1. Operational creditor — Recovery of hire charges — Section 9 IBC application — Prior winding-up proceedings under Companies Act, 1956. (Para 2 , 6 , 8 )
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2022 Supreme(SC) 923
SUPREME COURT OF INDIA
INDIRA BANERJEE, J.K. MAHESHWARI, JJ.
M/s Tech Sharp Engineers Pvt. Ltd. - Appellant
Versus
Sanghvi Movers Limited - Respondent
Civil Appeal No.296 of 2020
Decided on : 19-09-2022
Important Points
IMPORTANT POINT
(1) Provisions of Limitation Act are applicable to proceedings under IBC as far as may – Proceedings in good faith in a forum which lacks jurisdiction or is unable to entertain for like nature may save limitation
(2) Limitation – There cannot be any straitjacket formula for accepting or rejecting explanation furnished by Appellant/applicant for delay in taking steps.
(1) Provisions of Limitation Act are applicable to proceedings under IBC as far as may – Proceedings in good faith in a forum which lacks jurisdiction or is unable to entertain for like nature may save limitation
(2) Limitation – There cannot be any straitjacket formula for accepting or rejecting explanation furnished by Appellant/applicant for delay in taking steps.
Subject
Insolvency and Bankruptcy - Limitation for Initiation of Corporate Insolvency Resolution Process (CIRP)
Act Referred
COMPANIES ACT: S.433(e), S.434, S.439
Insolvency and Bankruptcy Code: S.62, S.9, S.61, S.7
LIMITATION ACT: Art.137, S.5, S.14(2), S.18
Insolvency and Bankruptcy Code: S.62, S.9, S.61, S.7
LIMITATION ACT: Art.137, S.5, S.14(2), S.18
Headnote
(A) Limitation Act, 1963 – Section 5 – Limitation – Condition precedent for condonation of delay in filing application or appeal, is existence of sufficient cause – Whether explanation furnished for delay would constitute “sufficient cause” or not would be dependent upon facts of each case – There cannot be any straitjacket formula for accepting or rejecting explanation furnished by Appellant/applicant for delay in taking steps – When an appeal is filed against an order rejecting an application on the ground of limitation, onus is on Appellant to make out sufficient cause for delay in filing application. (Paras 16 and 17)
(B) Insolvency and Bankruptcy Code, 2016 – Sections 7 and 9 – Limitation Act, 1963 – Sections 14(2) and 18 – Initiation of CIRP – Limitation – Provisions of Limitation Act are applicable to proceedings under IBC as far as may be – Acknowledgment must be made before period of limitation expires – Date of enforcement of IBC and/or date on which application could have first been filed under IBC are not relevant in computation of limitation – Proceedings in good faith in a forum which lacks jurisdiction or is unable to entertain for like nature may save limitation – Similarly, acknowledgment of liability may have effect of commencing a fresh period of limitation – A claim may not be barred by limitation – It is remedy for realisation of claim which gets barred by limitation – Limitation for initiation of winding up proceedings in Madras High Court stopped running on the date on which Winding-Up petition was filed – Initiation of proceedings in Madras High Court would not save limitation for initiation of proceedings for initiation of CIRP in NCLT under Section 7 of IBC – Impugned order of NCLAT set aside. (Paras 1, 23, 24, 25, 29 and 30)
Facts of the case:
Present appeal under Section 62 of Insolvency and Bankruptcy Code, 2016, is against a judgment and order dated 23rd July 2019 passed by the National Company Law Appellate Tribunal (NCLAT), New Delhi allowing Company Appeal (AT) (Insolvency) No. 118 of 2019 filed by the Respondent and setting aside order dated 2nd January 2019 passed by the Adjudicating Authority, i.e., National Company Law Tribunal (NCLT), Chennai whereby the Adjudicating Authority had dismissed an application filed by Respondent as barred by limitation.
Findings of Court:
This judgment, however, will not prevent the Respondent from pursuing any other remedy which the Respondent may be entitled to avail in accordance with law and/or pursue any pending proceedings in accordance with law.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. R. Chandrachud, AOR
For the Respondent(s): Mr. Shikhil Shiv Suri, Adv. Ms. Madhu Suri, Adv. Ms. Jyoti Suri, Adv. Ms. Nikita Thapar, Adv. Ms. Komal Gupta, Adv. Ms. Mahima Aggarwal, Adv. Mr. T. R. B. Sivakumar, AOR
For the Appellant(s) : Mr. R. Chandrachud, AOR
For the Respondent(s): Mr. Shikhil Shiv Suri, Adv. Ms. Madhu Suri, Adv. Ms. Jyoti Suri, Adv. Ms. Nikita Thapar, Adv. Ms. Komal Gupta, Adv. Ms. Mahima Aggarwal, Adv. Mr. T. R. B. Sivakumar, AOR
Table of Contents
2. Whether the limitation period for Section 9 applications commences from the date of default or from the date the IBC came into force. (Para 10 )
3. Limitation is computed from the date of default; the IBC's enforcement date is irrelevant, and parallel proceedings in other forums do not constitute sufficient cause for delay. (Para 17 , 18 , 19 )
4. Limitation for IBC applications is governed by Article 137 of the Limitation Act, commencing from the date of default, not from the date of the Code's enforcement. (Para 11 , 17 , 18 )
5. Appeal allowed and the NCLAT order set aside. (Para 30 )
6. When does the limitation period for filing an application under Section 9 of the IBC begin?
The limitation period begins when the right to sue accrues, which is the date when the default occurs. The date of enforcement of the IBC is not relevant in computing this period. (Para 11 , 17 , 18 )
7. Does the pendency of winding-up proceedings under the Companies Act, 1956, save the limitation period for initiating CIRP under the IBC?
No. The initiation of winding-up proceedings in a court does not save the limitation period for initiating the Corporate Insolvency Resolution Process (CIRP) under the IBC. (Para 19 , 28 )
8. Can a delay in filing an IBC application be condoned?
Yes, the NCLT/NCLAT has the discretion to entertain an application after the prescribed limitation period if the applicant demonstrates sufficient cause for the delay under Section 5 of the Limitation Act. (Para 13 , 14 , 16 )
9. Under what conditions does Section 14(2) of the Limitation Act allow for the exclusion of time?
Time is excluded if the applicant was prosecuting another civil proceeding in good faith in a court which, due to defect of jurisdiction or other similar cause, was unable to entertain it. (Para 23 , 25 , 26 )
JUDGMENT :
Indira Banerjee, J.
This appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016, hereinafter referred to as the “IBC” is against a judgment and order dated 23rd July 2019 passed by the National Company Law Appellate Tribunal (NCLAT), New Delhi allowing Company Appeal (AT) (Insolvency) No. 118 of 2019 filed by the Respondent and setting aside an order dated 2nd January 2019 passed by the Adjudicating Authority, i.e., the National Company Law Tribunal (NCLT), Chennai whereby the Adjudicating Authority had dismissed an application filed by the Respondent as barred by limitation.
2. Pursuant to an agreement executed by and between the Appellant and the Respondent, the Respondent let out on hire to the Appellant, 150 MT crane for erection of equipment at the site of Indian Oil Corporation Ltd. (IOCL) at Paradip in Odisha. The Respondent/Operational Creditor raised invoices on the Appellant between 3rd January 2012 and 4th March 2013 for a sum of Rs.38,84,709/-.
3. On or about 6th May 2013, the Respondent issued notice to the Appellant for payment of outstanding hire charges. By letter dated 17th May 2013, the Appellant replied to the said notice. Further correspondence ensued.
4. Ultimately, on 14th October 2013, the Respondent issued a statutory notice to the Appellant under Sections 433(e), 434 and 439 of the Companies Act, 1956 for Winding Up of the Appellant-Company. The Appellant duly replied to the notice on 7th November 2013, acknowledging its liability to the Respondent.
5. On 9th November 2013, the Respondent called upon the Appellant to clear its dues. On 24th May 2014, the Respondent issued a statutory notice under Sections 433(e), 434 and 439 of the Companies Act, 1956 calling upon the Appellant to pay Rs.38,84,709/-towards crane hire charges.
6. On or about 22nd December 2015, the Respondent filed a Winding Up petition dated 4th July 2015 in the Madras High Court. On 5th January 2016, the High Court returned the Winding Up petition to the Respondent for curing of defects. The Winding Up petition was represented on 3rd February 2016, but again returned on 24th May 2016 with an endorsement to comply with the defects as intimated earlier.
7. The IBC came into force on 1st December 2016. Thereafter the Respondent issued a demand notice on 14th November 2017 under Section 8(1) calling upon the Appellant to repay its dues.
8. On 30th March 2018, the Respondent filed petition being CP/724/ (IB)/2018 under Section 9 of the IBC for initiation of the Corporate Insolvency Resolution Process (CIRP) in the NCLT. On 20th June 2018, the Adjudicating Authority (NCLT) directed the Registry to issue notice to the Appellant.
9. By an order dated 2nd January 2019, the Adjudicating Authority (NCLT) rejected the application as barred by limitation, placing reliance on the judgment of this Court in B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633. The application under Section 9 of the IBC was accordingly dismissed.
10. The Respondent appealed to the NCLAT under Section 61 of the IBC. By the impugned judgment and order, the NCLAT has set aside the order dated 2nd January 2019 passed by the Adjudicating Authority (NCLT) rejecting the application of the Respondent under Section 9 of the IBC and has remitted the case to the Adjudicating Authority for admission after notice to the parties. The NCLAT directed that before admission of the case, it would be open to the Respondent to settle the matter with the Appellant. The NCLAT held :-
“8. In the present case, it is not in dispute that right to apply under Section 9 accrued to the Appellant on 1st December, 2016, when ‘I&B Code’ came into force. Therefore, we find that the application under Section 9 filed by the Appellant is within the period of three years from the date of right to apply accrued.”
11. For the purpose of limitation, the relevant date is the date on which the right to sue accrues which is the date when a default occurs.
In B.K.Educat
