Case Note & Summary
The case involves an appeal against the judgment of the National Company Law Appellate Tribunal (NCLAT) which had dismissed the appellant's appeal and upheld the admission of a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC) filed by the respondent, Asset Reconstruction Company (India) Ltd. The respondent No.2 was declared a Non-Performing Asset (NPA) on 21.07.2011. The State Bank of India filed two Original Applications (O.As) before the Debt Recovery Tribunal in 2012 to recover a debt of Rs. 50 crores. On 28.03.2014, the debt was assigned to the respondent No.1. The DRT dismissed the O.As on 10.06.2016 as not maintainable. The Gujarat High Court remanded the matter, and a Special Leave Petition against that order was dismissed on 25.03.2017. On 03.10.2017, the respondent No.1 filed a Section 7 application under the IBC to recover the debt, which had increased to about Rs. 124 crores. In the application, the date of default was mentioned as 21.07.2011 (the NPA date). The National Company Law Tribunal (NCLT) applied Article 62 of the Limitation Act, 1963 (which provides a 12-year limitation period for suits to enforce payment of money secured by mortgage) and held the application within limitation, admitting it. The NCLAT dismissed the appeal, holding that limitation began only from 01.12.2016, the date the IBC came into force. The Supreme Court allowed the appeal, holding that Article 137 (residuary article) applies to applications under Section 7, not Article 62 which applies only to suits. Time begins to run from the date of default (21.07.2011), and the application filed in 2017 was clearly time-barred. The Court also noted that the IBC cannot revive time-barred debts. The judgments of NCLT and NCLAT were set aside.
Headnote
A) Limitation Act - Article 137 - Application under Section 7 of IBC - Residuary Article - The Supreme Court held that Article 137 of the Limitation Act, 1963 applies to applications under Section 7 of the Insolvency and Bankruptcy Code, 2016, and not Article 62 which applies only to suits. Time begins to run from the date of default (NPA date). (Paras 6-7) B) Insolvency and Bankruptcy Code - Section 7 - Limitation - Time-barred debts - The Court held that the IBC cannot give a new lease of life to debts which are already time-barred. The application filed in 2017 for a debt declared NPA in 2011 was clearly time-barred under Article 137. (Paras 6-8) C) Limitation Act - Equity - No equity about limitation - The Court reiterated that there is no equity about limitation and time periods provided by the Limitation Act can be arbitrary in nature. (Para 7)
Issue of Consideration
Whether a Section 7 application under the Insolvency and Bankruptcy Code, 2016 is governed by Article 62 or Article 137 of the Limitation Act, 1963, and whether such application filed in 2017 for a debt declared NPA in 2011 is within limitation.
Final Decision
Appeal allowed; judgments of NCLT and NCLAT set aside; Section 7 application held time-barred under Article 137 of Limitation Act
Law Points
- Limitation Act
- 1963
- Article 137 applies to applications under Section 7 of Insolvency and Bankruptcy Code
- 2016
- Article 62 applies only to suits
- Limitation period begins from date of default (NPA date)
- No equity in limitation
- Time-barred debts cannot get new lease of life under IBC
