Summary
Sanghvi Movers hired a crane to Tech Sharp Engineers and invoiced about Rs. 38.85 lakh in 2012–13. The last payment was made in June 2013 and the last acknowledgment of liability was on 7 November 2013. Sanghvi filed a winding-up petition in the Madras High Court in December 2015. After the IBC came into force on 1 December 2016, it filed a Section 9 application in March 2018. The NCLT dismissed it as time-barred, but the NCLAT treated the right to apply as accruing on 1 December 2016. The Supreme Court allowed the corporate debtor's appeal. Limitation under Article 137 runs from the date of default, not from the IBC's commencement. Pendency of the winding-up petition did not qualify for exclusion under Section 14(2), as the High Court had jurisdiction, and no acknowledgment after 2013 extended time under Section 18.
Issues
- Whether limitation for a Section 9 IBC application runs from the date of default or from the date the IBC came into force
- Whether pendency of a winding-up petition in the High Court saves limitation for a Section 9 application under Section 14(2) of the Limitation Act
- Whether there was any acknowledgment of liability extending limitation under Section 18
Provisions considered
- Article 137 and Section 5, Limitation Act, 1963The three-year period for a Section 9 application runs from the date of default (B.K. Educational Services). The NCLT or NCLAT may condone delay only on sufficient cause, which the applicant must establish, and the parallel winding-up proceeding was not such cause. (¶¶ 11, 13, 14, 16, 17, 19)
- Section 14(2), Limitation Act, 1963Exclusion is available only for bona fide prosecution of a proceeding in a forum unable to entertain it for defect of jurisdiction or a like cause. The Madras High Court suffered from no such defect. (¶¶ 23, 25, 26)
- Section 18, Limitation Act, 1963A written acknowledgment made before limitation expires starts a fresh period, but the last acknowledgment here was on 7 November 2013. (¶¶ 21, 24, 26)
- Sections 9 and 62, Insolvency and Bankruptcy Code, 2016The Section 9 application filed in March 2018 for defaults of 2013 was time-barred, and the NCLAT's order reviving it was set aside on appeal under Section 62. (¶¶ 8, 9, 29, 30)
Held
- For limitation, the relevant date is when the right to sue accrues, that is, the date of default. The date the IBC came into force, or the date an application could first be filed under it, is irrelevant. It would be absurd to allow CIRP to be initiated within three years of the IBC's commencement for rights that accrued long before. (¶¶ 11, 17, 18)
- Delay may be condoned only on sufficient cause, which the applicant must make out, and there is no straitjacket formula. Pendency of proceedings in a parallel forum invoked by the creditor is not sufficient cause. (¶¶ 14, 15, 16, 17, 19)
- The winding-up petition in a court competent to hear it stopped limitation only for that proceeding. It did not save limitation for an IBC application, because Section 14(2) applies only to proceedings in a forum unable to entertain them for want of jurisdiction or a like cause. With the last acknowledgment and payment in 2013, the Section 9 application was barred. (¶¶ 21, 26, 28)
- It is the remedy, not the claim, that limitation bars, so the creditor may pursue any other remedy or pending proceeding available to it in accordance with law. (¶¶ 29, 31)
Result
Appeal allowed. The NCLAT's order was set aside and the NCLT's dismissal of the Section 9 application as time-barred restored, without prejudice to the respondent's other remedies.