The Supreme Court has observed that the date of coming into force of the Insolvency and Bankruptcy Code does not and cannot form a trigger point of limitation for applications filed under the Code.
The bench comprising Justice Rohinton Fali Nariman and Justice V. Ramasubramanian reiterated that, since such "applications" are petitions which are filed under the Code, it is Article 137 of the Limitation Act which will apply to such applications.
The bench was considering an appeal titled as Sagar Sharma vs. Phoenix Arc Pvt. Ltd. It set aside the order of NCLT and directed the petition be considered afresh.
Referring to the judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates, the bench said 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.
The court also made it clear 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, the bench added.
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