RAJENDRA NAROTTAM DAS SHETH VS. CHANDRA PRAKASH JAIN : CASE SUMMARY
The Supreme Court in Rajendra Narottam Das Sheth Vs. Chandra Prakash Jain (2021) SCC Online 843 approved the view taken by NCLAT in Palogix Infrastructure Pvt. Ltd. Vs. ICICI Bank Ltd. (2017) SCC Online NCLAT 266 in respect of institution of Section 7 IBC Application through power of attorney holder. The Supreme Court reiterated that Section 18 of Limitation Act is applicable on proceedings under IBC.
FACTS OF THE CASE
The Corporate Debtor was in business of setting up underground fiber network in some cities of Gujarat. Union Bank of India extended credit facility to the Corporate Debtor. Corporate Debtor defaulted in repayment of loan amount as such on 30.09.2014, the account of Corporate Debtor was declared NPA. Subsequent of that the Financial Creditor filed application under Section 19 of the Recovery of Debt due to Banks and Financial Institutions, 1993 for recovery of dues.
The Financial Creditor also filed Application under 7 of Insolvency and Bankruptcy Code, 2016 which was admitted on 01.06.2020. An appeal was filed before the NCLAT which was also dismissed.
FINDINGS OF THE SUPREME COURT
There were two issues involved – (i) whether application under Section 7 IBC filed through attorney holder is maintainable? (ii) whether application was barred by limitation?
The NCLAT in Palogix Infrastructure has held that “power of attorney holder” is not competent to file an application under Section 7 on behalf of the Financial Creditor. At the same time, NCLAT was of opinion that general authorization given to an officer of the Financial Creditor by means of a power of attorney, would not disentitle such officer to act an authorized representative of the Financial Creditor while filing application under Section 7 of the Code, merely because authorization was granted through power of attorney. NCLAT has further held in Palogix that if officer was authorized to sanction loans, Application filed by him under Section 7 cannot be rejected on the ground that there is no separate authorization. Corporate Debtor cannot take plea that while the officer has power to sanction loan, he has no power to recover loan or initiate CIRP. The Supreme Court approved the view taken in Palogix by the NCLAT.
The Supreme Court observed that in the present case Sh. Praveen Kumar Gupta has been given general authorization with respect to all business and affairs of the bank including commencement of legal proceedings before Court or Tribunal. Such authorization given through power of attorney does not impair Mr. Gupta’s ability to file an application under Section 7 of the Code.
It was contended before the Supreme Court that the date of default is shown as 30.09.2014 in the Section 7 Application. The Application was filed on 25.04.2019 as such Application was time barred.
The Supreme Court relied on Asset Reconstruction Company (India) Ltd Vs. Bishal Jaiswal & Anr ( 2021) 6 SCC 366 and Dena Bank Vs. C. ShivKumar Reddy & Anr (2021) SCC Online SC 543 and observed that non-furnishing of information by the Financial Creditor at the time of filing of application under Section 7 of the Code need not necessarily entail in dismissal of the application. An opportunity can be provided to the Financial Creditor to provide additional information required for satisfaction of the adjudicating authority.
The Financial Creditor has contended that Section 18 of the Limitation Act is applicable in view of Corporate Debtor acknowledging its debt by way of letters written in and after 2018 giving details of amount paid, acknowledging the amount outstanding and requesting consideration of one-time settlement proposal.
The Supreme Court observed that it is no more res integra that Section 18 of the Limitation Act is applicable to applications filed under Section 7 of the Code. In case debt is acknowledged within initial three years, a fresh period of limitation commences and application can be filed within extended period.
The Supreme Court observed that there are sufficient materials in the present case to justify enlargement of limitation according to Section 18 of Limitation, which has been considered by NCLT.
The Supreme Court dismissed the appeal.
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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.