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Breaking: Limitation Act Applicable To Applications Filed Under Sections 7 and 9 Of Insolvency and Bankruptcy Code From The Inception Of The Code: SC [Read Judgment]

In a significant Judgment the Supreme Court on Thursday held that the Limitation Act is applicable to applications filed under Sections 7 and 9 of Insolvency and Bankruptcy Code From the inception of the Code.

The two Judge Bench of Justices RF Nariman and Navin Sinha was examining the question ‘whether the Limitation Act, 1963 will apply to applications that are made under Section 7 and/or Section 9 of the Code on and from its commencement on 01.12.2016 till 06.06.2018’.

In all these cases, the Appellate Authority has held that the Limitation Act, 1963 does not so apply. Even on the assumption that Article 137 of the Limitation Act, 1963 is attracted to such applications, in any case, such applications being filed only on or after commencement of the Code on 01.12.2016, since three years have not elapsed since this date, all these applications, in any event, could be said to be within time.

Learned counsel appearing on behalf of the appellants have argued, relying upon the Report of the Insolvency Law Committee of March, 2018, that the object of the Amendment Act which introduced Section 238A into the Code was to clarify the law and, thus, Section 238A must be held to be retrospective. Further, according to them, in any case, the law of limitation, pertaining to the domain of procedure, must be held to apply retrospectively in any case.

On the other hand, Shri Ashish Dholakia, learned advocate appearing on behalf of some of the respondents, argued, based upon our judgment in Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407, that the Code is a complete Code dealing with insolvency and not debt recovery and that, therefore, the periods of limitation that are stated therein would show that the Limitation Act would not apply. In any case, as has been held by various judgments of this Court, the Limitation Act cannot apply to the NCLT as it is a tribunal and not a court.

Shri Dholakia argued that the Code being complete in itself, an intruder such as the Limitation Act must be shut out also by application of Section 238 of the Code which provides that, “notwithstanding anything inconsistent therewith contained in any other law for the time being in force”, the provisions of the Code would override such laws.

Allowing the appeals, the bench finally held that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted.

“The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.”

 The Bench has remanded the cases to the NCLAT to decide the appeals afresh in the light of this judgment.

The Appellant BK Educational Services was represented by Advocates Robin David, Dhiraj Philip and Febin Mathew Verghese from Dua Associates.

Read the Judgment

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