Summary
The Supreme Court upheld admission of the bank’s Section 7 insolvency application after excluding time spent diligently pursuing SARFAESI proceedings stayed on a prima facie jurisdictional ground. Section 238A IBC permits application of the Limitation Act, including Section 14, with contextual adaptation. Formal termination of the earlier proceedings was not essential. The Court also held that sufficient cause may support condonation under Section 5 without a formal written application, although the tribunal may require one and condonation is not a right.
Issues
- Whether Section 5 relief required a formal written condonation application.
- Whether Section 14 applied to Section 7 insolvency proceedings and time spent pursuing SARFAESI remedies.
- Whether earlier proceedings had to terminate before their duration could be excluded.
Provisions considered
- Sections 7 and 238A, Insolvency and Bankruptcy Code, 2016The three-year limitation applied subject to feasible application of the Limitation Act’s provisions, including exclusion of time and condonation. (¶¶ 37-40, 48-68, 88-95)
- Section 5 and Article 137, Limitation Act, 1963Sufficient cause could justify condonation without a formal written application, subject to judicial discretion; the ordinary period was three years from default. (¶¶ 51-64, 102)
- Section 14, including Explanation (a), Limitation Act, 1963Good-faith, diligent pursuit before a forum unable to entertain the matter could be excluded; formal termination was not an indispensable precondition in this case. (¶¶ 65, 70-87, 96-102)
Held
- The ordinary limitation for a Section 7 application is three years from accrual on default. Section 238A makes the Limitation Act applicable as far as feasible; the IBC does not wholly exclude Sections 5, 14 or 18. Section 18 was not factually attracted because the impugned decision did not rest on an acknowledgment. (¶ 48-68)
- Section 5 requires sufficient cause, rather than invariably a separate written application. On adequate material, the tribunal may condone delay without a formal application, but it may insist upon an application or affidavit and the applicant cannot demand condonation as of right. The discretion must balance substantial justice and accrued limitation rights. (¶¶ 59-64, 102)
- Section 14 is available in insolvency proceedings and must receive a contextual, purposive application. Its basic requirements of diligence, good faith and inability of the earlier forum to entertain the matter remain. In this setting, civil forums include tribunals and SARFAESI forums; Ishrat Ali’s contrary categorical exclusion was unsustainable. (¶¶ 70-75, 90-101)
- Explanation (a) does not require every earlier proceeding to terminate before exclusion is possible. It clarifies the interval to be counted and prevents exclusion beyond termination. Here the High Court’s subsisting stay on a prima facie jurisdictional ground prevented further pursuit of SARFAESI remedies; after excluding the relevant interval, the insolvency application was timely. (¶ 76-87)
- Exclusion under Section 14 and condonation under Section 5 are distinct but not mutually exclusive. Even where Section 14 does not strictly apply, its principles may support sufficient cause under Section 5. The record justified sustaining the Section 7 admission. (¶¶ 71, 102-103)
Result
Appeal dismissed. Admission of the Section 7 application and continuation of the insolvency proceedings upheld.