KOTAK MAHINDRA BANK LIMITED versus KEW PRECISION PARTS PRIVATE LIMITED & ORS.

Citation: [2022] 19 S.C.R. 212 · Decided: 05-08-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 19 S.C.R.
[2022] 19 S.C.R. 212
212
KOTAK MAHINDRA BANK LIMITED
v.
KEW PRECISION PARTS PRIVATE LIMITED & ORS.
(Civil Appeal No. 2176 of 2020)
AUGUST 05, 2022
[INDIRA BANERJEE AND J. K MAHESHWARI, JJ.]
Insolvency and Bankruptcy Code, 2016 – ss. 7, 8, 9, 14, 238A
– The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 – s. 13 (2) – Limitation
Act 1963 – Schedule – Art.137 and ss. 5, 18 – Appellant sanctioned
loan/credit facilities to Respondent and necessary documents were
executed between them on 29.11.2012 – Between 23.11.2012 and
31.12.2013, loan amounts were disbursed – Respondent mortgaged
its assets in favour of the Appellant by memorandum dated
13.12.2013 – Respondent defaulted in repaying the dues, hence
declared NPA by the Appellant on 30.09.2015 – On 19.11.2017,
Appellant issued statutory notice u/s. 13(2) of the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act 2002 – Respondent admitted its liability to the Appellant
and offered a one-time settlement at two instances – On 20.12.2018
settlement was signed and executed – Respondent defaulted in
repayment of settled amount – On 2.01.2019, Appellant filed an
application u/s. 7 of the IBC for initiating Corporate Insolvency
Resolution Process (CIRP) before NCLT – Admitting the application,
NCLT imposed a moratorium in terms of s. 14 of the Insolvency and
Bankruptcy Code (IBC) – The suspended Directors of the
Respondent filed an appeal before NCLAT contending that the
petition filed by the Appellant was patently barred by limitation –
NCLAT allowing the appeal held that the time when debt of non-
payment of due took place and that of the date of filing application
u/ s. 7 is beyond limitation – Aggrieved, the appellant filed appeal
u/s. 62 of IBC, 2016 — Held: NCLAT did not consider the question
of applicability of Section 5 of the Limitation Act for condonation
of delay, to proceedings under Section 7 of the IBC – If no limitation
period is provided anywhere else in the Schedule to the Limitation
Act, Article 137 of the Schedule of the Act would be attracted which
provides that the period of limitation prescribed for such an
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application is three years from the date of accrual of the right to
apply – CIRP proceedings were closed without giving the Appellant
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 and the Appellant might have got the opportunity to
rectify the defects in its application under Section 7 by filing
additional pleadings and/or documents – Hence, the impugned
judgment and order of the NCLAT is set aside to the extent that the
CIRP proceedings have been closed.
Allowing the appeal, the Court
HELD:
1.1 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. [Para 27][226-D-F]
1.2 From Section 25 of the Indian Contract Act, 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. [Para 29][228-B]
1.3 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). [Para 32][228-F-
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KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION
PARTS PRIVATE LIMITED & ORS.
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SUPREME COURT RE

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