India: NCLAT Settles The Issue Of The Applicability Of The Limitation Act To Insolvency Applications Under The Insolvency And Bankruptcy Code

Last Updated: 8 January 2018
Article by Chakrapani Misra, Ravitej Chilumuri and Akash Karmarkar

Most Read Contributor in India, December 2017

The National Company Law Appellate Tribunal, New Delhi (NCLAT) on 7 November 2017 passed a judgment in the case of M/s Speculum Plast Private Limited v. PTC Techno Private Limited, putting to rest the question of the applicability of the Limitation Act, 1963 (Limitation Act) to the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC). The present judgment comes in the wake of the decision of the NCLAT in Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Ltd (Neelkanth case) and the subsequent observations of the Supreme Court in an appeal against the said decision. The brevity of the observations in the Neelkanth case and the seemingly contradictory statements of the NCLAT and Supreme Court led to confusion among stakeholders. The present case provides some clarity on the issue, while raising certain new questions and problems.

In this case, the NCLAT has held that the Limitation Act shall not apply to the IBC, however, the National Company Law Tribunal (NCLT) may take into account the doctrine of laches while considering an application for initiating the insolvency process.

Arguments on behalf of the Appellants

  • IBC is a special Act and constitutes a 'self-contained code', independent of other laws, as borne out by the report of the Bankruptcy Law Reforms Committee. As such, in the absence of any specific provision incorporating the Limitation Act, it shall not be applicable.

Arguments on behalf of the Respondents

  • Sub-section 1 of Section 5 of the IBC states that the Adjudicating Authority under the IBC shall be the NCLT, which in turn has been constituted under Section 408 of the Companies Act, 2013 (Companies Act). Therefore, it was submitted that the provision of the Companies Act including Section 433 were applicable to the IBC, as the same were not in conflict with the IBC.
  • In the absence of any contrary provisions, IBC should be read with the provisions of the Companies Act including Section 433, which expressly makes the Limitation Act applicable to proceedings before the NCLT.
  • Similarly, other provisions of the Companies Act such as sections 424,425,434 and 430 also imply that the Limitation Act is applicable to the IBC.

Submissions of the Amicus Curiae

  • The purpose of the doctrine of limitation and prescription is to prevent a state of constant uncertainty, doubt and suspense. Having a time limit for litigation is based on public policy and having a life span for legal remedies promotes general welfare. (N.Balakrishnan V. M.A. Krishnamurthy, (1998) 7 SCC 12)
  • Since the bar of limitation applies to debts presented before the Hon'ble High Courts for the purpose of winding up under the Companies Act, 1956, and to subsequent claims presented before the Official Liquidator, limitation shall also apply to claims before the NCLT and the insolvency professional.
  • Section 60(6) of the IBC speaks about the interaction of IBC and the Limitation Act. Therefore, the Limitation Act must be applicable to IBC.
  • The use of the words 'National Company Law Tribunal' in Section 60(5) of IBC instead of 'Adjudicating Authority' indicates the intent of the Legislature to make Section 433 of the Companies Act and by extension, the Limitation Act applicable to IBC.
  • Even if the IBC is considered a self-contained code, Limitation Act can still apply unless it is expressly barred. (Girnar Traders v. State of Maharashtra & Ors. (2011)3SCC 1)

Reasoning of the Court

  • IBC is a complete code in itself. This is evident from the legislative intent, statutory framework, and 'principles driving the design' of IBC. (M/s. Innoventive Industries Ltd v. ICICI Bank & Anr, 2017 SCC OnLine Sc 10251.)
  • Since IBC is a special law and a complete code in itself, even in the absence of an express exclusion of the Limitation Act, courts may examine its provisions to assess whether the Limitation Act is necessarily excluded. (Hukumdev Narain Yadav v. Lalit Narain Mishra (1974) 2 SCC 133)
  • The provisions, design and framework of the IBC show the legislative intent to necessarily exclude the application of the Limitation Act, as under:
  • Section 243 repeals the Presidency-Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, without saving or incorporating provisions concerning the applicability of limitation contained in the aforesaid Acts.
  • Sections 7, 9, 12, 61, 62 and other such provisions of the IBC provide separate time periods for different stages in the insolvency process, which are different from the time prescribed under the Limitation Act.
  • Section 433 of the Companies Act is not applicable to the IBC since it has not been incorporated into the IBC under Section 255 read with the Eleventh Schedule.
  • The Limitation Act cannot be made applicable to a suo moto application for insolvency by a corporate applicant under Section 10, since in such applications there is no specific claim or debt.
  • Article 137 (Any other Application) of Part II of the Limitation Act prescribes a limitation period of 3 (three) years from the date that the right to apply accrues. Since the right to apply under the IBC accrued only on 1 December 2016, when the IBC came into force, all applications are within the period of limitation.
  • However, it is in the interest of public policy to prescribe a time limit for making legal claims. As such, although the Limitation Act is not applicable to the IBC, the "Doctrine of Limitation and Prescription" may still be applied, and laches on part of the applicant may be taken into consideration for rejecting a belated application.

Decision of the Court

  • The Limitation Act does not apply to insolvency applications under the IBC.
  • If the NCLT notices that the application under section 7 or 9 has been filed after a long delay, it may give opportunity to the Applicant to explain the delay within a reasonable period to ascertain whether there are any laches on the part of the Applicant. Stale claims of dues without explaining delays normally should not be entertained.
  • The aforesaid principle of laches cannot be applied to applications under Section 10 by a corporate applicant for initiating insolvency against itself.
  • Where there is a continuing cause of action, the question of rejecting an application on the ground of delay does not arise.
  • It is open for the Committee of Creditors to decide whether a claim made after long delay is acceptable. If a creditor is aggrieved by such a decision he may apply to the NCLT for relief.


This judgement seems to adopt an antithetical approach. On the one hand, it expands the scope of the IBC to permit time barred debts, while on the other hand imposes the restriction of laches on such claims. This, in effect, replaces the objective time limits under the Limitation Act, with the more subjective bar of the doctrine of laches. As such, whether or not a claim is belated can only be determined by the NCLT, on a case by case basis, after an application is made to it.

It appears that the judgment may lead to a substantial increase in insolvency applications to the NCLT, even in cases where there are inordinate and unexplainable delays. Further, there may also be a rise in appeals before the NCLAT from decisions of the NCLT dismissing applications on the ground of limitation. This judgment may also result in situations where debts that have accrued several years ago may be used to initiate the insolvency resolution process.

Therefore, whether a debt is belated is now a matter of argument and may be decided in favour of either party depending on the facts of the case. This gives greater scope to both the debtors and creditors to agitate their stands, and makes the arguments advanced by the counsel for the parties more relevant in deciding the issue of delay.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

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.

Events from this Firm
21 Dec 2017, Webinar, Mumbai, India
Contact Event Organizer: Khaitan & Co
The Insurance Group and the Private Equity Group at Khaitan & Co are pleased to invite you to an interactive webinar to discuss the implications of the Guidelines on private equity investment in the Indian insurance sector.
10 Feb 2018, Video/ Audio, Mumbai, India
Contact Event Organizer: Khaitan & Co Funds Team
This is to remind you that we will be hosting an audio-conference tomorrow, 10 January 2018, titled “SEBI’s Year End Bonanza to Investors and Fund Managers”, which is dedicated to fund managers and investors.
In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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