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2018 (10) TMI 777 - SC - Insolvency and BankruptcyApplicability of Limitation Act, 1963 to applications made u/s 7 and/or Section 9 of the IBC Code on and from its commencement on 01.12.2016 till 06.06.2018 - scope of Section 238A of the Insolvency and Bankruptcy Code, 2016 as inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 with effect from 06.06.2018 - applications seeking to resurrect time-barred claims - dispute or default - Held that - Given the fact that the procedure that would apply to the NCLT would be the procedure contained inter alia in the Limitation Act, it is clear that the NCLT would have to decide applications made to it under the Code in the same manner as it exercises its other jurisdiction under the Companies Act. This being the position in law, it is clear that when various provisions of the Companies Act were amended by the Eleventh Schedule to the Code, it was unnecessary to apply and adapt Section 433 of the Companies Act to the Code, as was done to various other Sections of the Companies Act. The amendment of Section 238A would not serve its object unless it is construed as being retrospective, as otherwise, applications seeking to resurrect time-barred claims would have to be allowed, not being governed by the law of limitation. As refer to a recent decision of this Court in SBI v. V. Ramakrishnan, (2018 (8) TMI 837 - SUPREME COURT OF INDIA) where this Court, after referring to the selfsame Insolvency Law Committee Report, held that the amendment made to Section 14 of the Code, in which the moratorium prescribed by Section 14 was held not to apply to guarantors, was held to be clarificatory, and therefore, retrospective in nature, the object being that an overbroad interpretation of Section 14 ought to be set at rest by clarifying that this was never the intention of Section 14 from the very inception. It will be seen from a reading of Section 8(2)(a) that the corporate debtor shall, within a period of 10 days of the receipt of the demand notice, bring to the notice of the operational creditor the existence of a dispute . As seen that dispute as defined in Section 5(6) includes a suit or arbitration proceeding relating to certain matters. Again, under Section 8(2)(a), the corporate debtor may, in the alternative, disclose the pendency of a suit or arbitration proceedings filed before the receipt of the demand notice. It is clear therefore, that at least in the case of an operational creditor, default must be non-payment of amounts that have become due and payable in law. The dispute or pendency of a suit or arbitration proceedings would necessarily bring in the Limitation Act, for if a suit or arbitration proceeding is time-barred, it would be liable to be dismissed. This again is an important pointer to the fact that when the expression due and due and payable occur in Sections 3(11) and 3(12) of the Code, they refer to a default which is non-payment of a debt that is due in law, i.e., that such debt is not barred by the law of limitation. It is well settled that where the same word occurs in a similar context, the draftsman of the statute intends that the word bears the same meaning throughout the statute (see Bhogilal Chunilal Pandya v. State of Bombay -1958 (11) TMI 31 - SUPREME COURT). It is thus clear that the expression default bears the same meaning in Sections 7 and 8 of the Code, making it clear that the corporate insolvency resolution process against a corporate debtor can only be initiated either by a financial or operational creditor in relation to debts which have not become time-barred We have held that at least insofar as the Code is concerned, the intention of the legislature, from the very beginning, was to apply the Limitation Act to the NCLT and the NCLAT while deciding applications filed under Sections 7 and 9 of the Code and appeals therefrom. Section 433 of the Companies Act, which applies to the Tribunal and the Appellate Tribunal, expressly applies the Limitation Act to the Appellate Tribunal, the NCLAT, as well. Also, the argument that the NCLAT is an appellate tribunal which is common to three statutes, under one of which, viz., the Competition Act, no period of limitation has been prescribed, would not lead to any anomalous situation. Merely because appeals under different statutes are sent to one appellate tribunal would make no difference to the position in law. Undoubtedly, if three separate appellate tribunals had been constituted under the three enactments in question, this argument would have no legs to stand on. Merely because, from the point of view of convenience, appeals are filed before one appellate forum would not mean that any anomalous situation would arise as each appeal would be decided keeping in mind the provisions of the particular Act in question. Therefore, this argument also must be rejected. Both, Section 433 of the Companies Act as well as Section 238A of the Code, apply the provisions of the Limitation Act as far as may be . Obviously, therefore, where periods of limitation have been laid down in the Code, these periods will apply notwithstanding anything to the contrary contained in the Limitation Act. From this, it does not follow that the baby must be thrown out with the bathwater. This argument, therefore, must also be rejected. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. 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.
Issues Involved:
1. Applicability of the Limitation Act, 1963 to applications under Sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016 from its commencement on 01.12.2016 till 06.06.2018. 2. Whether Section 238A of the Insolvency and Bankruptcy Code, 2016 is retrospective in nature. 3. The interpretation of "debt" and "default" under the Insolvency and Bankruptcy Code, 2016 in the context of time-barred debts. 4. The procedural application of the Limitation Act to the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). Detailed Analysis: 1. Applicability of the Limitation Act, 1963: The appellants argued that the Limitation Act, 1963 should apply to applications under Sections 7 and 9 of the Insolvency and Bankruptcy Code (IBC) from its commencement on 01.12.2016. The Appellate Tribunal had previously held that the Limitation Act did not apply to these applications. However, the Supreme Court clarified that the Limitation Act is applicable to such proceedings from the inception of the Code. Section 433 of the Companies Act, 2013, which applies to the NCLT and NCLAT, mandates that the Limitation Act applies to proceedings before these tribunals. 2. Retrospective Nature of Section 238A: The appellants contended that Section 238A, introduced by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, should be considered retrospective as it clarifies the existing law. The Supreme Court agreed, citing that procedural laws are typically retrospective unless they revive a dead remedy. The Court emphasized that the purpose of Section 238A was to prevent the resurrection of time-barred debts, aligning with the original intent of the IBC. 3. Interpretation of "Debt" and "Default": The definitions of "debt" and "default" under Sections 3(11) and 3(12) of the IBC were scrutinized. The Court held that these terms refer to debts that are "due and payable" in law, meaning they are not time-barred. The Court reiterated that the IBC was not intended to revive stale claims, and a debt that is time-barred cannot trigger the insolvency process. 4. Procedural Application of the Limitation Act: The Court examined the procedural application of the Limitation Act to the NCLT and NCLAT. It was noted that Section 433 of the Companies Act, 2013, which applies the Limitation Act to proceedings before the NCLT and NCLAT, was sufficient to cover applications under the IBC. The Court rejected the argument that the IBC, being a complete code, should exclude the Limitation Act, citing Section 60(6) of the IBC, which specifically mentions the Limitation Act. Conclusion: The Supreme Court concluded that the Limitation Act, 1963 applies to applications under Sections 7 and 9 of the IBC from the inception of the Code. Section 238A of the IBC is retrospective, and the definitions of "debt" and "default" in the IBC do not include time-barred debts. The appeals were remanded to the NCLAT for fresh consideration in light of this judgment.
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