Correctness of Acknowledgement Regarding Limitation Period Can Be Objected to By CD & Not By Unsecured Creditor | SC

Case Details: Axis Bank Ltd. v. Naren Sheth - [2024] 159 taxmann.com 356 (SC)

Judiciary and Counsel Details

• • Vikram Nath & Satish Chandra Sharma, JJ.
  • Sanjiv Sen, Sr. Adv. Akash Khurana, Adv. & Ujjal Banerjee, AOR for the Petitioner.
  • Surya Prakash, Arjun Bhatia, Devesh Dubey, Mahima Kapur, Ms Divya Singh Pundir, Advs. Ms Neha Sharma, Ms Megha Karnwal & Vikas Mehta, AOR for the Respondent.

Facts of the Case

In the instant case, the appellant entered into a leave and license agreement with ‘U’ and a security deposit of Rs. 87.56 crore was furnished by the appellant. ‘U’ executed a simple mortgage without possession in favour of the appellant for seven floors. Later, ‘U’ executed a sale deed in favour of ‘R’, whereunder the agreement of the appellant was protected.

Subsequently, ‘R’ having availed credit facility from R2- bank created a mortgage with respect to land underneath the said building. Further, ‘U’ merged with ‘R’ and was renamed as ‘S’ i.e. the corporate debtor. R2 declared the corporate debtor as NPA in view of defaults on 31-3-2013. R2 filed an application u/s 7 of the IBC against the corporate debtor on 21-1-2020 and the same was admitted by the Adjudicating Authority (NCLT).

The appellant assailed the said order before the NCLAT, however, the same was dismissed vide the impugned order. Thereafter, an appeal was made before the Supreme Court against the order passed by the NCLAT.

Supreme Court Held

On an appeal, the Supreme Court held that since the debt was acknowledged by the corporate debtor, the CIRP application was within the limitation period.

Further, the Supreme Court held that the correctness and genuineness of such acknowledgements could be objected to regarding its correctness by a corporate debtor and not by an unsecured creditor. The applicant filed an instant Miscellaneous Application seeking clarification of the above judgment of the Supreme Court.

The Supreme Court held that the word ‘unsecured creditor’ referred to in paragraph 20 of the judgment of the Supreme Court be now read as ‘secured creditor’.

Further, the Supreme Court held that the judgment was to be corrected to the above extent only and the miscellaneous application was to be disposed of accordingly.