Case Number: Civil Appeal No. 4222 of 2020

Judges Name: Hon’ble Judges L. Nageswara Rao J, B. R. Gavai J, B. V. Nagarathna J

Order dated: 30.09.2021

Facts of the Case:

The case is an appeal preferred by the suspended directors of R.K. Infratel Ltd (Corporate Debtor) against the order of the Hon’ble National Company Law Appellate Tribunal (NCLAT).  The Union Bank of India (Financial Creditor) initiated Corporate Insolvency Resolution Process against the corporate debtor. The Hon’ble National Company Law Tribunal (NCLT) admitted the application of the financial debtor and declared moratorium. The Appellants filed an appeal before the NCLAT stating that principle of natural justice is violated as they were not heard and application is time barred as well as the power of attorney for the filing was not proper. The NCLAT considered the power of attorney of the financial creditor as general one which gave the right to the authorized person to file on behalf of the financial creditor. On the question of the debt being time barred, the NCLAT ruled that the payments that were made after the loan was declared as non-performing assets is acknowledgement. The NCLAT dismissed the appeal of the suspended directors holding that the NCLT’s order was correct. Therefore, Appellants appealed before the Hon’ble Supreme Court.

Order:

The Hon’ble Supreme Court observed/held as follows:

• The Power of Attorney holder can be considered as an authorized person on behalf of the financial creditor to file application if there is a general authorization through a power of attorney.
• The application filed under Section 7 of the Code cannot be rejected on the round that the there is no specific authorization letter and corporate debtor cannot take the plea that the loan sanctioning officer has no power to initiate corporate insolvency resolution process in event of default. 
• The Adjudicating Authority is duty bound to scrutinize the application filed under Section 7 of the Code as to whether the application is barred by limitation, even if there is no plea for limitation.
• An acknowledgement made by the corporate debtor after the expiry of the period of limitation gives rise to a fresh period of limitation and Section 18 of the Limitation Act is applicable to applications filed under Section 7 of the Code.
• The burden of proof, prima facie for proving the default and that the application is within the period of limitation lies entirely upon the financial creditor and the adjudicating authority can also refer to the materials on record of both the parties for deciding whether the application is in time.

The Hon’ble Supreme Court dismissed the appeal.