Section 14 Limitation Act Applies To Application Under Section 7 IBC : Supreme Court

The Supreme Court has held that in an application under Section 7 of the Insolvency and Bankruptcy Code, the applicant can claim the benefit of Section 14 of the Limitation Act, in respect of proceedings under the SARFAESI Act.Section 14 of the Limitation Act 1963 allows for exclusion from the limitation period the time spent litigating before wrong forum.A bench comprising Justices Indira Banerjee and Hemant Gupta held that Section 14 applies to an application under Section 7 of the IBC and that there is no rule that the exclusion of time under Section 14 is available, only after the proceedings before the wrong forum terminate.The bench also held that SAFAESI proceedings are 'civil proceedings' for the purposes of Section 14 of the Limitation Act. The judgment came in the case Sesh Nath Singh Vs. Baidyabati Sheoraphuli Co-operative Bank Ltd.Factual backgroundIn this case, the National Company Law Appellate Tribunal rejected the contention raised by Corporate Debtor that since the account of the Corporate Debtor had been declared NPA on 31st March, 2013 and since the application under Section 7 of IBC had been filed on 27th August, 2018, after almost five years and five months from the date of accrual of the cause of action, the application filed by financial creditor is barred by limitation. The NCLAT held that, the applicant, the financial creditor, had bona fide, within the period of limitation, initiated proceedings against the Corporate Debtor under the SARFAESI Act and was thus entitled to exclusion of time under Section 14(2) of the Limitation Act. The NCLAT, after exclusion of the period of about three years and six months till the date of the interim order of the High Court, during which the Financial Creditor had been proceeding under SARFAESI Act, found that the application of the Financial Creditor, under Section 7 of the IBC, was within limitation.In appeal, the Apex Court bench considered these two issues :(i) Whether delay beyond three years in filing an application under Section 7 of IBC can be condoned, in the absence of an application for condonation of delay made by the applicant under Section 5 of the Limitation Act, 1963? (ii) Whether Section 14 of the Limitation Act, 1963 applies to applications under Section 7 of the IBC? If so, is the exclusion of time under Section 14 is available, only after the proceedings before the wrong forum terminate?Relying on an NCLAT judgment in Ishrat Ali v. Cosmos Cooperative Bank Limited and Anr.,the corporate debtor contended that in an application under Section 7 of the IBC, the applicant is not entitled to the benefit of Section 14 of the Limitation Act, 1963 in respect of proceedings under the SARFAESI Act.There is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application.While answering the first issue, the bench noted that Section 238A of the IBC provides that the provisions of the Limitation Act shall, as far as may be, apply to proceedings before the Adjudicating Authority(NCLT) and the NCLAT. The court observed that though, it is the general practice to make a formal application under Section 5 of the Limitation Act, 1963, in order to enable the Court or Tribunal to weigh the sufficiency of the cause for the inability of the appellant/applicant to approach the Court/Tribunal within the time prescribed by limitation, there is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application."A plain reading of Section 5 of the Limitation Act makes it amply clear that, it is not mandatory to file an application in writing before relief can be granted under the said section. Had such an application been mandatory, Section 5 of the Limitation Act would have expressly provided so. Section 5 would then have read that the Court might condone delay beyond the time prescribed by limitation for filing an application or appeal, if on consideration of the application of the appellant or the applicant, as the case may be, for condonation of delay, the Court is satisfied that the appellant/applicant had sufficient cause for not preferring the appeal or making the application within such period. Alternatively, a proviso or an Explanation would have been added to Section 5, requiring the appellant or the applicant, as the case may be, to make an application for condonation of delay. However, the Court can always insist that an application or an affidavit showing cause for the delay be filed. No applicant or appellant can claim condonation of delay under Section 5 of the Limitation Act as of right, without making an application."All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasibleThe bench also noted that the IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the...

Section 14 Limitation Act Applies To Application Under Section 7 IBC : Supreme Court

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