TaxTMI 
TaxTMI 
2017 (12) TMI 454
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....9; is a 'Special Act' enacted by Parliament and is a 'self-contained code' and in absence of any specific provision made therein the Limitation Act, 1963 is not applicable for triggering 'Corporate Insolvency Resolution Process'. 4. To substantiate the arguments, Learned Counsel for the appellant(s) relied on the report of the 'Bankruptcy Law Reforms Committee' to suggest that the legislative intent behind the formulation of the I & B Code' is to formulate a 'single law', independent of any other law including the Limitation Act. 5. On the other hand, according to learned counsel for the Respondents-'Corporate Debtor(s)' the Limitation Act, 1963 is applicable for triggering 'Corporate Insolvency Resolution Process' under 'I & B Code' which is to be read in conjunction with the provisions of the Companies Act, 2013 and other Acts, as far as they are applicable. 6. It was submitted that the 'Adjudicating Authority', as defined in sub-section (1) of Section 5 of the 'I & B Code' being 'National Company Law Tribunal' as constituted under Section 408 of the Companies Act, 2013, the provisions ....
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....in winding up before the Official Liquidator. 14. It was contended that it is a settled principle of law, that bar of limitation applied to the winding up petitions which used to be presented before the Hon'ble High Court and a creditor is not entitled to file a winding up petition based on a debt, if the debt is, otherwise time-barred. 15. Learned Amicus Curiae referred to Section 3 of Limitation Act, 1963 and submitted that the bar of limitation would apply to a claim filed by a creditor before the Official Liquidator attached to the Hon'ble High Court in terms of Companies Act, 1956, though the Official Liquidator is not a Court or a Judicial Tribunal or Quasi-Judicial Tribunal, but an executive appointed and authority recognized under the Companies Act, 1956. Such Official Liquidator' merely invites claims and submits report before the Hon'ble High Court. 16. According to him now under the 'I & B Code' the Insolvency Professional takes the position of the 'Official Liquidator', but with greater role to play, than the 'Official Liquidator'. 17. Learned Amicus Curiae also relied on Section 433 of the Companies Act, which provides that t....
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....f the MRTP Act relate to preparation, submission and sanction of approval of different plans by the authorities concerned which are aimed at achieving the object of planned development in contradistinction to haphazard development. An owner/person interested in the land and who wishes to object to the plans at the appropriate stage a self-contained adjudicatory machinery has been spelt out in the MRTP Act. Even the remedy of appeal is available under the MRTP Act with a complete chapter being devoted to acquisition of land for the planned development. Providing adjudicatory mechanism is one of the most important facets of deciding whether a particular statute is a "complete code" in itself or not." 21. We have noticed the rival contentions, the relevant provisions of law and decisions, as referred to above. 22. For determination of the issue, it is to be noticed as to whether 'I & B Code' is a 'self-contained Code' or not. In 'M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr.', the Hon'ble Supreme Court noticed the statement of objects and reasons in passing the 'I & B Code' based on various reports, most important of which the report of B....
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....made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay." XXX XXX XXX XXX "The role that insolvency and bankruptcy plays in debt financing Creditors put money into debt investments today in return for the promise of fixed future cash flows. But the returns expected on these investments are still uncertain because at the time of repayment, the seller (debtor) may make repayments as promised, or he may default and does not make the payment. When this happens, the debtor is considered insolvent. Other than cases of outright fraud, the....
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....t the debtors will not take any action to erode the value of the enterprise. The professional will have the power and responsibility to monitor and manage the operations and assets of the enterprise. The professional will manage the resolution process of negotiation to ensure balance of power between the creditors and debtor, and protect the rights of all creditors. The professional will ensure the reduction of asymmetry of information between creditors and debtor in the resolution process. II. The Code will enable symmetry of information between creditors and debtors. 5. The law must ensure that information that is essential for the insolvency and the bankruptcy resolution process is created and available when it is required. 6. The law must ensure that access to this information is made available to all creditors to the enterprise, either directly or through the regulated professional. 7. The law must enable access to this information to third parties who can participate in the resolution process, through the regulated professional. III. The Code will ensure a time-bound process to better preserve economic value. 8. The law must ensure that time value....
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....k & Anr. 2017 SCC OnLine SC 1025" " referring to different provisions of the 'I & B Code', observed: "59. The Insolvency and Bankruptcy Code, 2016 is an Act to consolidate and amend the laws relating to reorganization and insolvency resolution, inter alia of corporate persons. Insofar as corporate persons are concerned, amendments are made to the following enactments by Sections 249 to 252 and 255......." The Hon'ble Supreme Court further held:- "60. It is settled law that a consolidating and amending act like the present Central enactment forms a code complete in itself and is exhaustive of the matters dealt with therein......" The Hon'ble Supreme Court further proceeded to hold:- "63. There can be no doubt, therefore, that the Code is a Parliamentary law that is an exhaustive code on the subject matter of insolvency in relation to corporate entities, and is made under Entry 9, List III in the 7th Schedule which reads as under: "9. Bankruptcy and insolvency" 27. Thereby it is clear that the 'I & B Code' is complete code in itself. 28. Limitation Act, 1963 is the general legislation on the law of limitation. Section 3 prescribes....
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....slature intended it to be a complete code by itself which alone should govern the several matters provided by it. If on an examination of the relevant provisions it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act. In our view, even in a case where the special law does not exclude the provisions of Sections 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the Court to examine whether and to what extent the nature of those provisions or the nature of the subject-matter and scheme of the special law exclude their operation." 31. From the decision of Hon'ble Supreme Court in 'Hukumdev Narain Yadav v. Lalit Narain Mishra (1974) 2 SCC 133', it is clear that even if there exists no express exclusion in the special law, the court reserves the right to examine the provisions of the special law, to arrive at a conclusion as to whether the legislative intent was to exclude the operation of the Limitation Act, 1963 or not. 32. To examine the legislative intent to decide whether the 'I & B Code' excludes the ....
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....to a suit or application in respect of a debt provable but not proved under this Act" 36. The 'Presidency-Towns Insolvency Act, 1909' and the 'Provincial Insolvency Act, 1920' have been repealed by Section 243 of the 'I & B Code', relevant provision of which reads as follows:- "243. Repeal of certain enactments and savings. -- (1) The Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920 are hereby repealed. (2) Notwithstanding the repeal under sub-sections (1),- (i) all proceedings pending under and relating to the Presidency Towns Insolvency Act 1909, and the Provincial Insolvency Act 1920 immediately before the commencement of this Code shall continue to be governed under the aforementioned Acts and be heard and disposed of by the concerned courts or tribunals, as if the aforementioned Acts have not been repealed; (ii) any order, rule, notification, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, or thing done under or in pursuance of any repealed enactment shall, if in force at th....
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....e period of limitation prescribed for any suit or other legal proceeding, as ordered to be excluded in Section 101A of the 'Presidency-Towns Insolvency Act, 1909' and sub-section (2) of Section 78 of the 'Provincial Insolvency Act, 1920' has been retained with appropriate modification under sub-section (6) of Section 60 of the 'I & B Code', as quoted below:- "60. Adjudicating Authority for corporate persons. - (6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded." 39. The aforesaid provisions, makes clear the intent of the Legislature which necessarily excluded the provisions of Sections 4 to 24 of the Limitation Act, 1963. 40. A separate time period has been prescribed under different provisions of the 'I & B Code' such as:- Fourteen days' time allowed under sub-section (4) of Section 7 and sub-section (4) of Section 10 of th....
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....ollowing reasons:- Under Section 255 of the 'I & B Code', certain provisions of the Companies Act, 2013 have been amended in the manner specified in the Eleventh Schedule of the 'I & B Code'. There under Section 424 of the Companies Act, 2013 has been made part of the 'I & B Code' for the purpose of following procedural or principles of natural justice. Section 433 of the Companies Act, 2013 relates to limitation as quoted below:- "433. Limitation. -- The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case may be." However, Section 433 of the Companies Act, 2013 has not been amended to make it as a part of the 'I & B Code', therefore, we hold that Section 433 which relates to limitation of the Companies Act, 2013, ipso facto will not be applicable to 'I & B Code'. 48. There is a provision of limitation under the 'Recovery of Debts Due to Banks and Financial Institutions Act, 1993' (hereinafter referred to as "DRT Act") and 'Securitisation and Reconstruction of Financial Assets and Enforcement of Sec....
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....creditors and debtors; to ensure a time-bound process to better preserve economic value; to ensure a collective process; to respect the rights of all creditors equally; to ensure that when the negotiations fail to establish viability, the outcome of bankruptcy must be binding and to ensure clarity of priority, and that the rights of all stakeholders are upheld in resolving bankruptcy, as noticed above. 55. In 'M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr.' (Supra) the Hon'ble Supreme Court held that one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process. While noticing the key economic question in the bankruptcy process, the Hon'ble Supreme Court noticed the report of the Bankruptcy Law Reforms Committee, and observed that there is only one forum for evaluating possibilities, and for taking a decision there is a creditors committee, where all 'Financial Creditors' have votes in proportion to the magnitude of debt that they hold. As mentioned, the Hon'ble Supreme Court also noticed that 'speed is the essence' under 'I ....
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.... applicable, though we have held otherwise, in that case also application under Section 7 or 9 or 10 cannot be rejected on the ground that the application is barred by limitation for being filed beyond three years for following reasons. Except Article 137 of Part II i.e. 'other applications', as quoted below, no other provisions of Limitation is applicable in the matter of filing application under Sections 7 or 9 or 10:- 59. From Article 137 of the Limitation Act, 1963, it is clear that the period of three years' is to be counted from the date right to apply accrues to a 'Financial Creditor' or 'Operational Creditor' or 'Corporate Debtor'. 60. For initiation of 'Corporate Insolvency Resolution Process', the right to apply accrues under Section 7 or Section 9 or Section 10 only with effect from 1st December, 2016 when 'I & B Code' has come into force, therefore, the right to apply under Section 7 or Section 9 or Section 10 in all present cases having accrued after 1st December 2016, such applications cannot be rejected on the ground that the application is barred by limitation. 61. Learned Amicus Curiae rightly contended that t....
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....288] the Court observed that "the statute of limitation was intended for relief and quiet of the defendant and to prevent the persons from being harassed at a distant period of time after the committing of the injury complained of. 66. The above principles have been also recognised by the Hon'ble Supreme Court of India in Rajinder Singh v. Santa Singh,: AIR 1973 SC 2537, wherein the Hon'ble Supreme Court observed: "The object of law of limitation is to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party's own inaction, negligence or latches." 67. The object of fixing time-limit for litigation is based on Public Policy, fixing a life span of legal remedies for the purpose of general welfare. The Hon'ble Supreme Court in N. Balakrishnan v. M.A. Krishnamurthy, (1998) 7 SCC 123, inter alia observed: "the rules of limitation are not meant to destroy the rights of the parties but are meant to see that the parties do not resort to dilatory tactics but seek their remedy promptly and the law of limitation fixes a life span for legal injury suffered and that it is ens....
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....Committee of Creditors may decide such question. If any adverse decision is taken in regard to any creditor disputing the claim on ground of delay and laches, it will be open to the aggrieved creditor to file objection before the Adjudicating Authority against resolution plan and for its necessary correction who may decide the same in accordance with the observations as made above. 73. Coming to merits of present matter, in the case of M/s. Speculum Plast Pvt. Ltd. Vs. PTC Techno Pvt. Ltd. in Company Appeal (AT) (Insolvency) No. 47 of 2017, the Adjudicating Authority by impugned order dated 11th April, 2017 has not decided the question whether Limitation Act, 1963 is applicable in the proceeding for initiation of 'Corporate Insolvency Resolution Process' or not and without deciding the same rejected the case on the ground that the amount legally recoverable is beyond the period of limitation. It has not been noticed that the invoices raised are of the period from 1st April, 2013 to 19th September, 2013, and, therefore, default must have occurred after September, 2013. The 'I & B Code' having come into effect on 1st December 2016, the Adjudicating Authority was not ....