An application to the IBC should not amount to resurrection of time-barred debts which would have been dismissed on the ground of limitation, says SC

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.323 OF 2021

ASSET RECONSTRUCTION COMPANY
(INDIA) LIMITED …APPELLANT

VERSUS

BISHAL JAISWAL & ANR. …RESPONDENTS

WITH
CIVIL APPEAL NO.3228 OF 2020
CIVIL APPEAL NO.3765 OF 2020
CIVIL APPEAL NO.3 OF 2021
CIVIL APPEAL NO. OF 2021
(@ SLP(C) No.1168 of 2021)

J U D G M E N T

R.F. Nariman, J.

Civil Appeal No.323 of 2021

1. In 2009, Corporate Power Ltd. [“the corporate debtor”] set up a thermal power project in Jharkhand, and for so doing, availed of loan facilities from various lenders, including the State Bank of India [“SBI”]. The account of the corporate debtor was declared as a non-performing asset by SBI on 31.07.2013. On 27.03.2015, SBI issued a loan-recall notice to the corporate debtor in its capacity as the lenders’ agent. On 31.03.2015, some of the original lenders of the corporate debtor, namely, India Infrastructure Finance Company Limited, SBI, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala, and State Bank of Travancore assigned the debts owed to them by the corporate debtor to the appellant, the Asset Reconstruction Company (India) Limited. On 20.06.2015, the appellant issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 [“SARFAESI Act”] on behalf of itself and other consortium lenders to the corporate debtor. On 01.06.2016, the appellant took actual physical possession of the project assets of the corporate debtor under the SARFAESI Act. On 26.12.2018, the appellant filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 [“IBC”] before the National Company Law Tribunal, Calcutta [“NCLT”] for a default amounting to Rs.5997,80,02,973/- from the corporate debtor. As the relevant form indicating the date of default did not indicate any such date, this was made up by the appellant on 08.11.2019 by filing a supplementary affidavit before the NCLT, specifically mentioning the date of default and annexing copies of balance sheets of the corporate debtor, which, according to the appellant, acknowledged periodically the debt that was due. On 19.02.2020, the Section 7 application was admitted by the NCLT, observing that the balance sheets of the corporate debtor, wherein it acknowledged its liability, were signed before the expiry of three years from the date of default, and entries in such balance sheets being acknowledgements of the debt due for the purposes of Section 18 of the Limitation Act, 1963 [“Limitation Act”], the Section 7 application is not barred by limitation. In an appeal filed to the National Company Law Appellate Tribunal [“NCLAT”], the corporate debtor relied upon the Full Bench judgment of the NCLAT in V. Padmakumar v. Stressed Assets Stabilisation Fund, Company Appeal (AT) (Insolvency) No. 57 of 2020 (decided on 12.03.2020) [“V. Padmakumar”], in which a majority of four members [Justice (Retd.) A.I.S.Cheema, Member (Judicial), dissenting] held that entries in balance sheets would not amount to acknowledgement of debt for the purpose of extending limitation under Section 18 of the Limitation Act. 

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