KOTAK MAHINDRA BANK LIMITED versus A. BALAKRISHNAN & ANR.

[2022] 5 S.C.R.

KOTAK MAHINDRA BANK LIMITED

A. BALAKRISHNAN & ANR.

(Civil Appeal No. 689 of 2021)

BMAY 30, 2022

[L. NAGESWARA RAO, B. R. GAVAI ANDA. S. BOPANNA, JJ.]

Insolvency and Bankruptcy Code, 2016 : ss. 3, 5, 6, 7 and 14– Corporate Insolvency Resolution Process (CIRP) – Initiation of –CIssuance of Recovery Certificate, if would trigger the right to sue –On facts, respondent No.2-corporate debtor stood as the corporateguarantor in respect of credit facilities sanctioned to the borrowerentities by the appellant Bank – Default in payment of dues by theborrower entities – Compromise between the parties that theDcorporate debtor liable to pay the amount due from the borrowerentities to the Bank, however failure to make payment – In terms ofthe compromise entered into between the parties, issuance ofRecovery Certificates by the Debt Recovery Tribunal against theborrower entities and the corporate debtor – On basis of theRecovery Certificates, the Bank filed application u/s. 7 before NCLTEseeking initiation of CIRP against the Corporate Debtor –Application admitted – However, the NCLAT held the application tobetime-barred and issuance of Recovery Certificates did not triggerright to sue – On appeal, held : Once claim fructifies into finaljudgment and order/decree, upon adjudication and certificate ofFrecovery is also issued authorizing the creditor to realize its decretaldues, fresh right accrues to the creditor to recover the amount ofthe final judgment and/or order/decree and/or the amount specifiedin the Recovery Certificate – Issuance of certificate of recoveryin favour of the financial creditor would give rise to fresh causeof action to the the financial creditor, to initiate proceedings u/s 7Gfor initiation of the CIRP, within three years from the date of thejudgment and/or decree – Liability in respect of claim arising outof Recovery Certificate would be “financial debt” within themeaning of clause (8) of s. 5 and holder of the Recovery Certificatewould be “financial creditor” within the meaning of clause (7) ofHs. 5 – person would be entitled to initiate CIRP within period of

three years from the date on which the Recovery Certificate is issued– On facts, the application u/s. 7 was filed within period of threeyears from the date on which the Recovery Certificate was issued –Application u/s. 7 was within limitation – Thus, the judgment andorder passed by NCLAT is quashed and set aside – Securitizationand Reconstruction of Financial Assets and Enforcement of SecurityInterest Act, 2002 – s.13(2) – Companies Act, 1956 – ss. 433, 434 –Recovery of Debts Due to Banks and Financial Institutions Act,1993 – s.31A – Recovery of Debts and Bankruptcy Act, 1993 –s.19(22A).

Scheme of Insolvency and Bankruptcy Code, 2016–Discussed.

Interpretation of Statutes:

Purposive Interpretation – Held: Provisions of statue oughtto be interpreted in such manner which would advance the objectand purpose of the enactment – All the provisions in the Statuteshould be construed in context with each other and no provisioncan be read in isolation.

Literal rule of Interpretation – Held: When the language of astatutory provision is plain and unambiguous, it is not permissiblefor the Court to add or subtract words to statute or read somethinginto it which is not there – Court cannot rewrite or recast legislation.

Judgment/order: Per incuriam, when – Held: ‘Incuria’ literallymeans ‘carelessness’ – decision or judgment can be per incuriamany provision in statute, rule or regulation, which was not broughtto the notice of the Court – It can also be per incuriam if it is notpossible to reconcile its ratio with that of previously pronouncedjudgment of co-equal or larger Bench.

Words and Phrases: ‘Include’ – Meaning of – Held: Word‘include’ is used in interpretation clauses to enlarge the meaning ofthe words or phrases occurring in the body of the statute.

Allowing the appeal, the Court

HELD : 1.1 From the scheme of the Insolvency andBankruptcy Code, 2016, it could be seen that where anyCorporate Debtor commits default, financial creditor, an

Aoperational creditor or the Corporate Debtor itself is entitled toinitiate CIRP in respect of such Corporate Debtor in the manneras provided under the said Chapter. The default has been definedto mean non-payment of debt. The debt has been defined to meana liability or obligation in respect of claim which is due from anyperson and includes financial debt and operational debt. claimBmeans right to payment, whether or not such right is reducedto judgment, fixed, disputed, etc. It is more than settled that thetrigger point to initiate CIRP is when default takes place. Adefault would take place when debt in respect of claim is dueand not paid. claim would include right to payment whether orCnot such right is reduced to judgment. [Para 38][1095-D-F]

1.2 It is settled principle of law that the provisions of astatue ought to be interpreted in such manner which wouldadvance the object and purpose of the enactment. It is an equallywell settled principle of law that all the provisions in the StatuteDhave to be construed in context with each other and no provisioncan be read in isolation. [Paras 39 and 41][1095-F-G; 1096-A]

1.3 person to be entitled to be “financial creditor” hasto be owed financial debt and would also include person towhom such debt has been legally assigned or transferred to.ETherefore, the only question that would be required to beconsidered is, as to whether liability in respect of claim arisingout of Recovery Certificate would be included within the meaningof the term “financial debt” as defined under clause (8) of Section5 of the IBC. It would be pertinent to note that in clause (8) ofFSection 5 of the IBC, i.e, the definition clause of the term “financialdebt”, the words used are “means debt along with interest, ifany, which is disbursed against the consideration for the timevalue of money and includes”. [Paras 43 and 44][1096-B-D]

1.4 It is settled position of law that when the word “include”Gis used in interpretation clauses, the effect would be to enlargethe meaning of the words or phrases occurring in the body of thestatute. Such interpretation clause is to be so used that thosewords or phrases must be construed as comprehending, not onlysuch things, as they signify according to their natural import, but

also those things which the interpretation clause declares thatthey shall include. In such situation, there would be no warrantor justification in giving the restricted meaning to the provision.Applying these principles to clause (8) of Section 5 of the IBC, itcould clearly be seen that the words “means debt along withinterest, if any, which is disbursed against the consideration forthe time value of money” are followed by the words “andincludes”. Thereafter various categories (a) to (i) have beenmentioned. It is clear that by employing the words “and includes”,the Legislature has only given instances, which could be includedin the term “financial debt”. However, the list is not exhaustivebut inclusive. The legislative intent could not have been toexclude liability in respect of “claim” arising out of RecoveryCertificate from the definition of the term “financial debt”, whensuch liability in respect of “claim” simpliciter would beincluded in the definition of the term “financial debt”. The triggerpoint for initiation of CIRP is default of claim. “Default” is non-payment of debt by the debtor or the Corporate Debtor, whichhas become due and payable, as the case may be, “debt” is aliability or obligation in respect of claim which is due from anyperson, and “claim” means right to payment, whether such aright is reduced to judgment or not. It could thus be seen thatunless there is “claim”, which may or may not be reduced toany judgment, there would be no “debt” and consequently no“default” on non-payment of such “debt”. When the “claim”itself means right to payment, whether such right is reducedto judgment or not, if the contention of the respondents, thatmerely on “claim” being fructified in decree, the same wouldbe outside the ambit of clause (8) of Section 5 of the IBC, isaccepted, then it would be inconsistent with the plain languageused in the IBC. The definition is inclusive and not exhaustive.Taking into consideration the object and purpose of the IBC, thelegislature could never have intended to keep debt, which iscrystallized in the form of decree, outside the ambit of clause(8) of Section 5 of the IBC. [Paras 47, 51 & 52][1097-G-H; 1098-A-B; 1100-B-G]

1.5 Having held that liability in respect of claim arisingout of Recovery Certificate would be “financial debt” withinthe ambit of its definition under clause (8) of Section 5 of the

AIBC, as natural corollary thereof, the holder of such RecoveryCertificate would be financial creditor within the meaning ofclause (7) of Section 5 of the IBC. As such, such “person”would be “person” as provided under Section 6 of the IBC whowould be entitled to initiate the CIRP. [Para 53][1100-H; 1101-

1.6 The words used in clause (a) of sub-section (1) of Section14 of the IBC could not be read to mean that the decree-holderis not entitled to invoke the provisions of the IBC for initiationof CIRP. plain reading of said Section would clearly providethat once CIRP is initiated, there shall be prohibition for institutionCof suits or continuation of pending suits or proceedings againstthe corporate debtor including execution of any judgment, decreeor order in any court of law, tribunal, arbitration panel or otherauthority. The prohibition to institution of suit or continuation ofpending suits or proceedings including execution of decree wouldDnot mean that decree-holder is also prohibited from initiatingCIRP, if he is otherwise entitled to in law. The effect would bethat the applicant, who is decree-holder, would himself beprohibited from executing the decree in his favour. [Para 54][1101-B-D]E1.7 It is settled law that “Incuria” literally means“carelessness”. decision or judgment can be per incuriam anyprovision in statute, rule or regulation, which was not broughtto the notice of the Court. It can also be per incuriam if it is notpossible to reconcile its ratio with that of previously pronouncedjudgment of co-equal or larger Bench. perusal of the judgmentFof this Court in the case of Dena Bank’s case would reveal thatthis Court considered all the relevant provisions of the IBC andthe earlier judgments of this court. There is no inconsistency inthe judgment of this Court in the case of Dena Bank’s case withthe earlier judgments of this Court on which reliance was placed.GThe submission that the judgment of this Court in the case ofDena Bank’s case being per incuriam to the statutory provisionsand earlier judgments of this Court, is wholly unsustainable. [Paras67 and 68][1105-F-H; 1106-A-B]

1.8 liability in respect of claim arising out of RecoveryHCertificate would be “financial debt” within the meaning of clause

(8) of Section 5 of the IBC and holder of the Recovery Certificatewould be “financial creditor” within the meaning of clause (7)of Section 5 of the IBC. person would be entitled to initiateCIRP within period of three years from the date on which theRecovery Certificate is issued. [Para 69][1106-B-C]

1.9 Sub-section (22) of Section 19 of the Debt RecoveryAct empowers the Presiding Officer to issue certificate ofrecovery along with the final order, under sub-section (20), forpayment of debt with interest. The certificate is given for thepurposes of recovery of the amount of debt specified in thecertificate. Sub-section (22A) of Section 19 of the Debt RecoveryAct provides that any Recovery Certificate issued by thePresiding Officer under sub-section (22) shall be deemed to bedecree or order of the Court for the purposes of initiation ofwinding up proceedings against company, etc. [Para 71][1106-H; 1107-A-B]

1.10 The submission that the Recovery Certificate is forthe limited purpose of initiation of winding up proceedings, ifaccepted, the word “limited” would be required to be insertedbetween the words “shall be deemed to be decree or order ofthe Court” and “for the purposes of initiation of winding upproceedings”. If the submission is to be accepted, sub-section(22A) of Section 19 of the Debt Recovery Act would have to bereframed as “Any recovery certificate issued by the PresidingOfficer under sub-section (22) shall be deemed to be decree ororder of the Court for the limited purposes of initiation of windingup proceedings…”. If the said submission is accepted, it wouldresult in doing violence to the provisions of sub-section (22A) ofSection 19 of the Debt Recovery Act. When the language of astatutory provision is plain and unambiguous, it is not permissiblefor the Court to add or subtract words to statute or readsomething into it which is not there. It cannot rewrite or recastlegislation. [Paras 72, 73 and 75][1107-B-D, H; 1108-A]

1.11 From the plain and simple interpretation of the wordsused in sub-section (22A) of Section 19 of the Debt RecoveryAct, it would be amply clear that the Legislature provided thatfor the purposes of winding-up proceedings against Company,

Aetc., Recovery Certificate issued by the Presiding Officer undersub-section (22) of Section 19 of the Debt Recovery Act shall bedeemed to be decree or order of the Court. It is thus clear thatonce Recovery Certificate is issued by the Presiding Officerunder sub-section (22) of Section 19 of the Debt Recovery Act,in view of sub-section (22A) of Section 19 of the Debt RecoveryBAct it will be deemed to be decree or order of the Court for thepurposes of initiation of winding-up proceedings of Company,etc. However, there is nothing in sub-section (22A) of Section 19of the Debt Recovery Act to imply that the Legislature intendedto restrict the use of the Recovery Certificate limited for theCpurpose of winding-up proceedings. The submission of therespondents, if accepted, would be to provide something whichis not there in sub-section (22A) of Section 19 of the DebtRecovery Act. In any case, when the Legislature itself hasprovided that any Recovery Certificate issued under sub-section(22) of Section 19 of the Debt Recovery Act will be deemed to beDa decree or order of the Court for initiation of winding-upproceedings, which proceedings are much severe in nature, itwould be difficult to accept that the Legislature intended thatsuch Recovery Certificate could not be used for initiation ofCIRP, which would enable the Corporate Debtor to continue asEan on-going concern and, at the same time, pay the dues of thecreditors to the maximum. [Paras 77 and 78][1108-G-H; 1108-A-D]

1.12 liability in respect of claim arising out of RecoveryCertificate would be “financial debt” within the meaning of clauseF(8) of Section 5 of the IBC. Consequently, the holder of theRecovery Certificate would be financial creditor within themeaning of clause (7) of Section 5 of the IBC. As such, the holderof such certificate would be entitled to initiate CIRP, if initiatedwithin period of three years from the date of issuance of theRecovery Certificate. On facts, the application u/s. 7 IBC wasGfiled within period of three years from thedate on which theRecovery Certificate was issued. As such, the application underSection 7 IBC was within limitation and the NCLAT erred inholding that it is barred by limitation. The impugned judgmentand order passed by the National Company Law Appellate TribunalHis quashed and set aside. [Paras 84, 85 and 86][1111-A-B; C-E]

Dena Bank (Now Bank of Baroda) v. C. ShivakumarReddy and Another (2021) 10 SCC 330 – affirmed.

Paramjeet Singh Patheja v. ICDS Ltd. (2006) 13 SCC322 : [2006] 8 Suppl. SCR 178 – distinguished.

Subhankar Bhowmik v. Union of India and another2022 SCC OnLine Tri 208; Jignesh Shah and Anotherv. Union of India and Another (2019) 10 SCC 750 :[2019] 12 SCR 678; Gaurav Hargovindbhai Dave v.Asset Reconstruction Company (India) Limited andAnother (2019) 10 SCC 572 : [2019] 13 SCR 224;Nirmal Jeet Kaur v. State of M.P. and Another (2004) 7SCC 558 : [2004] 3 Suppl. SCR 1006; Secretary toGovt. of Kerala, Irrigation Department and Others v.James Varghese and Others 2022 SCC OnLine SC 545;P. S. Ramamoorthy Sastry v. Selvar Paints and VarnishWorks (Pvt.) Ltd. The Law Weekly, Vol. XCVII (97)dated 28[th] January, 1984 Part 1; Mukul Agarwal v.Royale Resinex Pvt. Ltd. Company Appeal (AT)(Insolvency) No. 777 of 2020 dated 30.03.2022; SwissRibbons Private Limited and Another v. Union of Indiaand Others (2019) 4 SCC 17 : [2019] 3 SCR 535;Associated Indem Mechanical (P) Ltd. v. W.B. SmallIndustries Development Corpn. Ltd. and Others (2007)3 SCC 607 : [2007] 1 SCR 174; Karnataka PowerTransmission Corporation and another v. Ashok IronWorks Private Limited (2009) 3 SCC 240 : [2009] 1109;Pioneer Urban Land and Infrastructure Limited andAnother v. Union of India and Others (2019) 8 SCC416 : [2019] 10 SCR 381; Rameswar Prasad Kejriwal& Sons Ltd. v. Garodia Hardware Stores (2001) SCCOnLine Cal 586; Union of India and Others v.Dhanwanti Devi and Others (1996) 6 SCC 44 : [1996]5 Suppl. SCR 32; The Regional Manager and Anotherv. Pawan Kumar Dubey (1976) 3 SCC 334 : [1976] 3SCR 540; Vashdeo R. Bhojwani v. AbhyudayaCo-operative Bank Limited and Another (2019) 9 SCC158 : [2019] 12 SCR 75; Balakrishna Savalram PujariWaghmare and Others v. Shree Dhyaneshwar Maharaj

1080SUPREME COURT REPORTS

ASansthan and Others [1959] 2 Suppl. SCR 476 : AIR1959 SC 798 : [1959] 2 Suppl. SCR 476; Mohd.Shahabuddin v. State of Bihar and Others (2010) 4 SCC653 : [2010] 3 SCR 911; Nasiruddin and others v. SitaRam Agarwal (2003) 2 SCC 577 : [2003] 1 SCR 634;Bhanu Kumar Jain v. Archana Kumar and AnotherB(2005) 1 SCC 787 : [2004] 6 Suppl. SCR 1104; Stateof U.P. v. Nawab Hussain (1977) 2 SCC 806 : [1977] 3SCR 428; Gulabchand Chhotalal Parikh v. State ofBombay (now Gujarat) [1965] 2 SCR 547 – referredto.

CDilworth v. Commissioner of Stamps (1899) AC 99;Thoday v. Thoday (1964) 2 WLR 371 – referred to.

Case Law Reference

KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN& ANR.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 689 of2021.

From the Judgment and Order dated 24.11.2020 of the NationalCompany Law Appellate Tribunal, New Delhi in Company Appeal (AT)(Insolvency) No. 1406 of 2019.

Guru Krishna Kumar, Sr. Adv., Mahesh Agarwal, Rishi Agrawala,Rohan Talwar, E. C. Agrawala, Advs. for the Appellant.

S. Prabhakaran, V. Prakash, K. V. Vishwanathan, Sr. Advs.,Ms. Iyengar Shubharanjani Ananth, M. A. Gouthaman, Ms. R. Soumya,Adarsh Mohandas, Abinesh S., Nishant, Rahul Sangwan, SivagnanamK., Advs. for the Respondents.

The Judgment of the Court was delivered by

B. R. GAVAI, J.

1. The present appeal challenges the judgment and order dated24[th] November, 2020 passed by the learned National Company LawAppellate Tribunal, New Delhi (hereinafter referred to as “NCLAT”) inCompany Appeal (AT) (Insolvency) No. 1406 of 2019, thereby allowingthe appeal filed by the respondent no. 1 – Director and reversing theorder dated 20[th] September, 2019 passed by the learned NationalCompany Law Tribunal, Chennai (hereinafter referred to as “NCLT”),whereby the application filed by the appellant under Section 7 of theInsolvency and Bankruptcy Code, 2016 (“IBC” for short) was admitted.The learned NCLAT while allowing the appeal held that the applicationfiled by the appellant was time-barred and that issuance of RecoveryCertificate would not trigger the right to sue.2. brief factual background giving rise to the present appeal isas under:

3. During the period between the years 1993 – 1994, Ind BankHousing Limited (hereinafter referred to as “IBHL”) sanctioned separatecredit facilities to these companies (hereinafter referred to as the“borrower entities”):

(i) M/s Green Gardens (P) Ltd,

(ii) M/s Gemini Arts (P) Ltd. and

(iii) M/s Mahalakshmi Properties & Investments (P) Ltd.

AThe respondent no. 2 M/s Prasad Properties and InvestmentsPvt. Ltd. (hereinafter referred to as “the Corporate Debtor”) stood asthe Corporate Guarantor/mortgagor and mortgaged its immovableproperty, situated in Guttala Begampet Village in Ranga Reddy Districtof Andhra Pradesh, by deposit of title deeds to secure the aforesaidcredit facilities sanctioned to the borrower entities.B

4. These borrower entities defaulted in repayment of the duesand subsequently IBHL classified all the facilities availed by them asNon – Performing Asset (“NPA” for short) in November 1997. Pursuantthereto, IBHL filed three civil suits before the High Court of Madras,against the borrower entities and the Corporate Debtor, for recovery ofCthe amounts due. During the pendency of the suits, the appellant – KotakMahindra Bank Ltd. (hereinafter referred to as “KMBL”) and IBHLentered into Deed of Assignment dated 13[th] October, 2006, whereinIBHL assigned all its rights, title, interest, estate, claim and demand tothe debts due from borrower entities, to KMBL.

5. Pursuant to the said deed, KMBL and the borrower entitiesentered into compromise on 7[th] August, 2006 (hereinafter referred toas “the said compromise”). The High Court vide common judgmentdated 26[th] March, 2007, recorded the said compromise between theparties to the effect that the Corporate Debtor was jointly and severallyEliable to pay the amount of Rs. 29,00,96,918/- due from the borrowerentities to KMBL. It was claimed by KMBL that the borrower entitiesfailed to make payments as per the said compromise and thus, KMBLissued Demand Notice dated 26[th] September 2007 to them and theCorporate Debtor under Section 13(2) of the Securitization andReconstruction of Financial Assets and Enforcement of Security InterestFAct, 2002 (hereinafter referred to as “the SARFAESI Act”). The saidnotice was followed by Possession Notice dated 10[th] January, 2008issued under Section 13(4) of the SARFAESI Act, by the KMBL due todefault in payment by the Corporate Debtor of the amount demanded.The KMBL further issued Winding Up Notice dated 6[th] May, 2008Gunder sections 433 and 434 of the Companies Act, 1956 to the CorporateDebtor.

6. Aggrieved by the continuous default of payment by theCorporate Debtor and the borrower entities, KMBL filed three applicationsunder Section 31(A) of the erstwhile Recovery of Debts Due to BanksHand Financial Institutions Act, 1993, now known as the Recovery of

Debts and Bankruptcy Act, 1993 (hereinafter referred to as “the DebtRecovery Act”) before the Debt Recovery Tribunal (“DRT” for short)for issuance of Debt Recovery Certificates in terms of the saidcompromise entered into between the parties. The said applications cameto be allowed by the DRT vide orders dated 31[st] March, 2017 and30[th] June, 2017, and separate Recovery Certificates dated 7[th] June, 2017and 20[th] October, 2017 came to be issued against each of the borrowerentities and the Corporate Debtor. In the meanwhile, from the year 2008to 2017, certain proceedings between the parties, with regard to acontempt petition filed by the KMBL as well as the dismissal of applicationsfiled for issuance of Recovery Certificate and the subsequent grant ofrelief in review application filed by the KMBL, were underway.7. On the basis of the aforementioned Recovery Certificates, on5[th] October, 2018 KMBL, claiming to be financial creditor, filed anapplication under Section 7 of IBC, being CP/1352/IB/2018 before thelearned NCLT and sought initiation of Corporate Insolvency ResolutionProcess (“CIRP” for short) against the Corporate Debtor, claiming anamount of Rs. 835,93,52,369/-. The said application came to be admittedby the learned NCLT on 20[th] September, 2019. The respondent no. 1,Director of the Corporate Debtor filed an appeal being Company Appeal(AT) (Insolvency) No. 1406 of 2019, against the said order of the learnedNCLT before the learned NCLAT. The grounds raised by the respondentno. 1 in the said appeal were with regard to the application for initiatingCIRP against the Corporate Debtor being filed after the expiry oflimitation period. The said appeal filed by the respondent no. 1 came tobe allowed vide impugned judgment and order dated 24[th] November,2020 in the aforementioned terms.

8. We have heard Shri Guru Krishna Kumar, learned SeniorCounsel appearing on behalf of KMBL, Shri S. Prabhakaran and Shri V.Prakash, learned Senior Counsel appearing on behalf of the respondentNo.1 and Shri K.V. Viswanathan, learned Senior Counsel appearing onbehalf of the respondent No.2.

9. Shri Guru Krishna Kumar, learned Senior Counsel submittedthat the issue involved in the present proceedings is no more res integra.It is submitted that this Court in the case of Dena Bank (Now Bank ofBaroda) vs. C. Shivakumar Reddy and another[1]has held that once aclaim fructifies into final judgment and order/decree, upon adjudication,1 (2021) 10 SCC 330

Aand certificate of recovery is also issued authorizing the creditor torealize its decretal dues, fresh right accrues to the creditor to recoverthe amount specified in the Recovery Certificate. It is submitted that inview of the law laid down by this Court in the case of Dena Bank(supra), the present appeal deserves to be allowed inasmuch as, theapplication under Section 7 of the IBC, filed by KMBL on 5[th ]October,B2018 is within the period of three years from the dates of issuance of theRecovery Certificates being 7[th] June, 2017 and 20[th] October, 2017.

10. Shri Guru Krishna Kumar further submitted that the conductof the respondents is that of dishonest borrower. Having entered intothe consent terms, which are decreed by the High Court of Madras videCorder dated 26[th] March, 2007 and having not complied with the termscontained in the compromise decree, it is now not open to the respondentsto oppose the admission of application under Section 7 of the IBC.

11. Shri K.V. Viswanathan, learned Senior Counsel, on the contrary,submitted that the cause of action has merged into the order of issuanceDof the Recovery Certificate by the DRT and therefore, by application ofthe doctrine of merger, the debt no more survives. Shri Viswanathanfurther submitted that the initiation of CIRP by KMBL would amount tofiling of second proceedings for the very same cause of action and thuswould be hit by the doctrine of res judicata and particularly, per remEjudicatam. In this respect, he relied on the judgments of this Court inthe cases of State of U.P. vs. Nawab Hussain[2]and GulabchandChhotalal Parikh vs. State of Bombay (now Gujarat)[3].12. Shri Viswanathan further submitted that in view of the limitedlegal fiction under Section 19(22A) of the Debt Recovery Act, theFRecovery Certificates cannot be treated as “decree” for all purposes. Itis submitted that assuming that decree-holder may initiate CIRP as afinancial creditor, but the holder of Recovery Certificate granted underSection 19(22) of the Debt Recovery Act is not entitled to initiate CIRPunder the IBC as financial creditor or decree holder. He submittedthat sub-sections (22) and (22A) of Section 19 of the Debt RecoveryGAct were brought on the statute book by The Enforcement of SecurityInterest and Recovery of Debts Laws and Miscellaneous Provisions(Amendment) Act, 2016 (Act No. 44 of 2016), which was enacted on16[th] August, 2016 and brought into force from 4[th] November, 2016. He2 (1977) 2 SCC 806H3 (1965) 2 SCR 547

submits that the deeming fiction contained therein applies only for thepurposes of initiation of winding up proceedings. The deeming fictioncannot be extended for any other purpose. In this respect, he relies onthe judgment of this Court in the case of Paramjeet Singh Patheja vs.ICDS Ltd.[4].

13. Shri Viswanathan further submitted that after 15[th] November,2016, i.e., the date on which Section 255 of the IBC was brought intoforce, the Recovery Certificate holders lost their right to use theircertificate as “decree” for initiating winding-up proceedings under theCompanies Act. Shri Viswanathan relied on the judgment of the TripuraHigh Court in the case of Subhankar Bhowmik vs. Union of Indiaand another[5]in support of his submission that decree-holder cannotinitiate CIRP. He submitted that the Special Leave Petition (Civil)No.6104 of 2022 challenging the judgment of the Tripura High Court inthe case of Subhankar Bhowmik (supra) has been dismissed by thisCourt on 11[th] April, 2022.

14. Shri Viswanathan submitted that the judgment of this Court inthe case of Dena Bank (supra) is per incuriam. He submitted that thesaid judgment is rendered without considering the provisions of sub-Sections (22) and (22A) of Section 19 of the Debt Recovery Act as wellas clauses (6), (10), (11) and (12) of Section 3, clauses (7) and (8) ofSection 5, Section 6 and Section 14(1)(a) of the IBC. He further submittedthat the judgment of this Court in the case of Dena Bank (supra) hasapplied the judgments of this Court in the cases of Jignesh Shah andanother vs. Union of India and another[6] and Gaurav HargovindbhaiDave vs. Asset Reconstruction Company (India) Limited andanother[7] incorrectly and as such, the judgment of this Court in the caseof Dena Bank (supra) is rendered per incuriam. In this respect, herelied on the judgment of this Court in the case of Nirmal Jeet Kaur vs.State of M.P. and another[8]so also the judgment of this Court in thecase of Secretary to Govt. of Kerala, Irrigation Department andothers vs. James Varghese and others[9].

4 (2006) 13 SCC 322

5 2022 SCC OnLine Tri 208

6 (2019) 10 SCC 750

7 (2019) 10 SCC 572

8 (2004) 7 SCC 558

9 2022 SCC OnLine SC 545

A15. Shri Viswanathan further submitted that if the aforesaidprovisions of the IBC and the Debt Recovery Act are considered incorrect perspective, the conclusion that would be inevitable is that adecree-holder is not “financial creditor” and as such, is disentitled toinvoke the provisions of Section 7 of the IBC. He submitted that theprovisions of Section 14 of the IBC would also amplify this position,Binasmuch as, under clause (a) of sub-section (1) thereof, the institutionof suits or continuation of pending suits or proceedings against thecorporate debtor including execution of any judgment, decree or order inany court of law, tribunal, arbitration panel or other authority is specificallyprohibited. He therefore submits that the learned NCLAT has correctlyCheld that the application filed by KMBL under Section 7 of the IBC wasbeyond the period of limitation since issuance of Recovery Certificatedoes not give rise to fresh cause of action and the timeline for thepurpose of limitation would start in the year 1997 when the accounts ofthe borrower entities were declared NPA, and that no interference iswarranted with the same.D16. Shri S. Prabhakaran and Shri V. Prakash, learned SeniorCounsel appearing on behalf of the respondent No.1 have advancedtheir arguments on similar lines as were advanced by Shri K.V.Viswanathan.

E17. Shri Guru Krishna Kumar, in rejoinder, submitted that thejudgment of this Court in the case of Dena Bank (supra) correctly laysdown the position of law. He submits that if the relevant provisions ofthe IBC are construed in correct perspective, the only conclusion thatwould be arrived at is that KMBL is “financial creditor”. He submitsthat the correct approach would be to consider the underlying transactionFforming the basis of the proceedings initiated by the creditor culminatingin Decree/Recovery Certificate. He submitted that if the underlyingtransactions are such that they constitute financial debt and the creditoris financial creditor, then that would be the determining factor fordeciding the maintainability of the CIRP application. Learned SeniorGCounsel further submitted that the judgment debt does not lose its legalessence or character solely because it has fructified into RecoveryCertificate. He relied on the judgment of the Division Bench of theMadras High Court in the case of P.S. Ramamoorthy Sastry vs. SelvarPaints and Varnish works (Pvt.) Ltd.[10] in respect of this proposition.H10 The Law Weekly, Vol. XCVII (97) dated 28th January, 1984 Part 1

He also relied on the judgment of the learned NCLAT in the case ofMukul Agarwal vs. Royale Resinex Pvt. Ltd.[11]

18. Shri Kumar further submitted that the purpose of the IBC isto preserve the Corporate Debtor as an on-going concern, while ensuringmaximum recovery for all the creditors. He submits that the provisionsof the IBC have to be interpreted in such manner as to advance thepurpose of the IBC and not in manner in which they defeat the objectof the IBC.

19. Shri Kumar submitted that the contention that the judgment ofthis Court in the case of Dena Bank (supra) is per incuriam theprovisions of the IBC and the Debt Recovery Act is totally withoutsubstance. He submits that the law laid down by this Court in the caseof Dena Bank (supra) is correct and warrants no interference.

20. Before we proceed to consider the rival submissions, it will beapposite to consider the factual scenario, the issues that arose forconsideration and the conclusion arrived at in the case of Dena Bank(supra).

21. In the case of Dena Bank (supra), the loan account of theCorporate Debtor was declared NPA on 31[st] December, 2013. TheCorporate Debtor had addressed letter dated 24[th] March, 2014 to theappellant Bank therein making request for restructuring the term loan.The appellant Bank did not accede to the same. On 22[nd] December,2014, the Bank issued legal notice to the Corporate Debtor as well asthe respondent No.2 therein, calling upon them to make payment ofRs.52.12 crores. The Corporate Debtor did not make the payment. Onor about 1[st] January, 2015, the Bank filed an application being OA No.16of 2015 under Section 19 of the Debt Recovery Act. On 27[th] March,2017, the DRT, Bengaluru passed judgment and order against theCorporate Debtor for recovery of Rs.52,12,49,438.60 with future interestat the rate of 16.55% per annum from the date of filing of the applicationtill the date of realisation. The Recovery Certificate came to be issuedon 25[th] May, 2017 by the DRT. There were certain proceedings in theintervening period, reference to the same would not be necessary. On12[th] October, 2018, the Bank filed Company Petition before theAdjudicating Authority under Section 7 of the IBC. The Corporate Debtorfiled its preliminary objection, inter alia, contending that the said petition

Awas barred by limitation. By order dated 21[st] March, 2019, the AdjudicatingAuthority admitted the petition under Section 7 of the IBC and appointedan Interim Resolution Professional (“IRP” for short). The same cameto be challenged by the respondent No.1 therein before the learnedNCLAT by way of an Appeal under Section 61 of the IBC. The learnedNCLAT vide order dated 18[th] December, 2019 allowed the appeal andBdismissed the petition filed by the appellant Bank holding that the samewas barred by limitation.

22. The question therefore that arose for consideration beforethis Court in the case of Dena Bank (supra) was, as to whether thepetition under Section 7 of the IBC was barred by limitation, on the soleCground that it had been filed beyond period of 3 years from the date ofdeclaration of the loan account of the Corporate Debtor as NPA.

23. While considering the said issue, this Court was also calledupon to consider other issues. The first one was, as to whether theapplication under Section 7 of the IBC could be held to be barred byDlimitation, though the Corporate Debtor had subsequently acknowledgedits liability within period of 3 years prior to the date of filing of thepetition under Section 7 of the IBC, by making proposal for one-timesettlement, or by acknowledging the debt in its statutory balance sheetsand books of accounts. The second issue that was considered in theEcase of Dena Bank (supra) was, as to whether final judgment anddecree of the DRT in favour of the financial creditor, or the issuance ofa certificate of recovery in favour of the financial creditor, would giverise to fresh cause of action to the financial creditor to initiateproceedings under Section 7 of the IBC within three years from the dateof the final judgment and decree, and/or within three years from theFdate of issuance of the certificate of recovery. The third issue was, as towhether the Adjudicating Authority had the power to permit amendmentof pleadings or to permit filing of additional documents in petition filedunder Section 7 of the IBC.24. Though all these issues have been elaborately considered byGthis Court in the case of Dena Bank (supra), we would only be concernedwith the issue, as to whether the issuance of the Recovery Certificate infavour of the “financial creditor” would give rise to fresh cause ofaction to initiate proceedings under Section 7 of the IBC. This Court inthe said case after considering various provisions of the IBC as well asHthe earlier judgments of this Court has observed thus:

“99. There can be no dispute with the proposition that the periodof limitation for making an application under Section 7 or 9 IBC isthree years from the date of accrual of the right to sue, that is, thedate of default. In GauravHargovindbhai Dave v. AssetReconstruction Co. (India) Ltd. [Gaurav HargovindbhaiDave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC572 : (2020) 1 SCC (Civ) 1] authored by Nariman, J. this Courtheld : (SCC p. 574, para 6)

“6. … The present case being “an application” which isfiled under Section 7, would fall only within the residuary Article137.”

100. In B.K. Educational Services (P) Ltd. v. Parag Gupta &Associates [B.K. Educational Services (P) Ltd. v. Parag Gupta& Associates, (2019) 11 SCC 633 : (2018) 5 SCC (Civ) 528] , thisCourt speaking through Nariman, J. held : (SCC p. 664, para 42)

“42. It is thus clear that since the Limitation Act is applicableto applications filed under Sections 7 and 9 of the Code from theinception of the Code, Article 137 of the Limitation Act getsattracted. “The right to sue”, therefore, accrues when defaultoccurs. If the default has occurred over three years prior to thedate of filing of the application, the application would be barredunder Article 137 of the Limitation Act, save and except in thosecases where, in the facts of the case, Section 5 of the LimitationAct may be applied to condone the delay in filing such application.”

101. In Jignesh Shah v. Union of India [Jignesh Shah v. Unionof India, (2019) 10 SCC 750 : (2020) 1 SCC (Civ) 48] this Courtspeaking through Nariman, J. reiterated the proposition that theperiod of limitation for making an application under Section 7 or 9IBC was three years from the date of accrual of the right to sue,that is, the date of default.

102. In Vashdeo R. Bhojwani v. Abhyudaya Coop. BankLtd. [Vashdeo R. Bhojwani v. Abhyudaya Coop. Bank Ltd.,(2019) 9 SCC 158 : (2019) 4 SCC (Civ) 308] this Court rejectedthe contention that the default was continuing wrong and Section23 of the Limitation Act, 1963 would apply, relying uponBalakrishna Savalram Pujari Waghmare v. ShreeDhyaneshwar Maharaj Sansthan [Balakrishna Savalram

1090SUPREME COURT REPORTS

[2022] 5 S.C.R.

APujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan,1959 Supp (2) SCR 476 : AIR 1959 SC 798].”

25. This Court further went on to observe thus:

“136. final judgment and order/decree is binding on thejudgment debtor. Once claim fructifies into final judgmentBand order/decree, upon adjudication, and certificate ofrecovery is also issued authorising the creditor to realise itsdecretal dues, fresh right accrues to the creditor to recoverthe amount of the final judgment and/or order/decree and/orthe amount specified in the recovery certificate.C*** **** ***

141. Moreover, judgment and/or decree for money in favourof the financial creditor, passed by the DRT, or any othertribunal or court, or the issuance of certificate of recoveryin favour of the financial creditor, would give rise to freshDcause of action for the financial creditor, to initiate proceedingsunder Section 7 IBC for initiation of the corporate insolvencyresolution process, within three years from the date of thejudgment and/or decree or within three years from the dateof issuance of the certificate of recovery, if the dues of theEcorporate debtor to the financial debtor, under the judgmentand/or decree and/or in terms of the certificate of recovery,or any part thereof remained unpaid.”

[emphasis supplied]

26. It could thus be seen that this Court in the case of Dena BankF(supra) in paragraphs 136 and 141, has in unequivocal terms held thatonce claim fructifies into final judgment and order/decree, uponadjudication, and certificate of recovery is also issued authorizing thecreditor to realize its decretal dues, fresh right accrues to the creditorto recover the amount of the final judgment and/or order/decree and/orthe amount specified in the Recovery Certificate. It has further beenGheld that issuance of certificate of recovery in favour of the financialcreditor would give rise to fresh cause of action to the financial creditor,to initiate proceedings under Section 7 of the IBC for initiation of theCIRP, within three years from the date of the judgment and/or decree orwithin three years from the date of issuance of the certificate of recovery,Hif 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, orany part thereof remained unpaid.

27. With these findings, we could have very well allowed thepresent appeal and set aside the judgment and order of the learnedNCLAT. Undisputedly, the application for initiation of CIRP under Section7 of the IBC has been filed by KMBL within period of three yearsfrom the date of issuance of the Recovery Certificate. However, sinceit has been argued by Shri K.V. Viswanathan, learned Senior Counselthat the judgment rendered by the two-Judge Bench of this Court in thecase of Dena Bank (supra) is per incuriam the provisions of the relevantstatutes and the judgments of the three-Judge Bench of this Court in thecases of Jignesh Shah (supra) and Gaurav Hargovindbhai Dave(supra) and since the issue is of seminal importance, we would proceedto consider the rival submissions.

28. It will be relevant to refer to clauses (6), (10), (11) and (12) ofSection 3, clauses (7) and (8) of Section 5, Section 6 and clause (a) ofsub-section (1) of Section 14 of the IBC, which are as under:

“3. Definitions.—In this Code, unless the context otherwiserequires,—

(1) ………………………………….

………………………………….

(6) “claim” means—

(a) right to payment, whether or not such right is reduced tojudgment, fixed, disputed, undisputed, legal, equitable, secured orunsecured;

(b) right to remedy for breach of contract under any law for thetime being in force, if such breach gives rise to right to payment,whether or not such right is reduced to judgment, fixed, matured,unmatured, disputed, undisputed, secured or unsecured;

*** *** ***

(10) “creditor” means any person to whom debt is owed andincludes financial creditor, an operational creditor, securedcreditor, an unsecured creditor and decree-holder;

1092SUPREME COURT REPORTS[2022] 5 S.C.R.

A(11) “debt” means liability or obligation in respect of claimwhich is due from any person and includes financial debt andoperational debt;

(12) “default” means non-payment of debt when whole or anypart or instalment of the amount of debt has become due andBpayable and is not [5][paid] by the debtor or the corporate debtor,as the case may be;

*** *** ***

5. Definitions.- In this Part, unless the context otherwiserequires,-

(1) ………………………………….………………………………….

(7) “financial creditor” means any person to whom financialdebt is owed and includes person to whom such debt has beenDlegally assigned or transferred to;

(8) “financial debt” means debt along with interest, if any, whichis disbursed against the consideration for the time value of moneyand includes—

(a) money borrowed against the payment of interest;E(b) any amount raised by acceptance under any acceptance creditfacility or its de-materialised equivalent;

(c) any amount raised pursuant to any note purchase facility orthe issue of bonds, notes, debentures, loan stock or any similarFinstrument;

(d) the amount of any liability in respect of any lease or hirepurchase contract which is deemed as finance or capital leaseunder the Indian Accounting Standards or such other accountingstandards as may be prescribed;

G(e) receivables sold or discounted other than any receivables soldon non-recourse basis;

(f) any amount raised under any other transaction, including anyforward sale or purchase agreement, having the commercial effectof borrowing;

Explanation.—For the purposes of this sub-clause,—

(i) any amount raised from an allottee under real estate projectshall be deemed to be an amount having the commercial effect ofa borrowing; and

(ii) the expressions, “allottee” and “real estate project” shall havethe meanings respectively assigned to them in clauses (d) and(zn) of Section 2 of the Real Estate (Regulation and Development)Act, 2016 (16 of 2016);

(g) any derivative transaction entered into in connection withprotection against or benefit from fluctuation in any rate or priceand for calculating the value of any derivative transaction, onlythe market value of such transaction shall be taken into account;

(h) any counter-indemnity obligation in respect of guarantee,indemnity, bond, documentary letter of credit or any other instrumentissued by bank or financial institution;

(i) the amount of any liability in respect of any of the guarantee orindemnity for any of the items referred to in sub-clauses (a) to(h) of this clause;

*** *** ***

6. Persons who may initiate corporate insolvency resolutionprocess.—Where any corporate debtor commits default, afinancial creditor, an operational creditor or the corporate debtoritself may initiate corporate insolvency resolution process in respectof such corporate debtor in the manner as provided under thisChapter.

*** *** ***

14. Moratorium.—(1) Subject to provisions of sub-sections (2)and (3), on the insolvency commencement date, the AdjudicatingAuthority shall by order declare moratorium for prohibiting all ofthe following, namely—

(a) the institution of suits or continuation of pending suits orproceedings against the corporate debtor including execution ofany judgment, decree or order in any court of law, tribunal,arbitration panel or other authority;”

A29. Clause (6) of Section 3 of the IBC defines the term “claim” intwo parts. Sub-clause (a) of clause (6) of Section 3 of the IBC definesthe term to mean, right to payment, whether or not such right is reducedto judgment, fixed, disputed, undisputed, legal, equitable, secured orunsecured. Sub-clause (b) of clause (6) of Section 3 of the IBC wouldshow that claim would also mean right to remedy for breach ofBcontract under any law for the time being in force, if such breach givesrise to right to payment, whether or not such right is reduced to judgment,fixed, matured, unmatured, disputed, undisputed, secured or unsecured.

30. Clause (10) of Section 3 of the IBC defines the term “creditor”,to mean any person to whom debt is owed and incudes financialCcreditor, an operational creditor, secured creditor, an unsecured creditorand decree-holder.

31. Clause (11) of Section 3 of the IBC defines the term “debt” tomean, liability or obligation in respect of claim which is due from anyperson and includes financial debt and operational debt.D

32. Clause (12) of Section 3 of the IBC defines the term “default”to mean non-payment of debt when whole or any part or instalment ofthe amount of debt has become due and payable and is not paid by thedebtor or the corporate debtor, as the case may be.

E33. Clause (7) of Section 5 of the IBC defines the term “financialcreditor” to mean any person to whom financial debt is owed andincludes person to whom such debt has been legally assigned ortransferred to.

34. Clause (8) of Section 5 of the IBC defines the term “financialFdebt”, to mean debt along with interest, if any, which is disbursedagainst the consideration for the time value of money and specifies variouscategories of debts in sub-clauses (a) to (h), which would be included inthe definition of term “financial debt”. Sub-clause (i) of clause (8) ofSection 5 of the IBC provides that the amount of any liability in respectof any of the guarantee or indemnity for any of the items referred to inGsub-clauses (a) to (h) of this clause would also be included in thedefinition of the term “financial debt”.

35. It could thus be seen that whereas sub-clauses (a) to (h) ofclause (8) of Section 5 of the IBC deal with specific categories, whichwould come in the definition of the term “financial debt”, sub-clause (i)Hof clause (8) of Section 5 of the IBC would include the amount of any

liability in respect of any of the guarantee or indemnity for any of theitems referred to in sub-clauses (a) to (h) of the said clause within themeaning of the term “financial debt”.

36. Section 6 of the IBC provides as to who may initiate CIRP. Itprovides that where any Corporate Debtor commits default, financialcreditor, an operational creditor or the Corporate Debtor itself may initiateCIRP in respect of such Corporate Debtor in the manner as providedunder the said Chapter.

37. Section 14 of the IBC provides “Moratorium”, consequentupon the admission of the application under Section 7 or Section 9 orSection 10 of the IBC, on an order passed by the Adjudicating Authority.Clause (a) of sub-section (1) of Section 14 of the IBC prohibits theinstitution of suits or continuation of pending suits or proceedings againstthe corporate debtor including execution of any judgment, decree ororder in any court of law, tribunal, arbitration panel or other authority.

38. From the scheme of the IBC, it could be seen that where anyCorporate Debtor commits default, financial creditor, an operationalcreditor or the Corporate Debtor itself is entitled to initiate CIRP in respectof such Corporate Debtor in the manner as provided under the saidChapter. The default has been defined to mean non-payment of debt.The debt has been defined to mean liability or obligation in respect ofa claim which is due from any person and includes financial debt andoperational debt. claim means right to payment, whether or not suchright is reduced to judgment, fixed, disputed, etc. It is more than settledthat the trigger point to initiate CIRP is when default takes place. Adefault would take place when debt in respect of claim is due and notpaid. claim would include right to payment whether or not such aright is reduced to judgment.

39. It is settled principle of law that the provisions of statueought to be interpreted in such manner which would advance the objectand purpose of the enactment.

40. This Court in the case of Swiss Ribbons Private Limitedand another vs. Union of India and others[12] has held that preservingthe Corporate Debtor as an on-going concern, while ensuring maximumrecovery for all creditors is the objective of the IBC.

41. It is an equally well settled principle of law that all the provisionsin the Statute have to be construed in context with each other and noprovision can be read in isolation.

42. In this background, we will have to consider, as to whether aperson, who holds Recovery Certificate would be financial creditorBwithin the meaning of clause (7) of Section 5 of the IBC.

43. person to be entitled to be “financial creditor” has to beowed financial debt and would also include person to whom suchdebt has been legally assigned or transferred to. Therefore, the onlyquestion that would be required to be considered is, as to whether aCliability in respect of claim arising out of Recovery Certificate wouldbe included within the meaning of the term “financial debt” as definedunder clause (8) of Section 5 of the IBC.

44. It will be pertinent to note that in clause (8) of Section 5 of theIBC, i.e, the definition clause of the term “financial debt”, the wordsDused are “means debt along with interest, if any, which is disbursedagainst the consideration for the time value of money and includes”.

45. At this juncture, we may rely on the following observations inthe case of Dilworth vs. Commissioner of Stamps[13], which have beenconsistently followed by this Court:

E“The word ‘include’ is very generally used in interpretation clausesin order to enlarge the meaning of words or phrases occurring inthe body of the statute; and when it is so used these words orphrases must be construed as comprehending, not only such thingsas they signify according to their natural import, but also thoseFthings which the interpretation clause declares that they shallinclude. But the word ‘include’ is susceptible of anotherconstruction, which may become imperative, if the context of theAct is sufficient to shew that it was not merely employed for thepurpose of adding to the natural significance of the words orexpressions defined. It may be equivalent to ‘mean and include’,Gand in that case it may afford an exhaustive explanation of themeaning which, for the purposes of the Act, must invariably beattached to these words or expressions.”

46. This Court in the case of Associated Indem Mechanical (P)Ltd. vs. W.B. Small Industries Development Corpn. Ltd. and others[14]while construing the definition of the term “premises” as provided underSection 2(c) of the W.B. Government Premises (Tenancy Regulation)Act, 1976, observed thus:

“13. ……..The definition of premises in Section 2(c) uses theword “includes” at two places. It is well settled that the word

“include” is generally used in interpretation clauses in orderto enlarge the meaning of the words or phrases occurring inthe body of the statute; and when it is so used those words orphrases must be construed as comprehending, not only suchthings, as they signify according to their natural import, butalso those things which the interpretation clause declares thatthey shall include.

(See Dadaji v. Sukhdeobabu [(1980) 1 SCC 621: AIR 1980 SC150]; Reserve Bank of India v. Peerless General Finance andInvestment Co. Ltd. [(1987) 1 SCC 424 : AIR 1987 SC 1023]and Mahalakshmi Oil Mills v. State of A.P. [(1989) 1 SCC 164: 1989 SCC (Tax) 56 : AIR 1989 SC 335] ) The inclusive definitionof “District Judge” in Article 236(a) of the Constitution has beenvery widely construed to include hierarchy of specialised civilcourts viz. Labour Courts and Industrial Courts which are notexpressly included in the definition. (See State ofMaharashtra v. Labour Law Practitioners’ Assn. [(1998) 2 SCC688 : 1998 SCC (L&S) 657 : AIR 1998 SC 1233] ) Therefore,there is no warrant or justification for restricting theapplicability of the Act to residential buildings alone merelyon the ground that in the opening part of the definition of theword “premises”, the words “building or hut” have beenused.”

[emphasis supplied]

47. It is thus clear that it is settled position of law that when theword “include” is used in interpretation clauses, the effect would be toenlarge the meaning of the words or phrases occurring in the body ofthe statute. Such interpretation clause is to be so used that those wordsor phrases must be construed as comprehending, not only such things,

14 (2007) 3 SCC 607

Aas they signify according to their natural import, but also those thingswhich the interpretation clause declares that they shall include. In sucha situation, there would be no warrant or justification in giving the restrictedmeaning to the provision.

48. In the case of Karnataka Power Transmission CorporationBand another vs. Ashok Iron Works Private Limited[15], this Court, whileconstruing the definition of the word “person” as could be found in Section2(1)(d) read with Section 2(1)(m) of the Consumer Protection Act, 1986,observed thus:

“17. It goes without saying that interpretation of word orCexpression must depend on the text and the context. The resort tothe word “includes” by the legislature often shows the intentionof the legislature that it wanted to give extensive and enlargedmeaning to such expression. Sometimes, however, the contextmay suggest that word “includes” may have been designed tomean “means”. The setting, context and object of an enactmentDmay provide sufficient guidance for interpretation of the word“includes” for the purposes of such enactment.”

18. Section 2(1)(m) which enumerates four categories, namely,

(i) firm whether registered or not;

E(ii) Hindu Undivided Family;

(iii) cooperative society; and

(iv) every other association of persons whether registered underthe Societies Registration Act, 1860 (21 of 1860) or not

Fwhile defining “person” cannot be held to be restrictive and confinedto these four categories as it is not said in terms that “person”shall mean one or other of the things which are enumerated, butthat it shall “include” them.

19. The General Clauses Act, 1897 in Section 3(42) definesG“person”:

“3. (42) ‘person’ shall include any company or association orbody of individuals, whether incorporated or not;”

20. Section 3 of the 1986 Act upon which reliance is placed bylearned counsel for KPTC provides that the provisions of the Actare in addition to and not in derogation of any other law for thetime being in force. This provision instead of helping the contentionof KPTC would rather suggest that the access to the remedyprovided to (sic under) the Act of 1986 is an addition to theprovisions of any other law for the time being in force. It does notin any way give any clue to restrict the definition of “person”.

21. Section 2(1)(m), is beyond all questions an interpretation clause,and must have been intended by the legislature to be taken intoaccount in construing the expression “person” as it occurs inSection 2(1)(d). While defining “person” in Section 2(1)(m), thelegislature never intended to exclude juristic person like company.As matter of fact, the four categories by way of enumerationmentioned therein is indicative, Categories (i), (ii) and (iv) beingunincorporate and Category (iii) corporate, of its intention toinclude body corporate as well as body unincorporate. Thedefinition of “person” in Section 2(1)(m) is inclusive and notexhaustive. It does not appear to us to admit of any doubt thatcompany is person within the meaning of Section 2(1)(d) readwith Section 2(1)(m) and we hold accordingly.”

49. It could thus be seen that though the word “company” wasnot specifically included in Section 2(1)(m) of the Consumer ProtectionAct, 1986, this Court in the case of Karnataka Power TransmissionCorporation (supra) found that the legislature never intended to excludea juristic person like company from the definition of the word “person”.It was found that the categories (i), (ii) and (iv) mentioned therein wereunincorporate and category (iii) was corporate. As such, the legislativeintention was to include body corporate as well as body unincorporate.It was held that the definition of “person” in Section 2(1)(m) was inclusiveand not exhaustive.

50. The three-Judge Bench of this Court in the case of PioneerUrban Land and Infrastructure Limited and another vs. Union ofIndia and others[16]was considering challenge to the amendmentsmade to the IBC vide which Explanation to sub-clause (f) of clause (8)of Section 5 of the IBC was inserted, which provides that any amount

Araised from an allottee under real estate project shall be deemed to bean amount having the commercial effect of borrowing. This Courtheld that “the expression “and includes” speaks of subject-matters whichmay not necessarily be reflected in the main part of the definition”.

51. Applying these principles to clause (8) of Section 5 of theBIBC, it could clearly be seen that the words “means debt along withinterest, if any, which is disbursed against the consideration for the timevalue of money” are followed by the words “and includes”. Thereaftervarious categories (a) to (i) have been mentioned. It is clear that byemploying the words “and includes”, the Legislature has only giveninstances, which could be included in the term “financial debt”. However,Cthe list is not exhaustive but inclusive. The legislative intent could nothave been to exclude liability in respect of “claim” arising out of aRecovery Certificate from the definition of the term “financial debt”,when such liability in respect of “claim” simpliciter would be includedin the definition of the term “financial debt”D52. In any case, we have already discussed hereinabove that thetrigger point for initiation of CIRP is default of claim. “Default” is non-payment of debt by the debtor or the Corporate Debtor, which hasbecome due and payable, as the case may be, “debt” is liability orobligation in respect of claim which is due from any person, and aE“claim” means right to payment, whether such right is reduced tojudgment or not. It could thus be seen that unless there is “claim”,which may or may not be reduced to any judgment, there would be no“debt” and consequently no “default” on non-payment of such “debt”.When the “claim” itself means right to payment, whether such rightis reduced to judgment or not, we find that if the contention of theFrespondents, that merely on “claim” being fructified in decree, thesame would be outside the ambit of clause (8) of Section 5 of the IBC,is accepted, then it would be inconsistent with the plain language used inthe IBC. As already discussed hereinabove, the definition is inclusiveand not exhaustive. Taking into consideration the object and purpose ofGthe IBC, the legislature could never have intended to keep debt, whichis crystallized in the form of decree, outside the ambit of clause (8) ofSection 5 of the IBC.

53. Having held that liability in respect of claim arising out ofa Recovery Certificate would be “financial debt” within the ambit ofHits definition under clause (8) of Section 5 of the IBC, as natural

corollary thereof, the holder of such Recovery Certificate would be afinancial creditor within the meaning of clause (7) of Section 5 of theIBC. As such, such “person” would be “person” as provided underSection 6 of the IBC who would be entitled to initiate the CIRP.

54. Insofar as the contention of the respondents with regard toclause (a) of sub-section (1) of Section 14 of the IBC is concerned, wedo not find that the words used in clause (a) of sub-section (1) of Section14 of the IBC could be read to mean that the decree-holder is not entitledto invoke the provisions of the IBC for initiation of CIRP. plain readingof said Section would clearly provide that once CIRP is initiated, thereshall be prohibition for institution of suits or continuation of pending suitsor proceedings against the corporate debtor including execution of anyjudgment, decree or order in any court of law, tribunal, arbitration panelor other authority. The prohibition to institution of suit or continuation ofpending suits or proceedings including execution of decree would notmean that decree-holder is also prohibited from initiating CIRP, if he isotherwise entitled to in law. The effect would be that the applicant, whois decree-holder, would himself be prohibited from executing the decreein his favour.

55. That leaves us to consider the contention, as to whether thejudgment of this Court in the case of Dena Bank (supra) is contrary tothe judgments of three-Judge Bench of this Court in the cases of JigneshShah (supra) and Gaurav Hargovindbhai Dave (supra), as contendedby the respondents, and therefore, per incuriam.

56. In the case of Jignesh Shah (supra), the cause of actionarose in the month of August, 2012. The winding-up petition, which wastransferred to the learned NCLT, was filed on 21[st] October, 2016, i.e.,after period of three years from the date on which cause of actionarose. This Court in the said case was considering question that, if awinding up petition was barred by limitation on the date it was filed,whether Section 238A of the IBC will give new lease of life to such atime-barred petition. This Court held that Section 238A of the IBC wouldnot extend the period of limitation for filing winding-up petition. On thefacts of the said case, it was found that on the date on which the winding-up petition was filed, it was barred by lapse of time and Section 238A ofthe IBC would not give new lease of life to such time-barred petition.The question that falls for consideration in the present case is, as towhether claim which is fructified in decree would give fresh cause

Aof action to file an application under Section 7 of the IBC within periodof three years from such decree or not. This issue did not fall forconsideration before this Court in the case of Jignesh Shah (supra).

57. In the case of Gaurav Hargovindbhai Dave (supra), therespondent therein was declared NPA on 21[st] July, 2011 and an applicationBunder Section 7 of the IBC was filed in the year 2017 while IBC wasbrought into force on 1[st] December, 2016. The three-Judge Bench ofthis Court in the said case held that the time began to run from the datewhen the respondent was declared NPA and as such, the applicationunder Section 7 of the IBC, which was filed beyond the period of threeyears, was barred by limitation. The question, as to whether personCwould be entitled to file an application for initiation of CIRP within aperiod of three years from the date on which the decree was passed ora Recovery Certificate was granted did not fall for consideration in thesaid case also.

58. Shri Viswanathan next contended that this Court in the caseDof Jignesh Shah (supra) has approved the judgment of the CalcuttaHigh Court in the case of Rameswar Prasad Kejriwal & Sons Ltd. vs.Garodia Hardware Stores[17]. In this respect, it will be relevant to notethat this Court was considering various judgments which were reliedupon by Dr. Singhvi. Insofar as the judgment of the Calcutta High CourtEin the case of Rameswar Prasad Kejriwal (supra) is concerned, in thesaid case, the cause of action arose in the year 1992. The suit was filedin 1994 and the decree was obtained in the year 1997. It is to be notedthat the winding-up petition came to be filed in the year 2001, i.e., aftera period of three years. It was sought to be argued that the limitationperiod would be 12 years. The same was rejected.F

59. No doubt that Shri Viswanathan is justified in referring toparagraph 21 of the judgment in the case of Jignesh Shah (supra) tothe extent that this Court observed that the suit for recovery, which is aseparate and independent proceeding distinct from the remedy of winding-up would, in no manner, impact the limitation within which the winding-Gup proceeding is to be filed, by somehow keeping the debt alive for thepurpose of the winding-up proceeding. However, the question, as towhether such suit or an application which has been culminated into adecree or Recovery Certificate would give fresh cause of action tofile an application under Section 7 of the IBC did not arise for considerationin the said judgment/case. The said judgment cannot be held to be aratio decidendi for proposition that even after the suit is decreed, orRecovery Certificate is issued, it could not give fresh cause of action toinitiate CIRP within period of three years.

60. As to what is ratio decidendi has been succinctly observed bythis Court in the case of Union of India and others vs. DhanwantiDevi and others[18], which is as under:

“9. …… It is not everything said by Judge while giving judgmentthat constitutes precedent. The only thing in Judge’s decisionbinding party is the principle upon which the case is decided andfor this reason it is important to analyse decision and isolatefrom it the ratio decidendi. According to the well-settled theoryof precedents, every decision contains three basic postulates—(i) findings of material facts, direct and inferential. An inferentialfinding of facts is the inference which the Judge draws from thedirect, or perceptible facts; (ii) statements of the principles of lawapplicable to the legal problems disclosed by the facts; and (iii)judgment based on the combined effect of the above. decisionis only an authority for what it actually decides. What is of theessence in decision is its ratio and not every observation foundtherein nor what logically follows from the various observationsmade in the judgment. Every judgment must be read as applicableto the particular facts proved, or assumed to be proved, since thegenerality of the expressions which may be found there is notintended to be exposition of the whole law, but governed andqualified by the particular facts of the case in which suchexpressions are to be found. It would, therefore, be not profitableto extract sentence here and there from the judgment and tobuild upon it because the essence of the decision is its ratio andnot every observation found therein. The enunciation of the reasonor principle on which question before court has been decidedis alone binding as precedent. The concrete decision alone isbinding between the parties to it, but it is the abstract ratiodecidendi, ascertained on consideration of the judgment inrelation to the subject-matter of the decision, which alone has theforce of law and which, when it is clear what it was, is binding. It

Ais only the principle laid down in the judgment that is binding lawunder Article 141 of the Constitution. deliberate judicial decisionarrived at after hearing an argument on question which arises inthe case or is put in issue may constitute precedent, no matterfor what reason, and the precedent by long recognition may matureinto rule of stare decisis. It is the rule deductible from theBapplication of law to the facts and circumstances of the casewhich constitutes its ratio decidendi.”

61. It will also be apposite to refer to the following observationsof this Court in the case of The Regional Manager and another vs.Pawan Kumar Dubey[19]:C

“7. …. Even where there appears to be some conflict, it would,we think, vanish when the ratio decidendi of each case is correctlyunderstood. It is the rule deducible from the application of law tothe facts and circumstances of case which constitutes its ratiodecidendi and not some conclusion based upon facts which mayDappear to be similar. One additional or different fact can make aworld of difference between conclusions in two cases even whenthe same principles are applied in each case to similar facts.”

62. It could thus be seen that one additional or different fact canmake world of difference between conclusions in two cases evenEwhen the same principles are applied in each case to similar facts.

63. It will further be relevant to note that the judgment of thisCourt in the case of Jignesh Shah (supra) was authored byR.F.Nariman, J. R.F.Nariman, J. in the case of Vashdeo R. Bhojwanivs. Abhyudaya Co-operative Bank Limited and another[20], whileFrelying on the judgment of three-Judge Bench of this Court in the caseof Balakrishna Savalram Pujari Waghmare and others vs. ShreeDhyaneshwar Maharaj Sansthan and others[21]has observed thus:

“Following this judgment, it is clear that when the recoverycertificate dated 24-12-2001 was issued, this certificate injuredGeffectively and completely the appellant’s rights as result ofwhich limitation would have begun ticking.”

19 (1976) 3 SCC 33420 (2019) 9 SCC 158H21 1959 Supp (2) SCR 476 : AIR 1959 SC 798

64. In the said case, the respondent No.2 was declared NPA on23[rd] December, 1999; the Recovery Certificate was issued on24[th] December, 2001; application under Section 7 of the IBC came to befiled on 21[st] July, 2017. In this factual background, this Court found thatthe application under Section 7 of the IBC, which was filed after periodof almost 16 years, i.e., much beyond the period of three years, wasbarred by limitation.

65. It was found that the limitation period for filing winding-uppetition would be three years and since the same was filed beyond theperiod of three years, it was liable to be dismissed. In the present case,undisputedly, the application under Section 7 of the IBC was filed withina period of three years from the date of issuance of the RecoveryCertificate.

66. It can thus be seen that this Court observed that the issuanceof Recovery Certificate injured effectively and completely the appellant’srights and therefore the limitation would begin from the said date. Ineffect, this Court observed that the issuance of Recovery Certificatecould trigger the limitation. As such, in our view, this Court in the case ofDena Bank (supra) has rightly relied on Vashdeo R. Bhojwani (supra),which, in turn, relied on the earlier three-Judge Bench judgment of thisCourt in the case of Balakrishna Savalram Pujari Waghmare (supra).

67. Shri Viswanathan, learned Senior Counsel relied on variousjudgments of this Court to fortify his submission that the judgment oftwo-Judge Bench of this Court in the case of Dena Bank (supra) is perincuriam. Recently, two-judge Bench of this Court (consisting of L.N.Rao and B.R. Gavai, JJ.) had an occasion to consider this doctrine in thecase of James Varghese (supra). It is settled law that “Incuria” literallymeans “carelessness”. decision or judgment can be per incuriam anyprovision in statute, rule or regulation, which was not brought to thenotice of the Court. It can also be per incuriam if it is not possible toreconcile its ratio with that of previously pronounced judgment of co-equal or larger Bench.

68. perusal of the judgment of this Court in the case of DenaBank (supra) would reveal that this Court considered all the relevantprovisions of the IBC and the earlier judgments of this court. As alreadydiscussed hereinabove, we do not find any inconsistency in the judgmentof this Court in the case of Dena Bank (supra) with the earlier judgments

Aof this Court on which reliance is placed by Shri Viswanathan. We findthat the contention that the judgment of this Court in the case of DenaBank (supra) being per incuriam to the statutory provisions and earlierjudgments of this Court, is wholly unsustainable.

69. We have already hereinabove, done the exercise of consideringBthe relevant provisions of the IBC afresh and come to conclusion thata liability in respect of claim arising out of Recovery Certificatewould be “financial debt” within the meaning of clause (8) of Section5 of the IBC and holder of the Recovery Certificate would be “financialcreditor” within the meaning of clause (7) of Section 5 of the IBC. Wehave also held that person would be entitled to initiate CIRP within aCperiod of three years from the date on which the Recovery Certificate isissued. We are of the considered view that the view taken by the two-Judge Bench of this Court in the case of Dena Bank (supra) is correctin law and we affirm the same.

70. That leaves us with the contention of Shri Viswanathan withDregard to sub-sections (22) and (22A) of Section 19 of the Debt RecoveryAct, which read thus:

“19. Application to the Tribunal.-(1)

………………………………………………..

E………………………………………………..

(22) The Presiding Officer shall issue certificate of recoveryalong with the final order, under sub-section (20), for payment ofdebt with interest under his signature to the Recovery Officer forrecovery of the amount of debt specified in the certificate.

F(22-A) Any recovery certificate issued by the Presiding Officerunder sub-section (22) shall be deemed to be decree or order ofthe Court for the purposes of initiation of winding up proceedingsagainst company registered under the Companies Act, 2013 (18of 2013) or Limited Liability Partnership registered under theLimited Liability Partnership Act, 2008 (9 of 2008) or insolvencyGproceedings against any individual or partnership firm under anylaw for the time being in force, as the case may be.”

71. It could be seen that sub-section (22) of Section 19 of theDebt Recovery Act empowers the Presiding Officer to issue certificateof recovery along with the final order, under sub-section (20), for paymentH

of debt with interest. The certificate is given for the purposes of recoveryof the amount of debt specified in the certificate. Sub-section (22A) ofSection 19 of the Debt Recovery Act provides that any RecoveryCertificate issued by the Presiding Officer under sub-section (22) shallbe deemed to be decree or order of the Court for the purposes of initiationof winding up proceedings against company, etc.

72. It is sought to be argued by Shri Viswanathan that the RecoveryCertificate is for the limited purpose of initiation of winding up proceedings.If we accept the contention of Shri Viswanathan, we would be requiredto insert the word “limited” between the words “shall be deemed to bedecree or order of the Court” and “for the purposes of initiation of windingup proceedings”. If the contention is to be accepted, sub-section (22A)of Section 19 of the Debt Recovery Act would have to be reframed as“Any recovery certificate issued by the Presiding Officer under sub-section (22) shall be deemed to be decree or order of the Court for thelimited purposes of initiation of winding up proceedings…”.

73. In our considered view, if we accept the said submission, itwould result in doing violence to the provisions of sub-section (22A) ofSection 19 of the Debt Recovery Act.

74. It will be apposite to refer to the following observations of thisCourt in the case of Mohd. Shahabuddin vs. State of Bihar andothers[22]:

“179. Even otherwise, it is well-settled principle in law thatthe court cannot read anything into statutory provision whichis plain and unambiguous. The language employed in astatute is determinative factor of the legislative intent. Ifthe language of the enactment is clear and unambiguous, itwould not be proper for the courts to add any words theretoand evolve some legislative intent, not found in the statute.Reference in this regard may be made to recent decision of thisCourt in Ansal Properties & Industries Ltd. v. State ofHaryana [(2009) 3 SCC 553].”

[emphasis supplied]

75. It is more than well settled that when the language of statutoryprovision is plain and unambiguous, it is not permissible for the Court to

Aadd or subtract words to statute or read something into it which is notthere. It cannot rewrite or recast legislation. At the cost of repetition, weobserve that if the argument as advanced by Shri Viswanathan is to beaccepted, it will completely change the texture of the fabric of sub-section (22A) of Section 19 of the Debt Recovery Act.B76. Though there are umpteen number of authorities to supportthis proposition, we do not wish to burden our judgment with them. Sufficeit to refer to the judgment of three-Judge Bench of this Court in the caseof Nasiruddin and others vs. Sita Ram Agarwal[23] wherein this Courthas held as under:

C“37. The court’s jurisdiction to interpret statute can be invokedwhen the same is ambiguous. It is well known that in given casethe court can iron out the fabric but it cannot change the textureof the fabric. It cannot enlarge the scope of legislation orintention when the language of the provision is plain andunambiguous. It cannot add or subtract words to statute orDread something into it which is not there. It cannot rewrite orrecast legislation. It is also necessary to determine that thereexists presumption that the legislature has not used anysuperfluous words. It is well settled that the real intention ofthe legislation must be gathered from the language used. ItEmay be true that use of the expression “shall or may” is not decisivefor arriving at finding as to whether the statute is directory ormandatory. But the intention of the legislature must be found outfrom the scheme of the Act. It is also equally well settled thatwhen negative words are used the courts will presume that theintention of the legislature was that the provisions are mandatoryFin character.”

[emphasis supplied]

77. From the plain and simple interpretation of the words used insub-section (22A) of Section 19 of the Debt Recovery Act, it would beGamply clear that the Legislature provided that for the purposes of winding-up proceedings against Company, etc., Recovery Certificate issuedby the Presiding Officer under sub-section (22) of Section 19 of theDebt Recovery Act shall be deemed to be decree or order of theCourt. It is thus clear that once Recovery Certificate is issued by the

Presiding Officer under sub-section (22) of Section 19 of the DebtRecovery Act, in view of sub-section (22A) of Section 19 of the DebtRecovery Act it will be deemed to be decree or order of the Court forthe purposes of initiation of winding-up proceedings of Company, etc.However, there is nothing in sub-section (22A) of Section 19 of theDebt Recovery Act to imply that the Legislature intended to restrict theuse of the Recovery Certificate limited for the purpose of winding-upproceedings. The contention of the respondents, if accepted, would beto provide something which is not there in sub-section (22A) of Section19 of the Debt Recovery Act.78. In any case, when the Legislature itself has provided that anyRecovery Certificate issued under sub-section (22) of Section 19 of theDebt Recovery Act will be deemed to be decree or order of the Courtfor initiation of winding-up proceedings, which proceedings are muchsevere in nature, it will be difficult to accept that the Legislature intendedthat such Recovery Certificate could not be used for initiation of CIRP,which would enable the Corporate Debtor to continue as an on-goingconcern and, at the same time, pay the dues of the creditors to themaximum. We, therefore, find no substance in the said submission.

79. Insofar as the judgment of this Court in the case of ParamjeetSingh Patheja (supra) is concerned, we do not find it necessary torefer to the same, inasmuch as the view, which we have taken, has beentaken after interpreting the provisions of the IBC, whereas the view inthe case of Paramjeet Singh Patheja (supra) is with regard to legalfiction as provided in Section 36 of the Arbitration and Conciliation Act,1996.

80. Insofar as the reliance on the case of Nawab Hussain (supra)is concerned, what has been observed by this Court is that the doctrineof per rem judicatam is based on two theories, viz., (i) the finality andconclusiveness of judicial decisions for the final termination of disputesin the general interest of the community as matter of public policy, and(ii) the interest of the individual that he should be protected frommultiplication of litigation. It has been held that the said doctrine servesnot only public but also private purpose by obstructing the reopeningof matters which have been adjudicated upon.

81. In the case of Nawab Hussain (supra), the respondent was aconfirmed Sub-Inspector of Police in Uttar Pradesh. He challenged his

Adismissal in writ petition before the Allahabad High Court on the groundthat he was not afforded reasonable opportunity. The said writ petitionwas dismissed. After the dismissal of the said writ petition, he filed suitin the Court of Civil Judge, Etah, raising certain additional grounds. Thesame was also dismissed. The respondent preferred second appeal,which was allowed by the High Court. The High Court had held that theBsuit was not barred by the principle of constructive res judicata. In thisbackground, the aforesaid observations were made by this Court whilereversing the judgment of the High Court and holding it to be barred byres judicata.

82. In the case of Gulabchand Chhotalal Parikh (supra), theCappellant therein had prayed for the issuance of writ of mandamus anda writ of prohibition against the respondent-State in writ petition filedin the High Court. The High Court dismissed the petition on merits afterfull contest. The appellant thereafter filed suit against the respondentand raised similar plea. In this background, the Trial Court, the FirstDAppellate Court and the High Court held that the suit was barred by resjudicata in view of the judgment of the High Court in the writ petition.In appeal, this Court affirming the concurrent views held that on generalprinciples of res judicata, the decision of the High Court in writ petitionunder Article 226 of the Constitution of India, after full contest, willoperate as res judicata in subsequent regular suit between the sameEparties with respect to the same matter.83. Insofar as the judgment in the case of Thoday vs. Thoday[24]is concerned, the same has been considered by this Court in the case ofBhanu Kumar Jain vs. Archana Kumar and another[25], wherein thisCourt held that cause of action estoppel arises where, in two differentFproceedings, identical issues are raised, in which event, the latterproceedings between the same parties shall be dealt with similarly aswas done in the previous proceedings. In such an event, the bar is absolutein relation to all points decided save and except allegation of fraud andcollusion. We are of the view that the said judgment would not evenGremotely be applicable to the facts of the present case. In that view ofthe matter, we do not find that reliance on the said judgment would be ofany assistance to the case of the respondents.

24 (1964) 2 WLR 371H25 (2005) 1 SCC 787

84. To conclude, we hold that liability in respect of claim arisingout of Recovery Certificate would be “financial debt” within themeaning of clause (8) of Section 5 of the IBC. Consequently, the holderof the Recovery Certificate would be financial creditor within themeaning of clause (7) of Section 5 of the IBC. As such, the holder ofsuch certificate would be entitled to initiate CIRP, if initiated within aperiod of three years from the date of issuance of the RecoveryCertificate.

85. We further find that the view taken by the two-Judge Benchof this Court in the case of Dena Bank (supra) is correct in law and weaffirm the same. We further find that in the facts of the present case,the application under Section 7 of the IBC was filed within period ofthree years from the date on which the Recovery Certificate was issued.As such, the application under Section 7 of the IBC was within limitationand the learned NCLAT has erred in holding that it is barred by limitation.

86. In the result, we pass the following judgment:

(i)The appeal is allowed.

(ii)The impugned judgment and order dated 24[th ]November, 2020passed by the learned National Company Law AppellateTribunal, New Delhi in Company Appeal (AT) (Insolvency)No.1406 of 2019 is quashed and set aside.

87. We further clarify that though elaborate arguments have beenadvanced by the rival parties upon the merits of the matter, we have nottouched the same. We have only decided the legal issues. The partieswould be at liberty to raise all the issues, considering the merits of thematter before the learned NCLT. The learned NCLT would decide thesame in accordance with law.

88. Pending applications, including the application(s) for ex-partestay and disposal of the matter shall stand disposed of in the aboveterms. There shall be no order as to costs.

GAppeal allowed.

Nidhi Jain(Assisted by : Neha Sharma, LCRA)