Section 14 Limitation Act excludes time spent in a failed IBC proceeding barred by pre-existing dispute

Time spent in a prior section 9 Insolvency and Bankruptcy Code proceeding could be excluded under section 14(1) of the Limitation Act where the earlier petition was pursued with due diligence and good faith, involved the same matter in issue, and failed at the threshold because a pre-existing dispute created a statutory jurisdictional bar. The later civil suit concerned the same default-based dispute, so the conditions for exclusion of time were met. The distinction between section 14(1) and section 14(2) did not prevent relief because the subsequent proceeding was a suit, not an application.

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Issues: Whether the time spent in a prior proceeding under section 9 of the Insolvency and Bankruptcy Code, 2016 could be excluded under section 14(1) of the Limitation Act, 1963 for the purpose of the subsequent civil suit.

Analysis: Section 14(1) applies where a plaintiff has prosecuted another civil proceeding with due diligence and in good faith, the earlier proceeding related to the same matter in issue, and it failed because the forum was unable to entertain it owing to defect of jurisdiction or a cause of like nature. A proceeding under section 9 of the Insolvency and Bankruptcy Code is founded on the occurrence of default, and the prior petition was rejected at the threshold on the ground of pre-existing dispute, which operated as a jurisdictional bar under that statute. The civil suit likewise turned on whether the defendants had defaulted in paying the plaintiff's dues, so the matter in issue in both proceedings was the same. The earlier proceeding had been pursued diligently and in good faith, and there was no negligence in prosecuting the remedy. The distinction between section 14(1) and section 14(2) did not defeat relief because the subsequent proceeding was a suit and not an application.

Conclusion: The requirements of section 14(1) were satisfied, and the time spent in the earlier section 9 proceeding was liable to be excluded for limitation purposes.

Ratio Decidendi: A prior proceeding rejected at the threshold for a statutory jurisdictional bar, including pre-existing dispute under the Insolvency and Bankruptcy Code, 2016, qualifies as a proceeding that failed for a cause of like nature under section 14(1) of the Limitation Act, 1963, if the later suit concerns the same matter in issue and was pursued with due diligence and good faith.

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