KOTAK MAHINDRA BANK LIMITED versus A. BALAKRISHNAN & ANR.

Citation: [2022] 5 S.C.R. 1072 · Decided: 30-05-2022 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 12 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
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KOTAK MAHINDRA BANK LIMITED
v.
A. BALAKRISHNAN & ANR.
(Civil Appeal No. 689 of 2021)
MAY 30, 2022
[L. NAGESWARA RAO, B. R. GAVAI AND
A. S. BOPANNA, JJ.]
Insolvency and Bankruptcy Code, 2016 : ss. 3, 5, 6, 7 and 14
– Corporate Insolvency Resolution Process (CIRP) – Initiation of –
Issuance of Recovery Certificate, if would trigger the right to sue –
On facts, respondent No.2-corporate debtor stood as the corporate
guarantor in respect of credit facilities sanctioned to the borrower
entities by the appellant Bank – Default in payment of dues by the
borrower entities – Compromise between the parties that the
corporate debtor liable to pay the amount due from the borrower
entities to the Bank, however failure to make payment – In terms of
the compromise entered into between the parties, issuance of
Recovery Certificates by the Debt Recovery Tribunal against the
borrower entities and the corporate debtor – On basis of the
Recovery Certificates, the Bank filed application u/s. 7 before NCLT
seeking initiation of CIRP against the Corporate Debtor –
Application admitted – However, the NCLAT held the application to
betime-barred and issuance of Recovery Certificates did not trigger
right to sue – On appeal, held : Once a claim fructifies into a final
judgment and order/decree, upon adjudication and a certificate of
recovery is also issued authorizing the creditor to realize its decretal
dues, a fresh right accrues to the creditor to recover the amount of
the final judgment and/or order/decree and/or the amount specified
in the Recovery Certificate – Issuance of a certificate of recovery
in favour of the financial creditor would give rise to a fresh cause
of action to the the financial creditor, to initiate proceedings u/s 7
for initiation of the CIRP, within three years from the date of the
judgment and/or decree – Liability in respect of a claim arising out
of a Recovery Certificate would be a “financial debt” within the
meaning of clause (8) of s. 5 and a holder of the Recovery Certificate
would be a “financial creditor” within the meaning of clause (7) of
s. 5 – A person would be entitled to initiate CIRP within a period of
[2022] 5 S.C.R. 1072
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three years from the date on which the Recovery Certificate is issued
– On facts, the application u/s. 7 was filed within a period of three
years from the date on which the Recovery Certificate was issued –
Application u/s. 7 was within limitation – Thus, the judgment and
order passed by NCLAT is quashed and set aside – Securitization
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 – s.13(2) – Companies Act, 1956 – ss. 433, 434 –
Recovery of Debts Due to Banks and Financial Institutions Act,
1993 – s.31A – Recovery of Debts and Bankruptcy Act, 1993 –
s.19(22A).
Scheme of Insolvency and Bankruptcy Code, 2016–
Discussed.
Interpretation of Statutes:
Purposive Interpretation – Held: Provisions of a statue ought
to be interpreted in such a manner which would advance the object
and purpose of the enactment – All the provisions in the Statute
should be construed in context with each other and no provision
can be read in isolation.
Literal rule of Interpretation – Held: When the language of a
statutory provision is plain and unambiguous, it is not permissible
for the Court to add or subtract words to a statute or read something
into it which is not there – Court cannot rewrite or recast legislation.
Judgment/order: Per incuriam, when – Held: ‘Incuria’ literally
means ‘carelessness’ – A decision or judgment can be per incuriam
any provision in a statute, rule or regulation, which was not brought
to the notice of the Court – It can also be per incuriam if it is not
possible to reconcile its ratio with that of a previously pronounced
judgment of a co-equal or larger Bench.
Words and Phrases: ‘Include’ – Meaning of – Held: Word
‘include’ is used in interpretation clauses to enlarge the meaning of
the words or phrases occurring in the body of the statute.
Allowing the appeal, the Court
HELD : 1.1 From the scheme of the Insolvency and
Bankruptcy Code, 2016, it could be seen that where any
Corporate Debtor commits a default, a financial creditor, an
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN
& ANR.
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SUPREME COURT REPORTS
[2022] 5 S.C.R.
operational creditor or the Corporate Debtor itself is entitled to
initiate CIRP in respect of such Corporate Debtor i

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