Case Note & Summary
The Supreme Court allowed the appeal filed by Sagar Sharma & Anr. against the order of the National Company Law Appellate Tribunal (NCLAT) in a matter under the Insolvency and Bankruptcy Code, 2016 (IBC). The core issue was the applicable limitation period for an application under Section 7 of the IBC filed by a financial creditor, Phoenix ARC Pvt. Ltd. The NCLAT had held that the right to apply accrued on 01.12.2016, the date the IBC came into force, and that Article 62 (erroneously stated as Article 61) of the Limitation Act, 1963 applied because a deed of mortgage existed between the parties. The Supreme Court, relying on its earlier judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates, clarified that the date of commencement of the IBC is irrelevant for limitation purposes. The Court held that Article 137 of the Limitation Act, which applies to applications generally, governs Section 7 applications, not Article 62, as the application is not to enforce a mortgage but to allege default. The Court set aside the NCLAT order and remanded the matter for fresh determination on the footing that Article 137 alone applies. The NCLT order dated 29.01.2019 was stayed until further orders from the NCLAT. The Court also recorded a statement by senior counsel Mr. Rakesh Dwivedi that he wished to raise a plea based on Section 22 of the Limitation Act before the NCLAT.
Headnote
A) Insolvency and Bankruptcy Code - Limitation - Section 7 Application - Article 137 of Limitation Act, 1963 - The Supreme Court held that the date of coming into force of the IBC (01.12.2016) cannot be the trigger point for limitation for applications under Section 7 of the Code. The Court clarified that Article 137 of the Limitation Act, 1963 applies to such applications, not Article 62. The judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates was reaffirmed. (Paras 1-4) B) Insolvency and Bankruptcy Code - Limitation - Applicability of Limitation Act - Section 7 Application - The Court held that an application under Section 7 of the IBC is not an application to enforce a mortgage liability; it is an application by a financial creditor alleging default. Therefore, Article 62 of the Limitation Act (erroneously cited as Article 61) does not apply. (Para 2) C) Constitution of India - Precedent - Article 141 - The Court emphasized that Article 141 of the Constitution mandates that judgments of the Supreme Court be followed in letter and spirit. The impugned judgment was set aside for not following the precedent in B.K. Educational Services. (Para 3)
Issue of Consideration
Whether the date of coming into force of the Insolvency and Bankruptcy Code, 2016 (01.12.2016) can be the trigger point for limitation for applications under Section 7 of the Code, and whether Article 62 or Article 137 of the Limitation Act, 1963 applies to such applications.
Final Decision
Appeal allowed. Impugned NCLAT judgment set aside. Matter remanded for fresh determination on the footing that Article 137 of Limitation Act alone applies. NCLT order dated 29.01.2019 stayed until further orders from NCLAT.
Law Points
- Limitation period for IBC applications under Section 7 is governed by Article 137 of Limitation Act
- 1963
- Date of commencement of IBC (01.12.2016) is irrelevant for limitation
- Article 62 of Limitation Act does not apply to Section 7 applications
- Precedent in B.K. Educational Services Private Limited vs. Parag Gupta and Associates followed.
