Case: Asset Reconstruction Company (India) Limited Vs. Tulip Star Hotels Limited &amp; Ors

2. The Respondent No.1, Tulip Star Hotels Limited and the Respondent No.2 Tulip Hotels Private Limited are the shareholders of the Corporate Debtor, V. Hotels Limited. The Respondent Nos. 1 and 2 each hold 50% share in the Corporate Debtor. Mr. Ajit B. Kerkar is the Managing Director of the Respondent No.1, Tulip Star Hotel Limited, Chairman of the Respondent No.2, Tulip Hotels Private Limited and also the Chairman of the Corporate Debtor.3. On or about 8th March 2002, a loan agreement was executed by and between a consortium of banks consisting of Bank of India, Punjab National Bank, Union Bank of India, Vijaya Bank, Canara Bank and Indian Bank, led by Bank of India (hereinafter referred to collectively as the Consortium) and the Corporate Debtor, pursuant to which the Consortium collectively sanctioned loan to the extent of Rs.129,00,00,000/- (Rupees One Hundred and Twenty-Nine Crore Only) to the Corporate Debtor.4. On 5th June 2003, the Corporate Debtor entered into an arrangement with Abu Dhabi Commercial Bank (ADCB) whereby ADCB agreed to advance USD 29,000,000/- to the Corporate Debtor for repayment of the loan taken by the Corporate Debtor from the Consortium under the loan agreement executed on 8th March 2002. It is stated that the Corporate Debtor repaid the amount disbursed by Bank of India to the Corporate Debtor under the said loan agreement from out of funds disbursed to the Corporate Debtor by ADCB, between August and December 2003.5. In August/ September 2008, a bank guarantee issued by Bank of India in favour of ADCB, on behalf of the Corporate Debtor was invoked by ADCB and Bank of India paid Rs.24,49,59,208/- (Twenty Four Crores Forty Nine Lakhs Fifty Nine Thousand Two Hundred and Eight) to ADCB under the Bank Guarantee.6. Around the same time, Bank of India, Punjab National Bank and Union Bank of India also converted their facility under the loan agreement into a non-fund-based bank guarantee.7. On 1st December 2008, the account of the Corporate Debtor in the Bank of India was classified as non-performing asset (NPA) and on 31st December 2008, an assignment agreement was executed by Bank of India assigning its receivables to the Appellant Financial Creditor.8. By a letter dated 7th February 2011 addressed to the Appellant, the Corporate Debtor proposed a settlement which is as follows:-(i) The Corporate Debtor would pay interest to the Appellant Financial Creditor at an average rate of 21% per annum at quarterly rests.(ii) The Corporate Debtor would pay a sum of Rs.9,02,00,000/- being 10% of the aggregate assigned debt to the Appellant Financial Creditor immediately on acceptance of the settlement.(iii) The Corporate Debtor proposed that the balance aggregate assigned debt of Rs.154,13,00,000/- along with interest accrued thereon from the date of the payment of the initial amount up to 30th September 2011 would be repaid in three equated monthly instalments beginning from 15th October 2011.9. On or about 10th February 2011, the Corporate Debtor submitted a revised proposal offering to pay interest on its outstanding dues to the Appellant at the rate of 22% per annum with monthly rests with effect from 1st July 2010. The Corporate Debtor also offered to pay Rs.10,00,00,000/- to the Appellant immediately upon acceptance of the revised proposal.10. The Corporate Debtor also agreed to pay the settlement amount of Rs.150,75,83,970/- being the aggregate assigned debt as on 30th June 2010 along with interest at the rate of 22% per annum compounded at monthly rests from 1st July 2010 till 30th September 2011.11. On or about 28th February 2011 the parties entered into a Settlement Agreement, the key terms whereof were as follows:-(i) The Corporate Debtor agreed to pay the settlement amount of Rs.150,75,83,970/- (Rupees One Hundred Fifty Crores Seventy-Five Lakhs Eighty-three Thousand Nine Hundred and Seventy Only) being the Aggregate amount in default as on 30th June 2010 along with the accrued interest at the rate of 22% per annum to be compounded at monthly rests from 1st July 2010 till 30th September 2011.(ii) Rs. 10,00,00,000/- (Rupees Ten Crore Only) would be paid as upfront payment upon execution of the Settlement Agreement.(iii) The balance amount after adjusting the upfront payment of Rs.10,00,00,000/- (Rupees Ten Crore Only) would be repaid on or before 30th September 2011.12. On 12th September 2011, the Corporate Debtor addressed a letter to the Appellant, seeking an extension of time till 30th September 2012 to pay its balance outstanding dues towards principal and interest. The Corporate Debtor acknowledged that its aggregate outstanding liability towards principal and interest to the Appellant was Rs.176,83,00,000/-. The Corporate Debtor offered to make an interim payment of Rs.15,00,00,000/- (Rupees Fifteen Crores Only) by 31st December 2011. On 29th September 2011, the agreement between the Corporate Debtor and the Appellant was modified.13. On 30th December 2011, the Appellant accepted the request of the Corporate Debtor for extension, subject to the condition that the Corporate Debtor would pay Rs.15,00,00,000/- (Rupees Fifteen Crores Only) by 31st December 2011, and the balance portion of the aggregate assigned debt totalling Rs.150,75,83,970/-, outstanding as on 30th June 2010, along with accrued interest at the rate of 22% per annum, to be compounded at monthly rests from 1st July 2010 till the date of payment, that is, 31st March 2012.14. On 17th March 2012, the Corporate Debtor confirmed that the aggregate assigned debt outstanding as on 31st March 2012 was Rs.192,89,46,697/- and requested for a further extension of time from 31st March 2012 to 31st December 2012 to pay the outstanding amounts.15. On 6th August 2012, the Appellant accepted the aforesaid extension request and agreed to the extension for repayment of the aggregate assigned debt outstanding as on 30th September 2012.16. On 10th September 2012, the Corporate Debtor sought further extension till 31st March 2013 for payment of outstanding principal and interest aggregating to Rs.211,35,16,073/-. On 5th December 2012, the Appellant accepted the extension subject to payment of processing fee of Rs.25,00,000/-.17. On 6th April 2013, the Corporate Debtor again sought extension of the date for repayment of the then outstanding amount. The Corporate Debtor acknowledged the outstanding aggregate assigned debt (inclusive of principal and interest) which had increased to Rs.239,88,27,673/- as on 31st March 2013. The Corporate Debtor offered to make an interim payment of Rs.91,00,00,000/- (Indian Rupees Ninety One Crores Only) by 31st August 2013 and the balance outstanding amounts by 30th September 2013.18. On 19th April 2013, the Corporate Debtor paid Rs.17,50,00,000/- to the Appellant, towards part repayment of the aggregate assigned debt. On 29th May 2013, the Appellant again accepted the request of the Corporate Debtor for extension of time.19. Ultimately, on 17th June 2013, the Appellant revoked the settlement and in terms of the default obligations under the Settlement Agreement, the rate of interest under the Deed of Variation was revised to 22%. By its letter dated 1st July 2013, the Corporate Debtor acknowledged its obligation to repay the aggregate assigned debt inclusive of interest.20. On 10th July 2013, the Appellant sent the Corporate Debtor a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) in order to enforce security interests against the Corporate Debtor. On 14th October 2013, the Appellant, through its authorized officer, issued a possession notice under Section 13(4) of the SARFAESI Act.21. On 6th May 2014, the Appellant invoked the personal guarantee of Mr. Ajit Kerkar, Managing Director of the Corporate Debtor. The aggregate assigned debt as on 6th May 2014 of principal and interest at 22% per annum was Rs.235,46,34,381/-.22. The Corporate Debtor apparently acknowledged its liabilities towards the Appellant in its Financial Statements from 2008-09 to 2016-17.23. The Appellant has filed an application to bring on record additional documents which were part of the records below including the copies of the financial statements.24. Mr. Neeraj Kishan Kaul, Senior Advocate appearing on behalf of the Appellant, rightly submitted that the Financial Statements provide a true and fair view of the state of affairs of a company in view of Sections 128 and 129 read with Section 134 of the Companies Act 2013 as also Sections 210, 211, 215, 216 and 217 of the Companies Act, 1956.25. On 3rd April 2018, the Appellant, as Financial Creditor, filed an application under Section 7(2) of the IBC in the National Company Law Tribunal (NCLT), Mumbai for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor which was registered and numbered CP(IB) No.532 of 2018.26. The Corporate Debtor filed a Miscellaneous Application being Misc. App. No.693 of 2018 in CP (IB) No.532 of 2018 before the NCLT, Mumbai praying for dismissal of the application of the Appellant under Section 7(2) of the IBC, inter alia, contending that the application was barred by limitation. By an order dated 1st May 2019, the Adjudicating Authority (NCLT), Mumbai dismissed the said Miscellaneous Application filed by the Corporate Debtor.27. By an order dated 31st May 2019, the Adjudicating Authority (NCLT) admitted the said application under Section 7(2) of the IBC and appointed one Mr. Anish Nanavaty as the Interim Resolution Professional (IRP). The Committee of Creditors confirmed the appointment of Mr. Anish Nanavaty as the Resolution Professional of the Corporate Debtor.28. The Corporate Debtor filed an appeal being Company Appeal (AT) (Insolvency) No.525 of 2019 before NCLAT against the order dated 1st May 2019, dismissing the Miscellaneous Application filed by the Corporate Debtor, seeking dismissal of the application of the Appellant Financial Creditor under Section 7(2) of the IBC.29. The shareholders of the Corporate Debtor, that is, the Respondent No.1, Tulip Star Hotels Limited and the Respondent No.2, Tulip Hotels Private Limited, filed an appeal being Company Appeal (AT) (Insolvency) No.627 of 2019 in the NCLAT against the order dated 31st May of the Adjudicating Authority, admitting the application of the Appellant under Section 7(5)(a) of the IBC.30. Both the appeals have been allowed by the common judgment of the Appellate Tribunal (NCLAT) dated 11th December 2019, impugned in these appeals.

Reasoning:
39. As held by this Court in Innoventive Industries Ltd. v. ICICI Bank and Anr (2018) 1 SCC 407 ., the Adjudicating Authority, considering an application under Section 7 of the IBC, is only required to see if there is the existence of a debt and default. Any dispute with regard to the quantum of debt is immaterial. The relevant part of the judgment of this Court in Innoventive Industries Ltd. (supra) is set out hereinbelow:-29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing—i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to 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 matter 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 is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.41. In Industrial Credit & Development Syndicate (supra), this Court held :-6. In Venkatadri Appa Row v. Parthasarathi Appa Row [(1920-21) 48 IA 150 : AIR 1922 PC 233] the Judicial Committee of the Privy Council had held that upon taking an account of principal and interest due, the ordinary rule with regard to payments by the debtor unappropriated either to principal or interest is that they are first to be applied to the discharge of the interest. This Court in Meghraj v. Bayabai [(1969) 2 SCC 274 : (1970) 1 SCR 523 ] reiterated the position of law and held that the normal rule was that in the case of a debt due with interest, any payment made by the debtor was in the first instance to be applied towards satisfaction of interest and thereafter to the principal. It was for the debtor to plead and prove the agreement, if any, that the amounts paid or deposited in the Court by him were accepted by the creditor/decree-holder subject to the condition imposed by him. …42. Even otherwise, in this case, the quantum of debt was well in excess of Rs. 1 crore and many times in excess of Rs.1 lakh, being the threshold amount under the IBC for initiation of CIRP proceedings at the material time. Subsequently, in 2020, the threshold limit was enhanced to Rs.1 crore.43. In our view, the NCLAT erred in law in holding that the Books of Account of a company could not be treated as acknowledgement of liability in respect of debt payable to a financial creditor.56. In Swiss Ribbons Private Limited & Anr. v. Union of India and Ors. (2019) 4 SCC 17,  authored by Nariman, J. this Court observed: -28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtors assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.57. IBC has overriding effect over other laws. Section 238 of the IBC provides that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law, for the time being in force, or any other instrument, having effect by virtue of such law.58. Unlike coercive recovery litigation, the Corporate Insolvency Resolution Process under the IBC is not adversarial to the interests of the Corporate Debtor, as observed by this Court in Swiss Ribbons Private Limited v. Union of India (supra).62. On a careful reading of the provisions of the IBC and in particular the provisions of Section 7(2) to (5) of the IBC read with the 2016 Adjudicating Authority Rules, 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.63. The time stipulation of fourteen days in Section 7(4) to ascertain the existence of a default is apparently directory not mandatory. The proviso inserted by amendment with effect from 16th August 2019 provides that if the Adjudicating Authority has not ascertained the default and passed an order under sub-section (5) of Section 7 of the IBC within the aforesaid time, it shall record its reasons in writing for not doing so. No other penalty is stipulated.64. Furthermore, the proviso to Section 7(5)(b) of the IBC requires the Adjudicating Authority to give notice to an applicant, to rectify the defect in its application within seven days of receipt of such notice from the Adjudicating Authority, before rejecting its application under Clause (b) of sub-section (5) of Section 7 of the IBC. When the Adjudicating Authority calls upon the applicant to cure some defects, that defect has to be rectified within seven days. However, in the absence of any prescribed penalty in the IBC for inability to cure the defects in an application within seven days from the date of receipt of notice, in an appropriate case, the Adjudicating Authority may accept the cured application, even after expiry of seven days, for the ends of justice.67. In Sesh Nath Singh & Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. 2021 SCC Online SC 244, authored by one of us (Indira Banerjee, J.), this Court held:-91. Legislature has in its wisdom chosen not to make the provisions of the Limitation Act verbatim applicable to proceedings in NCLT/NCLAT, but consciously used the words as far as may be. The words as far as may be are not meant to be otiose. Those words are to be understood in the sense in which they best harmonise with the subject matter of the legislation and the object which the Legislature has in view. The Courts would not give an interpretation to those words which would frustrate the purposes of making the Limitation Act applicable to proceedings in the NCLT/NCLAT as far as may be.xxx xxx xxx94. The use of words as far as may be, occurring in Section 238A of the IBC tones down the rigour of the words shall in the aforesaid Section which is normally considered as mandatory. The expression as far as may be is indicative of the fact that all or any of the provisions of the Limitation Act may not apply to proceedings before the Adjudicating Authority (NCLT) or the Appellate authority (NCLAT) if they are patently inconsistent with some provisions of the IBC. At the same time, the words as far as may be cannot be construed as a total exclusion of the requirements of the basic principles of Section 14 of the Limitation Act, but permits a wider, more liberal, contextual and purposive interpretation by necessary modification, which is in harmony with the principles of the said Section.68. There is no specific period of limitation prescribed in the Limitation Act, 1963, for an application under the IBC, before the Adjudicating Authority (NCLT). An application for which no period of limitation is provided anywhere else in the Schedule to the Limitation Act, is governed by Article 137 of the Schedule to the said Act. Under Article 137 of the Schedule to the Limitation Act, the period of limitation prescribed for such an application is three years from the date of accrual of the right to apply.69. There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. In Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. (2019) 10 SCC 572  authored by Nariman, J. this Court held:-6. …...The present case being an application which is filed under Section 7, would fall only within the residuary Article 137.70. In B. K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633,  this Court speaking through Nariman, J. held:-42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.71. In Jignesh Shah v. Union of India (2019) 10 SCC 750  this Court speaking through Nariman, J. reiterated the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC was three years from the date of accrual of the right to sue, that is, the date of default.72. In Radha Exports (India) (P) Ltd. v. K.P. Jayaram (2020) 10 SCC 538,  this Court held:-32. The proposition of law which emerges from Innoventive Industries Ltd. [Innoventive Industries Ltd. v. Icici Bank, (2018) 1 SCC 407  : (2018) 1 SCC (Civ) 356] is that the insolvency resolution process begins when a default takes place. In other words, once a debt or even part thereof becomes due and payable, the resolution process begins. Section 3(11) defines debt as a liability or obligation in respect of a claim and the claim means a right to payment even if it is disputed. The Code gets triggered the moment default is of Rs 1,00,000 or more. Once the adjudicating authority is satisfied that a default has occurred, the application must be admitted, unless it is otherwise incomplete and not in accordance with the rules. The judgment is however, not an authority for the proposition that a petition under Section 7 IBC has to be admitted, even if the claim is ex facie barred by limitation.33. On the other hand, in B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates [B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633  : (2018) 5 SCC (Civ) 528] , this Court held : (SCC p. 664, para 42)42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.35. It was for the applicant invoking the corporate insolvency resolution process, to prima facie show the existence in his favour, of a legally recoverable debt. In other words, the respondent had to show that the debt is not barred by limitation, which they failed to do.73. In Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd. (2020) 15 SCC 1,  relied upon by the Respondents, this Court, speaking through Dinesh Maheshwari, J., reiterated that the period of limitation for an application seeking initiation of CIRP under Section 7 of the IBC, was governed by Article 137 of the Limitation Act, 1963 and was, therefore, three years from the date when the right to apply accrued, i.e., the date when default occurred. In Babulal Vardharji Gurjar (supra), this Court observed and held:-35. Apart from the above and even if it be assumed that the principles relating to acknowledgment as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said provision and principles come in operation in the present case nor do they enure to the benefit of Respondent 2 for the fundamental reason that in the application made before NCLT, Respondent 2 specifically stated the date of default as 8-7-2011 being the date of NPA. It remains indisputable that neither has any other date of default been stated in the application nor has any suggestion about any acknowledgment been made. As noticed, even in Part V of the application, Respondent 2 was required to state the particulars of financial debt with documents and evidence on record. In the variety of descriptions which could have been given by the applicant in the said Part V of the application and even in residuary Point 8 therein, nothing was at all stated at any place about the so-called acknowledgment or any other date of default.35.1. Therefore, on the admitted fact situation of the present case, where only the date of default as 8-7-2011 has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgment or any other date of default, in our view, the submissions sought to be developed on behalf of Respondent 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, Respondent 2 never came out with any pleading other than stating the date of default as 8-7-2011 in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgment. In this view of the matter, reliance on the decision in Mahabir Cold Storage 1991 Supp (1) SCC 402 does not advance the cause of Respondent 2.36. The submissions made on behalf of the respondents that the rules of limitation are not meant to destroy the rights of the parties and reference to the decision in N. Balakrishnan (1998) 7 SCC 123  are also misplaced. Application of the rules of limitation to CIRP (by virtue of Section 238-A of the Code read with the above referred consistent decisions of this Court) does not, in any manner, deal with any of the rights of Respondent 2; it only bars recourse to the particular remedy of initiation of CIRP under the Code. Equally, the other submissions made on behalf of the respondents about any stringent application of the law of limitation which was introduced to the Code only after filing of the application by Respondent 2; or about the so-called prejudice likely to be caused to other banks and financial institutions are also of no substance, particularly in the light of the principles laid down and consistently followed by this Court right from the decision in B.K. Educational Services (2019) 11 SCC 633 . These contentions have only been noted to be rejected. Needless to add that when the application made by Respondent 2 for CIRP is barred by limitation, no proceedings undertaken therein after the order of admission could be of any effect. All such proceedings remain non est and could only be annulled.76. There can be no dispute with the proposition of law laid down in Babulal Vardharji Gurjar (supra) that limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. However, as observed above, an application in a statutory form cannot be judged in the manner of a plaint in a suit. Documents filed along with the application, or later, and subsequent affidavits and applications would have to be construed as part of the pleadings.77. The judgment of this Court in Babulal Vardharji Gurjar (supra) was rendered in the facts of the aforesaid case, where the date of default had been mentioned as 8.7.2011 being the date of N.P.A. and it remained undisputed that there had neither been any other date of default stated in the application nor had any suggestion about any acknowledgement been made.78. In the backdrop of the aforesaid facts, this court observed that even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration, in view of the averments regarding default therein and for want of any other averment with regard to acknowledgment.79. It is well settled, that a judgment is a precedent for the issue of law that is raised and decided and not observations made in the facts of any particular case. To quote V. Sudhish Pai in Constitutional Supremacy-A Revisit, Judicial utterances/pronouncements are in the setting of the facts of a particular case. To interpret words and provisions of a statute it may become necessary for judges to embark upon lengthy discussions, but such discussion is meant to explain not define. Judges interpret statutes, their words are not to be interpreted as statutes. The aforesaid passage was extracted and incorporated as part of the judgment of this Court in Sesh Nath Singh (supra).80. Babulal Vardharji Gurjar (supra) is not an authority for the proposition that the Books of Accounts of a Corporate Debtor could not be treated as acknowledgement of liability to a Financial Creditor. Nor does the judgment lay down the proposition that any affidavits or documents filed during the pendency of the proceedings cannot be taken into consideration.81. In Sesh Nath Singh (supra) this Court held that the IBC does not exclude the application of Section 14 or 18 or any other provision of the Limitation Act. There is, therefore, no reason to suppose that Sections 14 or 18 of the Limitation Act do not apply to proceedings under Section 7 or Section 9 of the IBC. In Laxmi Pat Surana v. Union Bank of India (2021) 8 SCC 481  this Court speaking through Khanwilkar J. held that there was no reason to exclude the effect of Section 18 of the Limitation Act to proceedings initiated under the IBC. In Bishal Jaiswal (supra), this Court, speaking through Nariman J. relied, inter alia, on Sesh Nath Singh (supra) and Laxmi Pat Surana (supra) and held that the question of applicability of Section 18 of the Limitation Act to proceedings under the IBC was no longer res integra.84. In Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others AIR 1961 SC 1236 , this Court held:-6. It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.85. It is well settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act. In Bishal Jaiswal (supra) authored by Nariman, J. this Court quoted with approval the judgments, inter alia, of Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff 1961 SCC Cal 128: AIR 1962 Cal 115,  and Pandem Tea Co. AIR 1974 Cal 170  Ltd., the judgment of the Delhi High Court in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana ILR (1972) 2 Del 712 and the judgment of Karnataka High Court in Hegde Golay Ltd. v. State Bank of India 1985 SCC Kar 290 : ILR 1987 Kar 2673 and held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt.86. In Bengal Silk Mills Co. (supra), the Calcutta High Court held:-9 I am unable to agree with the reasoning of the Nagpur decision that a balance-sheet does not save limitation because it is drawn up under a duty to set out the claims made on the company and not with the intention of acknowledging liability. The balance-sheet contains admissions of liability; the agent of the company who makes and signs it intends to make those admissions. The admissions do not cease to be acknowledgements of liability merely on the ground that they were made in discharge of a statutory duty. I notice that in the Nagpur case the balance- sheet had been signed by a director and had not been passed either by the Board of Directors or by the company at its annual general meeting and it seems that the actual decision may be distinguished on the ground that the balance-sheet was not made or signed by a duly authorized agent of the company.11. To come under section 19 an acknowledgement of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance-sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgement in respect of a specialty debt under section 5 of the Civil Procedure Act, 1833 (3 and 4 Will — 4c. 42), see Re : Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., [1928] Ch. 836…….87. In Re Pandem Tea Co. Ltd. (supra), Sabyasachi Mukharji J. held:-Now the question is whether the statements, which are contained in the profits and loss accounts and the assets and liabilities side indicating the liability of the petitioning creditor along with the statement of the Directors made to the shareholders as Directors report should be read together and if so whether reading these two statements together these amount to an acknowledgement as contemplated under Section 18 of the Limitation Act, 1963, or Section 19 of the Limitation Act, 1908. In my opinion, both these statements have to be read together. The balance-sheet is meant to be presented and passed by the shareholders and is generally accompanied by the Directors report to the shareholders. Therefore, in understanding the balance-sheets and in explaining the statements in the balance-sheets, the balance- sheets together with the Directors report must be taken together to find out the true meaning and purport of the statements. Counsel appearing for petitioning creditor contended that under the statute the balance-sheet was a separate document and as such if there was unequivocal acknowledgement on the balance-sheet the statement of the Directors report should not be taken into consideration. It is true the balance-sheet is a statutory document and perhaps is a separate document but the balance-sheet not confirmed or passed by the shareholders cannot be accepted as correct. Therefore, in order to validate the balance-sheet, it must be duly passed by the shareholders at the appropriate meeting and in order to do so it must be accompanied by a report, if any, made by the Directors. Therefore, even though the balance-sheet may be a separate document these two documents in the facts and circumstances of the case should be read together and should be construed together. It was held by the Supreme Court in the case of L.C. Mills v. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67  : AIR 1971 SC 1482 , that it was clear that the statement on which the plea of acknowledgement was founded should relate to a subsisting liability as the section required and it should be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay for an acknowledgement did not create a new right of action but merely extended the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question must, however, relate to a present subsisting liability and indicate the existence of a jural relationship between the parties such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not, however, be in express terms and could be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course did not mean that where a statement was made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. In order to find out the intention of the document by which acknowledgement was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole. …88. In South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana (supra), the Delhi High Court observed:-46. Shri Rameshwar Dial argued that statements in the balance-sheet of a company cannot amount to acknowledgement of liability because the balance-sheet is made under compulsion of the provisions in the Companies Act. There is no force in this argument. In the first place, section 18 of the Limitation Act, 1963, requires only that the acknowledgement of liability must have been made in writing, but it does not prescribe that the writing should be in any particular kind of document. So, the fact that the writing is contained in a balance-sheet is immaterial. In the second place, it is true that section 131 of the Companies Act, 1913 (section 210 of the Companies Act, 1956) makes it compulsory that an annual balance sheet should be prepared and placed before the Company by the Directors, and section 132 (section 211 of the Companies Act, 1956) requires that the balance-sheet should contain a summary, inter alia, of the current liabilities of the company. But, as pointed out by Bachawat J. in Bengal Silk Mills v. Ismail Golam Hossain Ariff, AIR 1962 Cal 115  although there was statutory compulsion to prepare the annual balance- sheet, there was no compulsion to make any particular admission, and a document is not taken out of the purview of section 18 of the Indian Limitation Act, 1963 (section 19 of the Indian Limitation Act, 1908) merely on the ground that it is prepared under compulsion of law or in discharge of statutory duty. Reference may also be made to the decisions in Raja of Vizianagram v. Vizianagram Mining Co. Ltd., AIR 1952 Mad 136,  Jones v. Bellgrove Properties Ltd., (1949) 1 All ER 498; and Lahore Enamelling and Stamping Co. v. A.K. Bhalla, AIR 1958 Punj 341, in which statements in balance-sheets of companies were held to amount to acknowledgements of liability of the companies.47. Shri Rameshwar Dial referred to the decision of the Privy Council in Consolidated Agencies Ltd. v. Bertram Ltd., (1964) 3 All ER 282. We shall advert to this decision presently when we deal with another argument of Shri Rameshwar Dial, and it is sufficient to state so far as the argument under consideration is concerned that even in this decision of the Privy Council it has been recognised that balance-sheets could in certain circumstances amount to acknowledgements of liability. It cannot, therefore, be said as a general proposition of law that statements in balance-sheets of a company cannot operate at all as acknowledgements of liability as contended by Shri Rameshwar Dial.90. In Reliance Asset Reconstruction Co. Ltd. v. Hotel Poonja International Pvt. Ltd. 2021 SCC Online SC 289, the Appellant had relied on two documents in the Paper Book, that is, (i) the Balance Sheet of the Corporate Debtor dated 16th August, 2017 and (ii) a letter dated 23rd April, 2019 issued by the Corporate Debtor to contend that the proceedings under Section 7 of the IBC were not barred by limitation, as limitation would start running afresh for a period of three years from the respective dates of those documents in acknowledgment of liability.91. This Court, however, did not accept the balance sheet dated 16th August, 2017 and the letter dated 23rd April, 2019 in the special facts and circumstances of the case where it could not be ascertained if the documents had been signed before the expiry of the prescribed period of limitation. This Court also found that the two documents could not be construed as admission that amounted to acknowledgement of the jural relationship and the existence of liability, since the balance sheet dated 16th August, 2017 did not acknowledge or admit any liability. Rather the Corporate Debtor had disputed and denied its liability. Similarly, the letter dated 23rd April, 2019 was also found not be an acknowledgment or admission of liability. On the other hand, the language of the letter made it absolutely clear that the liability had in fact been denied.92. Significantly, in Reliance Asset Reconstruction (supra), the loan had been sanctioned by Vijaya Bank in May 1986. The loan amount was declared NPA on 1st April 1993, an original application moved under the Debt Recovery Act was compromised in 2001 and the DRT had issued a Recovery Certificate in May 2003. Vijaya Bank assigned its Reliance Asset Reconstruction in May 2011 after which amended Recovery Certificate was issued in December 2012. The petition under Section 7 of the IBC was, however filed on 27th July 2018.94. In Lakshmirattan Cotton Mills Co. Ltd. v. Aluminium Corpn. of India Ltd. (1971) 1 SCC 67,  this Court held:-8. Section 19(1) of the Limitation Act, 1908, provides that where, before the expiration of the period prescribed for a suit 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, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. The expression signed here means not only signed personally by such a party, but also by an agent duly authorised in that behalf. Explanation 1 to the section then provides that an acknowledgment would be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment has not yet come, or is accompanied by a refusal to pay or is coupled with a claim to a set-off, or is addressed to a person other than the person entitled to the property or right. The new Act of 1963, contains in Section 18 substantially similar provisions.9. It is clear that the statement on which the plea of acknowledgment is founded must relate to a subsisting liability as the section requires that it must be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay, for, an acknowledgment does not create a new right of action but merely extends the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence of jural relationship between the parties, such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not be in express terms and can be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course does not mean that where a statement is made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. (See Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria [1962 (1) SCR 140 ] and Tilak Ram v. Nathu [AIR 1967 SC 935  at 938, 939] ). As Fry, L.J., Green v. Humphreys [(1884) 26 Ch D 474 at 481] said an acknowledgment is an admission by the writer that there is a debt owing by him, either to the receiver of the letter or to some other person on whose behalf the letter is received but it is not enough that he refers to a debt as being due from somebody. In order to take the case out of the statute there must upon the fair construction of the letter, read in the light of the surrounding circumstances, be an admission that the writer owes the debt. As already stated, the person making the acknowledgment can be both the debtor himself as also a person duly authorised by him to make the admission. In Khan Bahadur Shapoor Fredoom Mazda case the Court accepted a statement in a letter by a mortgagor to a second mortgagee to save the mortgaged property from being sold away at a cheap price at the instance of the prior mortgagee by himself purchasing it as one amounting to an admission of the jural relationship of a mortgagor and mortgagee, and therefore, to an acknowledgment within Section 19. Also, an agreement of reference to arbitration containing an unqualified admission that whoever on account should be proved to be the debtor would pay to the other has been held to amount to an acknowledgment. Such an admission is not subject to the condition that before the agreement should operate as an acknowledgment, the liability must be ascertained by the arbitrator. The acknowledgment operates whether the arbitrator acts or not. (See Tejpal Saraogi v. Lallanjee Jain [ CA No. 766 of 1962, decided on February, 8, 1965], approving Abdul Rahim Oosman & Co. v. Ojamshee Prushottamdas & Co. [1928 ILR 56 Cal 639].95. In Jignesh Shah and Another v. Union of India (supra), this Court relied upon a judgment of the Patna High Court in Ferro Alloys Corporation Limited v. Rajhans Steel Limited (1999) SCC Online Pat 1196, and held in effect that an application under Section 7 or 9 of the IBC may be time barred, even though some other recovery proceedings might have been instituted earlier, well within the period of limitation, in respect of the same debt. However, it would be a different matter, if the applicant had approached the Adjudicating Authority after obtaining a final order and/or decree in the recovery proceedings, if the decree remained unsatisfied. This Court held that a decree and/or final adjudication would give rise to a fresh period of limitation for initiation of the Corporate Insolvency Resolution Process.96. In Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy and Another (2021) 10 SCC 330,  this Court held:-138. While it is true that default in payment of a debt triggers the right to initiate the corporate resolution process, and a petition under Section 7 or 9 IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238-A IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a petition in the NCLT is condonable under Section 5 of the Limitation Act unlike delay in filing a suit. Furthermore, as observed above Sections 14 and 18 of the Limitation Act are also applicable to proceedings under the IBC.139. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of one-time settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC 572  : (2020) 1 SCC (Civ) 1] cited by Mr Shivshankar, this Court had no occasion to consider any proposal for one-time settlement. Be that as it may, the balance sheets and financial statements of the corporate debtor for 2016-2017, as observed above, constitute acknowledgment of liability which extended the limitation by three years, apart from the fact that a certificate of recovery was issued in favour of the appellant Bank in May 2017. The NCLT rightly admitted the application by its order dated 21-3-2019 [Dena Bank v. Kavveri Telecom Infrastructure Ltd., 2019 SCC OnLine NCLT 7881] .140. To sum up, in our considered opinion an application under Section 7 IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the corporate debtor as NPA, if there were an acknowledgment of the debt by the corporate debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years.142. There is no bar in law to the amendment of pleadings in an application under Section 7 IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 IBC in Form 1. In the absence of any express provision which either prohibits or sets a time-limit for filing of additional documents, it cannot be said that the adjudicating authority committed any illegality or error in permitting the appellant Bank to file additional documents. Needless however, to mention that depending on the facts and circumstances of the case, when there is inordinate delay, the adjudicating authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order. In our considered view, the decision of the adjudicating authority to entertain and/or to allow the request of the appellant Bank for the filing of additional documents with supporting pleadings, and to consider such documents and pleadings did not call for interference in appeal.97. To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years.98. In this case, the amount of the Corporate Debtor was declared NPA on 1st December 2008. By a letter dated 7th February, 2011, written well within three years, the Corporate Debtor acknowledged its liability and proposed a settlement. This was followed by several requests of extension of time to make payment and revised settlements. On 6th April, 2013, the Corporate Debtor sought extension of time to pay Rs.239,88,27,673 outstanding as on 31st March 2013. On 19th April, 2013, the Corporate Debtor made payment of Rs.17,50,00,000/-. On 1st July, 2013, the Corporate Debtor acknowledged its liability – this was after the Appellant Financial Creditor revoked the settlement invoking the default clause. The Corporate Debtor acknowledged its liabilities in its financial statements from 2008-09 till 2016-17. The application under Section 7(2) of the IBC was filed on 3rd April 2018, well within the extended period of limitation.