The much debated I&B Code, 2016 was enacted by the Government to correct the mounting burden of debts on business and corporate houses and to improve the NPA status of banks. It aimed towards a measure which provided the companies an option to revive and start afresh, simultaneously giving the creditors their due. The code has been used by several creditors to recover their dues or debts. In such a scenario one question arises that whether for a time-barred claim/debt an application under the I&B Code can be filed. The question has arisen in a no. of cases.
In Deem Roll-Tech Limited v. M/S R.L. Steel & Energy Ltd.,23 the question pertaining to initiation of CIRP for a timebarred claim came before the Principal Bench of NCLT. The debt had arisen out of sale and the last payment by the debtor was made on 25.02.2014. Holding that the provisions of Limitation Act, 1963 are applicable to applications under I&B Code, it was observed by the bench as follows:
A similar question arose in Sanjay Bagrodia v. Sathyam Green Power Pvt. Ltd.24 before the Principal Bench at New Delhi. To counter the plea that Limitation Act will be applicable to proceedings under I&B Code, the counsel for the operational creditor contended that tribunals are creatures of a statute and the Limitation Act, 1963 cannot be read into the Statutes creating the Tribunals unless it is expressly provided. He drew the attention of the Bench to Section 238 of I&B Code and argued that this is a non-obstante clause which provide that the IBC will have its effect notwithstanding anything inconsistent therewith contained in other laws for the time being in force.
The bench relied on its decision in Deem Role and held that limitation period is applicable and that the rule of prudence requires that public policy of law must be given effect which is widely followed. Law does not come to the rescue of those who sleep over their rights. It comes to the help of those who are vigilant. Explaining the non-obstante nature of section 238 of the Code, the bench observed as follows:
Hon'ble Justice MM Kumar in Sanjay Bagrodia also referred Section 60(6) of the Code and held that it provides for application of Limitation Act, 1963 to the I&B Code. The section provides as follows:
Interpreting the aforesaid provision Hon'ble J. MM Kumar observed as follows:
Thus, the petition of the operational creditor, being for a claim outside the net of limitation period was dismissed. Nevertheless, the position seems to have now been changed with the ruling given by Appellate Tribunal NCLAT in Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Limited.25 The NCLAT held that there is nothing on the record that Limitation Act, 1963 is applicable to I&B Code. There is no provision of the I&B Code which suggest that the Law of Limitation is applicable. The bench observed as follows:
Therefore, as of now the law stands on the footing that for bringing application under I&B Code, 2016, adherence to Limitation Act, 1963 is not required. Even when a creditor comes up with a time-barred claim/ debt, the process of Corporate Insolvency Resolution Process can be initiated at his instance. The ruling of the NCLAT is in consonance with the propounded object of the Code i.e. it is not a forum or tool for debt recovery but a platform for reinstating and revival of business which cannot be denied merely because the claim has become time-barred and there can be no default in respect of the same.
Footnotes
23 Company Application No. (I.B.) 24/PB/2017.
24 C.P. No. (IB)108(PB)/2017, MANU/NC/0465/2017.
25 Company Appeal (AT) (Insolvency) No. 44 of 2017, MANU/ NL/0063/2017.
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