2025 (12) TMI 458 - AT - IBC

Covid limitation extension saves s.95 IBC personal guarantor case; matter remanded for CIRP admission and continuation

JC Flower Asset Reconstruction Pvt. Ltd. Versus Mr. Mehul Gor & another and Mr. Sandeep Vedant & another

NCLAT held that the application under s.95 of the IBC against the personal guarantor was within limitation, applying the exclusion of the period from ... Application filed u/s 95 of IBC against the personal guarantors - time barred debt - exclusion of time between 15.3.2020 to 28.2.2022 - HELD THAT:- The authoritative statements of the Hon’ble Supreme Court in Prakash Corporates Vs Dee Vee Projects Ltd. [2022 (2) TMI 1268 - SUPREME COURT] and IL & FS Financial Services Ltd., Vs Adhunik Meghalaya steels Pvt. Ltd. [2025 (8) TMI 99 - SUPREME COURT] implies that the present PIRP is well within time. Necessarily, both the Orders of the Adjudicating Authority are set aside. The Adjudicating Authority is now required to proceed according to law. The matter is remanded back to the Adjudicating Authority to admit the CIRP on record and to proceed as per law - appeal allowed by way of remand. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether applications under Section 95 of the Insolvency and Bankruptcy Code filed on 17.08.2022 against personal guarantors were barred by limitation, having regard to the initial date of default on 10.10.2017 and the Covid-19 limitation exclusion orders of the Supreme Court. 1.2 Whether the Supreme Court's suo motu orders in W.P. (C) No. 3 of 2020, as clarified on 10.01.2022, confer only a uniform 90-day period from 01.03.2022 in all cases where limitation would have expired between 15.03.2020 and 28.02.2022, or whether the balance actual period of limitation survives where it exceeds 90 days. 1.3 Whether, after applying the exclusion of time directed in the Supreme Court's Covid-19 orders, the present proceedings under the Insolvency and Bankruptcy Code (including initiation of PIRP/CIRP founded on Section 95 applications) were within limitation and liable to be entertained by the Adjudicating Authority. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Computation of limitation for Section 95 proceedings in light of Supreme Court's Covid-19 limitation orders Legal framework (as discussed) 2.1 The Court referred to the orders passed by the Supreme Court in suo motu W.P. (C) No. 3 of 2020, particularly the order dated 10.01.2022 in M.A. No. 21 of 2022, which directed that: (a) The period from 15.03.2020 till 28.02.2022 shall stand excluded for purposes of limitation under all general or special laws in respect of all judicial or quasi-judicial proceedings. (b) The balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. (c) In cases where limitation would have expired between 15.03.2020 and 28.02.2022, all persons shall have a limitation period of 90 days from 01.03.2022, and where the actual balance period of limitation remaining from 01.03.2022 is greater than 90 days, that longer period shall apply. 2.2 The Court also relied on: (i) The decision in Prakash Corporates v. Dee Vee Projects Ltd., wherein the Supreme Court treated the 'eclipsed' Covid period as a period of exclusion analogous to Sections 12 to 15 of the Limitation Act, 1963, clarifying that such excluded period is not attributable to indolence of the litigant and results in enlargement of time over and above the prescribed period. (ii) The decision in IL & FS Financial Services Ltd. v. Adhunik Meghalaya Steels Pvt. Ltd., where the Supreme Court held that under sub-para 1 of para 5 of the order dated 10.01.2022, the entire period from 15.03.2020 to 28.02.2022 stands excluded and limitation, reckoning from an acknowledged starting point, commences on 01.03.2022 and continues thereafter for the full statutory period. Interpretation and reasoning 2.3 On facts, the date of default was 10.10.2017. In the ordinary course, the period of limitation of three years would have expired on 10.10.2020. As of 15.03.2020, the appellant still had 208 days of limitation remaining. 2.4 The Adjudicating Authority acknowledged the Supreme Court's suo motu orders but construed them to mean that, since the limitation would have expired between 15.03.2020 and 28.02.2022, only a fixed 90-day period from 01.03.2022 was available. On that basis, it held that the appellant was required to file on or before 30.05.2022, and hence the filing on 17.08.2022 was time-barred. 2.5 The Court rejected this approach, accepting the appellant's contention that, in terms of the Supreme Court's order dated 10.01.2022, the correct construction is: (a) The entire period from 15.03.2020 to 28.02.2022 is to be excluded from computation of limitation. (b) Where, as on 15.03.2020, a balance period of limitation remained which, when counted from 01.03.2022, exceeds 90 days, the actual remaining period applies, and not the minimum of 90 days. 2.6 Applying this interpretation, the Court held that: (a) As on 15.03.2020, there were 208 days of limitation remaining for the appellant. (b) By reason of the Covid exclusion order, this 208-day balance was to be reckoned afresh from 01.03.2022. (c) Counting 208 days from 01.03.2022, the limitation would expire only on 25.09.2022. (d) The petitions for initiating PIRP/CIRP based on Section 95 proceedings were in fact filed on 17.08.2022, which fell well within this extended period expiring on 25.09.2022. 2.7 The Court drew support from Prakash Corporates that the excluded Covid period operates like statutory exclusion under Sections 12-15 of the Limitation Act, whereby the prescribed period is effectively enlarged by removing from computation the excluded interval. It further relied on IL & FS Financial Services Ltd. to affirm that limitation, after exclusion of 15.03.2020 to 28.02.2022, begins afresh from 01.03.2022 for the entire balance period available under general law. Conclusions 2.8 The Court concluded that the Adjudicating Authority erred in applying a rigid 90-day period from 01.03.2022 without considering that the balance limitation as on 15.03.2020 exceeded 90 days. 2.9 Correct application of the Supreme Court's Covid limitation orders required exclusion of the entire period from 15.03.2020 to 28.02.2022, with the consequence that the appellant's balance 208 days of limitation had to be counted from 01.03.2022, making the outer limit 25.09.2022. 2.10 Since the applications were filed on 17.08.2022, they were within the period of limitation and not time-barred. 2.11 The orders of the Adjudicating Authority dismissing the Section 95 applications as barred by limitation were set aside. The matters were remanded to the Adjudicating Authority with a direction to admit the CIRP on record and to proceed in accordance with law.