KOTAK MAHINDRA BANK LIMITED versus A. BALAKRISHNAN & ANR.

KOTAK MAHINDRA BANK LIMITED versus A. BALAKRISHNAN & ANR.

Issuance of a Recovery Certificate by the Presiding Officer under Section 19(22) read with Section 19(22A) of the Debt Recovery Act gives rise to a fresh cause of action; a liability arising from such Recovery Certificate is a 'financial debt' within clause (8) of Section 5 IBC and the holder is a 'financial creditor' under clause (7) of Section 5; such a holder may initiate CIRP under Section 7 IBC within three years from the date of issuance of the Recovery Certificate. Accordingly the NCLAT order holding the Section 7 application time-barred was quashed and set aside.

Parties
Appellant / Financial Creditor: Kotak Mahindra Bank Limited; Respondent No.1 / Director: A. Balakrishnan; Respondent No.2 / Corporate Debtor: Prasad Properties and Investments Pvt. Ltd.
Jurisdiction
India
Judgment Date
30 May 2022
Procedural Posture
Civil Appeal to the Supreme Court / Final Judgment Allowing Appeal Against NCLAT Order; Order Quashed and Set Aside
Outcome
Appeal allowed; impugned NCLAT judgment and order dated 24.11.2020 quashed and set aside
Legal Topics
Corporate Insolvency Resolution Process (cirp), Recovery Certificate / Debt Recovery, Definition of Financial Debt and Financial Creditor Under IBC, Limitation for Initiation of CIRP, Statutory Interpretation, Moratorium (section 14 Ibc)
Insolvency Law Banking and Financial Regulation Civil Procedure and Limitation Corporate Insolvency Resolution Process (cirp) Recovery Certificate / Debt Recovery Definition of Financial Debt and Financial Creditor Under IBC Limitation for Initiation of CIRP Statutory Interpretation +1 more

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Parties

Kotak Mahindra Bank Limited

Appellant / Financial Creditor

A. Balakrishnan

Respondent No.1 / Director

Prasad Properties and Investments Pvt. Ltd.

Respondent No.2 / Corporate Debtor

Procedural Posture

Civil Appeal to the Supreme Court / Final Judgment Allowing Appeal Against NCLAT Order; Order Quashed and Set Aside

Legal Issues

  1. 1 Whether issuance of a Recovery Certificate gives rise to a fresh cause of action to initiate CIRP under Section 7 IBC
  2. 2 Whether liability arising from a Recovery Certificate is a "financial debt" under clause (8) of Section 5 IBC and its holder a "financial creditor" under clause (7) of Section 5 IBC
  3. 3 Whether Section 19(22A) of the Debt Recovery Act limits deeming of a Recovery Certificate to winding-up proceedings only

Ratio Decidendi

Issuance of a Recovery Certificate by the Presiding Officer under Section 19(22) read with Section 19(22A) of the Debt Recovery Act gives rise to a fresh cause of action; a liability arising from such Recovery Certificate is a 'financial debt' within clause (8) of Section 5 IBC and the holder is a 'financial creditor' under clause (7) of Section 5; such a holder may initiate CIRP under Section 7 IBC within three years from the date of issuance of the Recovery Certificate. Accordingly the NCLAT order holding the Section 7 application time-barred was quashed and set aside.

Court Disposition

Appeal allowed; impugned NCLAT judgment and order dated 24.11.2020 quashed and set aside

Orders

  • Appeal allowed
  • Impugned judgment and order dated 24th November, 2020 of the NCLAT in Company Appeal (AT) (Insolvency) No.1406 of 2019 is quashed and set aside