India: Applicability Of The Limitation Act, 1963 To The Insolvency And Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code, 2016 (Code) was enacted for a time bound insolvency resolution process with the primary aim of rehabilitating financially distressed entities while at the same time maximizing the value of assets of the financially distressed entities. Since the enactment of the Code on May 11, 2016, the regional National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) have churned out a number of judicial decisions in a timely manner that have clarified the interpretation, operation and applicability of several key provisions of the Code. It would hardly be far from the truth to state that the Code would not have proven to be the remarkable success that it already is without the timely contributions of the NCLTs and the NCLAT. While the jurisprudence under the Code is developing rapidly, there are notable gaps which are leading to confusion amongst stakeholders, which need to be resolved in a timely manner to keep the success story of the Code a continuing one.

Recently, by a judgment dated August 11, 2017 passed by the NCLAT in the case of Neelkanth Township and Construction Private Limited v. Urban Infrastructure Trustees Limited1 (Neelkanth Judgment), the question of whether the provisions of the Limitation Act, 1963 (Limitation Act) are applicable to the Code was answered by the NCLAT. Interestingly, the Neelkanth Judgment does not consider two earlier orders passed by the principle bench of the NCLT at New Delhi in the cases of Mis. Deem Roll Tech Limited v. Mis. R.L. Steel & Energy Limited2 and Sanjay Bagrodia v. Sathyam Green Power Pvt. Ltd.3 by which it was held that the provisions of the Limitation Act would apply to proceedings under the Code.

Legal position prior to the Neelkanth Judgment

In the case of Mis Deem Roll Tech Limited4 the principle bench of the NCLT dismissed the insolvency petition inter-alia on the grounds of the debt being barred by limitation. The petitioner in this case was an operational creditor under the Code, and was claiming debts on account of nonpayment against sale of goods to the respondent corporate debtor. The last payment received by the operational creditor was in the year 2014 and the outstanding amount became due and payable by the corporate debtor to the operational creditor in the year 2014 itself, without any further interest accruable thereon . In order to decide whether the claim of the operational creditor was time barred or not, the NCLT relied upon Section 255 of the Code and observed that even though various provisions of the Companies Act, 2013 have been amended in terms of the eleventh schedule to the Code, Section 4335 of the Companies Act, 2013 (by which the Limitation Act is applicable to proceedings before the NCLT and the NCLAT) was not amended. Further, the bench also observed that there was no specific bar on the application of the Limitation Act under the Code. In view of the same, the NCLT held that the Limitation Act is applicable to proceedings under the Code and dismissed the debt of the petitioner as being time barred.

Similarly, in the case of Sanjay Bagrodia6 which was again a petition filed under Section 9 of the Code by an operational creditor on account of non-payment of salary, the preliminary question for consideration was whether insolvency process can be triggered in a matter where the default had occurred beyond a period of three years on the basis that the claim was time barred by operation of the Limitation Act. The operational creditor in this case, relied upon the case of L.S. Synthetics Limited v. Fairgrowth Financial Services Limited & Anr.7 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, the NCLT distinguished the applicability of the principle in the Supreme Court's decision in L.S. Synthetics Limited as not being applicable to proceedings under the Code (which it held to be proceedings in the nature of recovery of dues and not for attachment of properties as was the case in L.S. Synthetics Limited) and 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. Furthermore, the NCLT, Principal Bench invoked Section 60 (6)8 of the Code and observed that the said provision contains an implicit indication for the applicability of the Limitation Act to the Code since it provides that the period of moratorium (under section 14 of the Code) must be excluded for the purposes of computing the period of limitation specified for any suit or application by or against a corporate debtor. The NCLT held that therefore, 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. The bench also relied upon the case of State of M.P. v. Bhailal Bhai & Ors.9 wherein, in relation to the issue of limitation vis -a-vis writ petitions (vyhich is not provided for by the Limitation Act), the Supreme Court held that the maximum period of limitation prescribed for filing of writ petitions would be similar to that prescribed for filing of a civil suit under the Limitation Act.

The Neelkanth Judgment

In this case, an appeal was filed by the corporate debtor, namely, Neelkanth Township and Construction Private Limited against the order of the NCLT, Mumbai, whereby an insolvency petition filed by the financial creditors (under section 7 of the Code), was allowed. The basis of the insolvency petition of the financial creditors were certain optionally convertible debentures issued by the corporate debtor, which carried nil or 1% p.a. interest rate thereon. The said debentures were "due for redemption in the years 2011, 2012 and 2013 respectively. Therefore, the corporate debtor challenged the order of the NCLT, Mumbai interalia on the ground that the debt of the financial creditors was time barred by operation of the Limitation Act. However, the NCLAT dismissed the appeal of the corporate debtor, and ruled that there is nothing on record to show that the Limitation Act, was applicable to the Code, and further observed that the Code "is not an Act for recovery of money claim; it relates to initiation of corporate insolvency resolution process. If there is a debt which includes interest and there is a default of debt and having a continuous course of action, the argument that the claim of money is barred by limitation cannot be accepted."

It appears from the reading of the above ruling that the NCLAT has made three primary observations on the point of the applicability of the Limitation Act, 1963 to the Code, being, (1) the process under the Code is not for recovery of a money claim; (2) there is no express provision under the Code which makes the Limitation Act applicable to the Code and the limitation period prescribed for recovery of loans cannot be made applicable for initiation of corporate insolvency process; and (3) debts which include interest thereon shall have a continuing cause of action and will not be barred under the law of limitation. Although the NCLAT appears to have relied upon the above three propositions in arriving at its decision that the Limitation Act is not applicable to the Code, the NCLAT's decision in the l\Jeelkanth Judgment suggests that the debt was not barred by limitation since it had a continuing course of action on account of accruing interest. With all due respect, this is a somewhat perplexing finding in that it suggests that if a debt is not of a continuing nature, it would be time-barred (it is another matter as to whether such debt would be time barred under the Limitation Act or some other law of law of limitation). The Neelkanth Judgment is also inconsiderate of the decisions of the principal bench of the NCLT in the cases of Mis Deem Roll Tech Limited and Sanjay Bagrodia, although in all fairness these decisions were not relied upon by the parties before the NCLAT.

The Neelkanth Judgment was appealed by the corporate debtor before the Supreme Court by way of a civil appeal10 , the Supreme Court dismissed the appeal while keeping the question on the applicability of Limitation Act to the Code open, which once again leaves the question unanswered.


It is a settled position that the law of limitation is a matter of public policy, which fixes a life span for legal remedies and seeks to bury prior causes of action which have not been agitated unexplainably and have become stale due to lapse of time. Before the commencement of the Code, for winding up petitions filed by creditors against debtor companies, under the Companies Act, 1956 also there was no period of limitation prescribed, various High Courts had settled that the said winding up petitions would be maintainable only if the 'debt' forming basis of such petitions was legal, subsisting and not time barred. Notably, the same reasoning was followed by the principle bench of NCLT, at New Delhi in the case of Prowess International v. Action Ispat11 wherein the NCLT, while determining the issue of whether a default was committed in making payment against an operational debt, considered whether such debt was time barred under the law of limitation since a stale claim would be unenforceable in law.

Therefore, the validity of a "debt" that is beyond the prescribed period for limitation for recovery of dues for the purpose of initiating insolvency proceedings under the Code cannot be ruled out entirely. The Neelkanth Judgment also has serious bearing" for resolution professionals who are entrusted with the task of verifying claims of creditors in the corporate insolvency resolution process. Since the Hon'ble Supreme Court in the appeal filed against the Neelkanth Judgment, has not decided the question of the limitation being applicable to insolvency proceedings and kept the same open, there is presently no conclusive position on the controversy as on date. Until such time that the question is answered by any ruling of NCLAT or the Supreme Court or a comprehensive amendment to the Code is carried out, the issue of limitation under the Code will be hotly debated.

To view the article in full click here.

First published in the IDFC law reporter

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Nishith Desai Associates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Nishith Desai Associates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions