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SUPREME COURT OF INDIA
A.M. KHANWILKAR, DINESH MAHESHWARI, JJ.
Babulal Vardharji Gurjar - Appellant
Versus
Veer Gurjar Aluminium Industries Private Limited And Another - Respondent
Civil Appeal No. 6347 of 2019
Decided on : 14-08-2020
(A) Insolvency and Bankruptcy Code, 2016 – Section 7 read with Section 238 – Initiation of Corporate Insolvency Resolution Process by financial creditor – Default in repayment of debt by corporate debtor – CIRP is not intended to be adversarial to corporate debtor but is essentially to protect its interests – Insolvency and Bankruptcy Code, 2016 has been enacted to consolidate and amend laws relating to re-organisation and insolvency resolution of corporate persons and other entrepreneurs in a time bound manner so as to ensure maximisation of value of assets of such persons and to balance interest of all stakeholders. (Paras 19 and 20)
(B) Insolvency and Bankruptcy Code, 2016 – Section 7 read with Section 238-A – Limitation Act, 1963 – Article 137 – Initiation of Corporate Insolvency Resolution Process by financial creditor – Bar of limitation – Period of limitation for an application seeking initiation of CIRP under Section 7 of Code is governed by Article 137 of Limitation Act and is three years from the date when right to apply accrues – Right to apply under the Code accrues on the date when default occurs – Default referred to in Code is that of actual non-payment by corporate debtor when a debt has become due and payable and that if default had occurred over three years prior to date of filing of application, application would be time-barred save and except in those cases where, on facts, delay in filing may be condoned; and an application under Section 7 of Code is not for enforcement of mortgage liability and Article 62 of the Limitation Act does not apply to this application.. (Para 30)
(C) Limitation Act, 1963 – Section 3 – Bar of limitation – Question of limitation is essentially a mixed question of law and facts – When a party seeks application of any particular provision for extension or enlargement of period of limitation, relevant facts are required to be pleaded and requisite evidence is required to be adduced – Even if Section 18 of Limitation Act and principles thereof were applicable, same would not apply to application under consideration in present case, looking to very averment regarding default therein and for want of any other averment in regard to acknowledgement. (Para 33.1)
Facts of the case:
Present appeal under Section 62 of the Insolvency and Bankruptcy Code, 20161 is directed against the judgment and order dated 14.05.2019 passed by the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) Insolvency No. 549 of 2018 whereby, Appellate Tribunal has rejected the contention that the application made by respondent No. 2 under Section 7 of the Code, seeking initiation of Corporate Insolvency Resolution Process3 in respect of the debtor company (respondent No. 1 herein), is barred by limitation; and has declined to interfere with the order dated 09.08.2018, passed by National Company Law Tribunal, Mumbai Bench in CP(IB)-488/I&BP/MB/2018, for commencement of CIRP as prayed for by the respondent No. 2.
Findings of the Court:
Application made by the respondent No. 2 under Section 7 of Code in the month of March 2018, seeking initiation of CIRP in respect of corporate debtor with specific assertion of the date of default as 08.07.2011, is clearly barred by limitation for having been filed much later than the period of three years from the date of default as stated in the application. The NCLT having not examined the question of limitation; the NCLAT having decided the question of limitation on entirely irrelevant considerations; and the attempt on the part of the respondents to save the limitation with reference to the principles of acknowledgment having been found unsustainable, the impugned orders deserve to be set aside and the application filed by the respondent No. 2 deserves to be rejected as being barred by limitation.
Result : Appeal allowed.
JUDGMENT :
DINESH MAHESHWARI, J.
Introductory with brief outline and issue involved
1. This appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 1 [Hereinafter also referred to as 'the Code' or 'IBC.] is directed against the judgment and order dated 14.05.2019 passed by the National Company Law Appellate Tribunal, New Delhi2 [Hereinafter also referred to as 'the Appellate Tribunal' or 'NCLAT'.] in Company Appeal (AT) Insolvency No. 549 of 2018 whereby, the Appellate Tribunal has rejected the contention that the application made by respondent No. 2 under Section 7 of the Code, seeking initiation of Corporate Insolvency Resolution Process 3 ['CIRP' for short.] in respect of the debtor company (respondent No. 1 herein), is barred by limitation; and has declined to interfere with the order dated 09.08.2018, passed by the National Company Law Tribunal, Mumbai Bench 4 [Hereinafter also referred to as 'the Adjudicating Authority' or 'the Tribunal' or 'NCLT.] in CP(IB)-488/I&BP/MB/2018, for commencement of CIRP as prayed for by the respondent No. 2.
2. A brief introduction of the parties and the subject matter as also a thumbnail sketch of the relevant orders passed in this matter and the issue involved shall be apposite at the very outset.
2.1. The appellant Shri Babulal Vardhaji Gurjar has been the director of the respondent No. 1 company viz., Veer Gurjar Aluminium Industries Pvt. Ltd. 5 [Hereinafter also referred to as 'the corporate debtor'.] On or about 21.03.2018, the respondent No. 2 JM Financial Assets Reconstruction Company Pvt. Ltd. 6 [Hereinafter also referred to as 'the financial creditor'.], while stating its capacity as the financial creditor, for being the assignee of the loans and advances disbursed by creditor bank to the corporate debtor, filed the said application under Section 7 of the Code before the Adjudicating Authority and sought initiation of CIRP in respect of the respondent No. 1.
2.2. After having considered the submissions on behalf of the financial creditor and the corporate debtor, the Adjudicating Authority, by its order dated 09.08.2018, admitted the application so made by the financial creditor and appointed an interim resolution professional 7 ['IRP' for short.]. Consequent to this order dated 09.08.2018, the corporate debtor (respondent No. 1) is now represented by the interim resolution professional.
2.3. Being aggrieved by the aforesaid order dated 09.08.2018, the appellant preferred an appeal before NCLAT and contended against maintainability of the application moved by the respondent No. 2. The appeal so filed by the appellant was summarily dismissed by the Appellate Tribunal by its order dated 17.09.2018. However, the order so passed by the Appellate Tribunal was not approved by this Court in the judgment dated 26.02.2019, passed in Civil Appeal No. 10710 of 2018, after finding that the issue relating to limitation, though raised, was not decided by the Appellate Tribunal. Hence, the matter was remanded to NCLAT for specifically dealing with the issue of limitation. After such remand, the Appellate Tribunal, by its impugned order dated 14.05.2019, has held that neither the application under Section 7 as made in this case is barred by limitation nor the claim of the respondent No. 2 is so barred and has, therefore, again dismissed the appeal. Being aggrieved, the appellant has approached this Court over again by way of the instant appeal.
3. In the impugned order dated 14.05.2019, the Appellate Tribunal has observed that the Code having come into force on 01.12.2016, the application made in the year 2018 is within limitation. The Appellate Tribunal has assigned another reason that mortgage security having been provided by the corporate debtor, the limitation period of twelve years is available for the claim made by the financial creditor as per Article 61 (b)of the Limitation Act, 1
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