RAJENDRA NAROTTAMDAS SHETH & ANR. versus CHANDRA PRAKASH JAIN & ANR.

Citation: [2021] 7 S.C.R. 838 · Decided: 30-09-2021 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Dismissed
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 7 S.C.R.
RAJENDRA NAROTTAMDAS SHETH & ANR.
v.
CHANDRA PRAKASH JAIN & ANR.
(Civil Appeal No. 4222 of 2020)
SEPTEMBER 30, 2021
[L. NAGESWARA RAO, B. R. GAVAI,
B. V. NAGARATHNA, JJ. ]
Insolvency and Bankruptcy Code, 2016 – s. 7 –
Maintainability of – Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016 – Limitation Act – s.18 – Loans
were granted by the Financial Creditor-respondent no.2 to the
Corporate Debtor-appellants – The Corporate Debtor was unable
to settle the dues of the Financial Creditor in time – The account of
the Corporate Debtor was declared as Non-Performing Asset (NPA)
– The Financial Creditor issued notice for recovery of all dues
payable – Pursuant to the notice, the Financial Creditor filed an
application before the Debt Recovery Tribunal u/s. 19 of the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993 for recovery of the dues, which was still pending consideration
– Meanwhile, the Financial Creditor filed an application u/s. 7 of
the Insolvency and Bankruptcy Code averring that the Corporate
Debtor owed an amount of Rs. 24.62 crore – There are two issues
that arise for consideration in this appeal before Supreme Court,
the first pertains to the maintainability of the application u/s. 7 of
the Code filed by a power of attorney holder and the second relates
to the question of limitation of the same application u/s.7 of the
Code – Held: As per Rule 4 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016, the financial
creditor is required to make an application for initiating the
corporate insolvency resolution process against the corporate
debtor u/s. 7 of the Code in Form 1 which is required to be signed
by the “person authorized to act on behalf of the financial creditor”
– In the instant case,  general authorisation, in terms of the power
of attorney with respect to all the business and affairs of the Bank,
including commencement of  legal proceedings was given to a person
‘P’ who has filed the application u/s.7 of the Code – Hence,
Application filed u/s 7 of the Code is maintainable – As far as
[2021] 7 S.C.R. 838
838
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limitation is concerned, any suit, appeal or application filed after
the prescribed period of limitation shall be dismissed in spite of
limitation  not being set up as a defence, as per s. 3 of the Limitation
Act – s.238A of the 2016 Code  makes  the provisions of the
Limitation Act applicable to the proceedings before the Adjudicating
Authority, as far as may be – Application u/s 7 has to filed within 3
years from the date of default – In the present case date of default
is 30.09.2014 and the application was filed on 25.04.2019 –
However, Corporate Debtor had placed on record a letter dated
17.11.2018, which detailed the amount repaid till 30.09.2018 and
acknowledged the amount outstanding as on 30.09.2018 – On the
basis of the said letter and the record showing that the Corporate
Debtor had executed various documents amounting to
acknowledgement of the debt even in the financial year 2019-20 –
Therefore, the Application u/s.7 is not time barred by limitation.
Dismissing the appeal, the Court
HELD: 1. Essentially, there are two issues that arise for
consideration in this Appeal. The first pertains to the
maintainability of the application under Section 7 of the Code
filed by a power of attorney holder. The second relates to the
question of limitation. [Para 6][845-E-F]
Maintainability of the application under Section  7 when filed
by a power of attorney holder
2. Initiation of the corporate insolvency resolution process
by a financial creditor is dealt with under Section 7 of the Code.
Section 7 (2) provides that the financial creditor shall make an
application in such form and manner and accompanied with such
fee as may be prescribed. As per Rule 4 of the Insolvency and
Bankruptcy (Application to Adjudicating Authority) Rules, 2016,
the financial creditor is required to make an application for
initiating the corporate insolvency resolution process against the
corporate debtor under Section 7 of the Code in Form 1,
accompanied with documents and records required therein. Form
1 is in a tabular form and the financial creditor has to give
particulars of the details sought. Further, the Form is required
to be signed by the “person authorised to act on behalf of the
financial creditor”. [Para 9][846-D-F]
RAJENDRA NAROTTAMDAS SHETH & ANR. v. CHAN
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