In 2011, the Dena Bank had sanctioned a Term Loan and Letter of Credit Cum Buyers’ Credit in favour of M/s. Kavveri Telecom Infrastructure with an upper limit of Rs. 45.00 Crores. In 2013, the Loan Account of the Corporate Debtor was pronounced as Non-Performing Asset (NPA) on the grounds that the Corporate Debtor defaulted in repayment of its dues to the Appellant Bank. Subsequently Corporate Debtor requested for restructuring the Term Loan but Appellant did not accept it.

Hence, in December 2014, the Appellant Bank gave a legal notice to the respondents calling upon them to make payment of Rs. 52.12 crores, claimed to be due from the Corporate Debtor as on 22nd December 2014. The Corporate Debtor did not make the said payment.  Thereafter, in 2015, the Bank filed an application under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 before the Debt Recovery Tribunal, Bangalore for the recovery of its outstanding dues.

In 2017, while proceedings were pending in the DRT, the Corporate Debtor gave a proposal for one time settlement of the Term Loan Account, upon payment of Rs. 5.50 crores (OTS Letter). But the proposal was rejected by the  Appellant Bank. Also in March 2017, the DRT passed a final judgement against the Corporate Debtor and subsequently issued a Recovery Certificate dated 25 May 2017 for Rs.52.12 Crores with future interest at the rate of 16.55% per annum, from the date of filing the application till the date of realization.

In October 2018, the Appellant Bank filed the Petition before the Adjudicating Authority (NCLT) under Section 7 of the IBC.

Further, in 2019 the Appellant Bank filed two applications under Rule 11 of the NCLT Rules, 2016 read with Rule 4 of the said rules for permission to place on record the final judgment of the DRT, the Recovery Certificate that was issued and additional documents OTS Letter. Annual Report of the Corporate Debtor for the years 2016-2017 and financial statements of the Corporate Debtor for F.Y. 2016-17 and 2017-18 which were allowed by the Adjudicating Authority. The NCLT rejecting the Corporate Debtor’s objections as to limitation, admitted the petition and an Interim Resolution Professional was appointed in March 2019.

Aggrieved by the order passed by NCLT, the Corporate Debtor filed an appeal before the NCLAT under Section 61 of the IBC. The NCLAT allowed the appeal and set aside the earlier judgment passed by the NCLT stating that the petition filed by the Appellant Bank under Section 7 of the IBC was barred by limitation. Thus, the said NCLAT’s decision is challenged before the Supreme Court.


1. Whether a Petition under Section 7 of the IBC would be barred by limitation, on the sole ground that it had been filed beyond a period of 3 years from the date of declaration of the loan account of the Corporate Debtor as NPA, even though the Corporate Debtor might subsequently have acknowledged its liability.

2. Whether a final judgment and decree of the DRT in favour of the Financial Creditor or a Recovery Certificate would give rise  to a fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the IBC.

3. Whether there is any bar in law to the amendment of pleadings to the file additional documents, in a Petition under Section 7 of the IBC.


The appellant Bank contented that the proposal for One Time Settlement of its Term Loan Account with the Appellant Bank was an acknowledgment of its liability. The final judgment and order/decree by the DRT along with the Recovery Certificate, Annual Report and financial statements of the Corporate Debtor all amounts to acknowledgment of liability. The Petition under Section 7 of the IBC was filed well within three years from the date of such acknowledgement.

The appellant Bank contented that Section 18 of the Limitation Act applied to proceedings under the IBC. In support of his contention, the appellant relied on the judgements in Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. And Anr.[1],  Laxmi Pat Surana v. Union Bank of India and Ors.[2]  and Asset Reconstruction Company (India) Limited. v. Bishal Jaiswal and Ors.[3]


The respondent contended that Appellant Bank filed its Petition under Section 7 of the IBC about five years after the date of default and was thus well beyond the period of limitation of three years, under Article 137 of the Schedule to the Limitation Act.

The respondent also contended the NCLAT has duly dealt with the question of acknowledgement holding. The appellant bank took advantage of the limited liberty granted by the NCLT to file a gist of the case and some orders/judgments and introduced a whole new set of documents and setting up an entirely new case for extension of limitation, on the ground of alleged acknowledgement of debt.

The respondent referred to the judgement in Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. and Anr.[4] and contented that a proposal for One Time Settlement cannot be construed as an acknowledgment of debt for the purpose of Section 18 of the Limitation Act.

Finally, the respondent contended that the Petition under Section 7 of the IBC was not based on the Recovery Certificate issued by the DRT or the judgment and order of the DRT. Therefore, there could be no question of reckoning limitation from the date of failure to make payment in terms of the Recovery Certificate.


After hearing contention of both sides and reading the provisions of IBC observed that Section 7(2) to (5) of the IBC read with the 2016 Adjudicating Authority Rules do not bar the filling of documents at any time until a final order either admitting or dismissing the application has been passed.  The time stipulation of fourteen days in Section 7(4) to ascertain the existence of a default is apparently directory not mandatory. The Court, however, observed that in an event of inordinate delay, the NCLT may use its discretion to decline such a request.

The court also observed that as per Section 18 of Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing a fresh period of limitation from the date on which the acknowledgement is signed. Such acknowledgement need not be accompanied by a promise to pay expressly or even by implication. However, the acknowledgement must be made before the relevant period of limitation has expired.

Referring to observations made in Ferro Alloys Corporation Limited v. Rajhans Steel Limited[5],  the Court held that order/decree of the DRT and the Recovery Certificate in favour of the Financial Creditor, would give rise to a fresh  cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the  IBC for initiation of the Corporate Insolvency Resolution Process, within three years  from the date of the judgment or issuance of the Certificate of Recovery.

Further the court observed that on a conjoint reading of the provisions of the IBC, it is clear that a final judgment and/or decree of any Court or Tribunal or any Arbitral Award for payment of money, if not satisfied, would fall within the ambit of a financial debt, enabling the creditor to initiate proceedings under Section 7 of the IBC.


Based on the observation, the Supreme Court allowed the appeal and set aside the order by NCLAT. The SC held that the entries in books of accounts and/or balance sheets of a  Corporate Debtor as well as the OTS Letter would amount to an acknowledgment under Section 18 of the Limitation Act.

The Court rejected the Corporate Debtor’s objection that the additional documents (containing the purported acknowledgements) were not originally filed with the Petition and held that the Appellant Bank is entitled to initiate proceedings under Section 7 of the IBC within three years from the date of issuance of the Recovery Certificate.

The Court also held that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in Form-1.

[1] AIR 2021 SC 2637.

[2] AIR 2021 SC 1707

[3] 2021 SCC Online SC 321

[4] (2019) 10 SCC 572

[5] 2000 99 CompCas 426 Patna


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