M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD. versus M/S HOTEL POONJA INTERNATIONAL PVT. LTD.

Citation: [2021] 1 S.C.R. 495 · Decided: 21-01-2021 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Dismissed

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Judgment (excerpt)

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M/S. RELIANCE ASSET RECONSTRUCTION COMPANY LTD.
  v.
 M/S HOTEL POONJA INTERNATIONAL PVT. LTD.
(Civil Appeal No. 4221 of 2020)
JANUARY 21, 2021
[INDIRA BANERJEE AND SANJIV KHANNA, JJ.]
Insolvency and Bankruptcy Code, 2016 – s.62 – The Assignor
Bank, along with Corporation Bank sanctioned a term loan of Rs.40
lakhs to the corporate debtor – The corporate debtor failed to repay
loan – The Assignor Bank declared the account of corporate debtor
as an “Non-Performing Asset” (NPA) on 01.04.1993 – Assignor
Bank filed application before the Debt Recovery Tribunal for
recovery of dues – A settlement was reached between the Assignor
Bank and the corporate debtor – Accordingly, DRT issued a
Recovery Certificate on 27.03.2003 – Corporate debtor again failed
to comply with the settlement – Thereafter, an agreement between
the Assignor Bank and the appellant was entered into, the appellant
was substituted as applicant in place of the Assignor Bank in DRT
and an amended Recovery Certificate was issued on 13.12.2012 –
On 27.07.2018, the appellant filed application u/s. 7 of the IBC
against the corporate debtor for initiation of Corporate Insolvency
Resolution Process (CIRP) before the NCLT, which was dismissed –
The NCLAT also found that application u/s.7 was barred by limitation
– Before the Supreme Court, appellant adverted to two documents,
that is, (i) the Balance sheet of the corporate debtor dated
16.08.2017 and (ii) a letter dated 23.04.2019 issued by the corporate
debtor in the Paper Book to contend that the proceedings u/s. 7 of
the IBC are not barred by limitation, as limitation would start running
afresh for a period of three years u/s.18 of the Limitation Act –
Held: The right to sue accrues when a default occurs, and if that
default has occurred over three years prior to the date of filing of
an application u/s. 7 of the IBC, the application would be barred u/
Art.137 of the Limitation Act – The right to sue accrued on
01.04.1993 when the amount of the corporate debtor with the
Assignor Bank was declared NPA – In Part IV of its application u/s.
7 of the IBC, the appellant itself declared the date of default as
01.04.1993 – Thus, the claim is apparently barred by limitation –
Even the application u/s.7 of the IBC was filed almost 6 years after
issuance of the amended Recovery Certificate (issued on
   [2021] 1 S.C.R. 495
495
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SUPREME COURT REPORTS
[2021] 1 S.C.R.
13.12.2012) – As far as two documents referred by the appellants
are concerned, the two documents cannot be construed as
admissions that amount to acknowledgment of the jural relationship
and existence of liability – The balance sheet dated 16.08.2017
does not acknowledge or admit any debt – Further, the letter dated
23.04.2019 again is not an acknowledgment and admission of
liability – The language and tone of the letter makes it absolutely
clear that the liability was denied – The Balance Sheet of the
corporate debtor dated 16.08.2017 and the letter dated 23.04.2019,
do not constitute any acknowledgment of liability and were not even
referred to by the appellant in its application under IBC – The NCLAT,
rightly held that the application u/s.7 of the IBC is barred by
limitation.
Limitation Act, 1963 – Art. 137 – Insolvency and Bankruptcy
Code, 2016 – ss. 7 and 9 – In B.K. Educational Services Private
Ltd. v. Parag Gupta and Associates (2009) 11 SCC 633: [2018] 12
SCR 794 held that 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.
Limitation Act, 1963 – Art. 137 – Insolvency and Bankruptcy
Code, 2016 – s. 7 – Held: In Gaurav Hargovindbhai Dave v. Asset
Reconstruction Company (India) Ltd. and Ors. (2019) 10 SCC 572,
it was held that “an application” which is filed u/s. 7, would fall
only within the residuary Art. 137.
Dismissing the appeal, the Court
HELD: 1.  It is well settled by a catena of decisions of this
Court, that Article 137 of the Limitation Act gets attracted to
applications filed under Sections 7 and 9 of the IBC. The right to
sue accrues when a default occurs, and if that default has occurred
over three years prior to the date of filing of an application under
Section 7 of the IBC, the application would be barred 6 under
Article 137 of the Limitation Act. At the highest, limitation started
ticking on 27th March 2003, when a Recovery Certificate was
issued by the DRT. The appellant has not di

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