Limitation in insolvency applications: bona fide SARFAESI proceedings may be excluded, and delay can be condoned on sufficient cause.

Section 238A of the Insolvency and Bankruptcy Code makes the Limitation Act applicable to Section 7 insolvency applications, so Article 137 ordinarily prescribes a three-year period from default. Delay may be condoned under Section 5 on sufficient cause, and a formal written application is not indispensable if the record otherwise shows the reason for delay. Section 14 is construed liberally: time spent prosecuting bona fide SARFAESI proceedings may be excluded where those proceedings were pursued diligently in a forum unable to entertain them for want of jurisdiction or a similar cause, even if they had not formally ended when the Section 7 application was filed.

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Issues: Whether the delay in filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 could be condoned without a formal application under Section 5 of the Limitation Act, 1963, and whether time spent in bona fide proceedings under the SARFAESI Act could be excluded under Section 14 of the Limitation Act, 1963.

Analysis: Section 238A of the Insolvency and Bankruptcy Code, 2016 makes the Limitation Act, 1963 applicable to proceedings before the Adjudicating Authority and the Appellate Tribunal as far as may be. An application under Section 7 of the Code is governed by Article 137 of the Limitation Act and is ordinarily subject to a three-year period from the date of default. The power under Section 5 is discretionary and may be exercised on sufficient cause being shown; a formal written application is not an absolute precondition if the record otherwise discloses the cause for delay. Section 14 is to be construed liberally and applies where a litigant has prosecuted another civil proceeding with due diligence and in good faith in a forum unable to entertain it for want of jurisdiction or a like cause. Proceedings under the SARFAESI Act were treated as civil proceedings for this purpose, and the time spent in such bona fide prosecution could be excluded even though those proceedings had not formally terminated when the Section 7 application was filed.

Conclusion: The delay in filing the Section 7 application was capable of being excluded and the application was not barred by limitation.

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