1. Application under Section 7 of the Insolvency and Bankruptcy Code — Dispute regarding the trigger point and applicable article for the limitation period. (Para 1 , 2 )
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2019 Supreme(SC) 1092
SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, V. RAMASUBRAMANIAN, JJ.
Sagar Sharma & Anr. – Appellants
Versus
Phoenix Arc Pvt. Ltd. & Anr. – Respondents
Civil Appeal No. 7673 of 2019
Decided on : 30-09-2019
Important Points
IMPORTANT POINTS
For enforcing any damage liability Article 62, and not Article 137, of Limitation Act would apply.
Date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code.
“Applications” u/s 7 being petitions filed under the Code, Article 137 of Limitation Act will apply to such applications.
For enforcing any damage liability Article 62, and not Article 137, of Limitation Act would apply.
Date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code.
“Applications” u/s 7 being petitions filed under the Code, Article 137 of Limitation Act will apply to such applications.
Subject
Insolvency and Bankruptcy Code - Limitation Period and Applicable Law
Act Referred
Headnote
(a) Insolvency and Bankruptcy Code 2016 - Section 7 - Application u/s 7 - Not an application for enforcing any damage liability - Article 62, and not Article 137, of Limitation Act would apply. (Para 2)
(b) Insolvency and Bankruptcy Code 2016 - Section 7 - Date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code. (Para 3)
(c) Insolvency and Bankruptcy Code 2016 - Section 7 - “Applications” u/s 7 are petitions filed under the Code - Article 137 of Limitation Act which will apply to such applications. (Para3)
Facts of the case:
It is a judgment clarifying 2018 Supreme(SC) 982.
Result: Appeal allowed.
Legal Category Hierarchy
Advocates Appeared:
For the Appellant(s) :Mukul Rohatgi, A.M. Singhvi, K.V. Viswanathan, Mahesh Agarwal, Rishi Agrawala, Himanshu Satija, Shadab Jan, Komal Khushalani, Arshit Anand, E. C. Agrawala, Nishant Rao, Divyang Gobind Chandiramani, Advocates
For the Respondent(s):Rakesh Dwivedi, Suresh Dutt Dobhal, Nirmal Goenka, Kunal Vajani, Kunal Mimani, Varun Ahuja, Advocates
For the Appellant(s) :Mukul Rohatgi, A.M. Singhvi, K.V. Viswanathan, Mahesh Agarwal, Rishi Agrawala, Himanshu Satija, Shadab Jan, Komal Khushalani, Arshit Anand, E. C. Agrawala, Nishant Rao, Divyang Gobind Chandiramani, Advocates
For the Respondent(s):Rakesh Dwivedi, Suresh Dutt Dobhal, Nirmal Goenka, Kunal Vajani, Kunal Mimani, Varun Ahuja, Advocates
Table of Contents
2. Whether the commencement of the Insolvency and Bankruptcy Code triggers limitation and whether Article 61/62 or Article 137 of the Limitation Act applies. (Para 1 , 2 )
3. The Code's commencement is irrelevant to limitation; Section 7 applications concern defaults rather than mortgage enforcement, necessitating the application of Article 137. (Para 1 , 2 , 3 )
4. The commencement date of the Insolvency and Bankruptcy Code does not trigger limitation; Article 137 of the Limitation Act applies to Section 7 applications. (Para 1 , 2 , 3 )
5. Impugned judgment set aside — Matter remanded for fresh determination on the basis that Article 137 of the Limitation Act alone applies. (Para 4 , 5 , 6 )
6. Does the date the Insolvency and Bankruptcy Code came into force trigger the limitation period for filing applications?
No, the date the Code came into force is wholly irrelevant to the triggering of any limitation period for the purposes of the Code. (Para 1 , 3 )
7. Which article of the Limitation Act applies to applications filed under Section 7 of the Insolvency and Bankruptcy Code?
Article 137 of the Limitation Act applies to applications filed under Section 7 of the Code, as these are petitions filed under the Code. (Para 2 , 3 )
8. Does the existence of a mortgage deed change the applicable limitation article for a Section 7 application under the IBC?
No, an application under Section 7 is based on a default as defined under the Code and does not purport to be an application to enforce mortgage liability. (Para 2 )
JUDGMENT :
R.F. Nariman, J.
1. By our judgment dated 11.10.2018 in B.K. Educational Services Private Limited vs. Parag Gupta and Associates (2018 SCC OnLine SC 1921 in paragraphs 2, 20, 38, 43, 48 & 49) we had made it clear that the Insolvency and Bankruptcy Code’s coming into force on 01.12.2016 is wholly irrelevant to the triggering of any limitation period for the purposes of the Code. However, we find that in the impugned judgment the following statement is made:
“13. Admittedly, ‘I&B Code’ has come into force since 1st December, 2016, therefore, the right to apply accrued to 1st Respondent on 1st December, 2016. Therefore, we hold that the application under Section 7 was not barred by limitation.”
2. We had also made it clear beyond any doubt that for applications that will be filed under Section 7 of the Code, Article 137 of the Limitation Act will apply. However, we find in the impugned judgment that Article 62 (erroneously stated to be Article 61) was stated to be attracted to the facts of the present case, considering that there was a deed of mortgage which was executed between the parties in this case. We may point out that an application under Section 7 of the Code does not purport to be an application to enforce any mortgage liability. It is an application made by a financial creditor stating that a default, as defined under the Code, has been made, which default amounts to Rs. 1,00,000/-(one lakh) or more which then triggers the application of the Code on settled principles that have been laid down by several judgments of this Court.
3. Article 141 of the Constitution of India mandates that our judgments are followed in letter and spirit. The date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code. Equally, since “applications” are petitions which are filed under the Code, it is Article 137 of the Limitation Act which will apply to such applications.
4. Accordingly, we set aside the judgment under appeal and direct that the matter be determined afresh. It will be open for both sides to argue the case on facts on the footing that Article 137 of the Limitation Act alone will apply.
5. The appeal is allowed in the aforesaid terms.
6. The NCLT order dated 29.01.2019 shall remain stayed until further orders from the NCLAT.
7. Mr. Rakesh Dwivedi, learned Senior Counsel, wishes to raise a plea based on Section 22 of the Limitation Act before the NCLAT. We record this statement.
