AI Structured Summary
Not yet generated for this judgment
Judgment
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
The Appellant happens to be the operational creditor , who has initiated proceedings under Section 9 of the I & B Code, 2016, to be read with Rule 6 of the I & B (Application to Adjudicating Authority) Rules, 2016, for the purposes of initiation of the CIRP proceedings, against the Corporate Debtor M/s. Shree Krishna Polystrap Pvt. Ltd.
The said application as preferred by the Appellant / Operational Creditor stood dismissed, by the Impugned Judgment dated 05.05.2020, rendered by the learned Adjudicating Authority on the ground that, the alleged default which was taken as to be the foundation for the purposes of initiation of the proceedings under Section 9,was falling beyond the prescribed period of limitation after inclusion of period as prescribed under Section 18 of the Limitation Act, 1963, which has been made applicable for the purposes of initiation of the Sec. 9 proceedings.
Brief facts of the case are given below:
The Corporate Debtor M/s. Shree Krishna Polystrap Pvt. Ltd. is a registered Company, incorporated and Registered under the provisions of the Companies Act, 1956, on 25.03.2009, and listed in the Register of Companies maintained by the Registrar of Companies.
The Operational Creditor has submitted that, he has delivered certain goods amounting to Rs.34,98,706/- in July-August 2012, to the Corporate Debtor as against 3 Orders given by the Corporate Debtor on 18.07.2012, 30.07.2012 and 16.08.2012 and after making supplies, he has raised 3 Invoices of Rs.6,16,540/-, Rs.11,34,614/- and Rs.17,43,502/-, totaling Rs.34,98,706/- against the Corporate Debtor. Despite supplying goods against the aforesaid Orders and despite raising 3 Invoices, the Corporate Debtor had not remitted the amount and as a consequence thereto, the operational creditor issued the notice for initiation of the proceedings under Sec. 9 of the I & B Code, 2016.
The basis of filing of an application under Sec. 9 of I & B Code, 2016, by the operational creditor by instituting the same on 29.03.2019,was that since, the default has been committed, the CIRP proceedings ought to be initiated against the Corporate Debtor.
The facts which has emerged from the records and as it has been placed by the appellant before this Tribunal, it is seen that, the goods which were made as subject matter of consideration, were supplied somewhere in July 2012 to August 2012, against 3 Invoices, which were raised against the Corporate Debtor. In accordance with the terms of payment, they were required to be remitted within a specified period, as given in the Invoices therein, but, the said amount was not remitted and consequently, the total amount which ultimately had fallen as due to be paid, as against the Invoices, raised against the Corporate Debtor, including the 3 Invoices as already referred to above was determined to be Rs.1,08,42,275/-, along with claim of the agreed interest, which was payable on the same.
The Operational Creditor has claimed that the Corporate Debtor has reckoned the liability of the debt payable to him by issuance of the two cheques being Cheque No. 00917 for an amount of Rs.34,98,706/- and Cheque No. 00918 for an amount of Rs.15,21,067/- drawn on the HDFC Bank, in favour of the Operational Creditor, and that it would amount to be an admission of a financial debt on part of the Corporate Debtor as such, and therefore, the proceedings could be initiated under Sec. 9 of I & B Code, 2016.
Apart from it, the Operational Creditor has come up with the case that, apart from the amount as reflected above which remained outstanding, there were various other cash payments which were made by the Corporate Debtor, between the period from 11.08.2015 to 18.03.2016, which he contends that, was made by the Corporate Debtor in discharge of the interest accruing on the aforesaid outstanding amount, and hence, such cash payment will also amount to acknowledgement of the financial liability by the Corporate Debtor.
The appellant / operational creditor in the proceedings initiated under Sec. 9 of I & B Code, 2016, has further submitted that the Respondent / Corporate Debtor, has confirmed the balance outstanding dues to be paid to him as on 31.03.2016, acknowledged the same and has never disputed the said amount due.
It is contended by the appellant herein that, once the Corporate Debtor has acknowledged the liability for payment of the balance amount on 31.03.2016, thus initiation of the proceedings under Section 9 of I & B Code, 2016, on 29.03.2019 would be falling well within the ambit of limitation as prescribed under Sec. 9 of the I & B Code, 2016, owing to the fact that the balance amount due stood acknowledged by the Corporate Debtor.
The said application was considered by the learned Adjudicating Authority, and has been rejected by the Impugned Judgment of 05.05.2020.
The learned Adjudicating Authority while dealing with the issue pertaining to the determination of financial liability, due to be paid by the Corporate Debtor, had considered the implications of Form 4 Notice, which was issued on 07.01.2019 and the alleged plea taken by the operational creditor with regards to the balance confirmation issued by the Corporate Debtor and the contents of the various invoices which were relied on by the Operational Creditor to substantiate the contents of the notice of demand issued under Section 8 of I & B Code, 2016, by the Operational Creditor / the appellant herein for initiation of the proceedings under Sec. 9 of the I & B Code, 2016.
The learned Adjudicating Authority after considering the various documents including three Invoices dated 18.07.2012, 30.07.2012 and 24.08.2012, had come to a conclusion that, the actual amount which could be said to be falling to be due to be paid according to the case of the Operational Creditor itself, based upon the evidence which was placed by him, before the learned Adjudicating Authority, will be falling well beyond the prescribed period of limitation, as per the provisions of the Limitation Act and the acknowledgment of financial debt received by him in form of balance confirmation as on 31.03.2016 as contemplated under Sec. 9, will not come to his rescue in the light of the provisions contained under Section 18(2) of the Limitation Act.
The learned Adjudicating Authority ultimately has rejected Sec. 9 application preferred by the Appellant / Operational Creditor based upon the ratio laid by the Principal Bench, NCLAT, in the matter of C. Shivakumar Reddy v. Dena Bank in CA (AT) (INS) No. 407 of 2019 on the ground that mere acknowledgment of a debt or a financial liability for that purpose, cannot be taken as to be the basis for the purposes of determining the upper limit of the limitation period of 3 years, which has been prescribed for initiation of the proceedings for deriving a conclusion under Sec. 18 of the Limitation Act.
The learned Adjudicating Authority had also considered the Judgment rendered by the Hon’ble Apex Court in the matters of B.K. Educational Services Pvt. Ltd. V. Parag Gupta as reported in 2018 SCC Online P1921, where almost a similar view has been taken which is that the bar of limitation would not be reckoned from the date of acknowledgment, be it by whatsoever mode, but rather, from the date when the actual default stood committed, which admittedly according to the pleading raised in Section 9 application of I & B Code, 2016, it has fallen due on 22.11.2012 which has been sought to be rejuvenated by contending that the acknowledgment has been given as on 31.03.2016 and therefore, the proceedings under Sec. 9 ought not to have been rejected on the ground of limitation, because acknowledgment would be one of the determining factors for the purpose of initiation of Section 9 application of I & B Code, 2016.
The learned Adjudicating Authority while considering the said plea with regards to the implications of the acknowledgement dated 31.03.2016, with regard to the date on which, the proceedings under Sec. 9 stood initiated i.e. 29.03.2019, has observed that, even according to the own case of the Operational Creditor as pleaded, the initiation of the proceedings under Sec. 9 happens to fall much beyond the period of limitation, the acknowledgment is without being based upon any credible documents on record, and also the date of acknowledgement falls beyond the 3 year limitation period from 22.11.2012 when the debt fell due, and accordingly has held the proceedings to be apparently barred by limitation and accordingly dismissed the same.
After having considered the contentions raised by the appellant in the appeal with regards to the factum of the modalities which had been adopted by the learned Adjudicating Authority, for the purposes of determining the aspect of limitation, the inferences which has been drawn by the learned Adjudicating Authority, could be very well derived from the pleading of the Operational Creditor itself, where in his pleadings he admits that, the amount due to be paid, has to be reckoned from 22.11.2012 and not from so called acknowledgment of 31.03.2016, which was not substantiated to be proved by any independent document on record. In the absence of there being any written acknowledgment of dues placed on record, before the learned Adjudicating Authority, nothing contrary could be drawn from alleged theory of `acknowledgment’ for the purposes of deciding the aspect of limitation.
The aforesaid aspect, as to what would be the exact parameters which are to be adopted for the purposes of initiation of Sec. 9 proceedings, from the perspective of the bar created in form of the limitation period of 3 years to be computed from the date on which the debt has fallen due to be paid, was an aspect which has been considered in various Judgments of the Hon’ble Apex Court. In Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1, the Hon’ble Apex Court in para 35 and 35.1 has observed that mere acknowledgement of due by the Corporate Debtor may not suffice for the purposes to override the implications of limitation as prescribed under law. Relevant para 35 and 35.1 of Babulal Vardharji (Supra) is extracted hereunder:
``35. Apart from the above and even if it be assumed that the principles relating to acknowledgment as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said provision and principles come in operation in the present case nor do they enure to the benefit of Respondent 2 for the fundamental reason that in the application made before NCLT, Respondent 2 specifically stated the date of default as “8-7-2011 being the date of NPA”. It remains indisputable that neither has any other date of default been stated in the application nor has any suggestion about any acknowledgment been made. As noticed, even in Part V of the application, Respondent 2 was required to state the particulars of financial debt with documents and evidence on record. In the variety of descriptions which could have been given by the applicant in the said Part V of the application and even in residuary Point 8 therein, nothing was at all stated at any place about the so-called acknowledgment or any other date of default.
35.1.Therefore, on the admitted fact situation of the present case, where only the date of default as “8-7-2011” has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgment or any other date of default, in our view, the submissions sought to be developed on behalf of Respondent 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, Respondent 2 never came out with any pleading other than stating the date of default as “8-7-2011” in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgment. In this view of the matter, reliance on the decision in Mahabir Cold Storage [Mahabir Cold Storage v. CIT, 1991 Supp (1) SCC 402] does not advance the cause of Respondent 2.’’
Almost a similar view has been taken in yet another matter as reported in 2021 Vol 7 SCC P 352 in the matters of Reliance Asset Reconstruction Co. Ltd. v. Hotel Poonja International Pvt. Ltd., wherein para 20, 29 & 30, it has been held that, acknowledgement of due is irrelevant for the purposes of determining the aspect of as to on what date the amount has actually fallen due to be paid. In the aforesaid Judgment, Hon’ble Apex Court has observed that reckoning or acknowledgement of a due has to be established by evidence on record and it is then only that the parameters which as prescribed under Sec. 18 of Limitation Act, could be attracted for the purposes to determine as to whether the proceedings drawn under Sec. 9 were barred by limitation or not.
The view taken by the Hon’ble Apex Court in the aforesaid two Judgments were yet again reiterated by the Hon’ble Apex Court in the Judgment reported in 2021 Vol. 10 SCC 330 Dena Bank v. C. Shivakumar Reddy & Anr. and having reference to para 111 & 125, wherein it has been observed that the acknowledgement of dues is not very relevant for the purposes of drawing of the proceedings under Sec. 9 of the I & B Code, 2016 and the same has had to be reckoned from the date when the amount has actually fallen due to be paid for the purposes of determining the cut off period of 3 years for initiation of the proceedings under Sec. 9 of the Code. Relevant para 111 and 125 are extracted hereunder:-
``111. 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.
125.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 personally or by an authorised agent.’’
Since the said aspect has not been established by any evidence on record as observed in the finding recorded by the learned Adjudicating Authority in para 9 of the said Impugned Order, because the so-called affirmation of the balance amount by an order of 31.03.2016, has not been confirmed by way of a written document placed on record by the Operational Creditor, the learned Adjudicating Authority, has rightly held that the aforesaid plea in respect of the acknowledgement confirming the debt due of 31.03.2016, cannot be accepted until and unless the same stands established by a credible document, which could be read in accordance with the law of evidence for the purposes of initiation of the proceedings under Sec. 9.
The Principal Bench of NCLAT in CA (AT) (INS) Nos. 525 & 627 of 2019 in a decision rendered on 11.12.2019 has dealt with the aspect of bar of limitation in the light of the provisions contained under Sec. 18 of the Limitation Act and while considering the application of Section 18 of the Limitation Act as observed in para 10 of the said Judgment, has ultimately drawn its conclusion in para 23 of the said Judgment whereby it has held that the books of accounts cannot be treated as to be an acknowledgement of liability in respect of a debt payable by the Corporate Debtor, until and unless the said document is verified in accordance with law of evidence to substantiate the date on which the actual amount actually stood acknowledged by the Corporate Debtor. The relevant paragraph 23 is extracted hereunder:
``23. In the present case, `Asset Reconstruction Company (India) Ltd.’-(`Financial Creditor’) has failed to bring on record any acknowledgment in writing by the `Corporate Debtor’ or its authorised person acknowledging the liability in respect of debt. The Books of Account cannot be treated as an acknowledgment of liability in respect of debt payable to the `Asset Reconstruction Company (India) Ltd.’-(`Financial Creditor’) signed by the `Corporate Debtor’ or its authorised signatory.’’
Owing to the aforesaid settled principle and particularly the facts under which the instant case is covered, when apparently according to the pleadings, it was the admitted case of the Operational Creditor, that the amount has fallen due to be paid on 22.11.2012 and no efforts were made by the Operational Creditor, to initiate the proceedings under Sec. 9, till the application under Section 9 was ultimately filed at a much belated stage on 29.03.2019, when the so-called acknowledgment of debt due in form of balance confirmation as on 31.03.2016 is not supported by any credible evidence and in that case too, the date of such acknowledgment falls beyond 3 year period when computed from the date on which the debt amount fell due, being 22.11.2012, the proceedings under Section 9 of I & B Code, 2016, cannot be sustained in the face of the bar being created by limitation under Limitation Act.
Thus, the Impugned Judgment of 05.05.2020, as rendered by the learned Adjudicating Authority, rejecting the Section 9 application on account of the bar created because of the limitation in initiation of the proceedings under Section 9 is absolutely justified in view of the settled law which has been referred to hereinabove.
In view of the above, the TA (AT) No. 132 / 2021 (Company Appeal (AT) (INS) No. 564 / 2020) would stand dismissed. All pending Interlocutory Applications would be treated to be disposed of.