silent on the applicability of the Limitation Act on the proceedings brought under the Code it poses some interesting issues that have been discussed in a number of cases before the National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”). This article aims to highlight some of those important judicial pronouncements.
A. Recent Cases
The Tribunals have dealt with the applicability of the Limitation Act to the proceedings initiated under the Code in a number of cases including the following:
In the case of Prowess International v. Action Ispat2 before NCLT (Delhi), it was held that for an insolvency proceeding under the Code there needs to be a default of debt and the trigger for a default is that the debt must be due and payable. It further held that a debt is due and payable when it is a valid debt in law and should be recoverable. This means that a time barred debt is not a valid debt, as is not recoverable in law. Based on the above reasoning, it was held that the provisions of the Limitation Act would be applicable to the Code.
Another interesting line of reasoning using Section 433 of the Companies Act, 2013 (“2013 Act”) was the case of Deem Roll v. R.L. Steel3, wherein NCLT (Delhi) held that as Section 433 of the 2013 Act makes the Limitation Act applicable to the NCLT and NCLAT, the provisions of the parent statute of the tribunals will also be applicable to the adjudicating authorities under the Code. Applying this principle to the facts of the case, the tribunal held that the claim made by the Operational Creditor was barred by limitation as made after the expiry of period of 3 (three) years.
In the case of Sanjay Bagrodia v. Sathyam Green Power Pvt. Ltd.4, the Operational Creditor placed reliance on the case of L.S. Synthetics Limited v. Fairgrowth Financial Services Limited & Anr.5 and contended that the provisions of the Limitation Act cannot be read into statutes such as the Code, unless the statute itself expressly provides for it. However, NCLT while distinguishing the applicability of the principle in the Supreme Court's decision in L.S. Synthetics Limited (Supra)6 observed that the nature of the proceedings under the Code is recovery of dues and not attachment of properties. It also observed that the delay had been caused by the Operational Creditor itself in asserting its right and availing the remedies available within the prescribed period of time. Further, it observed that Section 60 (6)7 of the Code contains an implicit indication for the applicability of the Limitation Act to the Code as it provides that the period of moratorium must be excluded for the purposes of computing the period of limitation specified for any suit or application by or against a corporate debtor. It was held that it flows from Section 60 (6) of the Code that the claim made before the NCLT must also be within the period of limitation as prescribed by the Limitation Act.
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2Company Application No. (I.B.) 18(PB)/2017
3Company Application No. (I.B.) 24/PB/2017
4C.P. No. (lB)108(PB)/ 2017
5(2004) 11 SCC 456
6Supra at 5
7Section 60 (6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.