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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
(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.
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 :-
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
(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 sa....
The main legal point established in the judgment is the interpretation of the limitation period for filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and the applicab....
(1) IBC is not just another statute for recovery of debts – Nor is it a statute which merely prescribes modalities of liquidation of a Corporate body, unable to pay its debts – It is essentially a st....
(1) In computing period of limitation for initiation of CIRP proceedings, time spent in pursuing remedy under SARFAESI Act or any other recovery law cannot be excluded.(2) IBC is essentially a statu....
The provisions of Section 18 of the Limitation Act are applicable to proceedings under the Insolvency and Bankruptcy Code, and an acknowledgement in a balance sheet without a qualification can extend....
(1) Acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt. Though filing of a balance sheet is by compulsion of law, acknowledgement of a debt is not n....
Acknowledgment of debt through balance sheets and restructuring efforts extends limitation under Section 18 of the Limitation Act; thus, a Section 7 application under IBC remains valid even if initia....
(1) Initiation of Corporate Insolvency Resolution Process (CIRP) – Period of limitation for making application under Section 7 or 9 of IBC is three years from the date of accrual of right to sue, tha....
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