# In the matter of Kotak Mahindra Bank Limited Vs. A. Balakrishnan & Anr. CIVIL APPEAL NO.689 OF 2021

> SC judgment dated 2022-05-30. Citation: TCN-2022-SC-00042. The appeal challenges the NCLAT's judgment that the application filed by Kotak Mahindra Bank…

- **Court:** SC
- **Order date:** 30 May 2022
- **Citation:** TCN-2022-SC-00042
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/kotak-mahindra-bank-limited-vs-a-balakrishnan-anr-civil-appeal-no689-of-2021-795b316f

## Summary

### Background

The appeal challenges the NCLAT's judgment that the application filed by Kotak Mahindra Bank Limited (KMBL) under Section 7 of the Insolvency and Bankruptcy Code (IBC) was time-barred. The NCLAT had reversed the NCLT's order which admitted the application. The core issue revolves around whether a recovery certificate issued by the Debt Recovery Tribunal (DRT) provides a fresh cause of action for initiating CIRP under the IBC, and whether KMBL's application was filed within the limitation period.

## Facts

During 1993-1994, Ind Bank Housing Limited (IBHL) sanctioned credit facilities to several companies. These borrower entities defaulted, and IBHL classified the facilities as Non-Performing Assets (NPA) in November 1997. IBHL filed civil suits against the borrower entities and Prasad Properties and Investments Pvt. Ltd. (the Corporate Debtor), who stood as a Corporate Guarantor. In 2006, Kotak Mahindra Bank Ltd. (KMBL) acquired IBHL's rights through a Deed of Assignment. KMBL and the borrower entities entered into a compromise in August 2006, recorded by the High Court in March 2007, making the Corporate Debtor jointly and severally liable for Rs. 29,00,96,918/-. KMBL issued a demand notice in September 2007 and a possession notice in January 2008 under the SARFAESI

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## Issues and analysis

### Issue 1: Whether a liability in respect of a claim arising out of a Recovery Certificate would be a …

**Ratio:** The term 'financial debt' as defined in Section 5(8) of the IBC is inclusive and not

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**Reasoning:** The court reasoned that the definition of 'financial debt' in Section 5(8) uses the words

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**Interpretation:** The court interpreted the definition of 'financial debt' broadly, emphasizing

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**Application:** The court applied this interpretation to the facts of the case, holding that

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## Parties

- **Judges:** L. Nageswa…; B.R. G…; +1 more
- **Appellants:** Kotak Mahindra…
- **Respondents:** Prasad Properties…; A. Balakr…

## Timeline

- **1993-01-01 — Credit Facilities…**: Ind Bank Housing Limited (IBHL) sanctioned separate credit facilities to various…
- **1997-11-01 — Facilities Classified…**: IBHL classified the credit facilities availed by the borrower entities as Non-Performing…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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