Limitation Act applicable to IBC 2016 from its inception in relation to CRIP applications – SC

Limitation Act applicable to IBC 2016 from its inception for CRIP applications filed under Sections 7 and 9 – Supreme Court

ABCAUS Case Law Citation:
ABCAUS 2569 (2018) (10) SC

The present case laws deals with Section 238A of the Insolvency and Bankruptcy Code, 2016 (Code), which was inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 with effect from 06.06.2018.

The Section 238A pf the Code reads as follows:

“238A. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.”

The question raised was as to whether the Limitation Act, 1963 will apply to applications made under Section 7 and/or Section 9 of the Code for initiation of corporate insolvency resolution process by financial and /or operational creditor, on and from the commencement of the Code on 01.12.2016 till the amendment effective from 06.06.2018.

The Appellate Authority held that the Limitation Act, 1963 does not so apply. Even on the assumption that Article 137 of the Limitation Act, 1963 is attracted to such applications, in any case, such applications being filed only on or after commencement of the Code on 01.12.2016, since three years have not elapsed since this date, all these applications, in any event, could be said to be within time.

If default occurred over 3 years prior CRIP application would be barred 

The Hon’ble Supreme Court held that the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code and therefore Article 137 of the Limitation Act gets attracted.

The Hon’ble Supreme Court opined that “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.

The appeals were remanded to the NCLAT to decide the appeals afresh.

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