2025 (1) TMI 1794 - AT - IBC

Limitation Act three-year rule: insolvency applications remain time-barred where pre-filing notice days are not excluded.

Article 137's three-year limitation governs applications under the insolvency regime; an acknowledgment in writing may extend accrual to the ... Computation of limitation - Acknowledgement of debt - exclusion of prescribed period under Section 15(2) of the Limitation Act, 1963 - when court is closed - pre-application demand notice - time of accrual of right to apply. Expiry of prescribed period when court is closed - Whether the Appellant was entitled to the benefit of Section 4 of the Limitation Act because the NCLT was closed when the three year limitation period expired and the application was consequently filed on the day the court re opened. - HELD THAT: - The Court accepted the legal proposition contained in Section 4 that if the prescribed period expires on a day when the court is closed, the suit, appeal or application may be instituted on the day the court re opens. However, on the facts the registry records and certified diary entry establish that the petition was filed on 10.10.2019 (diary no. 7074) and not on 09.10.2019 as claimed by the Appellant. The Appellant's proof of purchasing court fee on 09.10.2019 did not amount to filing on that date because hard copy presentation was then required and the petition bears the registry stamp of 10.10.2019; objections were raised that day and rectified subsequently. Consequently, the appellant could not avail Section 4 protection and the application was held to be filed after the expiry of the three year period reckoned from the alleged acknowledgement. [Paras 13, 15, 16] Section 4 does not assist the Appellant because the petition was filed on 10.10.2019 and not on the day the Tribunal re opened; therefore the application was time barred. Exclusion of notice period under Section 15(2) of the Limitation Act - Whether the ten day period under Section 8 of the Insolvency and Bankruptcy Code can be excluded from the computation of limitation for filing an application under Section 9 by invoking Section 15(2) of the Limitation Act and the decision in Disha Constructions. - HELD THAT: - Section 15(2) of the Limitation Act applies to computation of limitation for suits where notice has been given and to periods required for obtaining statutory consent or sanction; Section 15(1) deals with suits or applications for execution of a decree. Applications under Sections 7 or 9 of the Code are not suits; the Limitation Act's Section 15(2) therefore does not apply to Section 9 applications. The Court relied on authority holding that proceedings under Section 7 or 9 are not suits and concluded that the ten day notice period under Section 8 of the Code cannot be excluded from computation of limitation under Article 137 by reference to Section 15(2) or Disha Constructions. [Paras 17, 21, 23] The ten day notice period under Section 8 of the Code is not excluded under Section 15(2) of the Limitation Act for computing limitation for a Section 9 application; Disha Constructions is inapplicable. Final Conclusion: The Tribunal's finding that the Section 9 application was barred by limitation is sustained: the Appellant cannot avail Section 4 because the petition bears a registry filing date after the reopening, and the ten day notice under Section 8 cannot be excluded under Section 15(2) of the Limitation Act; the appeal is dismissed. Issues: (i) Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was filed within the period of limitation having regard to the alleged email acknowledgement dated 07.10.2016 and the NCLT holidays of 02.10.2019 to 08.10.2019; (ii) Whether the ten-day period under the Section 8 pre-filing demand notice is to be excluded from the computation of limitation under Section 15(2) of the Limitation Act, 1963 for an application under Section 9 of the Code.Issue (i): Whether the Section 9 application was within limitation considering the email of 07.10.2016 as acknowledgement and Section 4 of the Limitation Act, 1963 regarding court holidays.Analysis: Article 137 prescribes three years from when the right to apply accrues; an acknowledgement in writing could extend that period to 07.10.2019. Section 4 permits instituting an application on the day the court reopens where the prescribed period expires on a day the court is closed. The factual record shows the application was presented/registered on 10.10.2019 (diary no. 7074) and registry objections and electronic filing formalities were effected on subsequent dates; purchase of court fee on 09.10.2019 and portal issues do not establish filing/registration on 09.10.2019.Conclusion: The application was filed on 10.10.2019 and is time barred under Article 137; protection under Section 4 did not apply because the filing/registration did not occur on 09.10.2019.Issue (ii): Whether the ten-day period under Section 8 demand notice is excluded from limitation computation under Section 15(2) of the Limitation Act, 1963 for a Section 9 application.Analysis: Section 15(2) refers to exclusion of notice time in computing limitation for suits where notice is required. Article 137 and the schedule distinguish applications (including those under Section 9) from suits. Precedents and statutory classification show applications under Sections 7 and 9 are not suits within the meaning of Section 15(2); the insolvency code prescribes its own pre-filing regime and does not incorporate a provision excluding the ten-day period from Article 137 computation.Conclusion: The ten-day period under the Section 8 demand notice is not excludable under Section 15(2) for computing limitation of an application under Section 9 of the Code; exclusion is not available.Final Conclusion: The application under Section 9 was time barred and the impugned order dismissing it on limitation grounds is affirmed; the appeal is dismissed.Ratio Decidendi: Article 137 of the Limitation Act, 1963 governs limitation for Section 9 applications under the Insolvency and Bankruptcy Code, 2016; an application is time barred if not filed within three years from the date the right to apply accrues, Section 4 applies only where filing/registration occurs on the reopening date, and Section 15(2) of the Limitation Act, 1963 does not permit exclusion of the Section 8 ten-day notice period for applications under Section 9.