2022 (5) TMI 1123 - SC - Insolvency and Bankruptcy

Court clarifies exclusion of moratorium period under IBC for limitation period calculation

New Delhi Municipal Council Versus Minosha India Limited

The court held that Section 60(6) of the Insolvency and Bankruptcy Code (IBC) excludes the moratorium period for computing the limitation period in suits ... Impact of Section 60(6) of the IBC - Exclusion of moratorium period for initiation of proceedings of suit - whether the provision of Section 60(6) gives rise to a new lease of life to a proceeding at the instance of the corporate debtor on the basis of a moratorium which is put in place by virtue of the order passed under section 14 of the IBC? - whether corporate debtor can take advantage of the same to bring the application in this case filed under Section 11(6) of the Arbitration and Conciliation Act, 1996? HELD THAT:- The principles of interpretation of statutes have been invoked in the varying contexts and are to be applied on the basis of the facts of the case, the nature of the law and a host of principles. Undoubtedly, the golden rule of interpretation is the interpretation which thrives on the ordinary meaning of the words as they are used. This principle of literal interpretation of statutes has over a period of time indeed yielded to an interpretation which is purposive or which seeks to accommodate the object of the law giver. Suffice it to say that if the words of a statute are not ambiguous, the scope of interpretation dwindles. It is not for the Court to rewrite a statute. There may be occasions where the Court may even go to the extent of leaving out a word or not giving effect to certain part in order to give full meaning to the law by way of gleaning and giving effect to the intention of the legislature. Under the IBC, by virtue of the order admitting the application, be it under Sections 7, 9 or 10, and imposing moratorium, proceedings as are contemplated in Section 14 would be tabooed. This undoubtedly does not include an application under Section 11(6) of the 1996 Act by the corporate debtor or for that matter, any other proceeding by the corporate debtor against another party. At least there is no express exclusion of the jurisdiction of the Court or authorities to entertain any such proceeding at the hands of the corporate debtor - The powers of the Board of Directors or the partners of the corporate debtor shall stand suspended and it would be exercised by the interim resolution professional. When the authority changes hands from the interim resolution professional to the resolution professional, the previous management continues to be excluded. As far as understanding the meaning of Section 60(6) is concerned, there cannot be a slightest doubt that the period of Moratorium is excluded even in the case of a suit or application brought by a corporate debtor, viz., in regard to the period of the moratorium. It is true that on the one hand what is tabooed in Section 14 when a Moratorium is put into place is inter alia the institution of suits or continuance of pending suits or proceedings against the corporate debtor including proceeding in execution of inter alia, the decree or order of an arbitration panel - Section 60(6) on the other hand excludes the period during which the Moratorium under Section 14 is in place in computing the period of limitation. An ambiguity is introduced, namely the need to exclude the period of limitation for a suit or an application, at the instance of the corporate debtor when a Moratorium ushered in by an order under Section 14 does not pose any bar against a suit or an application at the instance of the corporate debtor. Notwithstanding the period of limitation under the Limitation Act, the Law Giver has thought it fit to provide that in respect of a corporate debtor if there has been an order of moratorium made in Part II, the period during which such moratorium was in place shall be excluded. ‘For which an order of moratorium’ cannot bear the interpretation which is sought to be placed by the appellant. The interpretation placed by the appellant is clearly against the plain meaning of the words which have been used - no doubt, from the words ‘by a corporate debtor’. Interpreting the statute in the manner which the appellant seeks would result in our denying the benefit of extending the period of limitation to the corporate debtor, a result, which we think, would not be warranted by the clear words used in the statute. Section 60(6) of the IBC does contemplate exclusion of the entire period during which the moratorium was in force in respect of corporate debtor in regard to a proceeding as contemplated therein at the hands of the corporate debtor. Appeal dismissed. Issues Involved:1. Impact of Section 60(6) of the Insolvency and Bankruptcy Code (IBC).2. Whether the moratorium under Section 14 of the IBC allows the corporate debtor to file an application under Section 11(6) of the Arbitration and Conciliation Act, 1996.3. Applicability of the Limitation Act, 1963 in the context of the IBC.4. Interpretation of statutory provisions and the legislative intent behind Section 60(6) of the IBC.Detailed Analysis:1. Impact of Section 60(6) of the Insolvency and Bankruptcy Code (IBC):The primary issue addressed is whether Section 60(6) of the IBC provides a new lease of life to proceedings initiated by the corporate debtor due to a moratorium under Section 14 of the IBC. The court held that Section 60(6) does indeed contemplate the exclusion of the entire period during which the moratorium was in force in respect of the corporate debtor for computing the period of limitation. The provision aims to ensure that the corporate debtor is not disadvantaged by the moratorium period when initiating proceedings.2. Whether the Moratorium Under Section 14 of the IBC Allows the Corporate Debtor to File an Application Under Section 11(6) of the Arbitration and Conciliation Act, 1996:The court noted that Section 14 of the IBC, which imposes a moratorium, does not bar the corporate debtor from initiating proceedings. It only prohibits suits or proceedings against the corporate debtor. The court clarified that the moratorium intends to provide a 'calm period' for the corporate debtor to undergo the Corporate Insolvency Resolution Process (CIRP), but it does not prevent the corporate debtor from filing applications or suits.3. Applicability of the Limitation Act, 1963 in the Context of the IBC:The appellant argued that the application under Section 11(6) of the 1996 Act was barred by limitation and that the period of moratorium should not be excluded. The court referred to Section 3 of the Limitation Act, 1963, which mandates the dismissal of suits or applications filed beyond the prescribed period. However, the court emphasized that Section 60(6) of the IBC overrides the Limitation Act by explicitly excluding the moratorium period from the limitation period for suits or applications by or against the corporate debtor.4. Interpretation of Statutory Provisions and the Legislative Intent Behind Section 60(6) of the IBC:The court applied principles of statutory interpretation, emphasizing the need to understand the text and context of the statute. It underscored that the literal meaning of Section 60(6) should be adhered to unless it leads to absurdity or injustice. The court highlighted the legislative intent to provide relief to the corporate debtor by excluding the moratorium period from the limitation period. This interpretation aligns with the objective of the IBC to facilitate the revival and resolution of the corporate debtor.Conclusion:The court concluded that Section 60(6) of the IBC mandates the exclusion of the moratorium period in computing the limitation period for suits or applications by the corporate debtor. This interpretation supports the legislative intent to provide a fair opportunity for the corporate debtor to initiate proceedings without being prejudiced by the moratorium period. The appeal was dismissed, affirming the appointment of the arbitrator and the exclusion of the moratorium period in computing the limitation period.