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2022 (9) TMI 861 - SC - Insolvency and BankruptcyInitiation of CIRP - Period of limitation - condonation of the delay in filing an application or appeal - NCLT dismissed the application - NCLAT allowed the application - HELD THAT - The condition precedent for condonation of the delay in filing an application or appeal, is the existence of sufficient cause. Whether the explanation furnished for the delay would constitute sufficient cause or not would be dependent upon facts of each case. There cannot be any straitjacket formula for accepting or rejecting the explanation furnished by the Appellant/applicant for the delay in taking steps. When an appeal is filed against an order rejecting an application on the ground of limitation, the onus is on the Appellant to make out sufficient cause for the delay in filing the application. The date of enforcement of the IBC and/or the date on which an application could have first been filed under the IBC are not relevant in computation of limitation. It would be absurd to hold that the CIRP could be initiated by filing an application under Section 7 or Section 9 of the IBC, within three years from the date on which an application under those provisions of the IBC could have first been made before the NCLT even though the right to sue may have accrued decades ago - the pendency of the proceedings in a parallel forum, invoked by the Respondent, is not sufficient cause for the delay in filing an application under Section 9 of the IBC. By the time the application was filed, the claim had become barred by limitation. It is now well settled that the provisions of the Limitation Act are applicable to proceedings under the IBC as far as may be - Similarly, under Section 18 of the Limitation Act, an acknowledgment of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires. A claim may not be barred by limitation. It is the remedy for realisation of the claim, which gets barred by limitation. The impugned order of the NCLAT is unsustainable in law - appeal allowed.
Issues Involved:
1. Applicability of Limitation Act to proceedings under the Insolvency and Bankruptcy Code (IBC). 2. Determination of the relevant date for computing limitation. 3. Effect of acknowledgment of debt on the limitation period. 4. Impact of parallel proceedings on the limitation period. Issue-wise Detailed Analysis: 1. Applicability of Limitation Act to proceedings under the Insolvency and Bankruptcy Code (IBC): The Supreme Court affirmed that the provisions of the Limitation Act apply to proceedings under the IBC. Specifically, Section 14(2) of the Limitation Act allows for the exclusion of time spent in prosecuting another civil proceeding in good faith in a court without jurisdiction. Additionally, Section 18 of the Limitation Act provides that an acknowledgment of liability in writing can restart the limitation period, provided the acknowledgment is made before the original limitation period expires. 2. Determination of the relevant date for computing limitation: The Court emphasized that the relevant date for computing the limitation period is the date on which the right to sue accrues, which is the date when a default occurs. In the case of B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates, it was held that the right to sue accrues when a default occurs, and if the default occurred more than three years before the date of filing the application, the application would be barred by limitation unless Section 5 of the Limitation Act is applied to condone the delay. 3. Effect of acknowledgment of debt on the limitation period: The Court noted that acknowledgment of debt must be made before the expiration of the original limitation period to restart the limitation period. In this case, the last acknowledgment of liability by the Appellant was on 7th November 2013, and the last payment was made in June 2013. Therefore, the acknowledgment did not extend the limitation period beyond the original three years from the date of default. 4. Impact of parallel proceedings on the limitation period: The Supreme Court held that the pendency of proceedings in a parallel forum does not constitute sufficient cause for the delay in filing an application under Section 9 of the IBC. The initiation of winding up proceedings in the Madras High Court did not save the limitation period for initiating CIRP proceedings in the NCLT under Section 7 of the IBC. The Court clarified that while a claim may not be barred by limitation, the remedy for realization of the claim can be barred by limitation. Conclusion: The Supreme Court set aside the impugned order of the NCLAT, which had held that the application under Section 9 of the IBC was within the limitation period. The Court concluded that the claim was barred by limitation as the right to sue accrued more than three years before the filing of the application under the IBC. The appeal was allowed, and the NCLAT's order was deemed unsustainable in law. However, the judgment did not prevent the Respondent from pursuing any other remedy available under the law or continuing any pending proceedings. Final Judgment: The appeal was allowed, and the impugned order of the NCLAT was set aside. The judgment clarified that the Respondent could still pursue any other legal remedies or pending proceedings in accordance with the law.
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