2019 (10) TMI 224 - SC - Insolvency and Bankruptcy

Initiation of CIRP - applicability of time limitation - section 7 of I B Code - HELD THAT - An application under Section 7 of the Code does not purport to be an application to enforce any mortgage liability. It is an application made by a financial creditor stating that a default, as defined under the Code, has been made, which default amounts to ₹ 1,00,000/- or more which then triggers the application of the Code on settled principles that have been laid down by several judgments of this Court. Article 141 of the Constitution of India mandates that our judgments are followed in letter and spirit. The date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code. Equally, since applications are petitions which are filed under the Code, it is Article 137 of the Limitation Act which will apply to such applications. The matter to be determined afresh - appeal allowed by way of remand.

Issues:
1) Interpretation of limitation period under the Insolvency and Bankruptcy Code.
2) Applicability of Article 137 of the Limitation Act to applications under Section 7 of the Code.
3) Compliance with Article 141 of the Constitution regarding following judicial precedents.

Analysis:
1) The Supreme Court clarified that the Insolvency and Bankruptcy Code's enforcement date is irrelevant for limitation periods under the Code. The Court noted a discrepancy in the impugned judgment where the Code's enforcement date was incorrectly considered as the trigger point for limitation. The Court emphasized that the right to apply under Section 7 of the Code accrues independently of the Code's enforcement date. The judgment dated 11.10.2018 in B.K. Educational Services Private Limited vs. Parag Gupta and Associates was referenced to support this position.

2) The Court reiterated that applications under Section 7 of the Code are governed by Article 137 of the Limitation Act, not Article 62 as erroneously mentioned in the impugned judgment. The Court emphasized that such applications are not related to enforcing mortgage liabilities but rather pertain to financial creditors asserting defaults meeting specific criteria under the Code. The correct application of Article 137 was underscored based on established legal principles set by previous Court judgments.

3) Upholding the constitutional mandate of Article 141, the Court emphasized the importance of adhering to judicial precedents. It clarified that the Insolvency and Bankruptcy Code's enforcement date does not trigger limitation periods for Code applications. The Court reiterated that Article 137 of the Limitation Act governs such applications, underscoring the need for consistency in legal interpretation and application.

4) Consequently, the Court set aside the impugned judgment and directed a fresh determination of the matter. Both parties were granted the opportunity to present their arguments based on the application of Article 137 of the Limitation Act. The appeal was allowed on these terms, ensuring a fair and accurate application of the law in the case.

5) The Court ordered that the NCLT order dated 29.01.2019 would remain stayed pending further orders from the NCLAT. Additionally, the Court noted the intention of Mr. Rakesh Dwivedi, learned Senior Counsel, to raise a plea under Section 22 of the Limitation Act before the NCLAT, recording this statement for future proceedings.

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