One-Time Settlement proposed by CD amounted to acknowledgement of debt: NCLAT

Case Details: Gulabchand Jain v. Punjab National Bank - [2022] 136 taxmann.com 194 (NCL-AT)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson and Dr. Alok Srivastava, Technical Member
  • Rajesh Bohra and Ms. Sangeeta Bohra, Advs. for the Appellant. 
  • Shivanshu Kumar and Atul Sharma, Advs. for the Respondent.

Facts of the Case

The Appellant took financial credit from Punjab National Bank (PNB). The account was declared NPA on 13-6-2009. The Bank initiated proceedings under SARFAESI Act, 2002 as well as before the Debts Recovery Tribunal which passed a Decree in favour of the bank.

On 31-5-2018, the financial creditor bank filed an application under section 7 for initiation of CIRP against the corporate debtor. The NCLT by impugned order admitted said application.

On appeal, the corporate debtor contended that the application filed on 31-5-2018 was well beyond the period of limitation and could not have been admitted.

The Respondent argued that the application filed by the PNB u/s 7 of the Code was well within time. In support of his case, he made three submissions.

a) Firstly, he submitted that he is covered by section 14 of the Limitation Act for the period during which application was pending before the DRT.

b) He further submitted that there are acknowledgements by the Corporate Debtor in the year 2011, 2012 & 2016, in which One Time Settlement (OTS) offers were made, which is acknowledgement within the meaning of section 18 of the Limitation Act and which will give an extension of limitation.

c) Lastly, he submitted that in view of the Decree issued by order dated 6-10-2017 of the DRT, the Bank will have a fresh period of limitation of three years from 6-10-2017 and the application filed by the Bank is within three years which is well within time.

NCLAT Held

The NCLAT held that by the decree passed on 6-10-2017 financial creditors should get a fresh period of limitation of three years and an application under section 7 having been filed within 3 years from 6-10-2017 could not be held to be barred by limitation.

It was held that since the corporate debtor had written letter to the financial creditor giving a proposal for OTS for outstanding dues, letters acknowledging debt issued by corporate debtor should give benefit to the financial creditor for extension othe f limitation period and, thus, an application filed under section 7 could not be said to be barred by limitation.

Case Review

• • Vijay Timber Industries v. Punjab National Bank [2022] 136 taxmann.com 193 (NCLT – AHM) (para 12) affirmed [see Annex]
  • Dena Bank v. C.Shivkumar Reddy [2021] 129 taxmann.com 60 (SC) (para 11) followed.
  • Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd. [2020] 114 taxmann.com 282/158 SCL 211 (NCLAT – New Delhi) (para 9) distinguished.

List of Cases Referred to

• • Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd. [2020] 114 taxmann.com 282/158 SCL 211 (NCLAT – New Delhi) (para 2)
  • B. K. Educational Services (P.) Ltd. v. Parag Gupta & Associates [2018] 98 taxmann.com 213/150 SCL 293 (SC) (para 2)
  • Dena Bank v. C. Shivakumar Reddy [2021] 129 taxmann.com 60 (SC) (para 10).