Omkara Assets Reconstruction Pvt. Ltd. Vs. Ritu Jankiprasad Shah - It is evident from these stipulations that the promise to pay was conditional and not having been accepted by the Petitioner with these conditions cannot constitute a clear and unconditional promise to pay. Hence, the said letters do not give rise fresh cause of action in terms of Section 25(3) of the Contract Act.

 NCLT Mumbai (2026.07.13) in  Omkara Assets Reconstruction Pvt. Ltd. Vs. Ritu Jankiprasad Shah [(2026) ibclaw.in 2738 NCLT, CP (IB) No. 1117/(MB)/2025] held that;

• There is a distinction between acknowledgment under Section 18 of the Limitation Act, 1963 and a promise within the meaning of Section 25 of the Contract Act. Both promise and acknowledgment in writing, signed by a party or its agent authorised in that behalf, have the effect of creating a fresh starting of limitation.

• The difference is that an acknowledgment under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by any promise to pay. If an acknowledgment shows existence of jural relationship, it may extend limitation even though there may be a denial to pay.

• On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional”.

• It is evident from these stipulations that the promise to pay was conditional and not having been accepted by the Petitioner with these conditions cannot constitute a clear and unconditional promise to pay. Hence, the said letters do not give rise fresh cause of action in terms of Section 25(3) of the Contract Act.

Excerpts of the Order; 

1) The present Company Petition is filed u/s. 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016/Code”) r/w Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 by Omkara Assets Reconstruction Private Limited (“hereinafter referred to as Petitioner/Financial Creditor”) for initiating Insolvency Resolution Process against Ritu Jankiprasad Shah (“hereinafter referred to as Personal Guarantor/Respondent”) of the Corporate Debtor/ M/s Maharashtra Steel Pvt. Ltd. for having committed default in repayment of the Loan Amount Guaranteed by the Personal Guarantor even after invocation of Guarantee and Demand.

2) The brief facts leading to the filing of the present Company Petition are as follows:

i. State Bank of India (SBI) through its Sterling Branch, sanctioned and disbursed various Credit Facilities aggregating to Rs. 45 Crores in favour of the Borrower vide Sanctioned Letter dt. 19.11.2009. Having executed various documents by the Corporate Debtor to secure the above said Credit facilities, the Personal Guarantee was also executed by Janki Prasad Shah and Ritu Janki Shah and the Corporate Guarantee by Maharashtra Steel Rolling Mills Pvt. Ltd. and Maharashtra Steels Investments Pvt. Ltd.

ii. The Corporate Debtor failed to make payments towards various Financial Facilities availed by them and as a result account of the Corporate Debtor was classified as the Non-Performing-Asset (NPA) on 31.01.2014. SBI initiated action against the provision of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and issued Notice under Section 13(2) of the said Act for the default Amount of Rs. 41,43,72,431/- on 02.07.2014.

iii. SBI took physical possession of the factory property at Wada on 22.11.2014 Corporate Debtor. Subsequently, vide Assignment Agreement dated 28.11.2019, · the account has been assigned to ASREC (India) Limited by SBI and further ASREC (India) Limited assigned the debt to Omkara Assets Reconstruction Pvt Ltd as on 17.03.2022. Vide SARFAESI Notice dt. 02.07.2014, to the Corporate Debtor, the Personal Guarantee vide the same Letter was also invoked and the demand was made to the Personal Guarantor to make the repayment of the Loan. In spite of that, no repayment was made.

iv. It is the case of the Applicant that the Corporate Debtor after availing the Loan has duly acknowledged the Debt from time to time and the debt was also acknowledged in the Financial Statement for the Year 2016-17. It is contended that no further Financial Statements were prepared and uploaded by the Corporate Debtor or else debt would have been further acknowledged by the Corporate Debtor. Meanwhile, the Company Petition No. 1187 of 2015 was filed before the Hon’ble High Court of Bombay and the Hon’ble High Court of Bombay admitted the said Petition and appointed Official Liquidator on 03.05.2018.

v. Due to pandemic Covid -19, the Limitation Period from 15.03.202 to 28.02.2022 was excluded and 90 days thereafter was available to file the Petition, till 31.05.2022. Thereafter, the Personal Guarantor Ms. Ritu Shah, addressed various Letters acknowledging debt due and payable to the Petitioner on 27.05.2024, 08.07.2024 and 16.01.2025. The Borrower through ex-Directors and Guarantor have acknowledged the Debt. The last Letter from the Personal Guarantor to the Corporate Debtor was received on 16.01.2025, though there is a break in chain of continuous acknowledgement of debt by the Corporate Debtor/Personal Guarantor. It is contended that the acknowledgement of liability even after expiry of original period of Limitation constitutes a fresh promise and gives rise to renewed cause of action, accordingly, any acknowledgement of debt made after the expiry of prescribed three years of Limitation rendering the claim maintainable from the date of such acknowledgement. Reliance is placed on the judgment in the case of Kotak Mahindra Bank Limited….vs….Kew Precision Parts Private Limited and Others (2022) 9 Supreme Court Cases 364, in Civil Appeal No. 2176 of 2020.

vi. It is submitted that the Hon’ble Supreme Court contemplates the Criteria required to be fulfilled i.e. a promise to pay whole or part of the Debtor in writing and signed by the respective party and such debt is of nature which Creditor will enforce but for the reasons of Limitation is unable to enforce the Payment. Thus, the promise to pay essentially must be treated as a contract and does not require an explicit acceptance of the same. Section 25(3) of the Contract attracted in the present case extending the Limitation.

vii. It is therefore submitted that the Petition is within Limitation and there is debt and default established by the Petitioner and therefore Personal Insolvency Resolution Process against the Personal Guarantor is required to be initiated.

3) The Respondent Personal Guarantor, pursuant to the Report under Section 99 of the Insolvency and Bankruptcy Code, 2016 filed by the Resolution Professional, appeared and filed their Reply and contended that the Petition is barred by Limitation and without going into the merits of the Case, the Petition is required to be dismissed. The account of the Corporate Debtor, M/s Maharashtra Steel Pvt. Ltd., was classified as Non-Performing-Asset (NPA) on 31.01.2014, thereafter, the Personal Guarantee was invoked vide Notice dt. 02.07.2014, consequently, the cause of action for filing the Petition against the Respondent herein crystalised at the latest on 02.07.2014. Accordingly, the Limitation for initiating proceedings against Respondent expires on 02.07.2017. Reliance of Financial Statements of the Corporate Debtor for the Financial Year 2016-17 is an attempt to contend that the debt stood acknowledged and consequently, the Limitation period stood extended.

4) Even if it is assumed to constitute the valid acknowledgement of debt by the Personal Guarantor, Petition would still remain barred by Limitation. The fresh period of Limitation would be commenced from the date of such acknowledgement i.e. 31.03.2017 and the period of 3 years would expire on 01.04.2020. Even if the exclusion of Limitation during Covid-19 Pandemic is taken and also 90 days period from 01.03.2022 is taken into consideration, the period of Limitation would still expire on 29.05.2022. The present Petition is filed admittedly on 15.10.2025, i.e. more than 3 years after the outer most period of Limitation available to the Petitioner, which is expired. It is therefore contended that the Petition is ex-facie barred by Limitation.

Submissions of Respondent/Personal Guarantor

5) It is submitted that the Petition is ex-facie barred by Limitation even after excluding Covid-19 Pandemic period and period of further 90 days as per the Judgment of the Hon’ble Supreme Court in the case of IL&FS Financial Services Ltd…vs…Adhunik Meghalaya Steels Pvt. Ltd., (2025) SCC OnLine SC 1567 is considered.

6) The reliance on Directors’ Report 03.09.2018 is wholly misconceived. Firstly, the document is neither signed nor stamped and its authenticity is therefore seriously disputed. Secondly, the said document does not pertain either to the Corporate Debtor or to the Respondent herein. It is a document of an altogether different entity and cannot constitute an acknowledgement on behalf of either the Corporate Debtor or the Respondent. Thirdly, the report does not contain any acknowledgement whatsoever of the alleged outstanding amounts claimed by the Petitioner. The Independent Auditors’ Reports for the Financial Years 2017-18 to 2020-21 are not the Reports of the Corporate Debtor or of the Respondent. They pertain to Maharashtra Steels Investment Pvt. Ltd., which is a separate Legal entity. The acknowledgement capable of extending Limitation must be clear, unambiguous and made by the person against whom the right is sought to be enforced. Documents of a third-party entity cannot operate as an acknowledgment on behalf of the Respondent.

7) The reliance on One Time Settlement (OTS) Proposals dt. 27.05.2024, 08.07.2024 and 16.01.2025 cannot revive a debt that had already become time-barred. It is a settled principle under Section 18 of the Limitation Act that an acknowledgement extends Limitation only if it is made before expiry of the prescribed period of Limitation. Once Limitation has expired, a subsequent acknowledgement cannot revive a barred claim. Reliance is placed on the Judgment of the Hon’ble Supreme Court in the case of Laxmi Pat Surana…vs…Union Bank of India (2021) 8 SCC 481 and also in the case of Small Industries Development Bank of India…vs…Sh. Krishnakant Bagree, (2025) ibclaw.in 2314 NCLT, wherein it was held that an acknowledgement made after expiry of Limitation does not revive a time-barred debt.

8) It is further submitted that OTS proposal relied upon by the Petitioner were merely proposals made in the course of settlement discussions and never culminated into a concluded contract between the Parties. The said OTS proposals were in the nature of conditional offers made by the Respondent with a view to explore an amicable resolution of disputes. The proposals were at all times subject to acceptance by the Petitioner. The Petitioner has neither pleaded nor produced any document evidencing its unequivocal acceptance of the said OTS proposals. In the absence of acceptance, the essential requirements for formation of a binding and enforceable contract are not satisfied. In other words, the said OTS proposals cannot be construed as forming any contract between the Parties which can be regarded as enforceable in law. Hence, the reliance of Section 25(3) of the Contract Act is also misconceived and erroneous. The OTS proposal was conditional upon it being accepted by the Applicant in full and final settlement, and there is no express promise to make any payment in any of the OTS Proposals without the acceptance of OTS proposals by the Applicant. Therefore, the Section 25(3) of the Contract Act is not applicable in the present case.

9) The only question falls for consideration in the present case is whether the Petition is filed within the Limitation and whether the OTS proposal by the Respondent amounts to acknowledgment of time barred debt and whether the Petition as filed on the basis of Notice of invocation dt. 02.07.2014 would survive, in view of Section 25(3) of the Contract Act.

Findings:

10) It is trite Law that provisions of Limitation Act are applicable to the proceedings under Section 238A of the Insolvency and Bankruptcy Code, 2016. Therefore, the Petition is required to be filed within a period of Three Years from the date of accrual of cause of action as contemplated under Section 137 of the Limitation Act. In the present case, undisputedly, the invocation of the Personal Guarantee was vide Notice dt. 02.07.2014, therefore, the cause of Action would first accrued on the expiry of the period stipulated under the Notice dt. 02.07.2014 (i.e. on 31.08.2014).

11) Therefore, the period of Limitation would expire on 31.08.2017. Admittedly, the present Petition is filed on 15.10.2025, therefore, the Petition would be barred by Limitation. However, it is the case of the Petitioner that there were acknowledgements of debt from time to time from the Corporate Debtor. The Corporate Debtor in its Financial Statements for the Year 2016-17 has acknowledged the Debt; therefore, the period of Limitation would stand extended till 31.03.2020. Now, since this period has fallen under the Covid-19 Pandemic period which taken from 15.03.2020 and ended on 28.02.2022, the Limitation after 15.03.2020 stands suspended and it would starts running after 28.02.2022 as held by the Hon’ble Supreme Court in the case of IL&FS Financial Services Ltd…vs…Adhunik Meghalaya Steels Pvt. Ltd., (2025) SCC OnLine SC 1567, further, period of 90 days would be available. Even excluding that period of 90 days, the Petition ought to have been filed on or before 29.05.2022 and the Petition is filed on 15.10.2025. Therefore, even on basis of acknowledgements of debt by the Corporate Debtor in its Financial Statement for the year 2016-17, the Petition would still fail on count of Limitation.

12) The submission of the Ld. Counsel for the Petitioner that there would have been further acknowledgment, had the Corporate Debtor filed its Financial Statements for the subsequent periods after 2017 does not holds any merit as they are admittedly not filed, which does not amount to acknowledgment of any debt thereafter.

13) As regards reliance on audited Financial Statements of Maharashtra Steels Investment Private Limited, the Corporate Guarantor to the facilities guaranteed by the Respondent, is concerned, it is noted that the said Financial Statements has neither acknowledged any liability towards the Petitioner Creditor in any of the year(s) in the said Financial Statements, nor any liability towards Petitioner Creditor is disclosed even as Contingent Liability therein. Accordingly, it can not be said that the debt, in question, has been acknowledged by such corporate guarantor binding the respondent herein in terms of clause 14 of the Guarantee Agreement, which provides that “14. If the Guarantors be more than one Individual or entity, each one or any of them is hereby authorised by the others of them to admit and acknowledge their liability to the Bank by any payment Into the account or by way of writing or in any manner otherwise and any such acknowledgement of liability or part payment by any or more of them shall in addition to this / their personal capacity be deemed to have been made on behalf of each of them for the purposes of Sections 18 and 19 of the Limitation Act, 1963.” Accordingly, we do not find merit in the reliance of these financial statements of corporate guarantor namely Maharashtra Steels Investment Private Limited. Nonetheless, the submission of the Ld. Counsel for the Respondent that the Financial Statements are prepared by some Third-Party and Independent Auditor and therefore it has no evidentiary value so far as the Corporate Debtor is concerned also does not have any substantial force and merits in view of clause 14 of Guarantee Agreement binding each of guarantor by the acknowledgement of other guarantor.

14) Only question that remains now is whether Section 25(3) of the Contract Act comes to the rescue of the Petitioner. It is the case of the Petitioner that the Personal Guarantor vide its Letter dt. 27.05.2024, which was received by the Petitioner on 16.01.2025, submitted an One Time Settlement proposal (OTS) offering to pay amounts due from the Principal borrower and such letter(s) are signed by the Respondent as “ex-director and guarantor” of Principal Borrower. Accordingly, it is submitted by the Petitioner that though there is break in chain of continuous acknowledgement of Debt by the Personal Guarantor/Corporate Debtor, the acknowledgement of liability even after expiry of Original Period of Limitation constitutes fresh promise and give rise to renewed cause of action. As against this contention, it is submitted by the Respondent that the OTS proposal was just a proposal and it was not accepted and therefore, it cannot be considered to be a valid contract between the Parties and it cannot give any extension of Limitation.

15) It is further submitted that it is settled principal under Section 18 of the Limitation Act that an acknowledgement extends limitation only if it is made before expiry of the prescribed period of Limitation. Once Limitation has expired, a subsequent acknowledgement cannot revive a barred claim. Reliance is placed on the Judgment of the Hon’ble Supreme Court in the case of Laxmi Pat Surana…vs…Union Bank of India (2021) 8 SCC 481 and also in the case of Small Industries Development Bank of India…vs…Sh. Krishnakant Bagree, (2025) ibclaw.in 2314 NCLT. It is therefore, submitted that the Petition is thus, barred by Limitation and the acknowledgment after the expiry of period of limitation would not revive the cause of action.

16) The Ld. Counsel for the Petitioner has placed reliance on the judgment in the case of Kotak Mahindra Bank Limited vs Kew Precision Parts Private Limited and Others (2022) 9 Supreme Court Cases 364, in Civil Appeal No. 2176 of 2020, wherein the Hon’ble Supreme Court held as under:

• “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 and Manufacturing Company Limited vs. State of Bombay1.

• 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 distinction between acknowledgment under Section 18 of the Limitation Act, 1963 and a promise within the meaning of Section 25 of the Contract Act. Both promise and acknowledgment in writing, signed by a party or its agent authorised in that behalf, have the effect of creating a fresh starting of limitation. The difference is that an acknowledgment under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by any promise to pay. If an acknowledgment shows existence of jural relationship, it may extend limitation even though there may be a denial to pay. On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional”.

17) The above Authority clearly lays down the difference between the provisions of Section 18 of the Limitation Act and Section 25(3) of the Contract Act. It is a trite Law that any acknowledgement of debt within the period of Limitation would attract Section 18 of the Limitation Act and the Limitation would stand extended for the further period as contemplated under the Law. However, Section 25 deals with the acknowledgement of time barred debt.

18) The Hon’ble Supreme Court in the above said Authorities has held that there is distinction between acknowledgement of Section 18 of the Limitation Act and a promise within the meaning of Section 25 of the Contract Act. Both Promise and acknowledgement in writing signed by a party or its agent authorised in their behalf, have the effect of creating fresh starting of Limitation. The difference is that the acknowledgment under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by a promise to pay, and if an acknowledgement shows existence of jural relationship, it may extend limitation even though there may be a denial to pay. On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional. In the present case, the acknowledgement at exhibit “H” would show that there is a proposal sent by the Personal Guarantor for One-Time-Settlement of the debt, wherein willingness to Pay an amount towards the full and final settlement of the outstanding debt was made. Therefore, there is a promise to pay which is unequivocally made in writing with the signature of the Personal Guarantor; and this Letter is not disputed. However, such promise has to be clear and unconditional.

19) Therefore, what is required under Section 25(3) is only a promise to pay time barred debt in clear terms. Acceptance of the promise is not contemplated and therefore, acknowledgement of time barred debt would attract Section 25(3) of the Contract Act and it would give a fresh cause of action for initiating the recovery.

20) It is noted that the said letter(s) contemplates that, On payment of upfront amount, we shall be granted approval for sale of Wada land – 6, acres, and any offer received from party will be accepted to conclude the sale”; “payment arranged from our sources and sale proceeds of the secured assets appropriated to you should be considered towards the payment of the settlement amount”; and “on the acceptance of the above proposal, all the recovery proceedings/actions taken by you shall be kept in abeyance”. It is evident from these stipulations that the promise to pay was conditional and not having been accepted by the Petitioner with these conditions cannot constitute a clear and unconditional promise to pay. Hence, the said letters do not give rise fresh cause of action in terms of Section 25(3) of the Contract Act. Needless to say, as against the provisions of Section 18 of the Limitation Act, the acknowledgement of time barred debt would gives fresh cause of action for which the Petitioner would have a fresh remedy available.

21) Therefore, since, the invocation of Guarantee and the demand thereunder was made sometimes in the Year, 2014 and admittedly, the Petition was not filed within the period of 3 years. The Original Cause of Action would stand extinguished after the period of Limitation. Hence, the present Petition filed on the Original cause of action on the contention that the acknowledgement of time barred debt subsequently by the Personal Guarantor would continue the same cause of action does not hold merits, therefore, the Petition would not survive.

22) In view of the above, we are of the Considered view that the present Petition as filed is barred by Limitation.

23) Accordingly, the Company Petition bearing CP (IB) No. 1117 of 2025, is disposed of as dismissed.

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Kotak Mahindra Bank Ltd. Vs. Kew Precision Parts Pvt. Ltd. & Ors. - It is clear that any agreement to pay a time barred debt, would be enforceable in law, within three years from the due date of payment, in terms of such agreement.

  SCI (2021.08.05) in Kotak Mahindra Bank Ltd. Vs. Kew Precision Parts Pvt. Ltd. & Ors. [Civil Appeal No. 2176 of 2020] ruled on various issues mainly;

• Suffice it to mention that in computing the period of limitation for initiation of CIRP proceedings, the time spent in pursuing remedy under the SARFAESI Act or any other recovery law cannot be excluded.

• It is also well settled that initiation of proceedings under SARFEASI or any other recovery law does not affect the right of a Financial Creditor to initiate CIRP unless its debt is repaid.

• “It is clear that any agreement to pay a time barred debt, would be enforceable in law, within three years from the due date of payment, in terms of such agreement.

• 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,

• 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 and Manufacturing Company Limited vs. State of Bombay1.

• The difference is that an acknowledgment under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by any promise to pay. If an acknowledgment shows existence of jural relationship, it may extend limitation even though there may be a denial to pay.

• On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. 

• Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional.

• The condition precedent for condonation of the delay in filing an application or appeal, is the existence of sufficient cause. Whether the explanation furnished for the delay would constitute “sufficient cause” or not would be dependent upon facts of each case. 

•  A Court/Tribunal may exercise its discretion to condone delay, even in the absence of a formal application.

• Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it.

• In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered.

• 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.

Excerpts of the order;

This appeal filed by the Appellant Financial Creditor, Kotak Mahindra Bank Limited under Section 62 of the Insolvency and Bankruptcy Code, 2016, hereinafter referred to as the ‘IBC’, is against the judgment and order dated 8th January, 2020 of the National Company Law Appellate Tribunal, New Delhi (NCLAT) allowing Company Appeal (AT) Insolvency No. 1349 of 2019 filed by the Respondent-Corporate Debtor, against an order dated 6th September, 2019 passed by the Adjudicating Authority/National Company Law Tribunal (NCLT) admitting the application being Company Petition No.(IB) 672/ND/2019 filed by the Appellant Financial Creditor under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporator Debtor.

 

# 14. The Corporate Debtor alleges that there were deficiencies in the banking services rendered by the Appellant Financier. Be that as it may, the Corporate Debtor availed credit facilities from the Appellant Financial Creditor, defaulted in repayment thereof and acknowledged liability to the Appellant Financial Creditor by making offers of one time settlement. When an application is filed by a Financial Creditor under Section 7 of the IBC for initiation of CIRP, all that the Adjudicating Authority is required to see is, whether there is a financial debt owed by the Corporate Debtor to the Financial Creditor and whether the amount of the debt exceeded Rs.1,00,000/- (Rupees one lac only) on the date of filing of the company petition, the said amount being the threshold limit for initiation of CIRP at the material time. The Adjudicating Authority also has to examine if the application is barred by limitation.

 

# 15. Pre-existing disputes, if any, between the Corporate Debtor and the Financial Creditor are of no consequence to an application of a Financial Creditor, under Section 7 of the IBC for initiation of CIRP, unlike an application of an Operational Creditor for initiation of CIRP under Section 9 of the IBC which may have to be dismissed if there is a pre-existing dispute.

 

# 16. The proceedings initiated by the Appellant Financial Creditor under the SARFAESI Act are not material to the issue in this appeal, of whether the application of the Appellant Financial Creditor before the NCLT was barred by limitation. Suffice it to mention that in computing the period of limitation for initiation of CIRP proceedings, the time spent in pursuing remedy under the SARFAESI Act or any other recovery law cannot be excluded. It is also well settled that initiation of proceedings under SARFEASI or any other recovery law does not affect the right of a Financial Creditor to initiate CIRP unless its debt is repaid.

 

# 17. The Corporate Debtor defaulted in payment of Rs.24,55,00,000/- to the appellant Financial Creditor as agreed. In these circumstances, the appellant Financial Creditor filed the said application being Company Petition No. (IB) 672/MD/2019 in the NCLT.

 

# 18. The said application was admitted by an order dated 6th September, 2019 of the Adjudicating Authority (NCLT). The Adjudicating Authority found that the account of the Corporate Debtor with the Appellant Financial Creditor had been declared NPA on 30th September 2015. The Appellant Financial Creditor was, however, relying on the proposal for one time settlement given by the Corporate Debtor on 12th December, 2018 to contend that the existence of financial debt had been admitted by the Corporate Debtor.

 

# 27. It is the case of the Appellant Financial Creditor that on 12th December 2018 the Corporate Debtor made an offer of one time settlement at Rs.15 Crores. This offer was not accepted. On 19th December 2018, the Corporate Debtor revised its offer to Rs.20 Crores for one time settlement. This offer was also not accepted. On 20th December 2018, the Corporate Debtor again revised its offer for one time settlement. This time the Corporate Debtor offered to settle the outstanding dues of the Financial Creditor upon payment of Rs. 24,55,00,000/- to be paid within 31st December 2018. This offer was accepted, and terms of settlement were signed.

 

# 28. Section 25 of the Indian Contract Act provides as follows :-

• “25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.—An agreement made without consideration is void, unless—An agreement made without consideration is void, unless—”

• (1) It is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless

• (2) It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.

• (3) It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.

• Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

• Explanation 2.—An Agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

• Illustrations

• (a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.

• (b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract.

• (c) A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.

• (d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.

• (e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.

• (f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

• (g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given.” The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A’s consent was freely given.

 

# 29. From the above, it is clear that any agreement to pay a time barred debt, would be enforceable in law, within three years from the due date of payment, in terms of such agreement. It appears that Section 25(3) of the Indian Contract Act was not brought to the notice of the NCLAT. The NCLAT also did not consider the aforesaid Section.

 

# 30. In this appeal, it is contended that the last offer of 20th December, 2018 was followed by an agreement. Whether there was such agreement or not would have to be considered by the Adjudicating Authority. To invoke Section 25(3), the following conditions must be satisfied:-

• (i) It must refer to a debt, which the creditor, but for the period of limitation, might have enforced;

• (ii) There must be a distinct promise to pay such debt, fully or in part;

• (iii) The promise must be in writing, and signed by the debtor or his duly appointed agent.

 

# 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 and Manufacturing Company Limited vs. State of Bombay1.

 

# 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 distinction between acknowledgment under Section 18 of the Limitation Act, 1963 and a promise within the meaning of Section 25 of the Contract Act. Both promise and acknowledgment in writing, signed by a party or its agent authorised in that behalf, have the effect of creating a fresh starting of limitation. The difference is that an acknowledgment under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by any promise to pay. If an acknowledgment shows existence of jural relationship, it may extend limitation even though there may be a denial to pay. On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional.

 

# 34. The scheme of the IBC is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Corporate Insolvency Resolution Process begins. Where any corporate debtor commits default, a financial creditor, an operational creditor or the corporate debtor itself may initiate Corporate Insolvency Resolution Process in respect of such corporate debtor in the manner as provided in Chapter II of the IBC.

 

# 35. The provisions of the IBC are designed to ensure that the business and/or commercial activities of the Corporate Debtor are continued by a Resolution Professional, post imposition of a moratorium, which would give the Corporate Debtor some reprieve from coercive litigation, which could drain the Corporate Debtor of its financial resources. This is to enable the Corporate Debtor to improve its financial health and at the same time repay the dues of its creditors.

 

# 39. Section 7(4) of the IBC casts an obligation on the Adjudicating Authority to ascertain the existence of a default from the records of an information utility, or on the basis of other evidence furnished by the financial creditor, within fourteen days of the receipt of the application under Section 7. As per the proviso to Section 7(4) of the IBC, inserted by amendment, by Act 26 of 2019, if the Adjudicating Authority has not ascertained the existence of default and passed an order within the stipulated period of time of fourteen days, it shall record its reasons for the same in writing. The application does not lapse for non-compliance of the time schedule. Nor is the Adjudicating Authority obliged to dismiss the application. On the other hand, the application cannot be dismissed, without compliance with the requisites of the Proviso to Section 7(5) of the IBC.

 

42. The IBC is not just another statute for recovery of debts. Nor is it a statute which merely prescribes the modalities of liquidation of a Corporate body, unable to pay its debts. It is essentially a statute which works towards the revival of a Corporate body, unable to pay its debts, by appointment of a Resolution Professional.

 

# 43. In Swiss Ribbons Private Limited & Anr. v. Union of India and Ors.2, authored by Nariman, J. this Court observed:-

• “28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor’s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.”

 

# 45. Unlike coercive recovery litigation, the Corporate Insolvency Resolution Process under the IBC is not adversarial to the interests of the Corporate Debtor, as observed by this Court in Swiss Ribbons Private Limited v. Union of India (supra).

 

# 46. On the other hand, the IBC is a beneficial legislation for equal treatment of all creditors of the Corporate Debtor, as also the protection of the livelihoods of its employees/workers, by revival of the Corporate Debtor through the entrepreneurial skills of persons other than those in its management, who failed to clear the dues of the Corporate Debtor to its creditors. It only segregates the interests of the Corporate Debtor from those of its promoters/persons in management.

 

47. In construing and/or interpreting any statutory provision one must look into the legislative intent of the statute. The intention of the statute has to be found in the words used by the legislature itself. In case of doubt it is always safe to look into the object and purpose of the statute or the reason and spirit behind it. Each word, phrase or sentence has to be construed in the light of the general purpose of the Act itself, as observed by Mukherjea J., in Popatlal Shah v. State of Madras3 and a plethora of other judgments of this Court.

 

# 48. When a question arises as to the meaning of a certain provision in a statute, the provision has to be read in its context. The statute has to be read as a whole. The previous state of the law, the general scope and ambit of the statute and the mischief that it was intended to remedy are relevant factors.

 

# 49. In Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy and Another4, this Court held:-

• 89. On a careful reading of the provisions of the IBC and in particular the provisions of Section 7(2) to (5) of the IBC read with the 2016 Adjudicating Authority Rules there is no bar to the filing of documents at any time until a final order either admitting or dismissing the application has been passed.”

 

# 50. Section 238A of the IBC provides as follows:-

• “238A. The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.”

 

# 51. It is well settled by a plethora of judgments of this Court as also different High Courts and, in particular, the judgment of this Court in B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates5 (2019) 11 SCC 633 : (2018) 5 SCC (Civ) 528] NCLT/NCLAT has the discretion to entertain an application/appeal after the prescribed period of limitation. The condition precedent for exercise of such discretion is the existence of sufficient cause for not preferring the appeal and/or the application within the period prescribed by limitation.

 

# 52. The condition precedent for condonation of the delay in filing an application or appeal, is the existence of sufficient cause. Whether the explanation furnished for the delay would constitute “sufficient cause” or not would be dependent upon facts of each case.

 

# 53. Section 5 of the Limitation Act, 1963 does not speak of any application. The section enables the court to admit an application or appeal if the applicant or the appellant, as the case may be, satisfies the court that he had sufficient cause for not making the application and/or preferring the appeal, within the time prescribed. A Court/Tribunal may exercise its discretion to condone delay, even in the absence of a formal application.

 

# 54. In Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Cooperative Bank Ltd.6 , authored by one of us (Indira Banerjee, J.), this Court held:-

• “64. Similarly under 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 of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires.

• 65. As observed above, Section 238-A IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before NCLT and Nclat. The IBC does not exclude the application of Sections 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in NCLT/Nclat. All the provisions of the Limitation Act are applicable to proceedings in NCLT/Nclat, to the extent feasible.

 

# 66. We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or 9 IBC. Of course, Section 18 of the Limitation Act is not attracted in this case, since the impugned order [Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd., 2019 SCC OnLine NCLAT 928] of Nclat does not proceed on the basis of any acknowledgment.

• ***

• 89. Legislature has in its wisdom chosen not to make the provisions of the Limitation Act verbatim applicable to proceedings in NCLT/NCLAT, but consciously used the words ‘as far as may be’. The words ‘as far as may be’ are not meant to be otiose. Those words are to be understood in the sense in which they best harmonise with the subject matter of the legislation and the object which the Legislature has in view. The Courts would not give an interpretation to those words which would frustrate the purposes of making the Limitation Act applicable to proceedings in the NCLT/NCLAT ‘as far as may be’.

• ***

• 92. The use of words ‘as far as may be’, occurring in Section 238A of the IBC tones down the rigour of the words ‘shall’ in the aforesaid Section which is normally considered as mandatory. The expression ‘as far as may be’ is indicative of the fact that all or any of the provisions of the Limitation Act may not apply to proceedings before the Adjudicating Authority (NCLT) or the Appellate authority (NCLAT) if they are patently inconsistent with some provisions of the IBC. At the same time, the words ‘as far as may be’ cannot be construed as a total exclusion of the requirements of the basic principles of Section 14 of the Limitation Act, but permits a wider, more liberal, contextual and purposive interpretation by necessary modification, which is in harmony with the principles of the said Section.”

 

# 55. There is no specific period of limitation prescribed in the Limitation Act, 1963, for an application under the IBC, before the Adjudicating Authority (NCLT). An application for which no period of limitation is provided anywhere else in the Schedule to the Limitation Act, is governed by Article 137 of the Schedule to the said Act. Under Article 137 of the Schedule to the Limitation Act, the period of limitation prescribed for such an application is three years from the date of accrual of the right to apply.

 

# 56. There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. In Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd.7 authored by Nariman, J. this Court held:-

• “6. ……The present case being “an application” which is filed under Section 7, would fall only within the residuary Article 137.”

 

# 57. In B. K. Educational Services Private Limited (supra), this Court speaking through Nariman, J. held:-

• “42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.”

 

# 58. In Jignesh Shah v. Union of India8 this Court speaking through Nariman, J. reiterated the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC was three years from the date of accrual of the right to sue, that is, the date of default.

 

# 59. In Dena Bank (supra), this Court relied upon the dictum of P.B. Gajendragadkar, J. in Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan9, and held:-

• “31. … Section 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constitutes a continuing wrong. In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury. It is only in regard to acts which can be properly characterised as continuing wrongs that Section 23 can be invoked.…”

 

# 60. It is well settled proposition of law, as laid down in the judgment of this Court in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd.10, that limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension in enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced.

 

# 61. The judgment in Babulal Vardharji Gurjar (supra) was rendered in the facts and circumstances of that case where there were no pleadings at all. As held by this Court in Dena Bank (supra), an application under Section 7 of the IBC in statutory form which requires filling in of particulars cannot be judged by the same standards as a plaint or other pleadings in a court of law. Additional affidavits filed subsequent to the filing of the application, by way of additional affidavits or applications would have to be construed as pleadings, as also the documents enclosed with or relied upon in the application made in the statutory format. Furthermore, pleadings can be amended at any time during the pendency of the proceedings.

 

# 62. As per Section 18 of Limitation Act, an acknowledgement 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 acknowledgement is signed. Such acknowledgement need not be accompanied by a promise to pay expressly or even by implication. However, the acknowledgement must be made before the relevant period of limitation has expired.

 

# 63. In Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others11, this Court held:-

“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 must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.”

 

# 64. It is well settled that even entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act. In Asset Reconstruction Company (India) Limited v. Bishal Jaiswal and Anr.12 (supra) authored by Nariman, J. this Court quoted with approval the judgments, inter alia, of Bengal Silk Mills Co. v. Ismail Golam Hossain Arif,13 and in Re Pandem Tea Co.14 Ltd., the judgment of the Delhi High Court in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana15 and the judgment of Karnataka High Court in Hegde Golay Ltd. v. State Bank of India16 and held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement 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 personally or by an authorised agent.

 

# 66. An acknowledgement made in writing within the period of limitation extends the period of limitation. In this case, there was no acknowledgement of debt within three years from the period on which the account of the Corporate Debtor was declared NPA or within three years from the date on which the loan facilities were recalled.

 

# 67. The Adjudicating Authority proceeded on the basis that the offer of settlement made by the Corporate Debtor on 12th December 2018 and rejection thereof by the appellate showed the Corporate Debtor had conceded that there was a continuous cause of action. It is, however, the case of the Appellant Financial Creditor in this appeal that terms of settlement were executed on 20th December 2018 whereby the Corporate Debtor agreed to repay the amount of Rs.24,55,00,000/- within 31st December 2018. The Adjudicating Authority, however, did not refer to any settlement. Nor did it address the question of whether any agreement for repayment of debt came into existence in December 2018 and, if so, whether the agreement would attract Section 25(3) of the Contract Act.

 

# 68. The Appellate Tribunal (NCLAT) found that there was no acknowledgement of debt within the period of limitation of three years. Holding the application of the Appellant Financial Creditor, under Section 7 of the IBC, to be barred by limitation, the Appellate Authority (NCLAT) allowed the appeal.

 

# 69. The Appellate Tribunal (NCLAT) also did not notice the terms of settlement stated to have been executed on 20th December 2018, possibly because the attention of the NCLAT was not drawn to any terms of the settlement. The Appellate Tribunal (NCLAT) did not, therefore, have the occasion to consider whether Section 25(3) of the Contract Act would be attracted. The Appellate Tribunal (NCLAT), as observed above, proceeded on the basis that the CIRP proceedings were barred by limitation in the absence of any acknowledgement of debt within the period of limitation, and closed the CIRP proceedings in the NCLT, without considering the question of applicability of Section 5 of the Limitation Act for condonation of delay, to proceedings under Section 7 of the IBC.

 

# 70. This Court is of the view that the Appellate Tribunal (NCLAT erred in closing the CIRP proceedings without giving the Appellant Financial Creditor the opportunity to explain if there was sufficient cause for the delay in approaching the NCLT. An appeal being the continuation of original proceedings, the provision of Section 7(5)(b) of the IBC, of notifying the Financial Creditor before rejection of a claim, would be attracted. If notified of the proposal to close the proceedings, the Appellant Financial Creditor might have got the opportunity to rectify the defects in its application under Section 7 by filing additional pleadings and/or documents. As held in Dena Bank (supra), documents can be filed at any time until the application for CIRP is finally dismissed.

 

# 71. The appeal is, therefore, allowed. The impugned judgment and order of the NCLAT is set aside to the extent that the CIRP proceedings have been closed. The Adjudicating Authority shall consider the application for CIRP afresh, in accordance with law, in the light of the observations made above, after giving the Appellant and the Respondent opportunity to file additional affidavits disclosing documents/additional affidavit in response.

 

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Blogger’s Comments; Observations of the Hon’ble Supreme Court in para16, as below, are somewhat in variance with its earlier observations in Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr;

• Suffice it to mention that in computing the period of limitation for initiation of CIRP proceedings, the time spent in pursuing remedy under the SARFAESI Act or any other recovery law cannot be excluded. 

 

Supreme Court (22.03.2021) in Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr.[Civil Appeal No. 9198 of 2019] held that; - 

# 75. There can be little doubt that Section 14 applies to an application under Section 7 of the IBC. At the cost of repetition, it is reiterated that the IBC does not exclude the operation of Section 14 of the IBC. The question is whether prior proceedings under the SARFAESI Act do not qualify for the exclusion of time under Section 14, inasmuch as they are not civil proceedings in a Court, as argued by Mr. Dave.

 

# 77. Section 14 of the Limitation Act is to be read as a whole. A conjoint and careful reading of Sub-Sections (1), (2) and (3) of Section 14 makes it clear that an applicant who has prosecuted another civil proceeding with due diligence, before a forum which is unable to entertain the same on account of defect of jurisdiction or any other cause of like nature, is entitled to exclusion of the time during which the applicant had been prosecuting such proceeding, in computing of limitation. The substantive provisions of Sub-sections (1), (2) and (3) of Section 14 do not say that Section 14 can only be invoked on termination of the earlier proceedings, prosecuted in good faith.

 

# 87. In our view, since the proceedings in the High Court were still pending on the date of filing of the application under Section 7 of the IBC in the NCLT, the entire period after the initiation of proceedings under the SARFAESI Act could be excluded. If the period from the date of institution of the proceedings under the SARFAESI Act till the date of filing of the application under Section 7 of the IBC in the NCLT is excluded, the application in the NCLT is well within the limitation of three years. Even if the period between the date of the notice under Section 13(2) and date of the interim order of the High Court staying the proceedings under the SARFAESI Act, on the prima facie ground of want of jurisdiction is excluded, the proceedings under Section 7 of IBC are still within limitation of three years.

 

# 96. In our considered opinion, the judgment of the NCLAT in the case of Ishrat Ali is unsustainable in law. The proceedings under the SARFAESI Act, 2002 are undoubtedly civil proceedings.

 

# 101. In our considered view, keeping in mind the scope and ambit of proceedings under the IBC before the NCLT/NCLAT, the expression ‘Court’ in Section 14(2) would be deemed to be any forum for a civil proceeding including any Tribunal or any forum under the SARFAESI Act.

 

# 102. In any case, Section 5 and Section 14 of the Limitation Act are not mutually exclusive. Even in a case where Section 14 does not strictly apply, the principles of Section 14 can be invoked to grant relief to an applicant under Section 5 of the Limitation Act by purposively construing ‘sufficient cause’. It is well settled that omission to refer to the correct section of a statute does not vitiate an order. At the cost of repetition it is reiterated that delay can be condoned irrespective of whether there is any formal application, if there are sufficient materials on record disclosing sufficient cause for the delay.

 

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