Section 7,9,61 – Liability acknowledged in 2013 -- Pendency of Winding up proceedings under Companies Act 1956 in High Court – Limitation for proceedings u/s 7 and 9 of the IBC -- On 30th March 2018, the Respondent filed petition u/s 9 of the IBC for initiation of the Corporate Insolvency Resolution Process (CIRP) in the NCLT -- Adjudicating Authority (NCLT) rejected the application as barred by limitation – Respondent appealed to the NCLAT u/s 61 of the IBC -- By the impugned judgment and order, the NCLAT set aside the order passed by the Adjudicating Authority (NCLT) rejecting the application of the Respondent u/s 9 of the IBC and has remitted the case to the Adjudicating Authority for admission after notice to the parties. Held, For the purpose of limitation, the relevant date is the date on which the right to sue accrues which is the date when a default occurs -- Pendency of the proceedings in a parallel forum, invoked by the Respondent, is not sufficient cause for the delay in filing an application u/s 9 of the IBC -- By the time the application was filed, the claim had become barred by limitation -- Madras High Court neither suffered from any defect of jurisdiction to entertain the winding up application nor was unable to entertain the winding up application for any other cause of a like nature – Limitation for initiation of winding up proceedings in the Madras High Court stopped running on the date on which the Winding Up petition was filed -- Initiation of proceedings in Madras High Court would not save limitation for initiation of proceedings for initiation of CIRP in the NCLT u/s 7 of the IBC -- A claim may not be barred by limitation -- It is the remedy for realisation of the claim, which gets barred by limitation. Impugned order of the NCLAT is unsustainable in law, set aside -- Appeal allowed.

(SC) Decided on : 19.09.2022

Section 7, 9 – Limitation Act, 1963 (36 of 1963), Section 5 – Condonation of delay -- NCLT/NCLAT has the discretion to entertain an application/appeal after the prescribed period of limitation -- Condition precedent for exercise of such discretion is the existence of sufficient cause for not preferring the appeal and/or the application within the period prescribed by limitation -- 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.

(SC) Decided on : 19.09.2022

Section 7, 9 – Proceedings u/s 7 and 9 of the IBC – Relevant date for limitation -- 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 u/s 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 -- What is material is the date on which the right to sue accrues, and whether the cause of action continuous.

(SC) Decided on : 19.09.2022

Section 14 –Object of moratorium -- Insolvency resolution process -- Object of a moratorium provision such as Section 14 is to see that there is no depletion of a corporate debtor’s assets during the insolvency resolution process so that it can be kept running as a going concern during this time, thus maximising value for all stakeholders -- Idea is that it facilitates the continued operation of the business of the corporate debtor to allow it breathing space to organise its affairs so that a new management may ultimately take over and bring the corporate debtor out of financial sickness, thus benefitting all stakeholders, which would include workmen of the corporate debtor.

(SC) Decided on: 01.03.2021