B. Prashanth Hegde vs. State Bank Of India

2026 INSC 155
REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 477 OF 2022

B. PRASHANTH HEGDE …APPELLANT(S)
VERSUS

STATE BANK OF INDIA & ANR. …RESPONDENT (S)
J U D G M E N T

MANOJ MISRA, J.
1. This appeal, under Section 62 of the Insolvency
1
and Bankruptcy Code, 2016 , impugns judgment and
order of the National Company Law Appellate
2
Tribunal, Principal Bench at New Delhi , dated
17.12.2021, passed in Company Appeal (AT) (Ins) No.
68 of 2019 and I.A. No. 1078 of 2021.
FACTS
2. A brief narration of facts in a chronological order
would be apposite. The first respondent (State Bank
Signature Not Verified
Digitally signed by
KAVITA PAHUJA
Date: 2026.02.13
17:02:29 IST
Reason:

1
IBC
2
NCLAT
Page 1 of 57
Civil Appeal No. 477/2022

3 4
of India ), claiming itself to be the Financial Creditor
of M/s. Metal Closure Pvt. Ltd. (i.e., the Corporate
5 6
Debtor ), filed an application under Section 7 of IBC
on behalf of self and on behalf of a consortium of

3
SBI
4
FC
5
CD
6
Section 7. Initiation of corporate insolvency resolution process by financial creditor. – (1) A financial
creditor either by itself or jointly with other financial creditors, or any other person on behalf of the
financial creditor, as may be notified by the Central Government, may file an application for initiating
corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority
when a default has occurred.
…..xxx….
Explanation . --- For the purposes of this sub-section, a default includes a default in respect of a
financial debt owed not only to the applicant financial creditor but to any other financial creditor of the
corporate debtor.
(2) The financial creditor shall make an application under sub-section (1) in such form and
manner and accompanied with such fee as may be prescribed.
(3) The financial creditor shall, along with the application furnish -
(a) record of the default recorded with the information utility or such other record or
evidence of default as may be specified;
(b) the name of the resolution professional proposed to act as an interim resolution
professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within 14 days of the receipt of the application under sub-
section (2), ascertain the existence of default from the records of an information utility or on the basis of
other evidence furnished by the financial creditor under sub-section (3):
Provided that if the Adjudicating Authority has not ascertained the existence of default
and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the
same.
(5) Where the Adjudicating Authority is satisfied that -
(a) a default has occurred and the application under sub-section (2) is complete and
there is no disciplinary proceedings pending against the proposed professional, it may, by order admit
such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or
any disciplinary proceeding is pending against the proposed resolution professional, it may, by order
reject such application
Provided that the Adjudicating Authority shall, before rejecting the application under
clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within
seven days of receipt of such notice from the Adjudicating Authority.
(6) The corporate insolvency process shall commence from the date of admission of the
application under sub-section (5).
(7) …xxxx..


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7
banks comprising SBI, Punjab National Bank ,
Corporation Bank and UCO Bank against CD for
8
initiating Corporate Insolvency Resolution Process ,
inter alia , alleging that CD is a defaulter of dues,
exceeding Rs. 280 crores, payable against various
credit facilities extended from time to time by
members of the consortium.
3. CD contested the application, inter alia, on the
ground that the same was filed beyond 3 years from
the date when the right to apply had accrued and
therefore, the application under Section 7 was liable
to be dismissed on the ground of limitation.

4. On 14.12.2018, the National Company Law
9
Tribunal, Bangalore Bench admitted the CIRP
petition and declared a moratorium under Section 14
of IBC.
5. Aggrieved by the order of NCLT dated 14.12.2018,
the suspended Managing Director of CD filed an

7
PNB
8
CIRP
9
NCLT
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appeal (i.e., Company Appeal (AT) (Ins) No. 68 of
10

2019 under Section 61 of IBC before NCLAT.
6. In the meanwhile, NCLT recommended liquidation
of the CD which was kept in abeyance pending
disposal of the appeal by NCLAT.
7. On 26.09.2019, NCLAT dismissed the aforesaid
appeal, inter alia, holding: (a) that credit facilities,
extended from time to time by various partners of the
consortium were secured by mortgage of immovable
properties of CD therefore, the limitation period
would be governed by Article 62 of the Schedule to
11
the Limitation Act, 1963 , which prescribes
limitation of 12 years; and (b) that though the
limitation to file an application under Section 7 of

10
Section 61. Appeals and Appellate Authority. – (1) Notwithstanding anything to the contrary
contained under the Companies Act, 2013 (18 of 2013), any person aggrieved by the order of the
Adjudicating Authority under this Part may prefer an appeal to the National Company Law Appellate
Tribunal.
(2) … xxx …
(3) … xxx …
(4) … xxx …
(5) An appeal against an order for initiation of corporate insolvency resolution process passed
under sub-section (2) of section 54-O, may be filed on grounds of material irregularity or fraud
committed in relation to such an order.

11
1963 Act

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12
IBC is three years, as per Article 137 of the
Schedule to the 1963 Act, the right to apply accrued
on 01.12.2016 i.e., when IBC came into force
therefore, the application is not barred by limitation.
Consequently, the appeal, which was pressed on the
sole ground of limitation, was dismissed.
8. On dismissal of the appeal by NCLAT, NCLT, by a
separate order, directed liquidation of CD.
9. Aggrieved by the order of NCLAT dated 26.09.2019,
the suspended Managing Director of CD filed an
13
appeal under Section 62 of IBC before this Court.
This Court, vide order dated 21.10.2019, allowed the
appeal, set aside the order of NCLAT and restored the
appeal on the file of NCLAT for being decided afresh,

12
Description of Suit Period of limitation Time from which period begins to run
PART II – OTHER APPLICATIONS
Article 137. Any other application for which Three years When the right to apply accrues
no period of limitation is
provided elsewhere in this
Division

13
Section 62: Appeal to Supreme Court. (1) Any person aggrieved by an order of the National Company
Law Appellate Tribunal may file an appeal to the Supreme Court on a question of law arising out of such
order under this Code within forty-five days from the date of receipt of such order.
(2) The Supreme Court may, if it is satisfied that a person was prevented by sufficient cause
from filing an appeal within forty-five days, allow the appeal to be filed within a further period not
exceeding fifteen days.

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Civil Appeal No. 477/2022


having regard to the decisions of this Court on the

issue of limitation.
10. Pursuant to the order of remand, NCLAT
allowed the appeal, vide order dated 14.10.2020, inter
alia , holding:
(i) The default had occurred on or before
31.01.2010 i.e., the date when the account
14
was declared Non-Performing Asset .
(ii) Limitation period, prescribed by Article
137 of the Schedule to the 2003 Act, is 3
years from the date of default, which
expired on 30.01.2013.
(iii) Application under Section 7 of IBC was
filed on 25.04.2018 and, therefore, barred
by limitation.
11. Aggrieved by the aforesaid order, SBI (i.e., the
first respondent) filed Company Appeal No. 3765 of
2021 before this Court. This appeal was allowed, vide
order dated 15.04.2021, thereby giving an

14
NPA
Page 6 of 57
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opportunity to SBI to amend its pleading (i.e., the
application under Section 7 of IBC), on payment of
costs, for introducing facts to explain that the
application under Section 7 was within the period of
limitation. The relevant portion of the order of this
Court dated 15.04.2021 is extracted below:
“6. There can be no doubt whatsoever that the
Appellant has been completely remiss and deficient in
pleading acknowledgement of the liabilities on the
facts of this case. However, given the staggering
amount allegedly due from the Respondents, we offer
one further opportunity to the Appellant to amend its
pleadings so as to incorporate what is stated in the
written submissions filed by it before the NCLAT,
subject to costs of Rs. 1,00,000 to be paid by the
Appellant to the Respondent within a period of four
weeks from today.

7. We, therefore, allow the appeal, set aside the
judgment of the NCLAT dated 14.10.2020, and
restore the appeal to the file to be decided in light of
judgment on Civil Appeal No.323 of 2021.”


12. Pursuant to the above order, NCLAT allowed the
amendment vide order dated 15.07.2021. As a
result, the Section 7 application was comprehensively
amended, thereby introducing detailed facts qua the
debt to demonstrate that the application was within
limitation. Thereafter, NCLAT, vide impugned order
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dated 17.12.2021, dismissed the appeal of the
suspended Managing Director and held the Section 7
application to be within limitation.
13. We have heard learned counsel for the parties at
length and have perused the record. Written
submissions were also provided for our convenience.
FINDINGS OF NCLAT
14. Before noticing the submissions made before us, it
is necessary to understand the context in which those
submissions were made. Therefore, in our view, it
would be useful to notice the findings returned by
NCLAT on the issues arising before it. The relevant
paragraphs of the impugned judgment of NCLAT are
reproduced below:
“31. The table below gives the relevant dates in connection
with the debts of the Corporate Debtor owed to the four
banks in the consortium, which are as per arguments and
pleadings of the Respondent No.1, and which would be
necessary for calculating the limitation and the dates when
the Corporate Debtor acknowledged the debt s through various
documents:

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32. From the dates in the table in the previous paragraph,
the learned senior counsel for Respondent No.1 has argued
that banks and CD were discussing restructuring of debts,
and thereby CD implicitly acknowledged the respective
debts as relevant for counting limitation in accordance with
the judgment of Hon’ble Supreme Court in ARCIL vs. Bishal
Jaiswal (2021 SCC OnLine SC 321). Debt restructuring
efforts with SBI went on till 28.5.2014, with PNB till
30.06.2014, with Corporation Bank till 10.10.2014 and
with UCO Bank till 31.12.2014. As a result of the
restructuring efforts certain letters of arrangement and
consortium agreements were entered into by the
consortium of banks and the CD. Hence these are relevant
dates when debts were in default and cause of action
started. As regards the claim of the appellant that the dates
of default of debts of the banks were in 2010, it was
clarified by learned senior counsel for Respondent No.1 that
the date of NPA which was shifted to 2010 was in
accordance with an RBI Master Circular dated 1.7.2013 for
the purposes of banks working and asset classification. The
actions taken by the banks and the CD between 2010 and
2014 when CD's debt was being restructured, including
signing of new working capital consortium agreements and
their sanction, in continuation of the old debts did provide
acknowledgements of the loans by CD. The Statement of
Accounts are detailed in items 7 & 8 of Part IV of the
Section 7 application are, therefore, sufficient for purpose of
acknowledgement of debt liability to the four banks.

33. Learned senior counsel for Respondent No.1 has stated
in his written submissions (attached at pp. 33-34 of the
Convenience Compilation of the Appellant Vol. I filed vide
Diary number 27721 dated 1.7.2020) that while originally
the account of the Corporate Debtor was classified as NPA
on 21.1.2010, it is an admitted fact that there were actions
taken thereafter during 2010 to 2014 to restructure the
account of the Corporate Debtor. As a result, various
Consortium Agreements were executed between the four
banks and the Corporate Debtor. The existence of the
Consortium Agreements and letter of arrangement are given
in item 5 of Part V of amended Section 7 application
(attached at pp. 93-114 of written submissions and
Convenience Compilation of Appellant, volume 1). These
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Working Capital Consortium Agreements and letter of
arrangement and their existence has not been denied by
the Corporate Debtor. It is the contention of the
Respondent No.1 that, through these Consortium
Agreements the Corporate Debtor has inter-alia admitted
its debt default and liability to pay to all the four banks till
the date of signing of the Working Capital Consortium
Agreement dated 21.3.2014.

34. The judgments of Hon’ble Supreme Court in Swiss
Ribbons (P) Ltd. (supra), Innoventive Industries Ltd. (supra)
and B.K. Educational Services (P) Ltd. (supra) do not
explicitly cover the issue of acknowledgement of debt
through documents such as balance sheet. In the matter of
ARCIL vs. Bishal Jaiswal (supra), the Hon’ble Supreme
Court has held that fresh limitation will start from the date
of acknowledgement in the balance sheet of the CD. This
judgment of Supreme Court now holds the fort insofar as
calculation of limitation period is concerned taking into
account the acknowledgements by CD in certain documents
like the balance sheets and in other documents. In the case
of Reliance Asset Reconstruction Co. Ltd. vs. Hotel Poonja
International Pvt. Ltd., the balance sheets were not relied
upon because no evidence had been put forward to show
that they were signed before the expiry of the prescribed
period of limitation and there was no pleading to the said
effect in the application under Section 7 of IBC. As opposed
to this situation, in the present case the balance sheets
relate to the period within three years from the date of NPA
of the four banks, which are 28.5.2014 for SBI, 30. 6.2014
for PNB 10.10.2014 for Corporation Bank and 31.12.2014
for UCO Bank and hence the acknowledgements which
were implicit in these balance sheets are within three years
of the date of start of limitation, and therefore extend
limitation as per section 18 of the Limitation Act.


35. In the case of Indian Overseas Bank vs. Patel Woods
Products Limited 2020 SCC OnLine NCLAT 551, the
Securitization Application filed by Indian Overseas Bank
had been disposed of. Since Section 7 application which
was filed thereafter, took the date of default as barred by
limitation and expressly for recovery of amount . Hence, the
Section 7 application was not admitted. In contrast, in the
present appeal, there is no decree for execution and the
Section 7 application is also considered to be within
limitation, due to various acknowledgements in balance
Page 10 of 57
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sheets for the financial years 2013-14 and 2014-15 and
reply filed before DRT, which provide fresh lease of life to
the issue of limitation.

36. xxx omitted xxx


37. In Swiss Ribbons (P) Ltd. case (supra), Hon’ble Supreme
Court has held that in so far as set-off and counterclaim is
concerned, such set-off may be considered at the stage of
filing of proof of claims during the resolution process by the
Resolution Professional. In the present appeal, only counter
claim has been made before DRT but no set off amount has
been adjudicated upon. Moreover, any amount of
counterclaim cannot retract from the fact of
acknowledgement of the debts.

38. In ARCIL vs. Bishal Jaiswal (supra), Hon’ble Supreme
Court has very clearly held that section 18 of the Limitation
Act gets attracted the moment acknowledgement in writing
signed by the party against whom such right to initiate
resolution process under Section 7 of IBC enures. This ratio
is supportive of claim made by Respondent No.1 SBI in the
present case, where acknowledgements in writing signed by
the Corporate Debtor come into play to extend the period of
limitation under section 18 of the Limitation Act.

39. In Bengal Silk Mills Co. (supra), it was held that a
compulsion in law to prepare a balance sheet does not
imply compulsion to make any particular admission and if a
qualification regarding a particular creditor or credit is
made with caveats, the case has to be examined on the
basis of its context to establish whether an
acknowledgement of liability has, in fact, been made for
extending the limitation. In the present case, there is no
caveat regarding acknowledgement or otherwise of the debt.
On the contrary, the Auditor’s report in the balance sheet
only adverts to the fact that the Corporate Debtor is not a
going concern but makes no qualifying remarks about the
debt which is included in the balance sheet.

40. Learned Counsels for Appellant and Respondent No.1
both have referred to the Master Circular No. RBI/2013-
14/62 DBOD No. BP. BC. 1/ 21.04.048/2013-14 dated
July 1, 2013 (pp. 166-167 of written submissions and
convenience compilation of appellant, Vol. I) with appellant
interpreting its provisions regarding asset classification as
NPA to be year 2010 from which the dates of default should
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be considered whereas Respondent No.1 claims that the
year should be 2014. We agree with the argument of Ld.
Senior Counsel of Respondent No.1 that while the asset
classification of the restructured loan account would be
governed as per applicable prudential norms regarding
classification as NPA, insofar as acknowledgement of the
debts is concerned they were implicitly present in working
capital consortium agreements and other documents
executed by the CD and banks and the debts were therefore
alive at the time these agreements were entered into.

41. We now consider the contention of the Corporate Debtor
that the amount of counterclaim raised against the banks
by the Corporate Debtor being Rs.1500 crores which is
much more than the amount of debt, hence there will be a
net amount payable to the corporate debtor and not to the
banks. Therefore, there is no debt in default and liable to be
paid to the banks. We note that the counterclaim has not
been decided and so it remains just a proposition yet to be
adjudicated upon. Moreover, merely raising a counterclaim
in DRT proceedings does not in any way detract from the
fact that debts are acknowledged, and they are in default,
and therefore liable to be paid by the Corporate Debtor as
the application under Section 7 is found to be within
limitation.

42. We are convinced by the argument of Respondent No.1
that the date of NPA of the debt due to SBI is 31.1.2010
only for the purposes of the RBI guidelines. The actual date
to default is the dates on which NPAs were initially declared
by respective banks with 28.5.2014 for SBI, 30.6.2014 for
PNB, 10.10.2014 for Corporation Bank and 31.12.2014 for
UCO Bank, since the debts of respective banks were
acknowledged by the CD till those dates. This is so because
during the period from 2010 to 2014 when efforts were
made by the four banks and the Corporate Debtor to
restructure the debts, there was admission and implicit
acknowledgment of the debts by the Corporate Debtor.

43. We then find that the acknowledgement of these debts
have been made, inter alia, in the CD's balance sheets for
year ending 31.3.2014 and 31.3.2015 which was signed on
30.9.2015, which is within three years from the date the
debts were acknowledged in 2014 during debt restructuring
process when Working Capital Consortium Agreements etc
were signed by the CD and the banks. Thus, the debts get a
fresh lease of limitation for three years from 30.9.2015. This
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limitation period will run till 29.9.2018 in accordance with
Article 137 of Limitation Act. The Section 7 application was
filed on 25.4.2018 which is within three years from
30.9.2015. Hence, we find that on the basis of amended
application under Section 7 and the documents attached
thereto, as well as pleadings of Respondent No.1, the
Section 7 application is found to be within limitation. The
debts are in default, and they are due and payable to the
four banks viz., SBI, PNB, Corporation Bank and UCO
Bank.

44. We are also of the view that criminal complaints filed
against officials of consortium of banks, and further action
thereon have no bearing or relevance to the proceedings
under Section 7 of the IBC.

45. In the light of discussion in above paragraphs, we are
convinced that the debts of the four banks (SBI, PNB,
Corporation Bank and UCO Bank) are in default, due and
liable to be paid by the Corporate Debtor as on the date of
filing of amended Section 7 application. The amended
Section 7 application is found to be in limitation. Thus,
State Bank of India (Respondent No.1) and other banks
(who have authorized SBI to act on their behalf) have been
able to establish to our complete satisfaction that the
ingredients of application under Section 7 of IBC against
the Corporate Debtor have been met and the application
u/s 7 deserves to be admitted.”
(Emphasis supplied)

15. In a nutshell, the findings/ conclusions of NCLAT
can be summarized as under:
(a) There is no dispute that CD is a defaulter.
The dispute is whether the Section 7
application is within the period of limitation
as specified in Article 137 of the Schedule to
the 1963 Act, or not.
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(b) Documents on record indicate that CD was
in negotiations with the creditor banks for
restructuring of its debt(s) and, ultimately,
signed Working Capital Consortium
Agreement(s) with the Banks, thereby
acknowledging its dues.
(c) As per document(s) available on record, the
NPA declaration date(s) are 28.5.2014 for SBI,
30.6.2014 for PNB, 10.10.2014 for
Corporation Bank and 31.12.2014 for UCO

Bank.
(d) On 30.09.2015, CD in its balance-sheet(s)
of 2013-2014 and 2014-2015 acknowledged
the debt(s). Such acknowledgement would
extend limitation up to 29.09.2018, whereas
the Section 7 application was filed on
25.4.2018 and therefore, the same is within

limitation.
(e) The NPA date 31.01.2010 mentioned by
SBI is for classification of debt because the
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restructuring exercise failed; therefore, it
cannot be taken as the date of default for
purposes of computing the limitation period.
(f) Mere filing of counterclaim would not wipe
out the debt.
(g) Lodging of FIR is inconsequential for
determining the issue qua admission of the
Section 7 application.

SUBMISSIONS ON BEHALF OF THE APPELLANT
16. On behalf of the appellant, it was submitted that
the application under Section 7 ought to have been
dismissed on the following grounds:
(i) The original as well as the amended
application did not contain particulars of
the default. They only disclose as to when
the accounts were declared NPA. Such
application is against the form (i.e., Form-I)
prescribed for filing an application under
Section 7.
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(ii) Limitation starts from the date of
default. In absence of disclosure of the date
of default, extension of the limitation period
by acknowledgement (i.e., under Section
15
18 of the 1963 Act) did not arise.
(iii) The amendment made pursuant to the
order of remand was way beyond what was
permitted by the order of remand dated

15.04.2021.
(iv) The balance-sheet(s) relied upon by
NCLAT were neither authenticated nor
approved in the meeting of shareholders
and were not filed with the Registrar of

15
Section 18. Effect of acknowledgment in writing. —(1) Where, before the expiration of the prescribed
period for a suit or application in respect of any property or right, an acknowledgment of liability in
respect of such property or right has been made in writing signed by the party against whom such
property or right is claimed, or by any person through whom he derives his title or liability, a fresh period
of limitation shall be computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is undated, oral evidence may be given
of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of
1872), oral evidence of its contents shall not be received.
Explanation .—For the purposes of this section,— (a) an acknowledgment may be sufficient
though it omits to specify the exact nature of the property or right, or avers that the time for payment,
delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver,
perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a
person entitled to the property or right,
(b) the word “signed” means signed either personally or by an agent duly authorised in this
behalf, and (c) an application for the execution of a decree or order shall not be deemed to be an
application in respect of any property or right.

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16
Companies . Besides, acknowledgement, if
any, in the balance-sheet(s) was qualified
and, as such, it did not extend the

limitation.
(v) The Section 7 application is vitiated by
fraud, malice and suppression of material
facts and, therefore, hit by Sections 65 and
75 of IBC.
17. To buttress the above submissions, reliance was
placed on Section 7 (3) (a) of IBC to contend that sub-
section (3) mandates FC to furnish record of the
default recorded with the information utility, or such
other record or evidence of default, as may be
specified; the Insolvency and Bankruptcy (Application
17
to Adjudicating Authority) Rules, 2016 prescribe
Form 1 for filing an application under Section 7 of
IBC; Part IV of Form-I mandates mentioning of the
amount claimed to be in default and the date on
which the default occurred along with workings for

16
ROC
17
2016 Rules
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computation of the amount(s) and days of default in a
tabular form; additionally, Part V requires FC to file
evidence and record of default with the information-
utility, if any. In the present case, FC did not comply
with these provisions. In absence thereof, the finding
that a default had occurred could not have been
recorded by the Adjudicating Authority, having regard
to the decisions of this Court in Indus Biotech
Private Limited V. Kotak India Venture (Offshore)
18
Fund & Ors and Swiss Ribbons Pvt. Ltd. & Anr V.
19
Union of India & Ors . Besides, the original
application filed on 25.04.2018 mentions no date of
default, and in the amended application, the date(s) of
default is/are shown as 28.05.2014, 30.06.2014,
10.10.2014 and 31.12.2014, which are none other
than the date(s) on which each member of the
consortium declared their respective accounts NPA.
Most importantly, NCLAT’s order dated 14.10.2020
identifies 31.01.2010 as the date on which CD’s

18
( 2021) 6 SCC 436
19
(2019) 4 SCC 17
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account was declared NPA. This finding of NCLAT was
not disturbed in appeal and, therefore, it was
impermissible for NCLAT to record a different finding

on the date of default.
18. In the alternative, it was argued that the NPA date
cannot be taken as the date of default. Limitation for
the purposes of filing an application under Section 7
commences from the date of default in payment of
amount exceeding Rs. 1 lakh (as it then was, now Rs.
1 crore). This position is clear from the decisions of
this Court in M/s. Innoventive Industries Ltd. v.
20
ICICI Bank & Anr. and Laxmi Pat Surana v.
21

Union Bank of India & Anr .
19. It was further argued that the remand order dated
15.04.2021 allowed FC to amend the Section 7
application to incorporate what was stated in the
written submissions. But the case set up in the
amended application is much beyond what the order
of remand permitted. Since the remit of remand was

20
(2018) 1 SCC 407
21
(2021) 8 SCC 481
Page 19 of 57
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limited, it was not open for NCLAT to consider and
allow a completely different case than what was
permitted by this Court.
20. It was also submitted that in absence of the date
of default in the application under Section 7, an
assessment as to whether the limitation period got
extended by acknowledgment was not possible.
Besides, a balance-sheet can be considered as an
acknowledgment only when it is duly approved by the
shareholders in an appropriate meeting, as was held
by the Calcutta High Court in Pandam Tea Company
22
Ltd. Whereas the balance-sheet relied by NCLAT was
not authenticated, and one which was never approved
in the shareholder meeting. Besides, the last balance-
sheet filed by CD with ROC was in the year 2013, and
the same balance-sheet made no acknowledgement of
liability as it was qualified by stating:
“Company has filed SARFAESI Appeal under Section 17 of
the SARFAESI Act and claimed cost of compensation
which is higher than the consortium bank’s total
advances.”

22
1973 SCC OnLine Cal 93

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21. As regards initiation of CIRP with a mala fide
intent, it was submitted that CIRP proceeding was
initiated not to resolve insolvency, but to circumvent
proceedings initiated by CD against the consortium of
banks. In that context, the following facts were
highlighted:
(i) First Information Report(s) were lodged
by the appellant against various accused,
including the consortium of banks and
their officials, which were investigated by
the Criminal Investigation Department (CID
Economic Offences Wing, Bengaluru,
Karnataka) culminating in two chargesheets
dated 05.05.2018 and 07.12.2018 arising
from Case Nos. 580 of 2016 and 486 of

2015 respectively.
(ii) The chargesheets reveal forging of
cheques with appellant’s signatures, forging
of statements of accounts, siphoning of
Page 21 of 57
Civil Appeal No. 477/2022


money and sale of machinery in open
market, unauthorized RTGS payments,
forging of bills of lading to make
unauthorized payments etc. They also
reveal that after taking over physical
possession of the assets of CD, the bank
made no efforts to auction the units. These
findings in the chargesheet(s) reflect the
true intent of the officials of the first
respondent in invoking proceedings under
the Securitization and Reconstruction of
Financial Assets and Enforcement of
23
Security Interest Act, 2002 , which was to
shut down operations of CD. Even the order
of the Karnataka High Court dated
13.03.2023 in W.P. No. 18864 of 2021
directed the Trial Court to take cognizance
against both banks, i.e., SBI and PNB, in
accordance with law, and directed the

23
SARFAESI
Page 22 of 57
Civil Appeal No. 477/2022


Investigation Officer to file additional
chargesheet by showing both banks as
accused.
(iii) Besides, FC filed a claim under the
Recovery of Debts Due to Banks and
24
Financial Institutions Act, 1993 , in which
CD filed a counterclaim seeking Rs. 1299
crores. The said proceeding was initiated in
2015, by which time the appeal under
Section 17 of SARFAESI Act, questioning
the taking over of physical possession of the
plants of CD and appointment of Forensic
Auditor, was pending. In this background,
when proceedings under the RDDB Act and
SARFAESI Act were pending, there was no
justification to invoke the provisions of IBC
in the year 2018 i.e., 02 years after IBC
came into force. The mala fide intention to
initiate proceedings under IBC also

24
RDDB Act

Page 23 of 57
Civil Appeal No. 477/2022


becomes clear from the fact that after filing
of the application under Section 7 of IBC,
the first respondent had been seeking
adjournment in proceedings under the
SARFAESI Act and RDDB Act.
22. Finally, it was submitted that the
Adjudicating Authority was required to examine
whether it was expedient to initiate CIRP in the
context of pending litigation between the parties,
as held by this Court in Vidarbha Industries
25

Power Ltd. v. Axis Bank Ltd.
23. Based on the above submissions, the learned
counsel for the appellant prayed that the impugned
order passed by NCLAT be set aside and the Section
7 application be dismissed.

SUBMISSIONS ON BEHALF OF RESPONDENT
24. Per contra , on behalf of the first respondent, it

was submitted:

25
(2022) 8 SCC 352

Page 24 of 57
Civil Appeal No. 477/2022


(i) The application under Section 7 of IBC was
well within limitation as CD had
acknowledged its dues from time to time in
writing and therefore, a fresh period of
limitation started from each such
acknowledgement. In this regard, the relevant
dates were provided in a tabular form
reproduced below:

26
Reserve Bank of India
Page 25 of 57
Civil Appeal No. 477/2022

(ii) Acknowledgement in the balance-sheets,
filed by CD, of its debts due to FCs would
extend the limitation period under Section 18
of 1963 Act, as held by this Court in Asset
Reconstruction Company (India) Ltd. v.

27
Original Application
28
Debt Recovery Tribunal
29
Chief Metropolitan Magistrate
Page 26 of 57
Civil Appeal No. 477/2022


30
Bishal Jaiswal & Anr. Further, the
balance-sheet(s) were signed by the
Director(s) of CD including the appellant, and
verified by their Chartered Accountant.
Therefore, the application under Section 7 of
IBC was not barred by limitation.
(iii) It is incorrect to state that the default, if
any, occurred on or before 31.01.2010,
because the account of CD was repeatedly
restructured between 2010 – 2014
whereunder CD was granted further
facilities/ concessions. Besides that, various
Working Capital Consortium Agreements were
executed between CD and Banks recording
admission of dues and grant of further credit
facilities, the last of which is dated
21.03.2014. As CD failed to adhere to the
terms of repayment even after restructuring,
the account with SBI, once again, turned NPA

30
(2021) 6 SCC 366

Page 27 of 57
Civil Appeal No. 477/2022


on 28.05.2014. This date was shifted back to
31.01.2010 for the purposes of provisioning
as per RBI norms, on account of failure of the
restructuring exercise. However, the date of
NPA remains 28.05.2014 as per IRAC norms
for accounts in the books of the bank.
(iv) The above facts were clarified through the
amended application, under Section 7 of IBC,
pursuant to the order of this Court dated
15.04.2021. The amended application
categorically mentions the date of default and
also how subsequent acknowledgements were
made by CD, thereby extending the period of
limitation.
(v) CIRP proceedings were not mala fide.
Rather, criminal proceedings were initiated by
CD to avoid repayment of credit facilities, and
those proceedings have been challenged
before the Karnataka High Court through
Criminal Petition No. 6885 of 2018, wherein
Page 28 of 57
Civil Appeal No. 477/2022


stay has been granted on 20.09.2018.
Further, mere filing of chargesheet does not
prove the allegations. Besides, the same
allegations made by the appellant before DRT
in TSA No. 9 of 2023 were discarded vide
order dated 21.03.2024.
(vi) Mere filing of counterclaim before DRT
would have no bearing on the outstanding
debt unless the same is decreed. Moreover,
the counterclaim was filed with the sole intent
to detract CIRP proceeding, which would be
clear from the following date(s) and event(s):
(a) SBI filed O.A. before DRT on
28.12.2015.
(b) Application under Section 7 was filed

on 24.04.2018.
(c) Counterclaim was filed by CD before
DRT on 09.08.2018 i.e., after filing of
application under Section 7.
Page 29 of 57
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(vii) There is nothing in IBC which interdicts a
CD from pursuing its remedies, as held by
this Court in Swiss Ribbons (supra) .
Therefore, the counterclaim for compensation
would not come in the way of CIRP
proceeding. Moreover, the claim for
compensation would be deemed rejected on
dismissal of TSA No. 9 of 2023 by DRT vide

order dated 21.03.2024.
(viii) Once the Adjudicating Authority is
satisfied that there is a default of an amount
exceeding the threshold, there is hardly any
discretion left with the Adjudicating Authority
to refuse admission of an application under
Section 7 IBC, as held by this Court in M.
Suresh Kumar Reddy v. Canara Bank and
31
Others .
25. Based on the above submissions, it was prayed on
behalf of the respondent that the appeal be dismissed.

31
(2023) 8 SCC 387

Page 30 of 57
Civil Appeal No. 477/2022


ISSUES
26. We have considered the rival submissions. In our
view, the main issues which arise for our consideration

in this appeal are:
(i) Whether the application under Section 7 of IBC
was liable to be dismissed for lack of material
particulars regarding the debt and date of default,
as required by Form I prescribed by the 2016

Rules?
(ii) Whether the application under Section 7 of IBC

was within limitation?
(iii) Whether the application under Section 7 of IBC
was for an oblique purpose and, therefore, ought
not to have been admitted, more so, when
proceedings inter se parties for recovery of debt

were pending before various judicial fora?
ANALYSIS

27. Before we proceed to address the issues, we must
bear in mind that these proceedings emanate from an
application under sub-section (1) of Section 7 of IBC.
Page 31 of 57
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Section 7 falls in Part II of IBC. Section 4 (1) of IBC,
which falls in Part II, states that this Part shall apply to
matters relating to the insolvency and liquidation of
corporate debtors where the minimum amount of
default is one lakh rupees. The Proviso to sub-section (1)
of Section 4 provides that the Central Government may,
by notification, specify the minimum amount of default
of a higher value, which shall not be more than one
crore rupees. In exercise of that power, vide notification
th
dated 24 March 2020, the Central Government
specified one crore rupees as the minimum amount of
default for the purposes of the said section. Thus, a
default of one crore rupees or above, post notification
th
dated 24 March 2020, is the threshold at which Part II
of IBC applies. In the aforesaid context, we shall
examine as to what are those essential ingredients
which an application under sub-section (1) of Section 7
of IBC must satisfy.


Page 32 of 57
Civil Appeal No. 477/2022


ESSENTIAL INGREDIENTS FOR AN APPLICATION

UNDER SECTION 7(1) OF IBC

28. Sub-section (1) of Section 7 provides that an
application may be filed at the instance of a financial
creditor either by itself or jointly with other financial
creditors, or any other person on behalf of the financial
creditor, as may be specified by the Central
Government, when a default has occurred. Section 3
32
(12) of IBC defines default as non-payment of debt
when whole or any part or instalment of the amount of
debt has become due and payable and is not paid.
Explanation to sub-section (1) of Section 7 of IBC
clarifies that for the purposes of sub-section (1), a
default includes a default in respect of a financial debt
owed not only to the applicant financial creditor but to
any other financial creditor of the corporate debtor.
Therefore, the essential ingredients which an application
under sub-section (1) of Section 7 must satisfy are: (a)

32
Section 3. – In this Code, unless the context otherwise requires, -
(12) “default” means any non-payment of debt when whole or any part or
instalment of the amount of debt has become due and payable and is not paid by the
debtor or the corporate debtor, as the case may be;

Page 33 of 57
Civil Appeal No. 477/2022


the applicant must be a financial creditor; (b) there
must be a financial debt; (c) there must be a default in
respect of payment of financial debt owed not only to the
applicant financial creditor but to any other financial
creditor of the corporate debtor; and (d) the default must
not be of a value lower than the threshold specified
under Section 4 of IBC.
LIMITATION FOR FILING THE APPLICATION UNDER

SECTION 7
29. Even if the essential ingredients of an application
under Section 7 are satisfied, the application for
initiating CIRP is not to be entertained if it is not within
limitation. Section 238-A of IBC inserted by Act 26 of
2018 with effect from 06.06.2018 provides that the
provisions of 1963 Act would apply to proceedings or
appeals before the Adjudicating Authority, the NCLAT,
the Debt Recovery Tribunal or the Debt Recovery

Appellate Tribunal, as the case may be.
Page 34 of 57
Civil Appeal No. 477/2022


30. In B. K. Educational Services (P) Ltd. v. Parag
33
Gupta & Associates this Court held that the
definition of “default” in Section 3(12) of IBC uses the
expression “due and payable” followed by the expression
“and is not paid by the debtor or the corporate
debtor…”. It was held that when the expressions “due”
and “due and payable” occur in Sections 3 (11) and 3
(12) of IBC, they refer to a default which is non-payment
of a debt that is due in law i.e., such debt is not barred
by the law of limitation. Thus, the corporate insolvency
resolution process against a corporate debtor can only
be initiated either by a financial or operational creditor
in relation to debts which have not become time barred.
In addition to above, it was held that Article 137 of 1963
Act would be applicable to an application under Section
7 or 9 of IBC and that the right to sue accrues when
default occurs. Therefore, if the default has occurred
over three years prior to the date of filing of the

33
(2019) 11 SCC 633

Page 35 of 57
Civil Appeal No. 477/2022


application, the application would be barred under

Article 137 of 1963 Act.
31. In Sesh Nath Singh and Anr. v. Baidyabati
34
Sheoraphuli Cooperative Bank Ltd. and Anr. this
Court held that Section 238-A of IBC makes the
provisions of 1963 Act, as far as may be, applicable to
proceedings before NCLT and NCLAT, and since IBC
does not exclude the application of Sections 6 or 14 or
18 of 1963 Act to proceedings under IBC, the same
would be applicable to proceedings in NCLT/ NCLAT to
the extent feasible. In consequence, even if the default
had occurred more than three years prior to the date of
filing the application under Sections 7 or 9 of IBC, if
there had been acknowledgment of debt within three
years of filing the application, while the debt had not
become barred by time, the application would be within
limitation as the acknowledgment would extend the
35

period of limitation under Section 18 of 1963 Act.


34
(2021) 7 SCC 313
35
Dena Bank (Now Bank of Baroda) v. C. Shivakumar Raddy and another, (2021) 10 SCC 330

Page 36 of 57
Civil Appeal No. 477/2022


FORM AND MANNER OF SUCH APPLICATION
32. Sub-section (2) of Section 7 provides the procedure
to be adopted in making an application under sub-
section (1) of Section 7. According to sub-section (2) of
Section 7, the application under sub-section (1) of
Section 7 by a financial creditor is to be made in such
form and manner and accompanied with such fee as
36
may be prescribed .
33. In exercise of the powers conferred by clauses (c),
(d), (e) and (f) of sub-section (1) of Section 239 read with
Sections 7, 8, 9 and 10 of IBC, the Central Government
has notified the Insolvency and Bankruptcy (Application
37
to Adjudicating Authority) Rules, 2016 . Rule 4 thereof
provides that an application under Section 7 of IBC
shall be made in Form 1, accompanied with documents
and records required therein and as specified in the
Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations,
2016. Rule 10 thereof, with which we are not

36
Section 3 (26) - ‘prescribed’ means prescribed by rules made by the Central Government.
37
2016 Rules

Page 37 of 57
Civil Appeal No. 477/2022


concerned, provides for other procedural aspects

including fee.
34. As one of the issues i.e., issue (i), which arises for
our consideration, is whether the application was in
conformity with the Form prescribed, we deem it
appropriate to reproduce Form 1 below:

Form 1
[ See sub-rule (1) of Rule 4]
5
[ APPLICATION BY FINANCIAL CREDITOR(S) TO INITIATE CORPORATE
INSOLVENCY RESOLUTION PROCESS *UNDER CHAPTER II OF PART II/
UNDER CHAPTER IV OF PART II OF THE CODE
[*strike out whichever is not applicable]]
[Under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with
Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating
Authority) Rules, 2016]
[Date]
To,
The National Company Law Tribunal

[Address]
From,
[Names and addresses of the registered offices of the financial creditors]
In the matter of [name of the corporate debtor]
Subject : Application to initiate corporate insolvency resolution process in
the matter of [name of the corporate debtor] under the Insolvency and
Bankruptcy Code, 2016
Madam/Sir,
[Names of the financial creditor(s)], hereby submit this application to initiate
a corporate insolvency resolution process in the matter of [name of
corporate debtor]. The details for the purpose of this application are set out
below:

Page 38 of 57
Civil Appeal No. 477/2022

Page 39 of 57
Civil Appeal No. 477/2022

I, hereby certify that, to the best of my knowledge, [name of proposed
insolvency professional], is fully qualified and permitted to act as an
insolvency professional in accordance with the Insolvency and Bankruptcy
Code, 2016 and the associated rules and regulations.
7
[Name of the financial creditor] has paid the requisite fee for this
application through [state means of payment] on [date] and served a copy
of this application by registered post/speed post/by hand/electronic means
to the registered office of the corporate debtor and to the Board].
Yours sincerely,
Signature of person authorised to act on behalf of the financial creditor
Name in block letters
Position with or in relation to the financial creditor
Address of person signing
Instructions
Please attach the following to this application:
Annex I Copies of all documents referred to in this application.
Annex II Written communication by the proposed interim resolution
Page 40 of 57
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professional as set out in Form, 2.
Annex
III
Proof that the specified application fee has been paid.
Annex

IV
Where the application is made jointly, the particulars specified in
this form shall be furnished in respect of all the joint applicants
along with a copy of authorisation to the financial creditor to file
and act on this application on behalf of all the applicants.
8
[Annex
Proofs of serving a copy of the application ( a ) to the corporate

V

debtor, and ( b ) to the Board.]

RELEVANCE OF THE FORM

35. Statutory Form 1 under Rule 4 (1) of the 2016
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 proposed interim
resolution professional. Parts IV and V require
particulars of financial debt with documents, records
and evidence of default including the date on which
the default occurred. We are concerned with
compliance of Parts IV and V.
36. The purpose of providing the necessary
particulars in a prescribed form is to give a bird’s eye
Page 41 of 57
Civil Appeal No. 477/2022


view of the details of the corporate debtor, the financial
debt, the default and the date of default so that the
Adjudicating Authority can discard frivolous
applications at the threshold. This is clear from clause
(b) of sub-section (5) of Section 7 of IBC which
empowers the Adjudicating Authority to reject an
incomplete application. However, as per the proviso to
clause (b) of sub-section (5) of Section 7, if the
application is incomplete, the Adjudicating Authority is
required to give notice to the applicant to rectify the
defects within 7 days of receipt of such notice before
rejecting the application.
38
37. In Dena Bank , upon consideration of the
provisions of IBC and the Rules and Regulations
framed thereunder, this Court held that the provisions
of IBC and the Rules and Regulations framed
thereunder must be construed liberally and in a
purposive manner to further the objects of enactment
of the statute, and should not be given a narrow and

38
See Footnote 35

Page 42 of 57
Civil Appeal No. 477/2022


pedantic interpretation which defeats the purpose of
the Act. This Court on a careful reading of the
provisions of IBC, and particularly the provisions of
sub-sections (2) to (5) of Section 7 read with the 2016
Rules, held that there is no bar to the filing of
documents at any time until a final order either
admitting or dismissing the application has been
passed. It was also held that 14 days’ time, stipulated
in Section 7(4) to ascertain the existence of a default
and of curing the defects in 7 days of receipt of notice
under the proviso to sub-section (5) of Section 7, is
directory and not mandatory, and in an appropriate
case, the adjudicating authority may accept the cured
application even after the expiry of the aforesaid

period.
38. In E.S. Krishnamurthy & Ors v. Bharath Hi-
39
Tech Builders (P) Ltd. , after noticing the earlier
decisions, this Court held that to assess whether the
corporate debtor is in default, the adjudicating

39
(2022) 3 SCC 161, paragraphs 30 and 34
Page 43 of 57
Civil Appeal No. 477/2022


authority has to merely see the records of the
information utility or other evidence produced by the
financial creditor to satisfy itself that a default has
occurred. It is of no consequence that the debt is
disputed so long as the debt is due i.e., payable, unless
interdicted by some law or has not yet become due in
the sense that it is payable at some future date. It was
held that the adjudicating authority thus has only to
verify whether an application under sub-section (2) is
complete and whether a default above the specified

threshold has occurred.
39. In M. Suresh Kumar Reddy (supra), a decision
relied by the respondents, after considering the earlier
decisions, this Court clarified that the decision in
Vidharba Industries (supra), a decision relied upon
by the appellant, was confined to its own facts and
cannot be read and understood as taking a view
contrary to the one taken in Innoventive (supra) and
E. S. Krishnamurthy (supra) . Consequently, it was
held, once the Adjudicating Authority (NCLT) is
Page 44 of 57
Civil Appeal No. 477/2022


satisfied that a default has occurred, there is hardly
any discretion left with it to deny admission of the
40
application under Section 7 of IBC.
40. In our view, a conjoint reading of sub-sections (1),
(2) and (5) of Section 7 makes it clear that an
application under Section 7 of a financial creditor for
initiating CIRP of CD hinges on a default on part of CD
of financial debt of an amount exceeding the specified
threshold. The Form prescribed for making the
application inter alia serves the purpose of bringing out
the necessary ingredients for presentation of an
application under Section 7(1) of IBC. The purpose of
providing the date of default is to show that the debt is
due and payable i.e., it has not become time barred.
Therefore, in our view, if the application is
substantially in conformity with the prescribed Form
and discloses the necessary ingredients for making an
application under sub-section (1) of Section 7 and
provides the relevant materials/ information to

40
See paragraph 11 of M. Suresh Kumar Reddy (citation at Footnote 31)
Page 45 of 57
Civil Appeal No. 477/2022


substantiate those ingredients, the purpose of
adhering to the Form is served, and such application is
not liable to be rejected under clause (b) of sub-section
(5) of Section 7 of IBC on the ground of any
insignificant omission or error in the application. The
aforesaid view finds support from use of the expression
‘may’ before ‘reject’ in Section 7(5)(b) of IBC. This
means that if the Adjudicating Authority is satisfied
from the materials placed before it in the application
that all the necessary ingredients are satisfied for
presentation of an application under Section 7(1) of
IBC, it may not reject the application for an

insignificant omission or non-adherence to the Form.
41. In light of the aforesaid legal position, we will
consider the issues posited above.

ISSUE (I)
42. In the present case, there is no dispute about the
existence of financial debt and default. The dispute is
as regards the date of default. Date of default assumes
importance because it is the factor which determines
Page 46 of 57
Civil Appeal No. 477/2022


whether the application under sub-section (1) of Section
7 is within limitation or not. The argument on behalf of
the appellant that the application does not specify the
exact date of default but only the date on which the debt
was declared NPA and, therefore, was liable to be
rejected, in our view, is misconceived as the application
was comprehensively amended pursuant to the order of
this Court in the earlier round of litigation. The
amended application was taken on record by the order
of NCLAT dated 15.07.2021. Once the amended
application was accepted on record, it became part of
the record and had to be considered.
43. The argument that amendments were more
extensive than what was permitted by this Court cannot
be accepted considering the decision of this Court in
Dena Bank (supra) where the power of the Adjudicating
Authority to allow rectification of application and
acceptance of documents beyond the stipulated time
frame was recognized.
Page 47 of 57
Civil Appeal No. 477/2022


44. The amended application and the documents
placed gave the material particulars of how the debt was
restructured and fresh working capital consortium
agreements were entered into. In that context, the dates
on which the accounts were declared NPA were
portrayed as the date(s) of default. These NPA dates
were 28.5.2014, 30.6.2014, 10.10.2014 and 31.12.2014
for SBI, PNB, Corporation Bank and UCO Bank
respectively. The application also disclosed that on
30.09.2015, CD’s debt was disclosed in the balance
sheets of the year ending 31.03.2014 and 31.03.2015,
signed by one of its directors /officers.
45. What is important here is that CD and the
creditors undertook a debt restructuring exercise and in
connection therewith various Working Capital
Consortium agreements were executed and signed
acknowledging the existing debt, thereby giving it a
fresh lease of life. In that context, as to when the initial
default had occurred lost its relevance because, by
virtue of the restructuring exercise and subsequent
Page 48 of 57
Civil Appeal No. 477/2022


agreements, the existing debt got a fresh lease of life. In
such circumstances, the disclosure of NPA date(s) as the
date(s) of default was justified which, coupled with
acknowledgment in the balance sheets, served the
purpose of indicating that the debt was not time barred
as on 25.04.2018 i.e., the date of presentation of the
Section 7 application. We are therefore of the view that
the amended application under Section 7 disclosed all
the material particulars to fulfill the ingredients of an
application under Section 7(1) of IBC. Issue No.(i) is

decided in the aforesaid terms.
ISSUE (II)
46. On the issue as to whether the Section 7
application was within limitation, the application was
presented on 25.04.2018 i.e., within three years from
30.09.2015 i.e., the date on which CD’s balance sheets
for the year ending 31.03.2014 and 31.03.2015 were
signed. An acknowledgment of debt in the balance sheet
of the CD is considered sufficient to extend the period of
limitation if other conditions of a valid acknowledgment
Page 49 of 57
Civil Appeal No. 477/2022


41
are fulfilled . To wriggle out from the consequences of
the aforesaid acknowledgement, the appellant has
raised a plea that the balance sheets were not submitted
for approval of the members of CD and were not
authenticated by the person authorized. What
transpires from the record is that the balance sheets
were signed by one of the directors of CD and were
brought on record by CD itself in S.A. No.152 of 2016
for challenging the measures taken by the Banks under
42
the SARFAESI Act .
47. Section 18 of 1963 Act provides that where, before
the expiration of the prescribed period for a suit or
application in respect of any property or right, an
acknowledgement of liability in respect of such property
or right has been made in writing signed by the party
against whom such property or right is claimed, or by
any person through whom he derives his title or liability,
a fresh period of limitation shall be computed from the
time when the acknowledgement was so signed. Clause

41
Asset Reconstruction Company v. Bishal Jaiswal (See Footnote 30)

42
See: Paragraph 9 of Written Submissions on behalf SBI
Page 50 of 57
Civil Appeal No. 477/2022


(a) of the Explanation to Section 18 provides that an
acknowledgement may be sufficient though it omits to
specify the exact nature of the property or right, or avers
that the time for payment, delivery, performance or
enjoyment has not yet come or is accompanied by a
refusal to pay, deliver, perform or permit to enjoy, or is
coupled with a claim to set off, or is addressed to a
person other than a person entitled to the property or
right. Clause (b) of the said Explanation provides that
for the purposes of Section 18, the word ‘signed’ means
signed either personally or by an agent duly authorized
in this behalf. A director of a company can be
considered its agent for the purposes of Section 18 of
1963 Act.
48. As there appears no dispute that the director of CD
had signed the balance sheets and those were produced
by CD in proceedings before DRT, the acknowledgment
therein of the debt, albeit with a caveat that the recovery
matter is sub judice before DRT, in our view, would be
Page 51 of 57
Civil Appeal No. 477/2022


sufficient to serve as an acknowledgment within the

purview of Section 18 of 1963 Act.
49. Thus, we find no error in the view taken by NCLAT
that such acknowledgement had the effect of extending
the period of limitation by three years starting from
30.09.2015. Insofar as the claim that acknowledgment
was not made within three years from the date of default
is concerned, suffice it to say that from time-to-time
various Working Capital Consortium Agreements were
executed between CD and the Banks. As many as four
such agreements i.e., dated 18.03.2010, 30.03.2011,
18.04.2013 and 21.03.2014, were set up in the
amended application to indicate that CD availed fresh
credit facilities and in the process acknowledged its past
liability. In such circumstances, NCLAT was correct in
holding that the acknowledgment was within the period
of limitation and, therefore, the period of limitation
would run till 29.09.2018. In consequence, the Section
7 application filed on 25.04.2018 was within the period

of limitation as prescribed by Article 137.
Page 52 of 57
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50. At this stage, we shall deal with another submission
made on behalf of the appellant. According to the
appellant, NCLAT had observed that NPA date in respect
of credit facilities extended by SBI was shifted to the
year 2010 as per RBI master circular dated 01.07.2013,
therefore, if the date of NPA falls in the year 2010, the
acknowledgement in the balance sheet(s) made on
30.09.2015 would be beyond the period of three years.
Consequently, it would not extend the limitation period.
The aforesaid submission is out of context. NCLAT had
not observed that the date of default would fall in the
year 2010. Rather, NCLAT referred to the master
circular of RBI to indicate that the shifting of NPA date
to the year 2010 was merely for bank’s asset
classification. In our view, how a bank classifies its debt
for managing its balance sheet is not a factor
determining the starting point of limitation more so,
when the debt is restructured and is acknowledged in
fresh working capital consortium agreements entered for
availing credit facilities. What is relevant is that by
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virtue of execution of these working capital consortium
agreements the banks got a fresh lease of life for their
dues and based on those agreements, new NPA date(s)
became relevant as starting point for computing
limitation.
51. In Axis Bank Limited v. Naren Seth and
43
another , this Court held that a one-time settlement
proposal of the debtor can constitute a valid
acknowledgment. Likewise, in Dena Bank (supra) , this
Court held that an offer for one-time settlement of a live
claim, made within the period of limitation, can be
construed as an acknowledgment to attract Section 18
of 1963 Act. In light thereof, if CD had entered into
various working capital consortium agreements with the
Banks while availing further credit facilities and in the
process acknowledged its past debt, it would constitute
a valid acknowledgment for extending the limitation
period. Thus, the NPA dates, based on subsequent
working capital consortium agreements, coupled with

43
(2024) 1 SCC 679

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acknowledgment of debt(s) in the balance sheets signed
on 30.09.2015, extended the limitation period up to
29.09.2018, within which the Section 7 application
came to be filed.
52. Another argument that NPA date in the earlier
order of NCLT / NCLAT was found to be falling in the
year 2010 therefore the application was time barred, is
also worthy of rejection. This is because the earlier order
of NCLAT was set aside and, subsequently, the Section 7
application was comprehensively amended under order
of this Court which has attained finality. As a result,
there was no bar for NCLAT to return a fresh finding
regarding the date on which the account was declared
NPA. In consequence, we do not find any error in the
finding returned by NCLAT that the Section 7
application was within limitation. Issue No. (ii) is
decided accordingly.

ISSUE (III)
53. The next issue raised on behalf of the appellant is
that the application under Section 7 was filed with an
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oblique purpose to stall the proceedings initiated by the
Banks at other fora and to penalize CD for initiating
criminal proceedings against the Banks. In addition, it
is submitted on behalf of the appellant that a
counterclaim of Rs.1500 crores was set up, which was
more than the outstanding debt, and therefore, the
application under Section 7 of IBC was submitted to
avoid the consequences of those proceedings.
54. We do not find any substance in the aforesaid plea
as initiation of proceedings by a financial creditor under
other statutes does not bar filing of an application under
the provisions of IBC. Moreover, mere pendency of a
counterclaim for damages against a financial creditor
will not operate as a bar on the right of the financial
creditor to invoke the provisions of IBC.
55. Insofar as the institution and pendency of criminal
proceedings are concerned, they will be decided on their
own merits. Besides, mere allegations about commission
of offences by officers of the financial creditor cannot
stifle proceedings under IBC, particularly when those
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offences have no bearing on the existence of the

financial debt. Issue No. (iii) is decided in terms above.
CONCLUSION
56. In conclusion, we find no merit in the appeal. The
same is dismissed. Interim order, if any, is discharged.
57. Pending applications, if any, shall stand disposed of.


.....................................J.
(P. S. NARASIMHA)



...................................J.
(MANOJ MISRA)

New Delhi;
February 12, 2026
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