DENA BANK (NOW BANK OF BARODA) versus C. SHIVAKUMAR REDDY AND ANR.

Citation: [2021] 8 S.C.R. 1061 · Decided: 04-08-2021 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 7 · see the full citation network in Lexace

Judgment (excerpt)

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DENA BANK (NOW BANK OF BARODA)
v.
C. SHIVAKUMAR REDDY AND ANR.
(Civil Appeal No.1650 of 2020)
AUGUST 04, 2021
[INDIRA BANERJEE AND V. RAMASUBRAMANIAN, JJ.]
Insolvency and Bankruptcy Code, 2016:
s. 7 – Initiation of corporate insolvency resolution process
by financial creditor – Petition u/s. 7, if barred by limitation – On
facts, appellant Bank sanctioned term loan and letter of credit cum
buyer’s credit in favour of corporate debtor – However, in 2013
the corporate debtor defaulted in repayment of its dues to the bank
and loan amount declared as non-performing asset-NPA –Issuance
of notice to corporate debtor in 2014, to clear its dues – Pursuant
thereto, in 2015 Bank filed application for recovery of the
outstanding dues – In 2017, Debt Recovery tribunal passed a
recovery order alongwith recovery certificate in favour of the Bank
– Thereafter, in 2018, Bank filed petition u/s. 7 of the IBC – Within
three months, Bank filed application to place on record additional
documents, recovery order and recovery certificate which was
allowed – Another application allowed to place on record letter of
the corporate debtor proposing one time settlement, and financial
statements of the corporate debtor – Thereafter, petition u/s. 7
admitted by the adjudicating authority-NCLT, however, the appellate
authority-NCLAT set aside the said order, holding the application
to be barred by limitation – On appeal, held: Application u/s. 7 not
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 – There was 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 –Recovery order by
the DRT and the recovery certificate issued in favour of the Bank
in 2017 gave a fresh cause of action to the Bank to initiate a petition
u/s. 7 – Offer of one time settlement of a live claim made in 201, and
the balance sheets and financial statements of the corporate debtor
[2021] 8 S.C.R. 1061
1061
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
for 2016-2017, constitute acknowledgement of liability which
extended the limitation by three years – These documents were
brought on record before any final decision was taken in the petition
u/s. 7, thus, NCLT rightly admitted the application.
s. 7 – Application u/s. 7 for initiation of Corporate insolvency
resolution process (CIRP) – Limitation period of three years for
filing application – Final judgment and decree of the Debt Recovery
tribunal in favour of the financial creditor, as also issuance of
recovery certificate – Held: Would give rise to a fresh cause of
action to the Financial Creditor to initiate proceedings u/s. 7 for
initiation of CIRP, within three years from the date of the final
judgment and decree, and/or within three years from the date of
issuance of the recovery certificate.
s. 7 – Application under – Filing of additional documents –
Permissibility of – Held: There is no bar in law to the amendment of
pleadings, in a petition u/s. 7 or to the filing of additional documents,
apart from those filed initially, along with the petition u/s. 7 of the
IBC in Form-1 – In the absence of any express provision prohibiting
or setting a time limit for filing of additional documents, it cannot
be said that the Adjudicating Authority committed any illegality or
error in permitting the Bank to file additional documents – When
there is inordinate delay, the Adjudicating Authority might, at its
discretion, decline the request of an applicant to file additional
pleadings and/or documents, and proceed to pass a final order.
s. 3(12)– ‘Default’ –Definition of – Held: Is “non-payment’
of a debt which has become due and payable whether in whole or
any part and is not paid by the Corporate Debtor”.
Object and scope of – Nature of construction – Held: 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 – It only
segregates the interests of the corporate debtor from those of its
promoters/persons in management – Relegation of creditors to the
remedy of coercive litigation against the corporate debtors could
be detrimental to the interests of the corporate debtor and its creditors
alike 

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