019, 26/08/2019 are factually found to be within the period of limitation under Law. Even post filing of the Section 7 Application, OTS proposals dated 17/09/2019, 21/09/2019, 11/10/2019, 18/12/2019, 20/02/2021, 07/08/2021, 02/10/2021, 23/04/2022, 15/06/2022 and 27/08/2022 are part of the record filed. At the cost of repetition, keeping in view, the ratio of the Hon'ble Apex Court in the aforenoted Judgments under IBC, 2016 in the matters of 'Dena Bank Vs. C. Shivakumar Reddy (Supra), Kotak Mahindra Vs. A. Balakrishnan' (Supra), 'Kotak Mahindra Vs. KEW Precision Parts' (Supra), 'Sabarmati Gas Limited Vs. Shah Alloys' (Supra), the Judgments relied upon by the Appellant herein are not germane to the issues raised in this Appeal. 30. Further, the second Respondent / the Resolution Professional of the Corporate Debtor Company filed the Status Report in compliance of the direction of this Tribunal dated 11/08/2023 submitting that three Prospective Resolution Applicants submitted their respective Plans and the time for submission for the balance Applicants has been extended till 18/08/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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