Summary
The Supreme Court held that the Limitation Act applied to applications under sections 7 and 9 of the Insolvency and Bankruptcy Code from the Code’s inception. Section 238A clarified that position retrospectively; the Code did not revive time-barred claims. Article 137’s three-year period ran from default, subject to condonation under section 5 on sufficient cause where applicable. The appeals were remanded to the NCLAT for fresh decisions applying these principles.
Issues
- Whether limitation governed insolvency applications filed before insertion of section 238A.
- Whether commencement of the Code revived old defaults or began a fresh limitation period.
- What limitation rule and remedy applied to the pending appeals.
Provisions considered
- Section 238A, Insolvency and Bankruptcy Code, 2016The provision was clarificatory and retrospective, confirming application of limitation from inception rather than reviving stale creditor claims. (¶¶ 1, 6, 12, 15, 16, 24, 25, 26, 27)
- Sections 408 and 433, Companies Act, 2013The NCLT’s constituted jurisdiction and broadly expressed limitation provision applied when it dealt with Code applications as well as Companies Act proceedings. (¶¶ 7, 8, 9, 10, 11, 24, 25)
- Article 137 and section 5, Limitation Act, 1963The three-year period accrued upon default, with condonation available upon sufficient cause in an appropriate case; it did not start afresh merely when the Code commenced. (¶¶ 12, 21, 22, 23, 27)
- Sections 3(11), 3(12) and 60(6), Insolvency and Bankruptcy Code, 2016Debt and default were construed in context as requiring a liability payable in law. The moratorium-related exclusion of time also contradicted wholesale exclusion of the Limitation Act. (¶¶ 7, 21, 22, 23, 26)
Held
- The Code was not intended to provide a fresh opportunity to enforce dead or stale claims. Its limitation scheme applied from commencement, independently supported by the Companies Act provisions and confirmed by the clarificatory amendment. (¶¶ 6, 7, 8, 9, 10, 11, 12, 15, 16, 24, 25)
- The subsistence of a debt despite a barred recovery remedy did not mean that such a debt could trigger creditor-initiated insolvency. The meaning of due and payable depended on the statutory context, which did not revive time-barred claims. (¶¶ 13, 18, 19, 20, 21, 22, 23)
- The Code’s overriding effect did not exclude the Limitation Act generally. Specific Code periods prevailed where prescribed, while the limitation legislation otherwise applied as far as might be. (¶ 26)
- For section 7 and section 9 applications, Article 137 ran from default. A default more than three years before filing rendered the application barred, subject to section 5 condonation on the facts where applicable. (¶ 27)
- The Court did not decide the alternative laches argument or individual appeals on their merits. They were remanded to the NCLAT for fresh decisions in light of the judgment. (¶ 28)
Result
Appeals remanded to the NCLAT for fresh decisions applying the Limitation Act from the Code’s inception, Article 137 from default and section 5 condonation where applicable.