SVG FASHIONS PVT. LTD. (EARLIER KNOWN AS SVG FASHIONS LTD. vs RITU MURLI MANOHAR GOYAL

SVG FASHIONS PVT. LTD. (EARLIER KNOWN AS  SVG FASHIONS LTD.  vs RITU MURLI MANOHAR GOYAL

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

NON­REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4228 OF  2020

SVG FASHIONS PVT. LTD. (EARLIER KNOWN AS 

SVG FASHIONS LTD.                               …APPELLANT(S)

VERSUS

RITU MURLI MANOHAR GOYAL & ANR. …RESPONDENT(S)

J U D G M E N T

V.RAMASUBRAMANIAN, J.

1. Aggrieved by the order of the National Company Law Appellate

Tribunal (for short “NCLAT”), reversing the order of ‘Admission’ passed

by the National Company Law Tribunal (for short “NCLT”) and holding

that   their   application   under   Section   9   of   the   Insolvency   and

Bankruptcy   Code,   2016   (for   short  “the   Code”)   was   barred   by

1

limitation,   the   operational   creditor   has   come   up   with   the   present

appeal.

2. We have heard the learned counsel for the appellant­operational

creditor; the learned counsel for the first respondent­shareholder and

Director   of   the   corporate­debtor   and   the   learned   counsel   for   the

second respondent­Interim Resolution Professional. 

3. The appellant herein filed an application under Section 9 of the

Code on 20.04.2018 against M/S Arpita Filaments Private Limited,

contending  inter   alia:   that  the   corporate­debtor   started   having

business dealings with them from 2013; that they sold and delivered

various fabrics to the corporate­debtor; that the corporate­debtor was

irregular in making payments as per the bills; and that the demand

notice issued by them under Section 8 of the Code read with Rule 5

did not invoke any response.

4. Before NCLT, the corporate­debtor raised four major objections,

one of which was that the claim was barred by limitation. But NCLT

found on the basis of a letter dated 28.09.2015 produced by the

2

operational creditor that six cheques had been issued in favour of the

operational   creditor.   These   cheques   returned   dishonoured   when

presented for payment. The stand taken by the corporate­debtor was

that those six cheques were lost by the corporate­debtor in March

2017 and that they had already issued “stop payment instructions” to

the bank on 4.03.2017. The corporate­debtor also claimed that the

letter dated 28.09.2015 relied upon by the operational creditor was

issued by Shree Adeshwar Textiles and that therefore, the operational

creditor cannot rely upon the same to save limitation.

5. However, the NCLT, by an order dated 26.09.2019 overruled the

objections and held that there was an acknowledgment of liability on

the part of the corporate­debtor and that therefore, the application

was within the period of limitation. Consequently, the NCLT ordered

the admission of the application under Section 9 of the Code and also

declared moratorium in terms of Section 14.

6. On an appeal filed by the appellant, the NCLAT held that the

debt arose during the period from 11.08.2013 to 02.09.2013 and that

the   six   cheques   purportedly   issued   towards   part   payment   of   the

3

liability having been issued on 5.12.2017, will not save limitation. The

NCLAT further held that even if the date of default is taken to be

7.10.2013 as pleaded by the operational creditor, the acknowledgment

of liability in terms of Section 18 of the Limitation Act ought to have

happened   on   or   before   07.10.2016.   But   the   cheques   were   dated

December 2017 and hence NCLAT reversed the decision of NCLT and

dismissed the application of the operational creditor.

7. But   we   find   from   the   order   of   NCLAT   that   there   was   no

discussion at all about the letter dated 28.09.2015. According to the

operational creditor, the six cheques in question were handed over

along with the letter dated 28.09.2015. The cheque numbers and the

bank on which the cheques were drawn, given in the letter dated

28.09.2015 tallied with the particulars of those six cheques allegedly

lost   by   the   corporate   debtor   in   March   2017.   Though   the   first

respondent herein clamed in his affidavit in reply that the corporatedebtor had issued stop payment instructions, he conceded that the

acknowledgment issued by the banker contained the date 01.01.2018.

4

The   following   extract   from   the   affidavit   in   reply/objections   of   the

Director of the corporate­debtor makes an interesting reading:

“...Hereto annexed and marked collectively as Annexure­C

are copies of the intimation issued by the banker of the

Corporate   Debtor   duly   recording   the   instruction   of   stop

payment qua the cheques in question taking record that

the cheques had been lost. It is submitted that the banker

of   the   Corporate   Debtor   has   issued   such   notices

acknowledging stop payment instruction on account of loss

of the cheques on 04/03/2017, however inadvertently due

to the error in the computers of the banker, the date on the

top right shows as 01/01/2018. the Corporate Debtor in

the process of obtaining appropriate letter from the banker

of the Corporate Debtor to the effect that the error in the

date has occurred due to some problem in the computers of

the   banker,   and   the   Corporate   Debtor   craves   leave   to

produce copy of the same as and when referred to and

relied upon and available with the Corporate Debtor from

the banker.”

8. Unfortunately   NCLAT   completely   overlooked   the   pleadings

revolving around the letter dated 28.09.2015 and the six cheques.

The failure of the NCLAT as the first appellate authority to look into a

very vital aspect such as this, vitiates its order, especially when NCLT

has recorded a specific finding of fact on this.

9. It is needless to point out that the law relating to the applicability

of Section 18 of the Limitation Act, 1963 is fairly well settled. In

5

Jignesh Shah and Another  vs. Union of India and Another1

, this

Court   pointed   out   that   when   time   begins   to   run,   it   can   only   be

extended in the manner provided in the Limitation Act. For holding so

this   Court   made   a   reference   to   Section   18   of   the   Limitation   Act.

Though in Babu Lal Vardharji Gurjar  vs. Veer Gurjar Aluminium

Industries Private Limited and Another2

, a two member Bench of

this Court held that the reference in Jignesh Shah (supra) to Section

18 of the Limitation Act was only illustrative and that the ratio in B.K.

Educational   Services   Private   Limited   vs.   Parag   Gupta   and

Associates3 did not stand altered by  Jignesh  Shah, no discordant

note was struck. But the cloud of doubt created by Babu Lal (supra)

was cleared subsequently in Laxmi Pat Surana  vs. Union Bank of

India   And   Another4

.   In  Asset   Reconstruction   Company   (India)

Limited vs. Bishal Jaiswal and Another5

, this Court, while applying

Section 18 of the Limitation Act, even went to the extent of holding

that an entry in the balance sheet of the company could also be

1  (2019) 10 SCC 750

2  (2020) 15 SCC 1

3  (2019) 11 SCC 633

4  (2021) 8 SCC 481

5  (2021) 6 SCC 366

6

treated  as  an  acknowledgment  in  writing,  subject  however  to   any

caveat found in the accompanying reports.

10. The law as it has developed on the applicability of Section 18 of

the Limitation Act and the circumstances in which it would apply,

have also not been examined by NCLAT. Therefore, the order of NCLAT

is liable to be set aside and the matter liable to be remanded back for

a   fresh   consideration.   Accordingly,   the   appeal   is   allowed,   the

impugned order of NCLAT is set aside and the matter remanded back

to NCLAT for a fresh consideration in the light of the observations and

the principles of law indicated above. There will be no order as to

costs.   

…………………………….J.

(Hemant Gupta)

…………………………….J.

(V. Ramasubramanian)

New Delhi

March  29, 2022.

7