Kotak Mahindra Bank Limited v. Kew Precision Parts Private Limited & Ors.

INDIRA BANERJEE, J. This appeal filed by the Appellant Financial Creditor , Kotak Mahindra Bank Limited under Section 62 of the Insolv ency and Bankruptcy Code, 2016, hereinafter referred to as the ‘IBC’, is against the judgment and order dated 8 th January, 2020 of the National Company Law Appellate Tribunal, New Delhi (NCLAT) allowing Company Appeal (AT) Insolvency No. 1349 of 2019 filed by the Respondent-Corporate Debtor, against an order dated 6 th September, 2019 passed by the Adjudicating Authority/National Company Law Tribunal (NCLT) admitting the application being Company Petition No.(IB) 672/ND/2019 filed by the Appellant Financial Creditor under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporator Debtor. 2. The Corporate Debtor carries on business of manufacture of tempo and tractor components. In or about 2012-2013, the Corporate Debtor decided to expand its business and operations and entered into negotiations with bankers for finance for the proposed expansion. 3. According to the Corporate Debtor, some-time in July-August 2012, some employees of the Appellant Financial Creditor approached the Corporate Debtor, offering financial assistance at lesser rate of interest than the then existing bankers of the Corporate Debtor, and better facilities and business support. 4. The Appellant Financial Creditor has, since November 2012 sanctioned loan facilities to the Corporate Debtor from time to time. At the meeting of the Board of Directors of the Corporate Debtor held on 29 th November 2012 and on 15 th March 2013, resolutions were adopted, inter alia, authorizing Mr. Munish Kumar Bhunsali to execute loan and security documents on behalf of the Corporate Debtor. 5. On or about 29 th November, 2012, necessary documents with regard to the loans/credit facilities were executed by and b etween the Appellant Financial Creditor and the Corporate Debtor. Betw een 23 rd November, 2012 and 31 st December, 2013, loan amounts were disbursed. 219 6. The following loan and security documents were executed between the Appellant Financial Creditor and the Corporate Debtor on 29 th November 2012:- (i) “Master Fund Based Facility Agreement (ii) Deed of Hypothecation (iii) Deed of guarantee by Muhish Kumar Bhunsali (iv) Demand Promissory Note (v) Take Delivery Letter for the Demand Promissory Note. (vi) Supplementary cum Modification Agreement (vii) End Use Undertaking” 7. On 27 th May 2013, further loan and security documents were executed between the Appellant Financial Creditor and the Corp orate Debtor, namely:- (i) “Memorandum of deposit of title deeds (ii) End Use Undertaking (iii) Undertaking (Mortgage) by Mr. Munish Kumar Bhunsali (iv) Power of Attorney (Mortgage) by Kew Precision Par ts Pvt. Ltd. (v) Declaration (Mortagage) by Mr. Munish Kumar Bhunsali” 8. By a Memorandum of Deposit dated 13 th December 2013 executed by the Corporate Debtor through Mr. Munish Kumar Bhunsali, the Corporate Debtor mortgaged its assets in favour of the A ppellant Financial Creditor. 9. By a letter of sanction dated 7 th February 2014, the Appellant Financial Creditor sanctioned credit/loan facilities aggregating Rupees Rs.2036.00 Lakhs to the Corporate Debtor as per the particulars g iven below:- “i. Cash credit : Rs.1000.00 lakhs ii. WCDL (Sub Limit of CC : Rs.680.00 Lakhs iii. Invoice Finance discounting : Rs.680.00 Lakhs (submit of CC) KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] iv. Term Loan – I : Rs.240 Lakhs v. Term Loan – II : Rs.334.00 Lakhs vi. Term Loan – III : Rs.426.00 Lakhs iv. Conditional WCDL : Rs.200.00 Lakhs Total Exposure : Rs. 2036 Lakhs” 10. According to the Appellant Financial Creditor, the Corporate Debtor defaulted in making repayment of its dues to the Financial Creditor. The Appellant Financial Creditor, therefore, declared the Account of the Corporate Debtor as “non-performing asset” (NPA) on 30 th September 2015. On 9 th October, 2015, the loan was recalled by the Appellant Financial Creditor. 11. On 19 th November 2017, the Appellant Financial Creditor issued statutory notice under Section 13(2) of the Securit isation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, hereinafter referred to as the SARFAESI Act. 12. On 12 th December 2018, the Corporate Debtor admitted its liability to the Appellant Financial Creditor and offere d a one time settlement for a sum of Rs.15,00,00,000/- (Rupees fifteen crores only) to be paid within 31 st December, 2018. On 19 th December 2018, the Corporate Debtor again admitted its liability to the Appellant Financial Creditor and offered a one time settlement for a sum of Rs.20,00,00,000/ - (Rupees twenty crores only) to be paid within 31 st December, 2018. On 20 th December, 2018, the Corporate Debtor revised its offer for one time settlement. The Corporate Debtor offered to settle the outstanding dues at a lumpsum amount of Rs.24,55,00,000/- (Rupees twenty four crores and fifty five lakhs only). The offer was accepted by the Appellant Financial Creditor. 13. On the same day, i.e., 20 th December, 2018, terms of settlement were signed and executed by the Corporate Debtor and the Appell ant Financial Creditor in terms whereof a sum of Rs.24,55,00,000/- (Rupees twenty four crores and fifty five lacs only) was to be paid on or before 31 st December, 2018. 14. The Corporate Debtor alleges that there were deficiencies in the banking services rendered by the Appellant Financier. Be that as it may, the Corporate Debtor availed credit facilities from t he Appellant 221 Financial Creditor, defaulted in repayment thereof and ackn owledged liability to the Appellant Financial Creditor by making offers of one time settlement. When an application is filed by a Financial Creditor und er Section 7 of the IBC for initiation of CIRP, all that the Adj udicating Authority is required to see is, whether there is a financial debt owed by the Corporate Debtor to the Financial Creditor and whether the amount of the debt exceeded Rs.1,00,000/- (Rupees one lac only) on the date of filing of the company petition, the said amount being the threshold limit for initiation of CIRP at the material time. The Adjudicating Authority also has to examine if the application is barred by limitation. 15. Pre-existing disputes, if any, between the Corporate Debt or and the Financial Creditor are of no consequence to an application of a Financial Creditor, under Section 7 of the IBC for initiation of CIRP, unlike an application of an Operational Creditor for initiation of CIRP under Section 9 of the IBC which may have to be dismissed if there is a pre-existing dispute. 16. The proceedings initiated by the Appellant Financial Creditor under the SARFAESI Act are not material to the issue in this appeal, of whether the application of the Appellant Financial Creditor befor e the NCLT was barred by limitation. Suffice it to mention that in computing the period of limitation for initiation of CIRP proceedings, the time spent in pursuing remedy under the SARFAESI Act or any other re covery law cannot be excluded. It is also well settled that initiation of proceedings under SARFEASI or any other recovery law does not affect the right of a Financial Creditor to initiate CIRP unless its debt is repaid. 17. The Corporate Debtor defaulted in payment of Rs.24,55,00,000/- to the appellant Financial Creditor as agreed. In these circumstances, the appellant Financial Creditor filed the said application being Company Petition No. (IB) 672/MD/2019 in the NCLT. 18. The said application was admitted by an order date d 6 th September, 2019 of the Adjudicating Authority (NCLT). The Adjudicating Authority found that the account of the Corporate Debtor with the Appellant Financial Creditor had been declared NPA on 30 th September 2015. The Appellant Financial Creditor was, however, relying on t he proposal for one time settlement given by the Corporate Debtor on 12 th December, 2018 to contend that the existence of financial debt had been admitted by the Corporate Debtor. KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] 19. From the order dated 6 th September, 2019 of the Adjudicating Authority, it appears that the Financial Creditor had been relying on Article 62 of the Limitation Act, 1963, under which suits relating to immoveable property to enforce payment of money secured by a mortga ge, or otherwise charged upon immoveable property, is 12 years from the time when the money sued for, becomes due. 20. The Adjudicating Authority found :- “Given the facts and circumstances that the Corporate Debtor vide its letter dated 12.12.2018 approached the Fin ancial Creditor for one time settlement of an amount of Rs.15 Crore, thereby admitting its default, there is a finding that the re is a continuous cause of action. As per the averments of the petition no payment has been made by the Corporate Debtor after the default occurre d in June, 2015 and as on dated 27.11.2018, an amount of Rs.46,63,35,337.31 is due and outstanding. The pres ent petition being filed in January 2019 is within limitation, bein g within three years from the date of the cause of action. Furth er even though an attempt was made on the part of the Corporate debtor to project certain inconsistencies in relation to claim amounts, however it is seen that the amount in default in excess of Rs.1,00,000/- being the minimum threshold limit fixed und er IBC, 2016.” 21. The Adjudicating Authority admitted the petition and imposed a moratorium in terms of Section 14 of the IBC and also confirmed the appointment of Mr. Ashwani Kumar Gupta, as the Interim Re solution Professional (IRP). 22. The suspended Directors of the Corporate Debtor filed the appeal being Company Appeal (AT) Insolvency No. 1349 of 2019 in the NCLAT contending that the petition filed by the Appellant Fi nancial Creditor under Section 7 of the IBC was patently barred by limitation. 23. The NCLAT held :- “33. The 1 st Respondent or Bank’s plea is that there was continuous and recurring cause of action from both sides i.e. the borrower and the ‘Corporate Debtor’ and the Bank also, that if any decree is passed by any civil court is pending or in existence of execution, it would amount to a ‘continuous cause 223 of action’. In fact the 1 st Respondent / Bank projects the plea that the ‘continuous cause of action’ means the ‘ca use of action’ which arise from repetition of acts or omission of t he same kind is that for which the action was brought. 34. A perusal of the application in form I part II filed b y the 1st Respondent / Bank to initiate ‘Corporate Insolv ency Resolution Process’ under ‘I&B’ shows that the amou nt claimed to be default as on 17.11.2015 was Rs. 18,65,05,035.86 and that the default took place in June, 2015. However, as on 27.11.2018 the outstanding balance w as mentioned as Rs. 46,63,35,337.31. xxx xxx xxx 38. It must be borne in mind and Article 62 of the Limitation Act, 1963 relates to enforcing the payment of money procured by mortgaged or otherwise charged upon the immoveab le property. A suit to enforce a mortgage is governed by Arti cle 62 and has to be filed within 12 years from the date when the money became due unless the limitation period prescribed was extended under any other provision of the Limitatio n Act. Article 137 of the Limitation Act constitutes the r esiduary article as regards the application. To put it succinctly, Article 113 pertains to the ‘Suits’, the Article 137 relate s to ‘Applications’. The language of Article 137 clearly postulates that the applicability of the said article will be r estricted to the applications not mentioned in the 3rd division of the schedule to the Limitation Act, 1963. xxx xxx xxx 41. In so far as Section 18 of the Limitation Act 1 963 pertaining to the effect of acknowledgement in writing un der Limitation Act is concerned, it is to be taken note of that an acknowledgement of liability must be in writing and al so to be signed by a party against whom the property or rig ht is claimed and that too, the same must be within the Limitation period. It cannot be gainsaid that an acknowledgement given after the expiry of the usual period is not suffici ent to keep the ‘debt’ alive. If a claim is barred, the fact that ther e was an acknowledgement of liability will not resuscitate a barred claim because of the reason that in any Law, there can only be an acknowledgement of an existing / subsisting liability . KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] 42. In law, the onus is always on the Creditor to establish t hat an acknowledgement was made within time. Further, t he acknowledgement does not create any new right and it only extends the limitation period as per decision P.Sre edevi Vs. P.Appu AIR 1991 Ker page – 76. 43. It may not be out of place for this Tribunal to make pertinent mention that when a party claiming benefi t of Section 14 of the Limitation Act, 1963 failed to secure re lief in earlier proceeding not because of any defect in jurisdic tion or some other cause of like nature, he cannot deriv e the benefit u/s 14 of the Limitation Act as per decision Z.Khan Vs. Board of Revenue, 1984 ALL LJ. However, in the decision ‘Ajob Enterprises’ V. Jayant Vegoiles & Chemicals AIR 1991, Bombay at page 35 it is held that the time taken to prosecut e suit against the Company for recovery of debt, such proceedings cannot be excluded in calculating the limitatio n period because the matter in issue in suit and wind ing up proceedings is not the same. xxx xxx xxx 45. In the present case, the 1st Respondent / Bank/Financ ial Creditor was given the liberty in SA 250/2016 (filed by the ‘Corporate Debtor’ by the Debt Recovery Tribunal, Luckn ow and another) Appellants on 10/04/2017 to recover the du es from the Appellants by proceeding afresh under the provisions of SARFAESI Act, 2002 and the Rules made thereunder. Later the 1st Respondent/Bank filed OA 576 before the Deb t Recovery Tribunal, Delhi against the ‘Corporate Debtor’ and others and obtained decree on 2.05.2019. Therefore, it is not open to the 1st Respondent/Bank to turn around and seek exclusion of time as per Section 14 of the Limitati on Act. Undoubtedly, the 1st Respondent / Bank had invoked the right Forum viz. Debt Recovery Tribunal, Delhi for recovery of its dues and ‘Corporate Debtor’ etc. xxx xxx xxx 47. In regard to the plea of the 1st Respondent/Bank that on 26.03.2016, a complaint was made by the ‘Corporate Debtor’ against the Bank for not rejecting their debts and in the said letter there was an admission of debt liability, it is to be pointed 225 out that the same cannot come to the rescue of the Bank because of the fact that the debt of non-payment of du es by the ‘Corporate Debtor’ took place in June, 2015 and Section 7 application was filed by the 1st Respondent / Bank b efore the Adjudicating Authority on 30.01.2019 which is b eyond the period of limitation as enshrined in Article 13 7 of the Limitation Act. Also that in the decision Kalpana Trading Co. Vs. Executive Officer Town Panchayat AIR 1999 Mad37, it is observed that just sending a letter to the higher authorities to settle the issues does not amount to an ‘Acknowledgement’.” 24. The operative part of the judgment and order is s et out hereinbelow : “54. In the result, the ‘Corporate Debtor’ ‘M/s Kew Precision Parts Pvt. Ltd.’ is released from the rigour of the ‘Corporate Insolvency Resolution Process’. All actions taken b y the ‘Interim Resolution Professional’ / ‘Resolution Profes sional’ and ‘Committee of Creditors’, if any, are declared illegal and set aside. The ‘Resolution Professional’ is directed to hand over the records and assets of the ‘Corporate Debtor’ to t he promoter/Directors of the ‘Corporate Debtor’ forthwi th. 55. The matter is remitted to Adjudicating Authority (‘Nation al Company Law Tribunal’) New Delhi Bench to determine the ‘Fee and Cost’ of ‘Corporate Insolvency Resolution Professional’ as incurred by him, which is to be born e and paid by 1st Respondent / Bank(‘Financial Creditor’). Before parting with the case, it is made crystal clear that the dismissal of the application filed by the 1st Respondent / Ba nk before the Adjudicating Authority will not preclude it from pursui ng / seeking appropriate remedy before the Competent F orum for redressal of its grievances, if it so desires/advi sed. The Appeal is allowed with aforestated observations and directions. No Costs. Connected IA No. 3842/19 and IA N o. 3843/19 are closed. However, the Appellants are dire cted to file certified copy of the impugned order of the Adjud icating Authority (‘NCLT’), New Delhi within one week from today.” 25. In this appeal, it is contended that cheques given b y the Corporate Debtor to the Financial Creditor bounced up to February 2017. Paragraph 2(vii) of the petition of appeal filed by the Corporate Debtor is extracted hereinbelow :- KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] “vii) That cheques given towards repayment of loan were presented for encashment and the said cheque bounced d ue to reason “funds insufficient” up to February, 2017 against which complaint u/s. 138 of the Negotiable Instruments Act, is pending before Court.” 26. If, as contended by the Appellant Financial Creditor, any cheque had been issued in February, 2017, the application of the Appellant Financial Creditor under Section 7 for initiation of CIRP fil ed on 2 nd January, 2019 would clearly be within limitation. However, there are no details of the payment disclosed by the Appellant Financial Creditor either in the proceedings before the NCLT or NCLAT or before this c ourt. However, if no payment had been made, after the acc ount of the Corporate Debtor had been declared NPA in September , 2015, acknowledgment made on 12 th December, 2018 or later, after expiry of over three years from the date on which the default occurred, would not save limitation. 27. It is the case of the Appellant Financial Creditor that on 12 th December 2018 the Corporate Debtor made an offer of one time settlement at Rs.15 Crores. This offer was not acce pted. On 19 th December 2018, the Corporate Debtor revised its offer to Rs.20 Crores for one time settlement. This offer was also not acce pted. On 20 th December 2018, the Corporate Debtor again revised its off er for one time settlement. This time the Corporate Debtor offered t o settle the outstanding dues of the Financial Creditor upon paym ent of Rs. 24,55,00,000/- to be paid within 31 st December 2018. This offer was accepted, and terms of settlement were signed. 28. Section 25 of the Indian Contract Act provides as follows :- “25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensat e for something done or is a promise to pay a debt barred by limitation law.—An agreement made without consideration is void, unless—An agreement made without consideratio n is void, unless—” (1) It is expressed in writing and registered under the law for the time being in force for the registration of documents, a nd is made on account of natural love and affection be tween parties standing in a near relation to each other; or unless 227 (2) It is a promise to compensate, wholly or in part, a pers on who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless. (3) It is a promise, made in writing and signed by the pers on to be charged therewith, or by his agent generally or speci ally authorized in that behalf, to pay wholly or in part a deb t of which the creditor might have enforced payment but fo r the law for the limitation of suits. In any of these cases, s uch an agreement is a contract. Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually mad e. Explanation 2.—An Agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Cour t in determining the question whether the consent of the promi sor was freely given. Illustrations (a) A promises, for no consideration, to give to B Rs. 1 ,000. This is a void agreement. (b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract. (c) A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract. (d) A supports B’s infant son. B promises to pay A’s expens es in so doing. This is a contract. (e) A owes B Rs. 1,000, but the debt is barred by th e Limitation Act. A signs a written promise to pay B Rs . 500 on account of the debt. This is a contract. (f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. (g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] given.” The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A’s consent was freely given. 29. From the above, 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. 30. In this appeal, it is contended that the last off er of 20 th December, 2018 was followed by an agreement. Whether there w as such agreement or not would have to be considered by the Adjudicating Authority. To invoke Section 25(3), the following conditions must be satisfied:- (i) It must refer to a debt, which the creditor, but for the period of limitation, might have enforced; (ii) There must be a distinct promise to pay such debt, fu lly or in part; (iii) The promise must be in writing, and signed by the debtor or his duly appointed agent. 31. Under Section 25(3), a debtor can enter into an agreement in writing, to pay the whole or part of a debt, which the creditor might have enforced, but for the limitation of a suit in law. A written promise to pay the barred debt is a valid contract. Such a promise constitutes novation and can form the basis of a suit independent of the original debt, for it is well settled that the debt is not extinguished, the remedy gets barred by passage of time as held by this Court in Bombay Dyeing and Manufacturing Company Limited vs. State of Bombay 1. 32. 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 re asons, and consequentially not enforceable against him, there is no quest ion of applicability of Section 25(3). 33. There is a distinction between acknowledgment under Section 18 of the Limitation Act, 1963 and a promise within the meani ng of Section 25 of the Contract Act. Both promise and acknowledgm ent in writing, signed by a party or its agent authorised in that behalf, have the 1 AIR 1958 SC 328 229 effect of creating a fresh starting of limitation. The difference is that an acknowledgment under Section 18 of the Limitation Act has to be made within the period of limitation and need not be accompanied by any promise to pay. If an acknowledgment shows existenc e of jural relationship, it may extend limitation even though there may be a denial to pay. On the other hand, Section 25(3) is only attracted when there is an express promise to pay a debt that is time barred or any part thereof. Promise to pay can be inferred on scrutinising the document. Only the promise should be clear and unconditional. 34. The scheme of the IBC is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Corporate Insolvency Resolution Process begins. Where any corpor ate debtor commits default, a financial creditor, an operational cr editor or the corporate debtor itself may initiate Corporate Insolvency Re solution Process in respect of such corporate debtor in the manner as provided in Chapter II of the IBC. 35. The provisions of the IBC are designed to ensure that the business and/or commercial activities of the Corporat e Debtor are continued by a Resolution Professional, post imposition of a moratorium, which would give the Corporate Debtor some reprieve from coerc ive litigation, which could drain the Corporate Debtor of its financial resources. This is to enable the Corporate Debtor to improve its f inancial health and at the same time repay the dues of its creditors. 36. Under Section 7(2) of the IBC, read with the Statutory 2016 Adjudicating Authority Rules, made in exercise of powers confe rred, inter alia , by clauses (c) (d) (e) and (f) of sub-section (1) of Sec tion 239 read with Sections 7, 8, 9 and 10 of the IBC, a financial creditor is required to apply in the prescribed Form 1 for initiation of the Corporate Insolvency Resolution Process, against a Corporate Debtor under Section 7 of the IBC, accompanied with documents and records required therein, and as specified in the Insolvency and Bankruptcy Board o f India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, hereinafter referred to as the 2016 IB Board of India Regulations. 37. Statutory Form 1 under Rule 4(1) of the 2016 Adjudicating Authority Rules comprises Parts I to V, of which Part I pertains to particulars of the Applicant, Part II pertains to particulars of the Corporate Debtor and Part III pertains to particulars of the p roposed Interim Resolution Professional. Parts IV and V which require parti culars of KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] Financial Debt with Documents, Records and Evidence of def ault, is extracted hereinbelow:- PART IV PART V 231 38. Section 7(3) requires a financial creditor making an application under Section 7(1) to furnish records of the default recorded with the information utility or such other record or evidence of default as may be specified; the name of the resolution professional proposed to act as an Interim Resolution Professional and any other information as m ay be specified by the Insolvency and Bankruptcy Board of India. 39. Section 7(4) of the IBC casts an obligation on the Adjudicating Authority to ascertain the existence of a default from the records of an information utility, or on the basis of other evidence furnished b y the financial creditor, within fourteen days of the receipt of the application under Section 7. As per the proviso to Section 7(4) of the IBC, inserted by amendment, by Act 26 of 2019, if the Adjudicating Authority has not ascertained the existence of default and passed an orde r within the stipulated period of time of fourteen days, it shall record its reasons for the same in writing. The application does not lapse for non-compliance of the time schedule. Nor is the Adjudicating Authority obliged to dismiss the application. On the other hand, the application cannot be dismissed, without compliance with the requisites of the Proviso to Section 7(5) of the IBC. 40. Section 7(5)(a) provides that when the Adjudicating Authority is satisfied that a default has occurred, and the application under sub- section (2) of Section 7 is complete and there is no disciplinary proceeding pending against the proposed resolution professional, it m ay by order admit such application. As per Section 7(5)(b), if the Adjudicating Authority is satisfied that default has not occurred or the ap plication under sub-Section (2) of Section 7 is incomplete or any disc iplinary proceeding is pending against the proposed resolution prof essional, it may, by order, reject such application, provided that the Adju dicating Authority shall, before rejecting the application under sub-section (b) of Section 5, give notice to the applicant, to rectify the defects in his application, within 7 days of receipt of such notice from the Adjudicating Authority. 41. The Corporate Insolvency Resolution Process commences on the date of admission of the application under sub-section (5) of Section 7 of the IBC. Section 7(7) casts an obligation on the Adjudicating Authority to communicate an order under clause (a) of sub-section (5) of Section 7 to the financial creditor and the corporate debtor and to communicate an order under clause (b) of sub-section (5) of Section 7 to the financial KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] creditor within seven days of admission or rejection of such application, as the case may be. Sections 8 and 9 of IBC pertain to In solvency Resolution by an operational creditor and are not attracted in the fact s and circumstances of this case. Section 10 pertains to initiation of Corporate Insolvency Resolution Process by the Corporate Debtor itself, and is also not attracted in the facts and circumstances of the case. 42. The IBC is not just another statute for recovery of debts. Nor is it a statute which merely prescribes the modalities of liquidation of a Corporate body, unable to pay its debts. It is essentially a statute which works towards the revival of a Corporate body, unable to pay its debts, by appointment of a Resolution Professional. 43. In Swiss Ribbons Private Limited & Anr. v. Union of India and Ors.2, authored by Nariman, J. this Court observed:- “28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation o f the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which put s the corporate debtor back on its feet, not being a mere reco very legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, th e resolution process is not adversarial to the corporate debt or but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itse lf, thereby preserving the assets of the corporate debto r during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor’s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitat e the corporate debtor to achieve all these ends.” 44. IBC has overriding effect over other laws. Section 238 of the IBC provides that the provisions of the IBC shall h ave effect, notwithstanding anything inconsistent therewith contained in any other 2 (2019) 4 SCC 17 233 law, for the time being in force, or any other instrument, having effect by virtue of any such law. 45. Unlike coercive recovery litigation, the Corporate Insolvency Resolution Process under the IBC is not adversarial to the inter ests of the Corporate Debtor, as observed by this Court in Swiss Ribbons Private Limited v. Union of India (supra). 46. On the other hand, the IBC is a beneficial legislation for equal treatment of all creditors of the Corporate Debtor, as also the protection of the livelihoods of its employees/workers, by revival of the Corporate Debtor through the entrepreneurial skills of persons other than those in its management, who failed to clear the dues of the Corporate Debtor to its creditors. It only segregates the interests of the Co rporate Debtor from those of its promoters/persons in management. 47. In construing and/or interpreting any statutory provision one must look into the legislative intent of the statute. The intention of the statute has to be found in the words used by the legislature itself. In case of doubt it is always safe to look into the object and purpos e of the statute or the reason and spirit behind it. Each word, phrase or sentence has to be construed in the light of the general purpose of the Act itself, as observed by Mukherjea J., in Popatlal Shah v. State of Madras 3 and a plethora of other judgments of this Court. 48. When a question arises as to the meaning of a certain provision in a statute, the provision has to be read in its context. The statute has to be read as a whole. The previous state of the law, the general scope and ambit of the statute and the mischief that it was intended to remedy are relevant factors. 49. In Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy and Another 4, this Court held:- 89. On a careful reading of the provisions of the IBC and in particular the provisions of Section 7(2) to (5) of the IBC read with the 2016 Adjudicating Authority Rules there is no bar to the filing of documents at any time until a final or der either admitting or dismissing the application has been passed.” 3 AIR 1953 SC 274 4 (2021) 10 SCC 330 KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] 50. Section 238A of the IBC provides as follows:- “238A . The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.” 51. It is well settled by a plethora of judgments of this C ourt as also different High Courts and, in particular, the judgment of this Court in B.K. Educational Services (P) Ltd. v. Parag Gupta & Ass ociates 5 (2019) 11 SCC 633 : (2018) 5 SCC (Civ) 528] NCLT/N CLA T has the discretion to entertain an application/appeal after the prescribed period of limitation. The condition precedent for exercise of such discretion is the existence of sufficient cause for not preferring the appeal and/or the application within the period prescribed by limitation. 52. The condition precedent for condonation of the delay in filing an application or appeal, is the existence of sufficient ca use. Whether the explanation furnished for the delay would constitute “sufficient cause” or not would be dependent upon facts of each case. 53. Section 5 of the Limitation Act, 1963 does not speak of any application. The section enables the court to admit an applica tion or appeal if the applicant or the appellant, as the case may be, satisfies the court that he had sufficient cause for not making the application and/or preferring the appeal, within the time prescribed. A Court/Tribunal may exercise its discretion to condone delay, even in the absence of a formal application. 54. In Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Cooperative Bank Ltd. 6, authored by one of us (Indira Banerjee, J.), this Court held:- “64 . Similarly under Section 18 of the Limitation Act, an acknowledgment of present subsisting liability, mad e in writing in respect of any right claimed by the opposit e party and signed by the party against whom the right is claim ed, has the effect of commencing of a fresh period of limi tation, from the date on which the acknowledgment is signed . 5 (2019) 11 SCC 633 6 (2021) 7 SCC 313 235 However, the acknowledgment must be made before the period of limitation expires. 65 . As observed above, Section 238-A IBC makes the provisions of the Limitation Act, as far as may be, appl icable to proceedings before NCLT and Nclat. The IBC does not exclude the application of Sections 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in NCLT/Nclat. All the provisions of the Limitation Act are applicable to proceedings in NCLT/Nclat, to the extent feasible. 66 . We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or 9 IBC. Of course, Section 18 of the Limitation Act is not attracted in this case, since the impugned order [Ses h Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd., 2019 SC C OnLine NCLAT 928] of Nclat does not proceed on the b asis of any acknowledgment. *** 89. Legislature has in its wisdom chosen not to make th e provisions of the Limitation Act verbatim applicabl e to proceedings in NCLT/NCLAT, but consciously used the words ‘as far as may be’. The words ‘as far as may be’ are not meant to be otiose. Those words are to be understood in the sense in which they best harmonise with the subject matter o f the legislation and the object which the Legislature has in view. The Courts would not give an interpretation to those w ords which would frustrate the purposes of making the Limitati on Act applicable to proceedings in the NCLT/NCLAT ‘as far a s may be’. *** 92. The use of words ‘as far as may be’, occurring in Sectio n 238A of the IBC tones down the rigour of the words ‘shall’ i n the aforesaid Section which is normally considered as mandatory. The expression ‘as far as may be’ is indicative of the fact that all or any of the provisions of the Limitati on Act may not apply to proceedings before the Adjudicatin g Authority (NCLT) or the Appellate authority (NCLAT) if t hey are patently inconsistent with some provisions of the IBC . At KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] the same time, the words ‘as far as may be’ cannot be construed as a total exclusion of the requirements of the basic princ iples of Section 14 of the Limitation Act, but permits a wider, more liberal, contextual and purposive interpretation by neces sary modification, which is in harmony with the principles o f the said Section.” 55. There is no specific period of limitation prescribed i n the Limitation Act, 1963, for an application under the IBC, b efore the Adjudicating Authority (NCLT). An application for which no period of limitation is provided anywhere else in the Schedule to the Limit ation Act, is governed by Article 137 of the Schedule to the said Act. Under Article 137 of the Schedule to the Limitation Act, the period of limitation prescribed for such an application is three years from the date of accrual of the right to apply. 56. There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right t o sue, that is, the date of default. In Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. 7 authored by Nariman, J. this Court held:- “6. …...The present case being “an application” which is filed under Section 7, would fall only within the residuary Article 137.” 57. In B. K. Educational Services Private Limited (supra), this Court speaking through Nariman, J. held:- “42. It is thus clear that since the Limitation Act is appli cable to applications filed under Sections 7 and 9 of the Code fr om the inception of the Code, Article 137 of the Limita tion Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over thr ee years prior to the date of filing of the application, the ap plication would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of th e case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.” 7 (2019) 10 SCC 572 237 58. In Jignesh Shah v. Union of India 8 this Court speaking through Nariman, J. reiterated the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC was three years from the date of accrual of the right to sue, that is, the date of default. 59. In Dena Bank (supra), this Court relied upon the dictum of P.B. Gajendragadkar, J. in Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan 9, and held:- “31. … Section 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes a n injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constit utes a continuing wrong. In this connection it is necessary to dr aw a distinction between the injury caused by the wrong ful act and what may be described as the effect of the said injury . It is only in regard to acts which can be properly characterised as continuing wrongs that Section 23 can be invoked.…” 60 . It is well settled proposition of law, as laid down in the judgment of this Court in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd. 10 , that limitation is essentially a mixed question of law and facts and when a party seeks application of any p articular provision for extension in enlargement of the period of limitat ion, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. 61. The judgment in Babulal Vardharji Gurjar (supra) was rendered in the facts and circumstances of that case where there were no pleadings at all. As held by this Court in Dena Bank (supra) , an application under Section 7 of the IBC in statutory form which requires filling in of particulars cannot be judged by the same standa rds as a 8 (2019) 10 SCC 750 9 AIR 1959 SC 798 10 (2020) 15 SCC 1 KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] plaint or other pleadings in a court of law. Additional affi davits filed subsequent to the filing of the application, by way of additional affidavits or applications would have to be construed as pleadings, as al so the documents enclosed with or relied upon in the application made in the statutory format. Furthermore, pleadings can be amended at any time during the pendency of the proceedings. 62. 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 ev en by implication. However, the acknowledgement must be made before the relevant period of limitation has expired. 63. In Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others 11 , this Court held:- “6. It is thus clear that acknowledgment as prescri bed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implicati on. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nat ure or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be infe rred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied f rom it. The admission in question need not be express but m ust be made in circumstances and in words from which the c ourt can reasonably infer that the person making the admi ssion intended to refer to a subsisting liability as at the date o f the 11 AIR 1961 SC 1236 239 statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surroundin g circumstances can always be considered. Stated gene rally courts lean in favour of a liberal construction of such statements though it does not mean that where no admissio n is made one should be inferred, or where a statemen t was made clearly without intending to admit the existence of jural relationship such intention could be fastened on th e maker of the statement by an involved or far-fetched proc ess of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is re ally no substantial difference between the parties as to the true legal position in this matter.” 64. It is well settled that even entries in books of accounts and/or balance sheets of a Corporate Debtor would amount t o an acknowledgment under Section 18 of the Limitation Act. In Asset Reconstruction Company (India) Limited v. Bishal Ja iswal and Anr. 12 (supra) authored by Nariman, J. this Court quoted with approval the judgments, inter alia , of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff ,13 and in Re Pandem Tea Co. 14 Ltd., the judgment of the Delhi High Court in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana 15 and the judgment of Karnataka High Court in Hegde Golay Ltd. v. State Bank of India 16 and held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt. In this Case, the Appella nt Financial Creditor has not relied on any books of accounts or Balance Sheets of the Corporate Debtor. 65. Section 18 of the Limitation Act speaks of an acknowledgment in writing of liability, signed by the party against whom such property or right is claimed. Even if the writing containing the acknowledgment is undated, evidence might be given of the time when it was signed. The explanation clarifies that an acknowledgment may be s ufficient even 12 AIR 2021 SC 5249 13 AIR 1962 Cal 115 14 AIR 1974 Cal 170 15 ILR (1972) 2 Del 712 16 ILR 1987 Kar 2673 KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.] though it is accompanied by refusal to pay, deliver, perform or permit to enjoy or is coupled with claim to set off, or is addressed t o a person other than a person entitled to the property or right. “Signed” is to be construed to mean signed personally or by an authorised agent. 66. An acknowledgement made in writing within the period of limitation extends the period of limitation. In this case, there was no acknowledgement of debt within three years from the period on which the account of the Corporate Debtor was declared NPA or within three years from the date on which the loan facilities were recalled. 67. The Adjudicating Authority proceeded on the basis that the offer of settlement made by the Corporate Debtor on 12 th December 2018 and rejection thereof by the appellate showed the Corporate Debtor had conceded that there was a continuous cause of action. It is, however, the case of the Appellant Financial Creditor in this appeal that terms of settlement were executed on 20th December 2018 wher eby the Corporate Debtor agreed to repay the amount of Rs.24,55,00,000/- within 31 st December 2018. The Adjudicating Authority, however, did not refer to any settlement. Nor did it address the question o f whether any agreement for repayment of debt came into existence in December 2018 and, if so, whether the agreement would attract Section 25(3) of the Contract Act. 68. The Appellate Tribunal (NCLAT) found that there was no acknowledgement of debt within the period of limitation of three years. Holding the application of the Appellant Financial Creditor, under Section 7 of the IBC, to be barred by limitation, the Appellate Authority (NCLAT) allowed the appeal. 69. The Appellate Tribunal (NCLAT) also did not notice the terms of settlement stated to have been executed on 20 th December 2018, possibly because the attention of the NCLAT was not drawn to any terms of the settlement. The Appellate Tribunal (NC LAT) did not, therefore, have the occasion to consider whether Section 25(3) of the Contract Act would be attracted. The Appellate Tribunal (NCLAT), as observed above, proceeded on the basis that the CIRP proceedings were barred by limitation in the absence of any acknowledgement of de bt within the period of limitation, and closed the CIRP proceedings in the NCLT, without considering the question of applicability of Section 5 of the Limitation Act for condonation of delay, to proceedings under Section 7 of the IBC. 241 70. This Court is of the view that the Appellate Tribunal (NCLAT erred in closing the CIRP proceedings without giving the A ppellant Financial Creditor 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 cla im, would be attracted. If notified of the proposal to close the proceedings, the Appellant Financial Creditor might have got the opportunity to rectify the defects in its application under Section 7 by filing additional pleadin gs and/or documents. As held in Dena Bank (supra), documents can be filed at any time until the application for CIRP is finally dismissed. 71. The appeal is, therefore, allowed. The impugned judgment and order of the NCLAT is set aside to the extent t hat the CIRP proceedings have been closed. The Adjudicating Authority shall consider the application for CIRP afresh, in accordance with law, in the light of the observations made above, after giving the Appel lant and the Respondent opportunity to file additional affidavits disclosing documents/ additional affidavit in response. Ankit Gyan and Anurag Bhaskar Appeal allowed. (Assisted by : Bodhi Ramteke, LCRA) KOTAK MAHINDRA BANK LIMITED v. KEW PRECISION PARTS PRIVATE LIMITED & ORS. [INDIRA BANERJEE, J.]