Axis Bank Vs. Naren Sheth : The Supreme Court Reiterates That Documents Acknowledging Debt Can Be Admitted At Appellate Stage Under IBC
The Supreme Court in Axis Bank Ltd Vs. Naren Sheth (Civil Appeal No. 2085 of 2022) has reiterated that documents acknowledging the debt can be accepted at appellate stage.
BRIEF FACTS
Axis Bank entered into leave and license agreement with Universal Premises and Textiles Pvt. Ltd. for premises from ground to 10th floor in a building named Solaris C. Universal Premises executed a sale deed in favour of Rajput Retail Ltd. The Leave and License Agreements in favour of the appellant were duly acknowledged, reserved, and protected under the sale deed. Rajput Retails Ltd. availed credit facilities from State Bank of India and mortgaged land underneath Solaris C to secure credit facilities. Universal Premises and Textiles Pvt. and Rajput Retails Ltd. was merged and renamed Shreem Corporation Ltd. Axis Bank filed summary suits for recovery of security deposit.
The State Bank of India declared the account of the Shreem Corporation Ltd. NPA. State Bank of India filed Application for initiation of CIRP against Shreem Corporation Ltd. along with Application for condonation of delay of 1392 days. Later on additional affidavit was filed stating that the delay was only of 662 days in view of acknowledgement of debt. The NCLT condoned the delay of 662 days and passed an order of admission.
Axis Bank filed an appeal against the admission order before NCLAT which was dismissed. Aggrieved by the same Axis Bank filed an Appeal before the Supreme Court.
ARGUMENTS SUBMITTED
It was contended by the Axis Bank (Appellant ) that the Application was barred by Limitation. The loan was declared NPA on 28.06.2013 with effect on 31.03.2013. As such limitation would expire on 31.03.2016. The SBI relied on the balance sheet ending 31.03.2015,which extended the limitation to 31.03.2018. The application would have been barred by limitation on 31.03.2021.
It was argued by the Appellant that time to time the case has been improved by the SBI abusing the process of law. Two OTS proposals were produced before the Supreme Court for the first time which is not permissible under law. Additional documents submitted by the appellant suffers from various defects.
The SBI submitted that debt has been acknowledged time to time and right to initiate insolvency proceedings was never lost.
FINDINGS OF THE SUPREME COURT
The Supreme Court observed that limitation would have expired on 31.03.2016. But there were four major acknowledgments. (i) Balance Sheet ending at 31.03.2015 (ii) First OTS dated 16th March, 2017 (iii) Second OTS dated 1st January, 2018 (iv) Third OTS Proposal 16th May, 2019. The petition under Section 7 was filed on 22nd January, 2020 within three years from the date of the first, second and the third OTS proposals.
The issue before the Supreme Court was whether such OTS proposals could be considered which have been produced subsequently before NCLAT or the Supreme Court.
The Supreme Court relied on Dena Bank (Now Bank of Baroda) vs. C. Sivakumar Reddy (2021) 10 SCC 330 and Kotak Mahindra Bank Limited vs. Kew Precision Parts Private Limited and Ors (2 (2022) 9 SCC 364) wherein it has been held that documents acknowledging debt could be accepted even at the appellate stage.
The Supreme Court also held that Section 14 will have no application inasmuch as the proceedings under the SARFAESI Act before the DRT cannot be said to be before a Court or Tribunal having no jurisdiction. State Bank of India, being a Secured Creditor, would definitely have a right to invoke the power under the SARFAESI Act and the said proceedings cannot be said to be without jurisdiction. Therefore, no benefit under Section 14 would be admissible to State Bank of India in the present case.
The appeal was dismissed by the Supreme Court.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.