Sanghvi Movers Ltd. Vs. M/s. Tech Sharp Engineers Pvt. Ltd. (NCLAT)
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
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.
Explore NCLAT’s decision on limitation in Sanghvi Movers Ltd. vs. Tech Sharp case. Key insights on approaching forums for timely relief and implications for IBC cases.
FULL TEXT OF ORDER OF NATIONAL COMPANY LAW APPELLATE TRIBUNAL
The Appellant- ‘Sanghvi Movers Ltd.’ filed application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) against ‘Tech Sharp Engineers Pvt. Ltd.’- (‘Corporate Debtor’) claiming that a sum of Rs.38,84,709/- has become due and payable on 28th February, 2013. The Adjudicating Authority (National Company Law Tribunal), Single Bench, Chennai, by impugned order dated 2nd January, 2019 rejected the same on the ground that the claim is time barred with following observations:
“Counsels for both the parties are present. As seen from the Order dated 18.12.2018, last the final opportunity was granted to the Operational Creditor for seeking instruction from his client. However, the counsel for the Operational Creditor again prayed for time for seeking instruction from his client. It appears that the Operational Creditor is derailing the proceeded of adjudicating, therefore, I proceeded to decide the matter on merits.
On perusal of the Application filed under Section 9 of the I&B Code, 2016, it appears that the claim amounting to Rs.38,84,709/- has become due and payable on 28.02.2013. There is a single confirmation of the claim by the Corporate Debtor on 07.11.2013 as reflects from the document placed at page 60 of the typed set filed with the Application. Thereafter, there is nothing on record to suggest that at any point of time the Corporate Debtor confirmed/ acknowledged the debt.
In the circumstances, the claim has become time barred and in view of the judgment of the Hon’ble Supreme Court passed in B.K.Educational Services Pvt. Ltd. –vs- Parag Gupta and Associates (2018 SCC Online SC 1921), the Petition stands dismissed.”
2. Learned counsel appearing on behalf of the Appellant submitted that the claim is not barred by limitation, the Adjudicating Authority without citing the relevant facts and reasons referred to the decision of the Hon’ble Supreme Court in “B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates- (2018) SCC OnLine SC 1921” and rejected the application.
3. It was submitted that the Adjudicating Authority neither noticed nor discussed the relevant fact, as reflected in Form-6 which the application under Section 9 of the ‘I&B Code’ filed by the Appellant.
4. Learned counsel appearing on behalf of the Respondent placed reliance on decision of the Hon’ble Supreme Court in “B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates- (2018) SCC OnLine SC 1921”, wherein the Hon’ble Supreme Court observed and held:
“48. 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.”
5. The question arises for consideration in this appeal is whether the claim is barred by limitation as observed by the Adjudicating Authority.
6. The aforesaid issue is mixed question of facts and law for which it is necessary to notice the relevant facts and the law.
7. For filing an application under Section 9, no period of limitation has been prescribed in any of the Division or part of Schedule of the ‘Limitation Act, 1963’, therefore, Article 137 of Part II of 3rd Division of Schedule to the ‘Limitation Act, 1963’ will be applicable, which reads as follows:
