2017 (12) TMI 454 - AT - Insolvency and Bankruptcy

Limitation Act, 1963 applicability for triggering Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 - Held that - In view of the settled principle, while we hold that the Limitation Act, 1963 is not applicable for initiation of Corporate Insolvency Resolution Process , we further hold that the Doctrine of Limitation and Prescription is necessary to be looked into for determining the question whether the application under Section 7 or Section 9 can be entertained after long delay, amounting to laches and thereby the person forfeited his claim. If there is a delay of more than three years from the date of cause of action and no laches on the part of the Applicant, the Applicant can explain the delay. Where there is a continuing cause of action, the question of rejecting any application on the ground of delay does not arise. Therefore, if it comes to the notice of the Adjudicating Authority that the application for initiation of Corporate Insolvency Resolution Process under section 7 or Section 9 has been filed after long delay, the Adjudicating Authority may give opportunity to the Applicant to explain the delay within a reasonable period to find out whether there are any laches on the part of the Applicant. The stale claim of dues without explaining delay, normally should not be entertained for triggering Corporate Insolvency Resolution Process under Section 7 and 9 of the I & B Code . However, the aforesaid principle for triggering an application under Section 10 of the I & B Code cannot be made applicable as the Corporate Applicant does not claim money but prays for initiation of Corporate Insolvency Resolution Process against itself, having defaulted to pay the dues of creditors. In so far it relates to filing of claim before the Insolvency Resolution Professional , in case of stale claim, long delay and in absence of any continuous cause of action, it is open to resolution applicant to decide whether such claim is to be accepted or not, and on submission of resolution plan, the Committee of Creditors may decide such question. If any adverse decision is taken in regard to any creditor disputing the claim on ground of delay and laches, it will be open to the aggrieved creditor to file objection before the Adjudicating Authority against resolution plan and for its necessary correction who may decide the same in accordance with the observations as made above. For the reasons aforesaid, we set aside the impugned order dated 11th April, 2017 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi in Company Petition No. (IB)-41(ND)/2017 and remit back the case to the Adjudicating Authority, New Delhi to find out whether the application is otherwise complete or not and, after notice and hearing the parties, will pass appropriate orders in accordance with law. In case, the application is complete, the Adjudicating Authority will admit the application preferred by the Appellants. In case it is incomplete, the Appellant be granted minimum seven days time to remove the defects in terms of proviso to sub-section (5) of Section 9 of the I & B Code .

Summary

Issues Involved:
1. Applicability of the Limitation Act, 1963 to the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (I&B Code).

Issue-wise Detailed Analysis:

1. Applicability of the Limitation Act, 1963 to CIRP under I&B Code:
Arguments by Appellant:
- The I&B Code is a 'Special Act' and a 'self-contained code' enacted by Parliament.
- In the absence of specific provisions in the I&B Code, the Limitation Act, 1963 should not apply to triggering CIRP.

Arguments by Respondent:
- The Limitation Act, 1963 is applicable to CIRP and should be read in conjunction with the Companies Act, 2013 and other relevant Acts.
- Provisions of Chapter XXVII of the Companies Act, 2013, including Section 433, are applicable as they do not conflict with the I&B Code.

Amicus Curiae's Submissions:
- The Doctrine of Limitation and Prescription is based on two considerations: a right not exercised for a long time becomes non-existent, and rights should not remain in a state of uncertainty.
- The Limitation Act, 1963, applies to winding up petitions and claims against companies in winding up.
- Section 433 of the Companies Act, 2013, and Section 3 of the Limitation Act, 1963, support the applicability of the Limitation Act to the I&B Code.

Tribunal's Observations:
- The I&B Code is a complete code in itself, as observed by the Hon'ble Supreme Court in "M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr."
- The I&B Code aims to bring insolvency law under a single unified umbrella to speed up the insolvency process.
- The legislative intent behind the I&B Code is to exclude the provisions of the Limitation Act, 1963, as the Code prescribes its own time limits for various processes.
- Section 433 of the Companies Act, 2013, is not applicable to the I&B Code as it has not been amended to be part of the Code.

Conclusion:
- The Limitation Act, 1963, is not applicable for initiating CIRP under Sections 7, 9, or 10 of the I&B Code.
- However, the Doctrine of Limitation and Prescription should be considered to determine if an application can be entertained after a long delay.
- The Adjudicating Authority should provide an opportunity to the applicant to explain any delay.

Case-specific Judgments:
1. M/s. Speculum Plast Pvt. Ltd. Vs. PTC Techno Pvt. Ltd.:
- The application was dismissed on the ground of limitation without considering the invoices' dates.
- The Tribunal set aside the order and remitted the case back to the Adjudicating Authority to decide on the application’s completeness and admit it if complete.

2. Parag Gupta Vs. M/s. B.K. Educational Services Pvt. Ltd.:
- The application was rejected based on limitation without considering the Income Tax Returns.
- The Tribunal set aside the order and remitted the case back to the Adjudicating Authority to consider the application without going into the question of limitation.

3. Ashlay Infrastructure Private Limited Vs. LDS Engineers Pvt. Ltd.:
- The application was rejected as time-barred.
- The Tribunal set aside the order and remitted the case back to the Adjudicating Authority to consider the application without considering the limitation.

Final Directions:
- All appeals were allowed with the direction to the Adjudicating Authorities to consider the applications afresh, focusing on their completeness and providing opportunities to rectify any defects. The question of limitation should not be a ground for rejection.

Costs:
- No order as to costs was made in the facts and circumstances of the cases.