Insolvency and Bankruptcy Code, 2016: s.9 – Initiation of Corporate Insolvency Resolution Process (CIRP) – Applicability of Limitation Act – Pursuant to agreement, respondent let out a crane on hire to the appellant – Respondent raised invoices on the appellant between 03.01.2013 and 04.03.2013 for a sum of Rs.38,84,709/- – On 14.10.2013, Respondent issued statutory notice to Appellant-Company for its winding up for payment of invoices– Appellant replied to notice on 07.11.2013, acknowledging its liability to the Respondent – Respondent filed a winding up petition before High Court which was returned for curing of defects, first time on 05.01.2016 and second time on 24.05.2016 – IBC came into force on 01.12.2016 – Respondent again issued a demand notice on 14.11.2017 u/s. 8(1) of IBC calling upon appellant to repay its dues – On 30.03.2018, the Respondent filed petition u/s. 9 of the IBC for initiation of CIRP in the NCLT, which was dismissed for being barred by limitation – Respondent approached NCLAT which set aside the order passed by NCLT and remitted the case back to NCLT for admission – NCLAT directed that before admission of the case, it would be open to the Respondent to settle the matter with the Appellant and that right to apply under s.9 accrued to appellant on 01.12.2016, when IBC came into force and, therefore, application u/s.9 filed by the Appellant is within the period of three years from the date of right to apply accrued – Hence instant appeal – Held: The pendency of the proceedings in a parallel forum is not sufficient cause for the delay in filing an application u/s.9 of the IBC – Material date is on which the right to sue accrued and if the cause of action continued – By the time the application was filed, the claim had become barred by limitation as is clear from the averments in the winding up petition, that there was no acknowledgment of liability after 07.11.2013 and last payment was made in June 2013 – No help will be provided by ss. 14 and 18 of the Limitation Act as the last acknowledgment was in 2013 and the High Court neither suffered from any defect of jurisdiction to entertain the winding up application nor was unable to entertain the winding up application for any other cause of a like nature – Initiation of proceedings in High Court would not save limitation for initiation of proceedings for initiation of CIRP in the NCLT – Order of NCLAT is unsustainable in law.
Allowing the appeal, the Court
HELD: 1. The condition precedent for condonation of the delay in filing an application or appeal, is the existence of sufficient cause. Whether the explanation furnished for the 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 the explanation furnished by the Appellant/applicant for the delay in taking steps. When an appeal is filed against an order rejecting an application on the ground of limitation, the onus is on the Appellant to make out sufficient cause for the delay in filing the application. The date of enforcement of the IBC and/or the date on which an application could have first been filed under the IBC are not relevant in computation of limitation. It would be absurd to hold that the CIRP could be initiated by filing an application under Section 7 or Section 9 of the IBC, within three years from the date on which an application under those provisions of the IBC could have first been made before the NCLT even though the right to sue may have accrued decades ago. [Paras 16 and 17][928-E-G]
2. The fact that an application for initiation of CIRP, may have been filed within three years from the date of enforcement of the relevant provisions of the IBC is inconsequential. What is material is the date on which the right to sue accrues, and whether the cause of action continuous. The pendency of the proceedings in a parallel forum, invoked by the Respondent, is not sufficient cause for the delay in filing an application under Section 9 of the IBC. By the time the application was filed, the claim had become barred by limitation. In a notice dated 24.05.2014 issued by the Respondent demanding payment, it was contended that the Appellant had agreed to pay its outstanding dues in five equated monthly installments of Rs.8,48,053/-. The Appellant had, however, defaulted after payment of one installment for the month of June, 2013. [Paras 18-20][929-A-C]
3. From the averments in the Winding Up petition, it is patently clear that there was no acknowledgment of liability after 07.11.2013. The last payment was made in June 2013. It is now well settled that the provisions of the Limitation Act are applicable to proceedings under the IBC as far as may be. Section 14(2) of the Limitation Act which provides for exclusion of time in computing the period of limitation in certain circumstances. Similarly, under Section 18 of the Limitation Act, an acknowledgment of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires. 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 the effect of commencing a fresh period of limitation. In this case, the last acknowledgment was in 2013 and the Madras High Court neither suffered from any defect of jurisdiction to entertain the winding up application nor was unable to entertain the winding up application for any other cause of a like nature. [Paras 21 and 23-26][930-F-G; 931C, F-H; 932-A-B]
4. The limitation for initiation of winding up proceedings in the Madras High Court stopped running on the date on which the Winding Up petition was filed. The initiation of proceedings in Madras High Court would not save limitation for initiation of proceedings for initiation of CIRP in the NCLT under Section 7 of the IBC. A claim may not be barred by limitation. It is the remedy for realisation of the claim, which gets barred by limitation. The impugned order of the NCLAT is unsustainable in law. 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. [Paras 28, 29 and 31][932E-G] B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates (2019) 11 SCC 633 : [2018] 12 SCR 794; Radha Export (India) Private Ltd. v. K.P. Jayaram and Anr (2020) 10 SCC 538 : [2020] 8 SCR 272; Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Private Ltd. and Anr. (2020) 15 SCC 1 : [2020] 10 SCALE 48; Ramlal, Motilal & Chhotelal v. Rewa
Coalfields Ltd. AIR 1962 SC 361 : [1962] SCR 762; Krishna v. Chathappan 1889 SCC Online Mad 1 –
relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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