Holding

A liability arising out of a Recovery Certificate is a "financial debt" and its holder is a "financial creditor" who may initiate a CIRP within three years from the date of issuance of the certificate.

Summary

Kotak Mahindra Bank (the appellant) sought initiation of a Corporate Insolvency Resolution Process (CIRP) against Prasad Properties and Investments Pvt. Ltd. (the corporate debtor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The corporate debtor had stood as guarantor for loans to three borrower entities, defaulted on payment, and a compromise decree made the debtor jointly liable. The Debt Recovery Tribunal later issued Recovery Certificates against the borrower entities and the corporate debtor. The appellant filed a Section 7 application within three years of the issuance of the certificates, but the National Company Law Appellate Tribunal (NCLAT) held it time‑barred, contending that a Recovery Certificate did not create a fresh cause of action. The Supreme Court examined the definitions of "financial debt" and "financial creditor" in the IBC, the effect of a Recovery Certificate as a decree, and the purpose‑ful interpretation of statutes, concluding that a Recovery Certificate gives rise to a fresh cause of action and the holder is a financial creditor eligible to initiate CIRP within three years. Consequently, the Supreme Court set aside the NCLAT order and allowed the appeal.

Issues considered

The effect of a Recovery Certificate issued under the Debt Recovery Act on the right to initiate a CIRP under the IBC.
Whether a liability arising from a Recovery Certificate qualifies as a "financial debt" within Section 5(8) of the IBC.
Whether the holder of a Recovery Certificate is a "financial creditor" under Section 5(7) of the IBC.
The applicable limitation period for filing a Section 7 application when a Recovery Certificate has been issued.
The interpretation of Section 19(22A) of the Debt Recovery Act – whether it limits the use of a Recovery Certificate to winding‑up proceedings only.

Legislation cited

Companies Act, 1956s. 433, s. 434
Insolvency and Bankruptcy Code, 2016s. 14, s. 3, s. 5, s. 6, s. 7
Limitation Act, 1963s. Article 137
Recovery of Debts and Bankruptcy Act, 1993 (Debt Recovery Act)s. 19(22), s. 19(22A)
Recovery of Debts Due to Banks and Financial Institutions Act, 1993s. 31A
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 13(2), s. 13(4)

Subjects

insolvencycorporate debtorfinancial creditorrecovery certificatelimitation periodIBCCIRPstatutory interpretationper incuriam

Judgment

1072 [2022]REPORTS
SUPREME COURT 5 S.C.R. 1072 [2022] 5 S.C.R.

A KOTAK MAHINDRA BANK LIMITED
v.
A. BALAKRISHNAN & ANR.
(Civil Appeal No. 689 of 2021)
B MAY 30, 2022
[L. NAGESWARA RAO, B. R. GAVAI AND
A. S. BOPANNA, JJ.]
Insolvency and Bankruptcy Code, 2016 : ss. 3, 5, 6, 7 and 14
– Corporate Insolvency Resolution Process (CIRP) – Initiation of –
C
Issuance of Recovery Certificate, if would trigger the right to sue –
On facts, respondent No.2-corporate debtor stood as the corporate
guarantor in respect of credit facilities sanctioned to the borrower
entities by the appellant Bank – Default in payment of dues by the
borrower entities – Compromise between the parties that the
D corporate debtor liable to pay the amount due from the borrower
entities to the Bank, however failure to make payment – In terms of
the compromise entered into between the parties, issuance of
Recovery Certificates by the Debt Recovery Tribunal against the
borrower entities and the corporate debtor – On basis of the
Recovery Certificates, the Bank filed application u/s. 7 before NCLT
E
seeking initiation of CIRP against the Corporate Debtor –
Application admitted – However, the NCLAT held the application to
betime-barred and issuance of Recovery Certificates did not trigger
right to sue – On appeal, held : Once a claim fructifies into a final
judgment and order/decree, upon adjudication and a certificate of
F recovery is also issued authorizing the creditor to realize its decretal
dues, a fresh right accrues to the creditor to recover the amount of
the final judgment and/or order/decree and/or the amount specified
in the Recovery Certificate – Issuance of a certificate of recovery
in favour of the financial creditor would give rise to a fresh cause
of action to the the financial creditor, to initiate proceedings u/s 7
G
for initiation of the CIRP, within three years from the date of the
judgment and/or decree – Liability in respect of a claim arising out
of a Recovery Certificate would be a “financial debt” within the
meaning of clause (8) of s. 5 and a holder of the Recovery Certificate
would be a “financial creditor” within the meaning of clause (7) of
H s. 5 – A person would be entitled to initiate CIRP within a period of
1072
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1073
& ANR.

three years from the date on which the Recovery Certificate is issued A
– On facts, the application u/s. 7 was filed within a period of three
years from the date on which the Recovery Certificate was issued –
Application u/s. 7 was within limitation – Thus, the judgment and
order passed by NCLAT is quashed and set aside – Securitization
and Reconstruction of Financial Assets and Enforcement of Security
B
Interest 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. C

Interpretation of Statutes:
Purposive Interpretation – Held: Provisions of a statue ought
to be interpreted in such a manner which would advance the object
and purpose of the enactment – All the provisions in the Statute D
should be construed in context with each other and no provision
can be read in isolation.
Literal rule of Interpretation – Held: When the language of a
statutory provision is plain and unambiguous, it is not permissible
for the Court to add or subtract words to a statute or read something E
into it which is not there – Court cannot rewrite or recast legislation.
Judgment/order: Per incuriam, when – Held: ‘Incuria’ literally
means ‘carelessness’ – A decision or judgment can be per incuriam
any provision in a statute, rule or regulation, which was not brought
to the notice of the Court – It can also be per incuriam if it is not F
possible to reconcile its ratio with that of a previously pronounced
judgment of a co-equal or larger Bench.
Words and Phrases: ‘Include’ – Meaning of – Held: Word
‘include’ is used in interpretation clauses to enlarge the meaning of
the words or phrases occurring in the body of the statute.
G
Allowing the appeal, the Court
HELD : 1.1 From the scheme of the Insolvency and
Bankruptcy Code, 2016, it could be seen that where any
Corporate Debtor commits a default, a financial creditor, an
H
1074 SUPREME COURT REPORTS [2022] 5 S.C.R.

A operational creditor or the Corporate Debtor itself is entitled to
initiate CIRP in respect of such Corporate Debtor in the manner
as provided under the said Chapter. The default has been defined
to mean non-payment of debt. The debt has been defined to mean
a liability or obligation in respect of a claim which is due from any
person and includes a financial debt and operational debt. A claim
B
means a right to payment, whether or not such right is reduced
to judgment, fixed, disputed, etc. It is more than settled that the
trigger point to initiate CIRP is when a default takes place. A
default would take place when a debt in respect of a claim is due
and not paid. A claim would include a right to payment whether or
C not such a right is reduced to judgment. [Para 38][1095-D-F]
1.2 It is a settled principle of law that the provisions of a
statue ought to be interpreted in such a manner which would
advance the object and purpose of the enactment. It is an equally
well settled principle of law that all the provisions in the Statute
D have to be construed in context with each other and no provision
can be read in isolation. [Paras 39 and 41][1095-F-G; 1096-A]
1.3 A person to be entitled to be a “financial creditor” has
to be owed a financial debt and would also include a person to
whom such debt has been legally assigned or transferred to.
E Therefore, the only question that would be required to be
considered is, as to whether a liability in respect of a claim arising
out of a Recovery Certificate would be included within the meaning
of the term “financial debt” as defined under clause (8) of Section
5 of the IBC. It would be pertinent to note that in clause (8) of
F Section 5 of the IBC, i.e, the definition clause of the term “financial
debt”, the words used are “means a debt along with interest, if
any, which is disbursed against the consideration for the time
value of money and includes”. [Paras 43 and 44][1096-B-D]
1.4 It is settled position of law that when the word “include”
G is used in interpretation clauses, the effect would be to enlarge
the meaning of the words or phrases occurring in the body of the
statute. Such interpretation clause is to be so used that those
words or phrases must be construed as comprehending, not only
such things, as they signify according to their natural import, but

H
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1075
& ANR.

also those things which the interpretation clause declares that A
they shall include. In such a situation, there would be no warrant
or justification in giving the restricted meaning to the provision.
Applying these principles to clause (8) of Section 5 of the IBC, it
could clearly be seen that the words “means a debt along with
interest, if any, which is disbursed against the consideration for
B
the time value of money” are followed by the words “and
includes”. Thereafter various categories (a) to (i) have been
mentioned. It is clear that by employing the words “and includes”,
the Legislature has only given instances, which could be included
in the term “financial debt”. However, the list is not exhaustive
but inclusive. The legislative intent could not have been to C
exclude a liability in respect of a “claim” arising out of a Recovery
Certificate from the definition of the term “financial debt”, when
such a liability in respect of a “claim” simpliciter would be
included in the definition of the term “financial debt”. The trigger
point for initiation of CIRP is default of claim. “Default” is non-
D
payment of debt by the debtor or the Corporate Debtor, which
has become due and payable, as the case may be, a “debt” is a
liability or obligation in respect of a claim which is due from any
person, and a “claim” means a right to payment, whether such a
right is reduced to judgment or not. It could thus be seen that
unless there is a “claim”, which may or may not be reduced to E
any judgment, there would be no “debt” and consequently no
“default” on non-payment of such a “debt”. When the “claim”
itself means a right to payment, whether such a right is reduced
to a judgment or not, if the contention of the respondents, that
merely on a “claim” being fructified in a decree, the same would
F
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 in the IBC. The definition is inclusive and not exhaustive.
Taking into consideration the object and purpose of the IBC, the
legislature could never have intended to keep a debt, which is
crystallized in the form of a decree, outside the ambit of clause G
(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 a liability in respect of a claim arising
out of a Recovery Certificate would be a “financial debt” within
the ambit of its definition under clause (8) of Section 5 of the H
1076 SUPREME COURT REPORTS [2022] 5 S.C.R.

A IBC, as a natural corollary thereof, the holder of such Recovery
Certificate would be a financial creditor within the meaning of
clause (7) of Section 5 of the IBC. As such, such a “person”
would be a “person” as provided under Section 6 of the IBC who
would be entitled to initiate the CIRP. [Para 53][1100-H; 1101-
A]
B
1.6 The words used in clause (a) of sub-section (1) of Section
14 of the IBC could not be read to mean that the decree-holder
is not entitled to invoke the provisions of the IBC for initiation
of CIRP. A plain reading of said Section would clearly provide
that once CIRP is initiated, there shall be prohibition for institution
C of suits or continuation of pending suits or proceedings against
the corporate debtor including execution of any judgment, decree
or order in any court of law, tribunal, arbitration panel or other
authority. The prohibition to institution of suit or continuation of
pending suits or proceedings including execution of decree would
D not mean that a decree-holder is also prohibited from initiating
CIRP, if he is otherwise entitled to in law. The effect would be
that the applicant, who is a decree-holder, would himself be
prohibited from executing the decree in his favour. [Para 54][1101-
B-D]
E 1.7 It is a settled law that “Incuria” literally means
“carelessness”. A decision or judgment can be per incuriam any
provision in a statute, rule or regulation, which was not brought
to the notice of the Court. It can also be per incuriam if it is not
possible to reconcile its ratio with that of a previously pronounced
judgment of a co-equal or larger Bench. A perusal of the judgment
F of this Court in the case of Dena Bank’s case would reveal that
this Court considered all the relevant provisions of the IBC and
the earlier judgments of this court. There is no inconsistency in
the judgment of this Court in the case of Dena Bank’s case with
the earlier judgments of this Court on which reliance was placed.
G The submission that the judgment of this Court in the case of
Dena Bank’s case being per incuriam to the statutory provisions
and earlier judgments of this Court, is wholly unsustainable. [Paras
67 and 68][1105-F-H; 1106-A-B]
1.8 A liability in respect of a claim arising out of a Recovery
H Certificate would be a “financial debt” within the meaning of clause
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1077
& ANR.

(8) of Section 5 of the IBC and a holder of the Recovery Certificate A
would be a “financial creditor” within the meaning of clause (7)
of Section 5 of the IBC. A person would be entitled to initiate
CIRP within a period of three years from the date on which the
Recovery Certificate is issued. [Para 69][1106-B-C]
1.9 Sub-section (22) of Section 19 of the Debt Recovery B
Act empowers the Presiding Officer to issue a certificate of
recovery along with the final order, under sub-section (20), for
payment of debt with interest. The certificate is given for the
purposes of recovery of the amount of debt specified in the
certificate. Sub-section (22A) of Section 19 of the Debt Recovery
Act provides that any Recovery Certificate issued by the C
Presiding Officer under sub-section (22) shall be deemed to be
decree or order of the Court for the purposes of initiation of
winding up proceedings against a company, etc. [Para 71][1106-
H; 1107-A-B]
1.10 The submission that the Recovery Certificate is for D
the limited purpose of initiation of winding up proceedings, if
accepted, the word “limited” would be required to be inserted
between the words “shall be deemed to be decree or order of
the Court” and “for the purposes of initiation of winding up
proceedings”. If the submission is to be accepted, sub-section E
(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 the limited purposes of initiation of winding
up proceedings…”. If the said submission is accepted, it would
result in doing violence to the provisions of sub-section (22A) of F
Section 19 of the Debt Recovery Act. When the language of a
statutory provision is plain and unambiguous, it is not permissible
for the Court to add or subtract words to a statute or read
something into it which is not there. It cannot rewrite or recast
legislation. [Paras 72, 73 and 75][1107-B-D, H; 1108-A] G
1.11 From the plain and simple interpretation of the words
used in sub-section (22A) of Section 19 of the Debt Recovery
Act, it would be amply clear that the Legislature provided that
for the purposes of winding-up proceedings against a Company,
H
1078 SUPREME COURT REPORTS [2022] 5 S.C.R.

A etc., a Recovery Certificate issued by the Presiding Officer under
sub-section (22) of Section 19 of the Debt Recovery Act shall be
deemed to be a decree or order of the Court. It is thus clear that
once a Recovery Certificate is issued by the Presiding Officer
under sub-section (22) of Section 19 of the Debt Recovery Act,
in view of sub-section (22A) of Section 19 of the Debt Recovery
B
Act it will be deemed to be a decree or order of the Court for the
purposes of initiation of winding-up proceedings of a Company,
etc. However, there is nothing in sub-section (22A) of Section 19
of the Debt Recovery Act to imply that the Legislature intended
to restrict the use of the Recovery Certificate limited for the
C purpose of winding-up proceedings. The submission of the
respondents, if accepted, would be to provide something which
is not there in sub-section (22A) of Section 19 of the Debt
Recovery Act. In any case, when the Legislature itself has
provided that any Recovery Certificate issued under sub-section
(22) of Section 19 of the Debt Recovery Act will be deemed to be
D
a decree or order of the Court for initiation of winding-up
proceedings, which proceedings are much severe in nature, it
would be difficult to accept that the Legislature intended that
such a Recovery Certificate could not be used for initiation of
CIRP, which would enable the Corporate Debtor to continue as
E an on-going concern and, at the same time, pay the dues of the
creditors to the maximum. [Paras 77 and 78][1108-G-H; 1108-A-
D]
1.12 A liability in respect of a claim arising out of a Recovery
Certificate would be a “financial debt” within the meaning of clause
F (8) of Section 5 of the IBC. Consequently, the holder of the
Recovery Certificate would be a financial creditor within the
meaning of clause (7) of Section 5 of the IBC. As such, the holder
of such certificate would be entitled to initiate CIRP, if initiated
within a period of three years from the date of issuance of the
Recovery Certificate. On facts, the application u/s. 7 IBC was
G filed within a period of three years from thedate on which the
Recovery Certificate was issued. As such, the application under
Section 7 IBC was within limitation and the NCLAT erred in
holding that it is barred by limitation. The impugned judgment
and order passed by the National Company Law Appellate Tribunal
H is quashed and set aside. [Paras 84, 85 and 86][1111-A-B; C-E]
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1079
& ANR.

Dena Bank (Now Bank of Baroda) v. C. Shivakumar A
Reddy and Another (2021) 10 SCC 330 – affirmed.
Paramjeet Singh Patheja v. ICDS Ltd. (2006) 13 SCC
322 : [2006] 8 Suppl. SCR 178 – distinguished.
Subhankar Bhowmik v. Union of India and another
2022 SCC OnLine Tri 208; Jignesh Shah and Another B
v. Union of India and Another (2019) 10 SCC 750 :
[2019] 12 SCR 678; Gaurav Hargovindbhai Dave v.
Asset Reconstruction Company (India) Limited and
Another (2019) 10 SCC 572 : [2019] 13 SCR 224;
Nirmal Jeet Kaur v. State of M.P. and Another (2004) 7 C
SCC 558 : [2004] 3 Suppl. SCR 1006; Secretary to
Govt. of Kerala, Irrigation Department and Others v.
James Varghese and Others 2022 SCC OnLine SC 545;
P. S. Ramamoorthy Sastry v. Selvar Paints and Varnish
Works (Pvt.) Ltd. The Law Weekly, Vol. XCVII (97)
dated 28 th January, 1984 Part 1; Mukul Agarwal v. D
Royale Resinex Pvt. Ltd. Company Appeal (AT)
(Insolvency) No. 777 of 2020 dated 30.03.2022; Swiss
Ribbons Private Limited and Another v. Union of India
and Others (2019) 4 SCC 17 : [2019] 3 SCR 535;
Associated Indem Mechanical (P) Ltd. v. W.B. Small E
Industries Development Corpn. Ltd. and Others (2007)
3 SCC 607 : [2007] 1 SCR 174; Karnataka Power
Transmission Corporation and another v. Ashok Iron
Works Private Limited (2009) 3 SCC 240 : [2009] 1109;
Pioneer Urban Land and Infrastructure Limited and
Another v. Union of India and Others (2019) 8 SCC F
416 : [2019] 10 SCR 381; Rameswar Prasad Kejriwal
& Sons Ltd. v. Garodia Hardware Stores (2001) SCC
OnLine 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 Another G
v. Pawan Kumar Dubey (1976) 3 SCC 334 : [1976] 3
SCR 540; Vashdeo R. Bhojwani v. Abhyudaya
Co-operative Bank Limited and Another (2019) 9 SCC
158 : [2019] 12 SCR 75; Balakrishna Savalram Pujari
Waghmare and Others v. Shree Dhyaneshwar Maharaj
H
1080 SUPREME COURT REPORTS [2022] 5 S.C.R.

A Sansthan and Others [1959] 2 Suppl. SCR 476 : AIR
1959 SC 798 : [1959] 2 Suppl. SCR 476; Mohd.
Shahabuddin v. State of Bihar and Others (2010) 4 SCC
653 : [2010] 3 SCR 911; Nasiruddin and others v. Sita
Ram Agarwal (2003) 2 SCC 577 : [2003] 1 SCR 634;
Bhanu Kumar Jain v. Archana Kumar and Another
B
(2005) 1 SCC 787 : [2004] 6 Suppl. SCR 1104; State
of U.P. v. Nawab Hussain (1977) 2 SCC 806 : [1977] 3
SCR 428; Gulabchand Chhotalal Parikh v. State of
Bombay (now Gujarat) [1965] 2 SCR 547 – referred
to.
C Dilworth v. Commissioner of Stamps (1899) AC 99;
Thoday v. Thoday (1964) 2 WLR 371 – referred to.
Case Law Reference
(2021) 10 SCC 330 affirmed Para 9
D [1977] 3 SCR 428 distinguished Para11
[1965] 2 SCR 547 distinguished Para 11
[2019] 12 SCR 678 referred to Para 14
[2019] 13 SCR 224 referred to Para 14
E [2004] 3 Suppl. SCR 1006 referred to Para 14
[2019] 3 SCR 535 referred to Para 40
[2007] 1 SCR 174 referred to Para 46
[2009] 1 SCR 1109 referred to Para 48
[2019] 10 SCR 381 referred to Para 50
F
[1996] 5 Suppl. SCR 32 referred to Para 60
[1976] 3 SCR 540 referred to Para 61
[2019] 12 SCR 75 referred to Para 63
[1959] 2 Suppl. SCR 476 referred to Para 63
G
[2010] 3 SCR 911 referred to Para 74
[2003] 1 SCR 634 referred to Para 76
[2006] 8 Suppl. SCR 178 distinguished Para 79
[2004] 6 Suppl. SCR 1104 referred to Para 83
H
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1081
& ANR.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 689 of A
2021.
From the Judgment and Order dated 24.11.2020 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No. 1406 of 2019.
Guru Krishna Kumar, Sr. Adv., Mahesh Agarwal, Rishi Agrawala, B
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, Sivagnanam
K., Advs. for the Respondents. C

The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. The present appeal challenges the judgment and order dated
24th November, 2020 passed by the learned National Company Law D
Appellate Tribunal, New Delhi (hereinafter referred to as “NCLAT”) in
Company Appeal (AT) (Insolvency) No. 1406 of 2019, thereby allowing
the appeal filed by the respondent no. 1 – Director and reversing the
order dated 20th September, 2019 passed by the learned National
Company Law Tribunal, Chennai (hereinafter referred to as “NCLT”),
E
whereby the application filed by the appellant under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (“IBC” for short) was admitted.
The learned NCLAT while allowing the appeal held that the application
filed by the appellant was time-barred and that issuance of Recovery
Certificate would not trigger the right to sue.
F
2. A brief factual background giving rise to the present appeal is
as under:
3. During the period between the years 1993 – 1994, Ind Bank
Housing Limited (hereinafter referred to as “IBHL”) sanctioned separate
credit facilities to these companies (hereinafter referred to as the
“borrower entities”): G

(i) M/s Green Gardens (P) Ltd,
(ii) M/s Gemini Arts (P) Ltd. and
(iii) M/s Mahalakshmi Properties & Investments (P) Ltd.
H
1082 SUPREME COURT REPORTS [2022] 5 S.C.R.

A The respondent no. 2 M/s Prasad Properties and Investments
Pvt. Ltd. (hereinafter referred to as “the Corporate Debtor”) stood as
the Corporate Guarantor/mortgagor and mortgaged its immovable
property, situated in Guttala Begampet Village in Ranga Reddy District
of Andhra Pradesh, by deposit of title deeds to secure the aforesaid
credit facilities sanctioned to the borrower entities.
B
4. These borrower entities defaulted in repayment of the dues
and subsequently IBHL classified all the facilities availed by them as
Non – Performing Asset (“NPA” for short) in November 1997. Pursuant
thereto, IBHL filed three civil suits before the High Court of Madras,
against the borrower entities and the Corporate Debtor, for recovery of
C the amounts due. During the pendency of the suits, the appellant – Kotak
Mahindra Bank Ltd. (hereinafter referred to as “KMBL”) and IBHL
entered into a Deed of Assignment dated 13th October, 2006, wherein
IBHL assigned all its rights, title, interest, estate, claim and demand to
the debts due from borrower entities, to KMBL.
D 5. Pursuant to the said deed, KMBL and the borrower entities
entered into a compromise on 7th August, 2006 (hereinafter referred to
as “the said compromise”). The High Court vide a common judgment
dated 26th March, 2007, recorded the said compromise between the
parties to the effect that the Corporate Debtor was jointly and severally
E liable to pay the amount of Rs. 29,00,96,918/- due from the borrower
entities to KMBL. It was claimed by KMBL that the borrower entities
failed to make payments as per the said compromise and thus, KMBL
issued a Demand Notice dated 26th September 2007 to them and the
Corporate Debtor under Section 13(2) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
F Act, 2002 (hereinafter referred to as “the SARFAESI Act”). The said
notice was followed by a Possession Notice dated 10th January, 2008
issued under Section 13(4) of the SARFAESI Act, by the KMBL due to
default in payment by the Corporate Debtor of the amount demanded.
The KMBL further issued a Winding Up Notice dated 6th May, 2008
G under sections 433 and 434 of the Companies Act, 1956 to the Corporate
Debtor.
6. Aggrieved by the continuous default of payment by the
Corporate Debtor and the borrower entities, KMBL filed three applications
under Section 31(A) of the erstwhile Recovery of Debts Due to Banks
H and Financial Institutions Act, 1993, now known as the Recovery of
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1083
& ANR. [B. R. GAVAI, J.]

Debts and Bankruptcy Act, 1993 (hereinafter referred to as “the Debt A
Recovery Act”) before the Debt Recovery Tribunal (“DRT” for short)
for issuance of Debt Recovery Certificates in terms of the said
compromise entered into between the parties. The said applications came
to be allowed by the DRT vide orders dated 31st March, 2017 and
30th June, 2017, and separate Recovery Certificates dated 7th June, 2017
B
and 20th October, 2017 came to be issued against each of the borrower
entities and the Corporate Debtor. In the meanwhile, from the year 2008
to 2017, certain proceedings between the parties, with regard to a
contempt petition filed by the KMBL as well as the dismissal of applications
filed for issuance of Recovery Certificate and the subsequent grant of
relief in a review application filed by the KMBL, were underway. C
7. On the basis of the aforementioned Recovery Certificates, on
5th October, 2018 KMBL, claiming to be a financial creditor, filed an
application under Section 7 of IBC, being CP/1352/IB/2018 before the
learned NCLT and sought initiation of Corporate Insolvency Resolution
Process (“CIRP” for short) against the Corporate Debtor, claiming an D
amount of Rs. 835,93,52,369/-. The said application came to be admitted
by the learned NCLT on 20th 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 learned
NCLT before the learned NCLAT. The grounds raised by the respondent
no. 1 in the said appeal were with regard to the application for initiating E
CIRP against the Corporate Debtor being filed after the expiry of
limitation period. The said appeal filed by the respondent no. 1 came to
be allowed vide impugned judgment and order dated 24th November,
2020 in the aforementioned terms.
8. We have heard Shri Guru Krishna Kumar, learned Senior F
Counsel appearing on behalf of KMBL, Shri S. Prabhakaran and Shri V.
Prakash, learned Senior Counsel appearing on behalf of the respondent
No.1 and Shri K.V. Viswanathan, learned Senior Counsel appearing on
behalf of the respondent No.2.
9. Shri Guru Krishna Kumar, learned Senior Counsel submitted G
that 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 of
Baroda) vs. C. Shivakumar Reddy and another1 has held that once a
claim fructifies into a final judgment and order/decree, upon adjudication,
1
(2021) 10 SCC 330 H
1084 SUPREME COURT REPORTS [2022] 5 S.C.R.

A and a certificate of recovery is also issued authorizing the creditor to
realize its decretal dues, a fresh right accrues to the creditor to recover
the amount specified in the Recovery Certificate. It is submitted that in
view of the law laid down by this Court in the case of Dena Bank
(supra), the present appeal deserves to be allowed inasmuch as, the
application under Section 7 of the IBC, filed by KMBL on 5 th October,
B
2018 is within the period of three years from the dates of issuance of the
Recovery Certificates being 7th June, 2017 and 20th October, 2017.
10. Shri Guru Krishna Kumar further submitted that the conduct
of the respondents is that of a dishonest borrower. Having entered into
the consent terms, which are decreed by the High Court of Madras vide
C order dated 26th March, 2007 and having not complied with the terms
contained in the compromise decree, it is now not open to the respondents
to 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 issuance
D of the Recovery Certificate by the DRT and therefore, by application of
the doctrine of merger, the debt no more survives. Shri Viswanathan
further submitted that the initiation of CIRP by KMBL would amount to
filing of second proceedings for the very same cause of action and thus
would be hit by the doctrine of res judicata and particularly, per rem
E judicatam. In this respect, he relied on the judgments of this Court in
the cases of State of U.P. vs. Nawab Hussain2 and Gulabchand
Chhotalal Parikh vs. State of Bombay (now Gujarat)3.
12. Shri Viswanathan further submitted that in view of the limited
legal fiction under Section 19(22A) of the Debt Recovery Act, the
F Recovery Certificates cannot be treated as “decree” for all purposes. It
is submitted that assuming that a decree-holder may initiate CIRP as a
financial creditor, but the holder of a Recovery Certificate granted under
Section 19(22) of the Debt Recovery Act is not entitled to initiate CIRP
under the IBC as a financial creditor or a decree holder. He submitted
that sub-sections (22) and (22A) of Section 19 of the Debt Recovery
G Act were brought on the statute book by The Enforcement of Security
Interest and Recovery of Debts Laws and Miscellaneous Provisions
(Amendment) Act, 2016 (Act No. 44 of 2016), which was enacted on
16th August, 2016 and brought into force from 4th November, 2016. He
2
(1977) 2 SCC 806
3
H (1965) 2 SCR 547
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1085
& ANR. [B. R. GAVAI, J.]

submits that the deeming fiction contained therein applies only for the A
purposes of initiation of winding up proceedings. The deeming fiction
cannot be extended for any other purpose. In this respect, he relies on
the judgment of this Court in the case of Paramjeet Singh Patheja vs.
ICDS Ltd.4.
13. Shri Viswanathan further submitted that after 15th November, B
2016, i.e., the date on which Section 255 of the IBC was brought into
force, the Recovery Certificate holders lost their right to use their
certificate as a “decree” for initiating winding-up proceedings under the
Companies Act. Shri Viswanathan relied on the judgment of the Tripura
High Court in the case of Subhankar Bhowmik vs. Union of India
and another5 in support of his submission that a decree-holder cannot C
initiate CIRP. He submitted that the Special Leave Petition (Civil)
No.6104 of 2022 challenging the judgment of the Tripura High Court in
the case of Subhankar Bhowmik (supra) has been dismissed by this
Court on 11th April, 2022.
14. Shri Viswanathan submitted that the judgment of this Court in D
the case of Dena Bank (supra) is per incuriam. He submitted that the
said judgment is rendered without considering the provisions of sub-
Sections (22) and (22A) of Section 19 of the Debt Recovery Act as well
as clauses (6), (10), (11) and (12) of Section 3, clauses (7) and (8) of
Section 5, Section 6 and Section 14(1)(a) of the IBC. He further submitted E
that the judgment of this Court in the case of Dena Bank (supra) has
applied the judgments of this Court in the cases of Jignesh Shah and
another vs. Union of India and another6 and Gaurav Hargovindbhai
Dave vs. Asset Reconstruction Company (India) Limited and
another7 incorrectly and as such, the judgment of this Court in the case
of Dena Bank (supra) is rendered per incuriam. In this respect, he F
relied on the judgment of this Court in the case of Nirmal Jeet Kaur vs.
State of M.P. and another8 so also the judgment of this Court in the
case of Secretary to Govt. of Kerala, Irrigation Department and
others vs. James Varghese and others9.
G
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 H
1086 SUPREME COURT REPORTS [2022] 5 S.C.R.

A 15. Shri Viswanathan further submitted that if the aforesaid
provisions of the IBC and the Debt Recovery Act are considered in
correct perspective, the conclusion that would be inevitable is that a
decree-holder is not a “financial creditor” and as such, is disentitled to
invoke the provisions of Section 7 of the IBC. He submitted that the
provisions of Section 14 of the IBC would also amplify this position,
B
inasmuch as, under clause (a) of sub-section (1) thereof, the institution
of suits or continuation of pending suits or proceedings against the
corporate debtor including execution of any judgment, decree or order in
any court of law, tribunal, arbitration panel or other authority is specifically
prohibited. He therefore submits that the learned NCLAT has correctly
C held that the application filed by KMBL under Section 7 of the IBC was
beyond the period of limitation since issuance of Recovery Certificate
does not give rise to a fresh cause of action and the timeline for the
purpose of limitation would start in the year 1997 when the accounts of
the borrower entities were declared NPA, and that no interference is
warranted with the same.
D
16. Shri S. Prabhakaran and Shri V. Prakash, learned Senior
Counsel appearing on behalf of the respondent No.1 have advanced
their arguments on similar lines as were advanced by Shri K.V.
Viswanathan.
E 17. Shri Guru Krishna Kumar, in rejoinder, submitted that the
judgment of this Court in the case of Dena Bank (supra) correctly lays
down the position of law. He submits that if the relevant provisions of
the IBC are construed in correct perspective, the only conclusion that
would be arrived at is that KMBL is a “financial creditor”. He submits
that the correct approach would be to consider the underlying transaction
F forming the basis of the proceedings initiated by the creditor culminating
in a Decree/Recovery Certificate. He submitted that if the underlying
transactions are such that they constitute a financial debt and the creditor
is a financial creditor, then that would be the determining factor for
deciding the maintainability of the CIRP application. Learned Senior
G Counsel further submitted that the judgment debt does not lose its legal
essence or character solely because it has fructified into a Recovery
Certificate. He relied on the judgment of the Division Bench of the
Madras High Court in the case of P.S. Ramamoorthy Sastry vs. Selvar
Paints and Varnish works (Pvt.) Ltd.10 in respect of this proposition.
10
H The Law Weekly, Vol. XCVII (97) dated 28 th January, 1984 Part 1
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1087
& ANR. [B. R. GAVAI, J.]

He also relied on the judgment of the learned NCLAT in the case of A
Mukul Agarwal vs. Royale Resinex Pvt. Ltd.11
18. Shri Kumar further submitted that the purpose of the IBC is
to preserve the Corporate Debtor as an on-going concern, while ensuring
maximum recovery for all the creditors. He submits that the provisions
of the IBC have to be interpreted in such a manner as to advance the B
purpose of the IBC and not in a manner in which they defeat the object
of the IBC.
19. Shri Kumar submitted that the contention that the judgment of
this Court in the case of Dena Bank (supra) is per incuriam the
provisions of the IBC and the Debt Recovery Act is totally without C
substance. He submits that the law laid down by this Court in the case
of Dena Bank (supra) is correct and warrants no interference.
20. Before we proceed to consider the rival submissions, it will be
apposite to consider the factual scenario, the issues that arose for
consideration and the conclusion arrived at in the case of Dena Bank D
(supra).
21. In the case of Dena Bank (supra), the loan account of the
Corporate Debtor was declared NPA on 31st December, 2013. The
Corporate Debtor had addressed a letter dated 24th March, 2014 to the
appellant Bank therein making a request for restructuring the term loan. E
The appellant Bank did not accede to the same. On 22nd December,
2014, the Bank issued legal notice to the Corporate Debtor as well as
the respondent No.2 therein, calling upon them to make payment of
Rs.52.12 crores. The Corporate Debtor did not make the payment. On
or about 1st January, 2015, the Bank filed an application being OA No.16
of 2015 under Section 19 of the Debt Recovery Act. On 27th March, F
2017, the DRT, Bengaluru passed a judgment and order against the
Corporate Debtor for recovery of Rs.52,12,49,438.60 with future interest
at the rate of 16.55% per annum from the date of filing of the application
till the date of realisation. The Recovery Certificate came to be issued
on 25th May, 2017 by the DRT. There were certain proceedings in the G
intervening period, reference to the same would not be necessary. On
12 th October, 2018, the Bank filed a Company Petition before the
Adjudicating Authority under Section 7 of the IBC. The Corporate Debtor
filed its preliminary objection, inter alia, contending that the said petition
11
Company Appeal (AT) (Insolvency) No.777 of 2020 dated 30.03.2022 H
1088 SUPREME COURT REPORTS [2022] 5 S.C.R.

A was barred by limitation. By order dated 21st March, 2019, the Adjudicating
Authority admitted the petition under Section 7 of the IBC and appointed
an Interim Resolution Professional (“IRP” for short). The same came
to be challenged by the respondent No.1 therein before the learned
NCLAT by way of an Appeal under Section 61 of the IBC. The learned
NCLAT vide order dated 18th December, 2019 allowed the appeal and
B
dismissed the petition filed by the appellant Bank holding that the same
was barred by limitation.
22. The question therefore that arose for consideration before
this Court in the case of Dena Bank (supra) was, as to whether the
petition under Section 7 of the IBC was barred by limitation, on the sole
C ground that it had been filed beyond a period of 3 years from the date of
declaration of the loan account of the Corporate Debtor as NPA.
23. While considering the said issue, this Court was also called
upon to consider other issues. The first one was, as to whether the
application under Section 7 of the IBC could be held to be barred by
D limitation, though the Corporate Debtor had subsequently acknowledged
its liability within a period of 3 years prior to the date of filing of the
petition under Section 7 of the IBC, by making a proposal for a one-time
settlement, or by acknowledging the debt in its statutory balance sheets
and books of accounts. The second issue that was considered in the
E case of Dena Bank (supra) was, as to whether a final judgment and
decree of the DRT in favour of the financial creditor, or the issuance of
a certificate of recovery in favour of the financial creditor, would give
rise to a fresh cause of action to the financial creditor to initiate
proceedings under Section 7 of the IBC within three years from the date
of the final judgment and decree, and/or within three years from the
F date of issuance of the certificate of recovery. The third issue was, as to
whether the Adjudicating Authority had the power to permit amendment
of pleadings or to permit filing of additional documents in a petition filed
under Section 7 of the IBC.
24. Though all these issues have been elaborately considered by
G this Court in the case of Dena Bank (supra), we would only be concerned
with the issue, as to whether the issuance of the Recovery Certificate in
favour of the “financial creditor” would give rise to a fresh cause of
action to initiate proceedings under Section 7 of the IBC. This Court in
the said case after considering various provisions of the IBC as well as
H the earlier judgments of this Court has observed thus:
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1089
& ANR. [B. R. GAVAI, J.]

“99. There can be no dispute with the proposition that the period A
of limitation for making an application under Section 7 or 9 IBC is
three years from the date of accrual of the right to sue, that is, the
date of default. In GauravHargovindbhai Dave v. Asset
Reconstruction Co. (India) Ltd. [Gaurav Hargovindbhai
Dave v. Asset Reconstruction Co. (India) Ltd., (2019) 10 SCC
B
572 : (2020) 1 SCC (Civ) 1] authored by Nariman, J. this Court
held : (SCC p. 574, para 6)
“6. … The present case being “an application” which is
filed under Section 7, would fall only within the residuary Article
137.”
C
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] , this
Court speaking through Nariman, J. held : (SCC p. 664, para 42)
“42. It is thus clear that since the Limitation Act is applicable D
to applications filed under Sections 7 and 9 of the Code from the
inception of the Code, Article 137 of the Limitation Act gets
attracted. “The right to sue”, therefore, accrues when a default
occurs. If the default has occurred over three years prior to the
date of filing of the application, the application would be barred
under Article 137 of the Limitation Act, save and except in those E
cases where, in the facts of the case, Section 5 of the Limitation
Act may be applied to condone the delay in filing such application.”
101. In Jignesh Shah v. Union of India [Jignesh Shah v. Union
of India, (2019) 10 SCC 750 : (2020) 1 SCC (Civ) 48] this Court
speaking through Nariman, J. reiterated the proposition that the F
period of limitation for making an application under Section 7 or 9
IBC 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. Bank
Ltd. [Vashdeo R. Bhojwani v. Abhyudaya Coop. Bank Ltd., G
(2019) 9 SCC 158 : (2019) 4 SCC (Civ) 308] this Court rejected
the contention that the default was a continuing wrong and Section
23 of the Limitation Act, 1963 would apply, relying upon
Balakrishna Savalram Pujari Waghmare v. Shree
Dhyaneshwar Maharaj Sansthan [Balakrishna Savalram
H
1090 SUPREME COURT REPORTS [2022] 5 S.C.R.

A Pujari 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. A final judgment and order/decree is binding on the
judgment debtor. Once a claim fructifies into a final judgment
B and order/decree, upon adjudication, and a certificate of
recovery is also issued authorising the creditor to realise its
decretal dues, a fresh right accrues to the creditor to recover
the amount of the final judgment and/or order/decree and/or
the amount specified in the recovery certificate.
C *** **** ***
141. Moreover, a judgment and/or decree for money in favour
of the financial creditor, passed by the DRT, or any other
tribunal or court, or the issuance of a certificate of recovery
in favour of the financial creditor, would give rise to a fresh
D cause of action for the financial creditor, to initiate proceedings
under Section 7 IBC for initiation of the corporate insolvency
resolution process, within three years from the date of the
judgment and/or decree or within three years from the date
of issuance of the certificate of recovery, if the dues of the
E corporate debtor to the financial debtor, under the judgment
and/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 Bank
F (supra) in paragraphs 136 and 141, has in unequivocal terms held that
once a claim fructifies into a final judgment and order/decree, upon
adjudication, and a certificate of recovery is also issued authorizing the
creditor to realize its decretal dues, a fresh right accrues to the creditor
to recover the amount of the final judgment and/or order/decree and/or
the amount specified in the Recovery Certificate. It has further been
G
held that issuance of a certificate of recovery in favour of the financial
creditor would give rise to a fresh cause of action to the financial creditor,
to initiate proceedings under Section 7 of the IBC for initiation of the
CIRP, within three years from the date of the judgment and/or decree or
within three years from the date of issuance of the certificate of recovery,
H if the dues of the corporate debtor to the financial debtor, under the
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1091
& ANR. [B. R. GAVAI, J.]

judgment and/or decree and/or in terms of the certificate of recovery, or A
any part thereof remained unpaid.
27. With these findings, we could have very well allowed the
present appeal and set aside the judgment and order of the learned
NCLAT. Undisputedly, the application for initiation of CIRP under Section
7 of the IBC has been filed by KMBL within a period of three years B
from the date of issuance of the Recovery Certificate. However, since
it has been argued by Shri K.V. Viswanathan, learned Senior Counsel
that the judgment rendered by the two-Judge Bench of this Court in the
case of Dena Bank (supra) is per incuriam the provisions of the relevant
statutes and the judgments of the three-Judge Bench of this Court in the
cases of Jignesh Shah (supra) and Gaurav Hargovindbhai Dave C
(supra) and since the issue is of seminal importance, we would proceed
to consider the rival submissions.
28. It will be relevant to refer to clauses (6), (10), (11) and (12) of
Section 3, clauses (7) and (8) of Section 5, Section 6 and clause (a) of
sub-section (1) of Section 14 of the IBC, which are as under: D

“3. Definitions.—In this Code, unless the context otherwise
requires,—
(1) ………………………………….
…………………………………. E
(6) “claim” means—
(a) a right to payment, whether or not such right is reduced to
judgment, fixed, disputed, undisputed, legal, equitable, secured or
unsecured;
F
(b) right to remedy for breach of contract under any law for the
time being in force, if such breach gives rise to a right to payment,
whether or not such right is reduced to judgment, fixed, matured,
unmatured, disputed, undisputed, secured or unsecured;
*** *** *** G
(10) “creditor” means any person to whom a debt is owed and
includes a financial creditor, an operational creditor, a secured
creditor, an unsecured creditor and a decree-holder;

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

A (11) “debt” means a liability or obligation in respect of a claim
which is due from any person and includes a financial debt and
operational debt;
(12) “default” means non-payment of debt when whole or any
part or instalment of the amount of debt has become due and
B payable 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 otherwise
requires,-
C
(1) ………………………………….
………………………………….
(7) “financial creditor” means any person to whom a financial
debt is owed and includes a person to whom such debt has been
D legally assigned or transferred to;
(8) “financial debt” means a debt along with interest, if any, which
is disbursed against the consideration for the time value of money
and includes—
(a) money borrowed against the payment of interest;
E
(b) any amount raised by acceptance under any acceptance credit
facility or its de-materialised equivalent;
(c) any amount raised pursuant to any note purchase facility or
the issue of bonds, notes, debentures, loan stock or any similar
F instrument;
(d) the amount of any liability in respect of any lease or hire
purchase contract which is deemed as a finance or capital lease
under the Indian Accounting Standards or such other accounting
standards as may be prescribed;
G (e) receivables sold or discounted other than any receivables sold
on non-recourse basis;
(f) any amount raised under any other transaction, including any
forward sale or purchase agreement, having the commercial effect
of a borrowing;
H
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1093
& ANR. [B. R. GAVAI, J.]

Explanation.—For the purposes of this sub-clause,— A
(i) any amount raised from an allottee under a real estate project
shall be deemed to be an amount having the commercial effect of
a borrowing; and
(ii) the expressions, “allottee” and “real estate project” shall have
the meanings respectively assigned to them in clauses (d) and B
(zn) of Section 2 of the Real Estate (Regulation and Development)
Act, 2016 (16 of 2016);
(g) any derivative transaction entered into in connection with
protection against or benefit from fluctuation in any rate or price
and for calculating the value of any derivative transaction, only C
the market value of such transaction shall be taken into account;
(h) any counter-indemnity obligation in respect of a guarantee,
indemnity, bond, documentary letter of credit or any other instrument
issued by a bank or financial institution;
D
(i) the amount of any liability in respect of any of the guarantee or
indemnity for any of the items referred to in sub-clauses (a) to
(h) of this clause;
*** *** ***
6. Persons who may initiate corporate insolvency resolution E
process.—Where any corporate debtor commits a default, a
financial creditor, an operational creditor or the corporate debtor
itself may initiate corporate insolvency resolution process in respect
of such corporate debtor in the manner as provided under this
Chapter.
F
*** *** ***
14. Moratorium.—(1) Subject to provisions of sub-sections (2)
and (3), on the insolvency commencement date, the Adjudicating
Authority shall by order declare moratorium for prohibiting all of
the following, namely— G
(a) the institution of suits or continuation of pending suits or
proceedings against the corporate debtor including execution of
any judgment, decree or order in any court of law, tribunal,
arbitration panel or other authority;”
H
1094 SUPREME COURT REPORTS [2022] 5 S.C.R.

A 29. Clause (6) of Section 3 of the IBC defines the term “claim” in
two parts. Sub-clause (a) of clause (6) of Section 3 of the IBC defines
the term to mean, a right to payment, whether or not such right is reduced
to judgment, fixed, disputed, undisputed, legal, equitable, secured or
unsecured. Sub-clause (b) of clause (6) of Section 3 of the IBC would
show that a claim would also mean a right to remedy for breach of
B
contract under any law for the time being in force, if such breach gives
rise to a 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 a debt is owed and incudes a financial
C creditor, an operational creditor, a secured creditor, an unsecured creditor
and a decree-holder.
31. Clause (11) of Section 3 of the IBC defines the term “debt” to
mean, a liability or obligation in respect of a claim which is due from any
person and includes a 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 of
the amount of debt has become due and payable and is not paid by the
debtor or the corporate debtor, as the case may be.

E 33. Clause (7) of Section 5 of the IBC defines the term “financial
creditor” to mean any person to whom a financial debt is owed and
includes a person to whom such debt has been legally assigned or
transferred to.
34. Clause (8) of Section 5 of the IBC defines the term “financial
F debt”, to mean a debt along with interest, if any, which is disbursed
against the consideration for the time value of money and specifies various
categories of debts in sub-clauses (a) to (h), which would be included in
the definition of term “financial debt”. Sub-clause (i) of clause (8) of
Section 5 of the IBC provides that the amount of any liability in respect
of any of the guarantee or indemnity for any of the items referred to in
G sub-clauses (a) to (h) of this clause would also be included in the
definition of the term “financial debt”.
35. It could thus be seen that whereas sub-clauses (a) to (h) of
clause (8) of Section 5 of the IBC deal with specific categories, which
would come in the definition of the term “financial debt”, sub-clause (i)
H of clause (8) of Section 5 of the IBC would include the amount of any
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1095
& ANR. [B. R. GAVAI, J.]

liability in respect of any of the guarantee or indemnity for any of the A
items referred to in sub-clauses (a) to (h) of the said clause within the
meaning of the term “financial debt”.
36. Section 6 of the IBC provides as to who may initiate CIRP. It
provides that where any Corporate Debtor commits a default, a financial
creditor, an operational creditor or the Corporate Debtor itself may initiate B
CIRP in respect of such Corporate Debtor in the manner as provided
under the said Chapter.
37. Section 14 of the IBC provides “Moratorium”, consequent
upon the admission of the application under Section 7 or Section 9 or
Section 10 of the IBC, on an order passed by the Adjudicating Authority. C
Clause (a) of sub-section (1) of Section 14 of the IBC prohibits the
institution of suits or continuation of pending suits or proceedings against
the corporate debtor including execution of any judgment, decree or
order in any court of law, tribunal, arbitration panel or other authority.
38. From the scheme of the IBC, it could be seen that where any D
Corporate Debtor commits a default, a financial creditor, an operational
creditor or the Corporate Debtor itself is entitled to initiate CIRP in respect
of such Corporate Debtor in the manner as provided under the said
Chapter. The default has been defined to mean non-payment of debt.
The debt has been defined to mean a liability or obligation in respect of
a claim which is due from any person and includes a financial debt and E
operational debt. A claim means a right to payment, whether or not such
right is reduced to judgment, fixed, disputed, etc. It is more than settled
that the trigger point to initiate CIRP is when a default takes place. A
default would take place when a debt in respect of a claim is due and not
paid. A claim would include a right to payment whether or not such a F
right is reduced to judgment.
39. It is a settled principle of law that the provisions of a statue
ought to be interpreted in such a manner which would advance the object
and purpose of the enactment.
40. This Court in the case of Swiss Ribbons Private Limited G
and another vs. Union of India and others12 has held that preserving
the Corporate Debtor as an on-going concern, while ensuring maximum
recovery for all creditors is the objective of the IBC.

12
(2019) 4 SCC 17 H
1096 SUPREME COURT REPORTS [2022] 5 S.C.R.

A 41. It is an equally well settled principle of law that all the provisions
in the Statute have to be construed in context with each other and no
provision can be read in isolation.
42. In this background, we will have to consider, as to whether a
person, who holds a Recovery Certificate would be a financial creditor
B within the meaning of clause (7) of Section 5 of the IBC.
43. A person to be entitled to be a “financial creditor” has to be
owed a financial debt and would also include a person to whom such
debt has been legally assigned or transferred to. Therefore, the only
question that would be required to be considered is, as to whether a
C liability in respect of a claim arising out of a Recovery Certificate would
be included within the meaning of the term “financial debt” as defined
under clause (8) of Section 5 of the IBC.
44. It will be pertinent to note that in clause (8) of Section 5 of the
IBC, i.e, the definition clause of the term “financial debt”, the words
D used are “means a debt along with interest, if any, which is disbursed
against the consideration for the time value of money and includes”.
45. At this juncture, we may rely on the following observations in
the case of Dilworth vs. Commissioner of Stamps13, which have been
consistently followed by this Court:
E “The word ‘include’ is very generally used in interpretation clauses
in order to enlarge the meaning of words or phrases occurring in
the body of the statute; and when it is so used these words or
phrases must be construed as comprehending, not only such things
as they signify according to their natural import, but also those
F things which the interpretation clause declares that they shall
include. But the word ‘include’ is susceptible of another
construction, which may become imperative, if the context of the
Act is sufficient to shew that it was not merely employed for the
purpose of adding to the natural significance of the words or
expressions defined. It may be equivalent to ‘mean and include’,
G and in that case it may afford an exhaustive explanation of the
meaning which, for the purposes of the Act, must invariably be
attached to these words or expressions.”

13
H (1899) AC 99
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1097
& ANR. [B. R. GAVAI, J.]

46. This Court in the case of Associated Indem Mechanical (P) A
Ltd. vs. W.B. Small Industries Development Corpn. Ltd. and others 14
while construing the definition of the term “premises” as provided under
Section 2(c) of the W.B. Government Premises (Tenancy Regulation)
Act, 1976, observed thus:
“13. ……..The definition of premises in Section 2(c) uses the B
word “includes” at two places. It is well settled that the word
“include” is generally used in interpretation clauses in order
to enlarge the meaning of the words or phrases occurring in
the body of the statute; and when it is so used those words or
phrases must be construed as comprehending, not only such
things, as they signify according to their natural import, but C
also those things which the interpretation clause declares that
they shall include.
(See Dadaji v. Sukhdeobabu [(1980) 1 SCC 621: AIR 1980 SC
150]; Reserve Bank of India v. Peerless General Finance and
Investment Co. Ltd. [(1987) 1 SCC 424 : AIR 1987 SC 1023] D
and Mahalakshmi Oil Mills v. State of A.P. [(1989) 1 SCC 164
: 1989 SCC (Tax) 56 : AIR 1989 SC 335] ) The inclusive definition
of “District Judge” in Article 236(a) of the Constitution has been
very widely construed to include hierarchy of specialised civil
courts viz. Labour Courts and Industrial Courts which are not E
expressly included in the definition. (See State of
Maharashtra v. Labour Law Practitioners’ Assn. [(1998) 2 SCC
688 : 1998 SCC (L&S) 657 : AIR 1998 SC 1233] ) Therefore,
there is no warrant or justification for restricting the
applicability of the Act to residential buildings alone merely
on the ground that in the opening part of the definition of the F
word “premises”, the words “building or hut” have been
used.”
[emphasis supplied]
47. It is thus clear that it is a settled position of law that when the G
word “include” is used in interpretation clauses, the effect would be to
enlarge the meaning of the words or phrases occurring in the body of
the statute. Such interpretation clause is to be so used that those words
or phrases must be construed as comprehending, not only such things,

14
(2007) 3 SCC 607 H
1098 SUPREME COURT REPORTS [2022] 5 S.C.R.

A as they signify according to their natural import, but also those things
which the interpretation clause declares that they shall include. In such
a situation, there would be no warrant or justification in giving the restricted
meaning to the provision.
48. In the case of Karnataka Power Transmission Corporation
B and another vs. Ashok Iron Works Private Limited15, this Court, while
construing the definition of the word “person” as could be found in Section
2(1)(d) read with Section 2(1)(m) of the Consumer Protection Act, 1986,
observed thus:
“17. It goes without saying that interpretation of a word or
C expression must depend on the text and the context. The resort to
the word “includes” by the legislature often shows the intention
of the legislature that it wanted to give extensive and enlarged
meaning to such expression. Sometimes, however, the context
may suggest that word “includes” may have been designed to
mean “means”. The setting, context and object of an enactment
D may 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) a firm whether registered or not;
E (ii) a Hindu Undivided Family;
(iii) a cooperative society; and
(iv) every other association of persons whether registered under
the Societies Registration Act, 1860 (21 of 1860) or not
F while defining “person” cannot be held to be restrictive and confined
to these four categories as it is not said in terms that “person”
shall mean one or other of the things which are enumerated, but
that it shall “include” them.
19. The General Clauses Act, 1897 in Section 3(42) defines
G “person”:
“3. (42) ‘person’ shall include any company or association or
body of individuals, whether incorporated or not;”

H 15
(2009) 3 SCC 240
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1099
& ANR. [B. R. GAVAI, J.]

20. Section 3 of the 1986 Act upon which reliance is placed by A
learned counsel for KPTC provides that the provisions of the Act
are in addition to and not in derogation of any other law for the
time being in force. This provision instead of helping the contention
of KPTC would rather suggest that the access to the remedy
provided to (sic under) the Act of 1986 is an addition to the
B
provisions of any other law for the time being in force. It does not
in 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 into
account in construing the expression “person” as it occurs in
Section 2(1)(d). While defining “person” in Section 2(1)(m), the C
legislature never intended to exclude a juristic person like company.
As a matter of fact, the four categories by way of enumeration
mentioned therein is indicative, Categories (i), (ii) and (iv) being
unincorporate and Category (iii) corporate, of its intention to
include body corporate as well as body unincorporate. The D
definition of “person” in Section 2(1)(m) is inclusive and not
exhaustive. It does not appear to us to admit of any doubt that
company is a person within the meaning of Section 2(1)(d) read
with Section 2(1)(m) and we hold accordingly.”
49. It could thus be seen that though the word “company” was E
not specifically included in Section 2(1)(m) of the Consumer Protection
Act, 1986, this Court in the case of Karnataka Power Transmission
Corporation (supra) found that the legislature never intended to exclude
a juristic person like company from the definition of the word “person”.
It was found that the categories (i), (ii) and (iv) mentioned therein were
unincorporate and category (iii) was corporate. As such, the legislative F
intention was to include body corporate as well as body unincorporate.
It was held that the definition of “person” in Section 2(1)(m) was inclusive
and not exhaustive.
50. The three-Judge Bench of this Court in the case of Pioneer
Urban Land and Infrastructure Limited and another vs. Union of G
India and others16 was considering a challenge to the amendments
made 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

16
(2019) 8 SCC 416 H
1100 SUPREME COURT REPORTS [2022] 5 S.C.R.

A raised from an allottee under a real estate project shall be deemed to be
an amount having the commercial effect of a borrowing. This Court
held that “the expression “and includes” speaks of subject-matters which
may not necessarily be reflected in the main part of the definition”.
51. Applying these principles to clause (8) of Section 5 of the
B IBC, it could clearly be seen that the words “means a debt along with
interest, if any, which is disbursed against the consideration for the time
value of money” are followed by the words “and includes”. Thereafter
various categories (a) to (i) have been mentioned. It is clear that by
employing the words “and includes”, the Legislature has only given
instances, which could be included in the term “financial debt”. However,
C the list is not exhaustive but inclusive. The legislative intent could not
have been to exclude a liability in respect of a “claim” arising out of a
Recovery Certificate from the definition of the term “financial debt”,
when such a liability in respect of a “claim” simpliciter would be included
in the definition of the term “financial debt”
D 52. In any case, we have already discussed hereinabove that the
trigger point for initiation of CIRP is default of claim. “Default” is non-
payment of debt by the debtor or the Corporate Debtor, which has
become due and payable, as the case may be, a “debt” is a liability or
obligation in respect of a claim which is due from any person, and a
E “claim” means a right to payment, whether such a right is reduced to
judgment or not. It could thus be seen that unless there is a “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 a “debt”.
When the “claim” itself means a right to payment, whether such a right
is reduced to a judgment or not, we find that if the contention of the
F respondents, that merely on a “claim” being fructified in a decree, the
same 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 in
the IBC. As already discussed hereinabove, the definition is inclusive
and not exhaustive. Taking into consideration the object and purpose of
G the IBC, the legislature could never have intended to keep a debt, which
is crystallized in the form of a decree, outside the ambit of clause (8) of
Section 5 of the IBC.
53. Having held that a liability in respect of a claim arising out of
a Recovery Certificate would be a “financial debt” within the ambit of
H its definition under clause (8) of Section 5 of the IBC, as a natural
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1101
& ANR. [B. R. GAVAI, J.]

corollary thereof, the holder of such Recovery Certificate would be a A
financial creditor within the meaning of clause (7) of Section 5 of the
IBC. As such, such a “person” would be a “person” as provided under
Section 6 of the IBC who would be entitled to initiate the CIRP.
54. Insofar as the contention of the respondents with regard to
clause (a) of sub-section (1) of Section 14 of the IBC is concerned, we B
do not find that the words used in clause (a) of sub-section (1) of Section
14 of the IBC could be read to mean that the decree-holder is not entitled
to invoke the provisions of the IBC for initiation of CIRP. A plain reading
of said Section would clearly provide that once CIRP is initiated, there
shall be prohibition for institution of suits or continuation of pending suits
or proceedings against the corporate debtor including execution of any C
judgment, decree or order in any court of law, tribunal, arbitration panel
or other authority. The prohibition to institution of suit or continuation of
pending suits or proceedings including execution of decree would not
mean that a decree-holder is also prohibited from initiating CIRP, if he is
otherwise entitled to in law. The effect would be that the applicant, who D
is a decree-holder, would himself be prohibited from executing the decree
in his favour.
55. That leaves us to consider the contention, as to whether the
judgment of this Court in the case of Dena Bank (supra) is contrary to
the judgments of three-Judge Bench of this Court in the cases of Jignesh E
Shah (supra) and Gaurav Hargovindbhai Dave (supra), as contended
by the respondents, and therefore, per incuriam.
56. In the case of Jignesh Shah (supra), the cause of action
arose in the month of August, 2012. The winding-up petition, which was
transferred to the learned NCLT, was filed on 21st October, 2016, i.e., F
after a period of three years from the date on which cause of action
arose. This Court in the said case was considering a question that, if a
winding up petition was barred by limitation on the date it was filed,
whether Section 238A of the IBC will give a new lease of life to such a
time-barred petition. This Court held that Section 238A of the IBC would
not extend the period of limitation for filing winding-up petition. On the G
facts 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 of
the IBC would not give a new lease of life to such a time-barred petition.
The question that falls for consideration in the present case is, as to
whether a claim which is fructified in a decree would give a fresh cause H
1102 SUPREME COURT REPORTS [2022] 5 S.C.R.

A of action to file an application under Section 7 of the IBC within a period
of three years from such decree or not. This issue did not fall for
consideration before this Court in the case of Jignesh Shah (supra).
57. In the case of Gaurav Hargovindbhai Dave (supra), the
respondent therein was declared NPA on 21st July, 2011 and an application
B under Section 7 of the IBC was filed in the year 2017 while IBC was
brought into force on 1st December, 2016. The three-Judge Bench of
this Court in the said case held that the time began to run from the date
when the respondent was declared NPA and as such, the application
under Section 7 of the IBC, which was filed beyond the period of three
years, was barred by limitation. The question, as to whether a person
C would be entitled to file an application for initiation of CIRP within a
period of three years from the date on which the decree was passed or
a Recovery Certificate was granted did not fall for consideration in the
said case also.
58. Shri Viswanathan next contended that this Court in the case
D of Jignesh Shah (supra) has approved the judgment of the Calcutta
High Court in the case of Rameswar Prasad Kejriwal & Sons Ltd. vs.
Garodia Hardware Stores17. In this respect, it will be relevant to note
that this Court was considering various judgments which were relied
upon by Dr. Singhvi. Insofar as the judgment of the Calcutta High Court
E in the case of Rameswar Prasad Kejriwal (supra) is concerned, in the
said case, the cause of action arose in the year 1992. The suit was filed
in 1994 and the decree was obtained in the year 1997. It is to be noted
that the winding-up petition came to be filed in the year 2001, i.e., after
a period of three years. It was sought to be argued that the limitation
period would be 12 years. The same was rejected.
F
59. No doubt that Shri Viswanathan is justified in referring to
paragraph 21 of the judgment in the case of Jignesh Shah (supra) to
the extent that this Court observed that the suit for recovery, which is a
separate and independent proceeding distinct from the remedy of winding-
up would, in no manner, impact the limitation within which the winding-
G up proceeding is to be filed, by somehow keeping the debt alive for the
purpose of the winding-up proceeding. However, the question, as to
whether such a suit or an application which has been culminated into a
decree or a Recovery Certificate would give a fresh cause of action to

H 17
2001 SCC OnLine Cal 586
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1103
& ANR. [B. R. GAVAI, J.]

file an application under Section 7 of the IBC did not arise for consideration A
in the said judgment/case. The said judgment cannot be held to be a
ratio decidendi for a proposition that even after the suit is decreed, or
Recovery Certificate is issued, it could not give fresh cause of action to
initiate CIRP within a period of three years.
60. As to what is ratio decidendi has been succinctly observed by B
this Court in the case of Union of India and others vs. Dhanwanti
Devi and others18, which is as under:
“9. …… It is not everything said by a Judge while giving judgment
that constitutes a precedent. The only thing in a Judge’s decision
binding a party is the principle upon which the case is decided and C
for this reason it is important to analyse a decision and isolate
from it the ratio decidendi. According to the well-settled theory
of precedents, every decision contains three basic postulates—
(i) findings of material facts, direct and inferential. An inferential
finding of facts is the inference which the Judge draws from the
direct, or perceptible facts; (ii) statements of the principles of law D
applicable to the legal problems disclosed by the facts; and (iii)
judgment based on the combined effect of the above. A decision
is only an authority for what it actually decides. What is of the
essence in a decision is its ratio and not every observation found
therein nor what logically follows from the various observations E
made in the judgment. Every judgment must be read as applicable
to the particular facts proved, or assumed to be proved, since the
generality of the expressions which may be found there is not
intended to be exposition of the whole law, but governed and
qualified by the particular facts of the case in which such
expressions are to be found. It would, therefore, be not profitable F
to extract a sentence here and there from the judgment and to
build upon it because the essence of the decision is its ratio and
not every observation found therein. The enunciation of the reason
or principle on which a question before a court has been decided
is alone binding as a precedent. The concrete decision alone is G
binding between the parties to it, but it is the abstract ratio
decidendi, ascertained on a consideration of the judgment in
relation to the subject-matter of the decision, which alone has the
force of law and which, when it is clear what it was, is binding. It
18
(1996) 6 SCC 44 H
1104 SUPREME COURT REPORTS [2022] 5 S.C.R.

A is only the principle laid down in the judgment that is binding law
under Article 141 of the Constitution. A deliberate judicial decision
arrived at after hearing an argument on a question which arises in
the case or is put in issue may constitute a precedent, no matter
for what reason, and the precedent by long recognition may mature
into rule of stare decisis. It is the rule deductible from the
B
application of law to the facts and circumstances of the case
which constitutes its ratio decidendi.”
61. It will also be apposite to refer to the following observations
of this Court in the case of The Regional Manager and another vs.
Pawan Kumar Dubey19:
C
“7. …. Even where there appears to be some conflict, it would,
we think, vanish when the ratio decidendi of each case is correctly
understood. It is the rule deducible from the application of law to
the facts and circumstances of a case which constitutes its ratio
decidendi and not some conclusion based upon facts which may
D appear to be similar. One additional or different fact can make a
world of difference between conclusions in two cases even when
the same principles are applied in each case to similar facts.”
62. It could thus be seen that one additional or different fact can
make a world of difference between conclusions in two cases even
E when the same principles are applied in each case to similar facts.
63. It will further be relevant to note that the judgment of this
Court in the case of Jignesh Shah (supra) was authored by
R.F.Nariman, J. R.F.Nariman, J. in the case of Vashdeo R. Bhojwani
vs. Abhyudaya Co-operative Bank Limited and another20, while
F relying on the judgment of three-Judge Bench of this Court in the case
of Balakrishna Savalram Pujari Waghmare and others vs. Shree
Dhyaneshwar Maharaj Sansthan and others21 has observed thus:
“Following this judgment, it is clear that when the recovery
certificate dated 24-12-2001 was issued, this certificate injured
G effectively and completely the appellant’s rights as a result of
which limitation would have begun ticking.”

19
(1976) 3 SCC 334
20
(2019) 9 SCC 158
H 21
1959 Supp (2) SCR 476 : AIR 1959 SC 798
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1105
& ANR. [B. R. GAVAI, J.]

64. In the said case, the respondent No.2 was declared NPA on A
23 rd December, 1999; the Recovery Certificate was issued on
24th December, 2001; application under Section 7 of the IBC came to be
filed on 21st July, 2017. In this factual background, this Court found that
the application under Section 7 of the IBC, which was filed after a period
of almost 16 years, i.e., much beyond the period of three years, was
B
barred by limitation.
65. It was found that the limitation period for filing a winding-up
petition would be three years and since the same was filed beyond the
period of three years, it was liable to be dismissed. In the present case,
undisputedly, the application under Section 7 of the IBC was filed within
a period of three years from the date of issuance of the Recovery C
Certificate.
66. It can thus be seen that this Court observed that the issuance
of Recovery Certificate injured effectively and completely the appellant’s
rights and therefore the limitation would begin from the said date. In
effect, this Court observed that the issuance of Recovery Certificate D
could trigger the limitation. As such, in our view, this Court in the case of
Dena Bank (supra) has rightly relied on Vashdeo R. Bhojwani (supra),
which, in turn, relied on the earlier three-Judge Bench judgment of this
Court in the case of Balakrishna Savalram Pujari Waghmare (supra).
67. Shri Viswanathan, learned Senior Counsel relied on various E
judgments of this Court to fortify his submission that the judgment of
two-Judge Bench of this Court in the case of Dena Bank (supra) is per
incuriam. Recently, a two-judge Bench of this Court (consisting of L.N.
Rao and B.R. Gavai, JJ.) had an occasion to consider this doctrine in the
case of James Varghese (supra). It is a settled law that “Incuria” literally F
means “carelessness”. A decision or judgment can be per incuriam any
provision in a statute, rule or regulation, which was not brought to the
notice of the Court. It can also be per incuriam if it is not possible to
reconcile its ratio with that of a previously pronounced judgment of a co-
equal or larger Bench.
G
68. A perusal of the judgment of this Court in the case of Dena
Bank (supra) would reveal that this Court considered all the relevant
provisions of the IBC and the earlier judgments of this court. As already
discussed hereinabove, we do not find any inconsistency in the judgment
of this Court in the case of Dena Bank (supra) with the earlier judgments
H
1106 SUPREME COURT REPORTS [2022] 5 S.C.R.

A of this Court on which reliance is placed by Shri Viswanathan. We find
that the contention that the judgment of this Court in the case of Dena
Bank (supra) being per incuriam to the statutory provisions and earlier
judgments of this Court, is wholly unsustainable.
69. We have already hereinabove, done the exercise of considering
B the relevant provisions of the IBC afresh and come to a conclusion that
a liability in respect of a claim arising out of a Recovery Certificate
would be a “financial debt” within the meaning of clause (8) of Section
5 of the IBC and a holder of the Recovery Certificate would be a “financial
creditor” within the meaning of clause (7) of Section 5 of the IBC. We
have also held that a person would be entitled to initiate CIRP within a
C period of three years from the date on which the Recovery Certificate is
issued. 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 correct
in law and we affirm the same.
70. That leaves us with the contention of Shri Viswanathan with
D regard to sub-sections (22) and (22A) of Section 19 of the Debt Recovery
Act, which read thus:
“19. Application to the Tribunal.-(1)
………………………………………………..

E ………………………………………………..
(22) The Presiding Officer shall issue a certificate of recovery
along with the final order, under sub-section (20), for payment of
debt with interest under his signature to the Recovery Officer for
recovery of the amount of debt specified in the certificate.
F (22-A) Any recovery certificate issued by the Presiding Officer
under sub-section (22) shall be deemed to be decree or order of
the Court for the purposes of initiation of winding up proceedings
against a company registered under the Companies Act, 2013 (18
of 2013) or Limited Liability Partnership registered under the
Limited Liability Partnership Act, 2008 (9 of 2008) or insolvency
G
proceedings against any individual or partnership firm under any
law for the time being in force, as the case may be.”
71. It could be seen that sub-section (22) of Section 19 of the
Debt Recovery Act empowers the Presiding Officer to issue a certificate
of recovery along with the final order, under sub-section (20), for payment
H
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1107
& ANR. [B. R. GAVAI, J.]

of debt with interest. The certificate is given for the purposes of recovery A
of the amount of debt specified in the certificate. Sub-section (22A) of
Section 19 of the Debt Recovery Act provides that any Recovery
Certificate issued by the Presiding Officer under sub-section (22) shall
be deemed to be decree or order of the Court for the purposes of initiation
of winding up proceedings against a company, etc.
B
72. It is sought to be argued by Shri Viswanathan that the Recovery
Certificate is for the limited purpose of initiation of winding up proceedings.
If we accept the contention of Shri Viswanathan, we would be required
to insert the word “limited” between the words “shall be deemed to be
decree or order of the Court” and “for the purposes of initiation of winding
up proceedings”. If the contention is to be accepted, sub-section (22A) C
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 the
limited purposes of initiation of winding up proceedings…”.
73. In our considered view, if we accept the said submission, it D
would result in doing violence to the provisions of sub-section (22A) of
Section 19 of the Debt Recovery Act.
74. It will be apposite to refer to the following observations of this
Court in the case of Mohd. Shahabuddin vs. State of Bihar and
others22: E

“179. Even otherwise, it is a well-settled principle in law that
the court cannot read anything into a statutory provision which
is plain and unambiguous. The language employed in a
statute is a determinative factor of the legislative intent. If
the language of the enactment is clear and unambiguous, it F
would not be proper for the courts to add any words thereto
and evolve some legislative intent, not found in the statute.
Reference in this regard may be made to a recent decision of this
Court in Ansal Properties & Industries Ltd. v. State of
Haryana [(2009) 3 SCC 553].” G
[emphasis supplied]
75. It is more than well settled that when the language of a statutory
provision is plain and unambiguous, it is not permissible for the Court to

22
(2010) 4 SCC 653 H
1108 SUPREME COURT REPORTS [2022] 5 S.C.R.

A add or subtract words to a statute or read something into it which is not
there. It cannot rewrite or recast legislation. At the cost of repetition, we
observe that if the argument as advanced by Shri Viswanathan is to be
accepted, it will completely change the texture of the fabric of sub-
section (22A) of Section 19 of the Debt Recovery Act.
B 76. Though there are umpteen number of authorities to support
this proposition, we do not wish to burden our judgment with them. Suffice
it to refer to the judgment of three-Judge Bench of this Court in the case
of Nasiruddin and others vs. Sita Ram Agarwal23 wherein this Court
has held as under:
C “37. The court’s jurisdiction to interpret a statute can be invoked
when the same is ambiguous. It is well known that in a given case
the court can iron out the fabric but it cannot change the texture
of the fabric. It cannot enlarge the scope of legislation or
intention when the language of the provision is plain and
unambiguous. It cannot add or subtract words to a statute or
D read something into it which is not there. It cannot rewrite or
recast legislation. It is also necessary to determine that there
exists a presumption that the legislature has not used any
superfluous words. It is well settled that the real intention of
the legislation must be gathered from the language used. It
E may be true that use of the expression “shall or may” is not decisive
for arriving at a finding as to whether the statute is directory or
mandatory. But the intention of the legislature must be found out
from the scheme of the Act. It is also equally well settled that
when negative words are used the courts will presume that the
intention of the legislature was that the provisions are mandatory
F in character.”
[emphasis supplied]
77. From the plain and simple interpretation of the words used in
sub-section (22A) of Section 19 of the Debt Recovery Act, it would be
G amply clear that the Legislature provided that for the purposes of winding-
up proceedings against a Company, etc., a Recovery Certificate issued
by the Presiding Officer under sub-section (22) of Section 19 of the
Debt Recovery Act shall be deemed to be a decree or order of the
Court. It is thus clear that once a Recovery Certificate is issued by the
23
H (2003) 2 SCC 577
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1109
& ANR. [B. R. GAVAI, J.]

Presiding Officer under sub-section (22) of Section 19 of the Debt A
Recovery Act, in view of sub-section (22A) of Section 19 of the Debt
Recovery Act it will be deemed to be a decree or order of the Court for
the purposes of initiation of winding-up proceedings of a Company, etc.
However, there is nothing in sub-section (22A) of Section 19 of the
Debt Recovery Act to imply that the Legislature intended to restrict the
B
use of the Recovery Certificate limited for the purpose of winding-up
proceedings. The contention of the respondents, if accepted, would be
to provide something which is not there in sub-section (22A) of Section
19 of the Debt Recovery Act.
78. In any case, when the Legislature itself has provided that any
Recovery Certificate issued under sub-section (22) of Section 19 of the C
Debt Recovery Act will be deemed to be a decree or order of the Court
for initiation of winding-up proceedings, which proceedings are much
severe in nature, it will be difficult to accept that the Legislature intended
that such a Recovery Certificate could not be used for initiation of CIRP,
which would enable the Corporate Debtor to continue as an on-going D
concern and, at the same time, pay the dues of the creditors to the
maximum. We, therefore, find no substance in the said submission.
79. Insofar as the judgment of this Court in the case of Paramjeet
Singh Patheja (supra) is concerned, we do not find it necessary to
refer to the same, inasmuch as the view, which we have taken, has been E
taken after interpreting the provisions of the IBC, whereas the view in
the case of Paramjeet Singh Patheja (supra) is with regard to legal
fiction as provided in Section 36 of the Arbitration and Conciliation Act,
1996.
80. Insofar as the reliance on the case of Nawab Hussain (supra) F
is concerned, what has been observed by this Court is that the doctrine
of per rem judicatam is based on two theories, viz., (i) the finality and
conclusiveness of judicial decisions for the final termination of disputes
in the general interest of the community as a matter of public policy, and
(ii) the interest of the individual that he should be protected from
multiplication of litigation. It has been held that the said doctrine serves G
not only a public but also a private purpose by obstructing the reopening
of matters which have been adjudicated upon.
81. In the case of Nawab Hussain (supra), the respondent was a
confirmed Sub-Inspector of Police in Uttar Pradesh. He challenged his
H
1110 SUPREME COURT REPORTS [2022] 5 S.C.R.

A dismissal in a writ petition before the Allahabad High Court on the ground
that he was not afforded a reasonable opportunity. The said writ petition
was dismissed. After the dismissal of the said writ petition, he filed a suit
in the Court of Civil Judge, Etah, raising certain additional grounds. The
same was also dismissed. The respondent preferred a second appeal,
which was allowed by the High Court. The High Court had held that the
B
suit was not barred by the principle of constructive res judicata. In this
background, the aforesaid observations were made by this Court while
reversing the judgment of the High Court and holding it to be barred by
res judicata.
82. In the case of Gulabchand Chhotalal Parikh (supra), the
C appellant therein had prayed for the issuance of a writ of mandamus and
a writ of prohibition against the respondent-State in a writ petition filed
in the High Court. The High Court dismissed the petition on merits after
full contest. The appellant thereafter filed a suit against the respondent
and raised a similar plea. In this background, the Trial Court, the First
D Appellate Court and the High Court held that the suit was barred by res
judicata in view of the judgment of the High Court in the writ petition.
In appeal, this Court affirming the concurrent views held that on general
principles of res judicata, the decision of the High Court in a writ petition
under Article 226 of the Constitution of India, after full contest, will
operate as res judicata in a subsequent regular suit between the same
E parties with respect to the same matter.
83. Insofar as the judgment in the case of Thoday vs. Thoday24
is concerned, the same has been considered by this Court in the case of
Bhanu Kumar Jain vs. Archana Kumar and another25, wherein this
Court held that a cause of action estoppel arises where, in two different
F proceedings, identical issues are raised, in which event, the latter
proceedings between the same parties shall be dealt with similarly as
was done in the previous proceedings. In such an event, the bar is absolute
in relation to all points decided save and except allegation of fraud and
collusion. We are of the view that the said judgment would not even
G remotely be applicable to the facts of the present case. In that view of
the matter, we do not find that reliance on the said judgment would be of
any assistance to the case of the respondents.

24
(1964) 2 WLR 371
25
H (2005) 1 SCC 787
KOTAK MAHINDRA BANK LIMITED v. A. BALAKRISHNAN 1111
& ANR. [B. R. GAVAI, J.]

84. To conclude, we hold that a liability in respect of a claim arising A
out of a Recovery Certificate would be a “financial debt” within the
meaning of clause (8) of Section 5 of the IBC. Consequently, the holder
of the Recovery Certificate would be a financial creditor within the
meaning of clause (7) of Section 5 of the IBC. As such, the holder of
such certificate would be entitled to initiate CIRP, if initiated within a
B
period of three years from the date of issuance of the Recovery
Certificate.
85. We further find that the view taken by the two-Judge Bench
of this Court in the case of Dena Bank (supra) is correct in law and we
affirm the same. We further find that in the facts of the present case,
the application under Section 7 of the IBC was filed within a period of C
three years from the date on which the Recovery Certificate was issued.
As such, the application under Section 7 of the IBC was within limitation
and the learned NCLAT has erred in holding that it is barred by limitation.
86. In the result, we pass the following judgment:
D
(i) The appeal is allowed.
(ii) The impugned judgment and order dated 24th November, 2020
passed by the learned National Company Law Appellate
Tribunal, New Delhi in Company Appeal (AT) (Insolvency)
No.1406 of 2019 is quashed and set aside. E
87. We further clarify that though elaborate arguments have been
advanced by the rival parties upon the merits of the matter, we have not
touched the same. We have only decided the legal issues. The parties
would be at liberty to raise all the issues, considering the merits of the
matter before the learned NCLT. The learned NCLT would decide the F
same in accordance with law.
88. Pending applications, including the application(s) for ex-parte
stay and disposal of the matter shall stand disposed of in the above
terms. There shall be no order as to costs.
G
Nidhi Jain Appeal allowed.
(Assisted by : Neha Sharma, LCRA)

H