Plea Filed u/s 95 on 10.08.2021 Was Within Limitation Due to Debt Acknowledgement and SC’s Exclusion of COVID Period

Case Details: Shrenik Ashokbhai Morakhia v. Reliance Asset Reconstruction Company Ltd. - [2024] 163 taxmann.com 459 (SC)

Judiciary and Counsel Details

• Prashant Kumar Mishra & K.V. Viswanathan, JJ.
• Pranjit Bhattacharya, Raj Sarit Khare, Advs. & Vaibhav Niti, AOR for the Appellant.
• Bharat Sood, Rishi Maheshari, Anne Mathew, Miranda Solaman, Advs. & P.S. Sudheer, AOR for the Respondent.

Facts of the Case

In the instant case, the corporate debtor obtained a credit facility from the original lender, the bank, in which the appellant, as a personal guarantor, executed a joint deed of guarantee in favour of the bank.

Meanwhile, the corporate debtor’s account was declared NPA, and the bank invoked the personal guarantee, demanding repayment from the appellant. The appellant issued a Declaration-cum-Undertaking in favour of Dena Bank. Later, the bank assigned a loan facility in favour of respondent no.1 (i.e., the financial creditor).

Subsequently, respondent no.1 filed an application under section 95 of the IBC against the appellant, which the Adjudicating Authority (NCLT) admitted. The appellant, then appealed to the NCLAT on the ground that the application filed under section 95 by respondent no.1 was barred by time.

The NCLAT upheld the NCLT’s order, stating that a Declaration cum Undertaking issued on 29.01.2018 acknowledged the debt and extended the limitation period. Further, the Supreme Court’s order in Suo Motu Writ Petition (Civil) No. 3 of 2020 excluded the period from 15.03.2020 to 28.02.2022 from the limitation period. Therefore, an application filed on 10.08.2021 was well within the limitation period. Subsequently, an appeal was made to the Supreme Court against the order passed by the NCLAT.

It was noted that Section 95(1) of the IBC permits a creditor to file an application through a Resolution Professional to initiate the insolvency resolution process. Thus, the submission of an application by the financial creditor through the Resolution Professional is clearly permitted by Section 95(1) of the IBC.

Supreme Court Held

The Supreme Court held that there was no error in the order passed by the Adjudicating Authority admitting the Sec 95 application. In view of the facts, the instant Court was not inclined to interfere with the impugned order passed by the NCLAT and, therefore, an instant appeal was to be dismissed.

List of Cases Reviewed

• Shrenik Ashokbhai Morakhia v. Reliance Asset Reconstruction Company Ltd. [2024] 163 taxmann.com 458 (NCLT -New Delhi) (para 1) affirmed (see annex)