The supreme court setting aside the judgement of the NCLAT made it clear that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 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. Earlier on appeal, the order of the (Adjudicating Authority) NCLT was set aside by NCLAT on the ground that the said Petition of the Appellant Bank under Section 7 of the IBC, was barred by limitation. The Appellant has filed various documents proving the acknowledgement of debt from the respondent which brings in a fresh cause of action.  The financial creditors like Banks, NBFCs can file insolvency petition under section 7 within three years of acknowledgement of debts. 

The main issues considered in this case are follows:

1. Whether the NCLAT has erred in law in arriving at the conclusion that, the Petition filed by the Appellant Bank under Section 7 of the IBC was barred by limitation, and setting aside the order passed by the Adjudicating Authority, admitting the said Petition.  
2. Whether a Petition under Section 7 of the IBC would be barred by limitation, on the sole ground that it had been filed beyond a period of 3 years from the date of declaration of the loan account of the Corporate  Debtor as NPA, even though the Corporate Debtor might subsequently have acknowledged its liability to the Appellant Bank, within a period of three years prior to the date of filing of the Petition under Section 7 of the IBC, by making a proposal for a One Time Settlement, or by acknowledging the debt in its statutory Balance Sheets and Books of Accounts. 
3. Whether a final judgment and decree of the DRT in favour of the Financial Creditor, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the IBC within three years from the date of the final judgment and decree, and/or within three years from the date of issuance of the Certificate of Recovery. 
4. Whether there is any bar in law to the amendment of pleadings, in a Petition under Section 7 of the IBC, or to the filing of additional documents, apart from those filed initially, along with the Petition under Section 7 of the IBC in Form-1.

The Supreme court upheld the order of the Adjudicating Authority (NCLT) admitting the Corporate Insolvency petition filed by Dena Bank after five years from the date of declaration of the loan account of the Corporate Debtor as NPA.  The supreme court setting aside the judgement of the NCLAT made it clear 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. It also held that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the 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. Moreover, a judgment and/or decree for money in favour of the Financial Creditor, passed by the DRT, or any other Tribunal or Court, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the Certificate of Recovery, if the dues of the Corporate Debtor to the Financial Debtor, under the judgment and/or decree and/or in terms of the Certificate of Recovery, or any part thereof remained unpaid.

Please click the following link for complete Judgment

Dena Bank (now Bank of Baroda) Vs C. Shivakumar Reddy and Anr. CIVIL APPEAL NO.1650 OF 2020 

Cases referred

Ferro Alloys Corporation Limited v. Rajhans Steel Limited (1999) SCC Online Pat 1196 Jignesh Shah and Another v. Union of India, 2019 SCC online SC 1254.

Reliance Asset Reconstruction Co. Ltd. v. Hotel Poonja International Pvt. Ltd 2021 SCC Online SC 289.

Gaurav Hargovindbhai Dave v. Asset Reconstruction Company, 2019 SCC Online SC 1239.

Sesh Nath Singh and Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. And Anr. (2021 SCC Online SC 244) ).

Jignesh Shah and Anr. v. Union of India and Anr. 2019 SCC online SC 1254: 

Laxmi Pat Surana v. Union Bank of India and Ors.(2021 SCC Online SC 267).

Asset Reconstruction Company (India) Limited. v. Bishal Jaiswal and Ors. (2021 SCC Online SC 321).  

Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Private Limited ((2020) 15 SCC 1.