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IF THE APPELLANT HAD APPROACHED APPROPRIATE FORUM FOR APPROPRIATE REMEDY IN TIME WITH CONTINUOUS CAUSE OF ACTION, THEN THE CLAIM IS NOT BARRED BY LIMITATION

Insolvency and Bankruptcy Code, 2016

NATIONAL COMPANY LAW APPELLATE TRIBUNAL

SANGHVI MOVERS Ltd. v. TECH SHARP ENGINEERS PVT. LTD.

[Company Appeal (AT)(Insolvency) No. 118 of 2019] DATE: 23.07.2019

FACTS 

In this case a winding up petition was filed before the Madras High Court as the Appellant had outstanding dues against the services provided by the Respondent.

When the IBC got enforced, an application u/s. 9 was filed for default of the sum of Rs. 38,84,709.

The said application came to be rejected by the NCLT on the ground that it is barred by limitation and hence the impugned rejection has been appealed herein before the NCLAT. 

ISSUE BEFORE THE NCLAT

Whether the claim of the Appellant is barred by limitation? 

CONCLUDING VIEW

The NCLAT, while relying upon Section 137 of the Limitation Act, 1963 concluded that the Appellant had approached an appropriate forum for relief in time and hence the application was not barred by limitation. It concluded as below:

“18. From the facts as narrated above, it will be evident that the winding up petition was filed before the Hon’ble High Court of Judicature at Madras which had not reached finality and in the meantime, as the ‘I&B Code’ came into force, the demand notice under Section 8(1) was issued on 14th November, 2017 for payment of outstanding amount along with the interest. Thus, as we find that there is continuous cause of action the claim is within the period of limitation. The Appellant had moved before an appropriate forum for appropriate relief in time, in accordance with law and so we hold that the claim of the Appellant is not barred by limitation as the petition under Section 433 & 434 of the Companies Act, 1956 become infructuous, by operation of law.”

AMLEGALS REMARKS

In the present case, the NCLAT took into consideration the complete facts as well as the laws which were previously not considered in several cases.

The Hon’ble Supreme Court in BK Educational Services Pvt. Ltd. v. Parag Gupta and Associates (2018 SCC OnLine SC 1921) had very categorically held that the Limitation Act shall be applicable prospectively, since the very inception of the IBC.

Further, Section 137 of the Limitation Act provides that the application for initiating CIRP has to be filed within a period of 3 years from the date on which the right to apply accrued.

The right to apply accrued under the IBC from 01.12.2016 as laid down in Pushpa Shah & Anr v. IL&FS Financial Services Ltd. (Company Appeal (AT)(Insolvency) No. 521 of 2018) since it’s the date on which IBC came in force.

The present judgment of NCLAT has made it crystal clear that if the creditor had already approached the appropriate forum for appropriate relief in time, before the commencement of IBC then the application is very well within the limitation period.

Therefore, the NCLAT has kept the essence of the above mentioned two judgments and the Limitation Act intact. 

This content is purely an academic analysis under “Legal intelligence series”.

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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