Summary
The NCLAT treated commencement of the Insolvency and Bankruptcy Code as the starting point of limitation and invoked mortgage limitation for a Section 7 application. The Court rejected both approaches, reiterated that Article 137 governed the application, and remitted the dispute for fresh determination on that basis.
Issues
- Whether commencement of the Code or the mortgage-enforcement limitation could determine timeliness of a Section 7 application.
Held
- The Code’s commencement on 1 December 2016 does not trigger limitation. The binding holding in B.K. Educational Services required Article 137 to govern applications under Section 7. (¶¶ 1, 2, 3)
- A Section 7 application invokes insolvency on financial default rather than enforcement of mortgage liability. The existence of a mortgage did not substitute Article 62 for the applicable residuary provision. (¶¶ 2, 3)
Result
The appeal was allowed, the NCLAT judgment set aside and fresh determination directed with both parties free to argue the facts under Article 137. The NCLT order of 29 January 2019 remained stayed until further NCLAT orders. Counsel’s intention to advance a Section 22 Limitation Act plea was recorded without deciding it.