Acknowledgment of debt
Shubham
Budhiraja[1]
Company-ABC is a JV between
company-A & company-B holding 50% each in ABC wherein Mr. X is the MD of
company-A, chairman of company-B and chairman of company-ABC.
Loan Agreement was entered
between company-ABC and consortium of banks with personal guarantee of Mr. X.
The account of company-ABC declared as NPA and banks assigned the debt to
assets reconstruction company (ARC). In February 2020, settlement arrived
between ARC and company-ABC. From 2011 to 2012, ABC keep asking for extension
of payment and in 2013, ARC revoked the settlement and invoked Section 13(2)
SARFESI. In 2014, personal guarantee of Mr. X also invoked.
In 2018, Section 7 petition
filed by ARC to which ABC took objection of limitation but NCLT allowed the
petition. ARC contended that company-ABC has acknowledged the debt in their
financial statements. However, NCLAT allowed the objection and dismissed the
CIRP. Hon’ble Supreme Court while setting aside the NCLAT judgment held that[2]:
(I)
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.
However, an
application in a statutory form cannot be judged in the manner of a plaint in a
suit. Documents filed along with the application, or later and subsequent
affidavits and applications would have to be construed as part of the pleadings.
(II)
An application under Section 7 of the IBC
would not be barred by limitation, on the ground that it had been filed beyond
a period of three years from the date of declaration of the loan account of the
Corporate Debtor as NPA, if there were an acknowledgement of the debt by the
Corporate Debtor before expiry of the period of limitation of three years, in
which case the period of limitation would get extended by a further period of
three years.
(III)
In this case, the amount of the Corporate
Debtor was declared NPA on 1st December 2008. By a letter dated 7th February,
2011, written well within three years, the Corporate Debtor acknowledged its
liability and proposed a settlement. This was followed by several requests of
extension of time to make payment and revised settlements. On 6th April, 2013,
the Corporate Debtor sought extension of time to pay Rs.239,88,27,673
outstanding as on 31st March 2013. On 19th April, 2013, the Corporate Debtor
made payment of Rs.17,50,00,000/-. On 1st July, 2013, the Corporate Debtor
acknowledged its liability – this was after the Appellant Financial Creditor
revoked the settlement invoking the default clause. The Corporate Debtor
acknowledged its liabilities in its financial statements from 2008-09 till
2016-17. The application under Section 7(2) of the IBC was filed on 3rd April
2018, well within the extended period of limitation.
[1] Advocate,
Delhi High Court [ACS, LLB, BCOM(H)], Budhirajalawchambers@gmail.com
[2] CIVIL
APPEAL NOS. 84-85 OF 2020
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