Exclusion of SARFAESI proceedings kept the Section 7 insolvency application within limitation

Time spent by a financial creditor in pursuing SARFAESI remedies was treated as excludable under Section 14(2) of the Limitation Act because those proceedings were prosecuted with due diligence and in good faith for the same relief. Applying that exclusion, the Section 7 insolvency application was computed within the limitation period under Article 137 of the Limitation Act, so the time-bar objection failed.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, or whether the time spent in pursuing remedies under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 could be excluded under Section 14(2) of the Limitation Act, 1963.

Analysis: The account had been declared non-performing asset in 2013, but the financial creditor had promptly pursued the statutory remedy under the SARFAESI regime by issuing demand and possession notices and continued those proceedings until the High Court restrained further action. The period spent in those proceedings was treated as having been prosecuted with due diligence and in good faith for the same relief. On that basis, the time consumed in the SARFAESI proceedings was excluded while computing limitation for the insolvency application, bringing the Section 7 petition within the period prescribed by Article 137 of the Limitation Act, 1963.

Conclusion: The application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was held to be within limitation, and the objection of time-bar failed.

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