JSA advised and represented State Bank of India (“SBI”) in a Civil Appeal filed in the Supreme Court of India, on behalf of SBI against the order of the National Company Law Appellate Tribunal (“NCLAT”) dated November 17, 2020 and of the National Company Law Tribunal (“NCLT”) dated September 16, 2020.
SBI had rightly filed an application under Section 7 of Insolvency and Bankruptcy Code (“Code”) for initiation of CIRP proceedings for realisation of an amount in excess of Rs. 100 Crores with interest which was classified as a Non-Performing Asset on June 10, 2014. However, NCLT and then further NCLAT denied the legitimate right of SBI as a Financial Creditor of Krishidhan Seeds Private Limited (“KSPL”).
NCLAT held that the application filed on behalf of SBI was barred by limitation under Article 137 of the Limitation Act, 1963 (“Limitation Act”) and further refused to apply Section 18 of the Limitation Act, for there was no valid acknowledgement in writing of the debt. However, KSPL, vide letter dated January 19, 2016, and then vide letter dated September 18, 2017 accepted its liability while offering a one-time settlement to SBI in lieu of its debts. Similarly, the acknowledgments under balance sheets were not accepted to extend the period of limitation under section 18 of the Limitation Act.
The Supreme Court of India held that the provisions of Limitation Act would be applicable to the proceedings initiated under the Code and SBI was entitled to the recourse under Section 18 of the Limitation Act.
The keys legal finding in the matter are as under:
- The provisions of section 18 of the Limitation Act are not alien to and are applicable to the proceedings under the Code.
- An acknowledgment in the balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgment was within a period of three years from the original date of default.
Accordingly, the Apex Court restored the proceedings before the NCLT for expeditious disposal within three months from the date of its order.
JSA team comprised Lead Partner – Varghese Thomas, Partner – Divyam Agarwal, Partner – Fatema Kachwalla, Senior Associate – Pallavi Kumar , and Junior Associate – Karan Singh.