TITLE: AXIS BANK LIMITED V. NAREN SHETH & ANR.
CITATION: CIVIL APPEAL NO. 2085 OF 2022
DECIDED ON: 12 SEPTEMBER 2023
CORAM: JUSTICE VIKRAM NATH AND JUSTICE AHSANUDDIN AMANULLAH
Justice Vikram Nath references a recent judgment (Dena Bank case) that supports the acceptance of additional documents, such as balance sheets and settlement offers, even at the appellate stage and rejects claims of delay, stating that the proceedings were within the extended period of limitation provided under Section 18 of the Limitation Act. Justice Vikram Nath and Justice Ahsanuddin Amanullah dismiss the appeal, finding no merit in the appellant’s arguments.
Brief facts:
The civil appeal involves Axis Bank challenging NCLAT’s dismissal of its appeal against insolvency proceedings initiated under Section 7 of the Insolvency and Bankruptcy Code. Under Section 62 of the Insolvency and Bankruptcy Code, Axis Bank Limited (appellant) and Naren Sheth & Anr. (Respondent) are involved in a civil appeal before the Supreme Court of India. A leave and licence arrangement with Universal Premises, later mergers, credit facility defaults, and the balance sheet recognition of debt in the Corporate Debtor are the causes of the dispute. When the Corporate Debtor was classified as a non-performing asset (NPA) by State Bank of India, insolvency procedures under Section 7 of the IBC were initiated.
Court’s Observation and Analysis:
The Supreme Court meticulously analyzed the intricacies of the case, primarily focusing on three key aspects – the acknowledgment of debt, the impact of one-time settlement (OTS) proposals, and the application of Sections 5 and 18 of the Limitation Act.
First, the court examined the Corporate Debtor’s acknowledgement of debt in its balance sheet for the fiscal year that ended on March 31, 2015. The importance of these acknowledgements in insolvency cases was acknowledged by the court. It examined these acknowledgments’ content and clarity closely, focusing on their significance in proving debt and how it affects the statute of limitations for filing for bankruptcy. In order to lay the groundwork for its further consideration, the court carefully considered the acknowledgment in order to ascertain its legitimacy and legal implications.
Second, the suggestions for one-time settlements (OTS) made after the debt was acknowledged were examined by the court. It assessed whether the admissibility of the insolvency petition was affected in any way by these proposals. The court examined the consequences of the Corporate Debtor’s endeavours to resolve the outstanding debt via OTS and evaluated if these endeavours signified a relinquishment of their entitlement to challenge the insolvency procedures. This part of the analysis clarified the debtor’s actions after acknowledgment and how they relate to the continuing bankruptcy battle.
Interpreting and applying Sections 5 and 18 of the Limitation Act was a crucial aspect of the court’s investigation. The court carefully considered whether Respondent No. 2, State Bank of India, might profit from these sections’ provisions to prolong the statute of limitations for filing for bankruptcy. Section 18 addresses the consequences of acknowledging or making a payment before the allotted time has passed. Section 5 deals with the forgiveness of delays. To determine the legislative intent underlying these sections and their relevance to the particular facts of the case, the court used a purposive interpretation. The decision upheld Respondent No. 2’s advantage from Sections 5 and 18, which grant an extension of time to start insolvency proceedings.
The Court’s comprehensive approach encompassed the consideration of The Ruby Mills Ltd.’s applications, which sought intervention and instructions about the payment of the remaining advance money. In addition to dismissing the appellant’s appeal, the judgement highlighted the court’s commitment to fairness and fair conflict settlement by giving The Ruby Mills Ltd. the chance to seek remedies before the Adjudicating Authority or any other appropriate body.
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Written by- Komal Goswami
