2021 Supreme(SC) 247

SUPREME COURT OF INDIA
INDIRA BANERJEE, HEMANT GUPTA, J.
SESH NATH SINGH & ANR. - APPELLANT
VERSUS
BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. - RESPONDENT
CIVIL APPEAL NO.9198 OF 2019
Decided on : 22-03-2021

IMPORTANT POINTS
(1) Sine qua non for initiation of corporate insolvency resolution process is occurrence of default. Period of limitation for making application under Section 7 or 9 of IBC is three years from date of default.
(2) No applicant or appellant can claim condonation of delay under Section 5 of Limitation Act as of right, without making application.
(3) Proceedings under the SARFAESI Act would be deemed to be civil proceedings in a Court.
(4) All provisions of Limitation Act are applicable to proceedings in NCLT/NCLAT, to the extent feasible.
(5) Delay can be condoned irrespective of whether there is any formal application, if there are sufficient materials on record disclosing sufficient cause for delay.
(6) Interpretation of Statute – Object oriented approach cannot be carried to the extent of doing violence to plain language used, by rewriting the section or substituting words in place of actual words used by Legislature.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Section 7 read with Section 238A – Limitation Act, 1963 – Section 5 – Initiation of Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor – Sine qua non for initiation of corporate insolvency resolution process is occurrence of default – Period of limitation for making application under Section 7 or 9 of IBC is three years from date of default – NCLT/NCLAT has discretion to entertain application/appeal after prescribed period of limitation – Condition precedent for exercise of such discretion is existence of sufficient cause for not preferring appeal and/or application within period prescribed by limitation. (Paras 36, 38, 52 and 59)

(B) Limitation Act, 1963 – Section 5 – Limitation – Condonation of delay – Condition precedent for condonation of delay in filing an application or appeal, is existence of sufficient cause – Whether explanation furnished for delay would constitute ‘sufficient cause’ or not would dependent upon facts of each case – Acceptance of explanation furnished should be rule and refusal an exception, when no negligence or inaction or want of bona fides can be imputed to defaulting party – When stakes are high, explanation should not be rejected by taking a pedantic and hyper technical view of matter, causing thereby irreparable loss and injury to party against whom lis terminates – Courts are required to strike a balance between legitimate rights and interests of respective parties. (Paras 61 and 62)

(C) Limitation Act, 1963 – Section 5 – Limitation – Condonation of delay – Section 5 does not speak of any application – Although, it is general practice to make a formal application under Section 5 of Limitation Act, 1963, in order to enable Court or Tribunal to weigh sufficiency of cause for inability of appellant/applicant to approach Court/Tribunal within time prescribed by limitation, there is no bar to exercise by Court/Tribunal of its discretion to condone delay, in absence of a formal application – No applicant or appellant can claim condonation of delay under Section 5 of Limitation Act as of right, without making application. (Paras 63 and 64)

(D) Insolvency and Bankruptcy Code 2016 – Section 238A – Limitation Act, 1963 – Sections 14 and 18 – Initiation of Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor – Period of limitation – Provisions of Limitation Act would apply mutatis mutandis to proceedings under IBC in NCLT/NCLAT – IBC does not exclude application of Section 6 or 14 or 18 or any other provision of Limitation Act to proceedings under IBC in NCLT/NCLAT – All provisions of Limitation Act are applicable to proceedings in NCLT/NCLAT, to the extent feasible – Section 14 of Limitation Act has to be interpreted liberally to advance cause of justice – Section 14 would be applicable in cases of mistaken remedy or selection of a wrong forum. (Paras 67, 74, 75 and 92)

(E) Statute Law – Explanation – An explanation added to a statutory provision is not a substantive provision in any sense of the term but is meant to explain or clarify certain ambiguities, which may have crept into statutory provisions. (Para 79)

(F) Limitation Act, 1963 – Sections 5 and 14 – Limitation – Exemption – Section 5 and Section 14 of Limitation Act are not mutually exclusive – Even in a case where Section 14 does not strictly apply, principles of Section 14 can be invoked to grant relief to an applicant under Section 5 of Limitation Act by purposively construing ‘sufficient cause’ – Omission to refer to correct section of a statute does not vitiate an order – Delay can be condoned irrespective of whether there is any formal application, if there are sufficient materials on record disclosing sufficient cause for delay. (Para 102)

(G) Interpretation of Statute – Parameters – Court should adopt an object oriented approach keeping in mind principle that legislative futility is to be ruled out so long as interpretative possibility permits – Object oriented approach cannot be carried to the extent of doing violence to plain language used, by rewriting the section or substituting words in place of actual words used by Legislature. (Para 93)

Facts of the case:

Instant appeal under Section 62 of the Insolvency and Bankruptcy Code 2016, is against a judgment and order dated 22nd November 2019, passed by National Company Law Appellate Tribunal (NCLAT), dismissing Company Appeal (AT) (Insolvency) No.672 of 2019, filed by Appellants, challenging an order dated 25th April 2019, of the National Company Law Tribunal (NCLT), Kolkata Bench, admitting application filed by the Respondent No.1 as Financial Creditor, under Section 7 of the IBC being CP(IB) No.1202/KB/2018, thereby initiating Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor, Debi Fabtech Private Ltd.

Findings of Court:

Keeping in mind scope and ambit of proceedings under IBC before the NCLT/NCLAT, expression ‘Court’ in Section 14(2) would be deemed to be any forum for a civil proceeding including any Tribunal or any forum under SARFAESI Act.

Result : Appeal dismissed.

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