TaxTMI 
TaxTMI 
2017 (12) TMI 454
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....earned Counsel for the appellant(s) 'I & B Code' 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 u....
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....gh Court, and (ii) When the creditor presented its claim against the company 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'.....
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....is required to be shown that it is a complete legislation for the purpose for which it is enacted. The provisions of 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 ....
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....for two reasons. First, while the 'calm period' can help keep an organisation afloat, without the full clarity of ownership and control, significant decisions cannot be 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, t....
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....egotiate in the assessment of viability without fear of debt recovery enforcement by creditors. 4. The law must appoint a resolution professional as the manager of the resolution period, so that the creditors can negotiate the assessment of viability with the confidence that 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....
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....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. 26. The Hon'ble Supreme Court in "M/s. Innoventive Industries Ltd. Vs. ICICI Bank & 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....
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.... 1965. 30. However, in 'Hukumdev Narain Yadav v. Lalit Narain Mishra (1974) 2 SCC 133', a three Judges Bench of the Hon'ble Supreme Court, while examining the question as to whether the Limitation Act, 1963 would be applicable to the provisions of Representation of People Act, held as under: "17....... but what we have to see is whether the scheme of the special law, that is in this case the Act, and the nature of the remedy provided therein are such that the Legislature 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. ....
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....f adjudication has been annulled under this Act, in computing the period of limitation prescribed for any suit or application for the execution of a decree or (other than a suit or application in respect of which the leave of the Court was obtained under sub-section (2) of section 28) which might have been brought or made but for the making of an order of adjudication under this Act, the period from the date of the order of adjudication to the date of the order of annulment shall be excluded: Provided that nothing in this section shall apply 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....
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....tioned in the Schedule." 37. Though the aforesaid two Acts have been repealed, in the 'I & B Code', the Legislature did not choose to prescribe any separate provisions of 'limitation' as was made in Section 101 of the 'Presidency-Towns Insolvency-Act, 1909' or sub-section (1) of Section 78 of the 'Provincial Insolvency Act, 1920' whereunder provisions of Sections 5 and 12 of the Indian Limitation Act, 1908' were made applicable to appeals and applications under the aforesaid Acts and the decision under the provisions was treated to be decree. 38. However, the provision of computing the 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....
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....ed to condone the delay but not exceeding fifteen days. There are other provisions where such time limit has been prescribed, which is different from the time prescribed under the Limitation Act, 1963. 46. From the aforesaid provision, we find that the scheme of the 'Special Act' i.e. the 'I & B Code', and the nature of the remedy provided therein are such that the Legislature intended it to be a complete code by itself which alone should govern the several matters provided by it. 47. In so far as, the application under Section 433 of the Companies Act, 2013 is concerned, we are of the view that the said provision is not applicable for the following 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 t....
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....espect of financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963)." However, Section 36 of the SARFAESI Act has not been amended to make applicable to 'I & B Code'. 53. In view of the aforesaid discussion, we hold that Section 24 of the Recovery of Debts and Bankruptcy Act, 1993 and Section 36 of the SARFAESI Act, 2002 are not applicable to the proceedings for initiation of 'Corporate Insolvency Resolution Process'. 54. On the other hand, the Committee by its report suggested to frame law for Insolvency Resolution Process' to facilitate the assessment of viability of the enterprise at a very early stage; to enable symmetry of information between 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....
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....ay be submitted by creditors to him, as stipulated in clause (b) of sub-section (1) of Section 18. In such case, once the creditors put their claim, the Insolvency Resolution Professional' cannot reject the claim on the ground that the claim is barred by limitation, as the provision of Limitation Act, 1963 will not be applicable for filing a claim before the 'Interim Resolution Professional'. Similarly, the Committee of Creditors while deciding the resolution plan, cannot reject any such claim, on the ground that the same is barred by limitation though the Committee of Creditors may not make any provision in the resolution plan on the ground of unexplained delay. 58. Even if it is accepted that the Limitation Act, 1963 is 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 Articl....
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....38 and 439, the learned author described the doctrine in the following words: "In order to avoid the difficulty and error that necessarily result from lapse of time the presumption of the coincidence of fact and right is rightly accepted as final after a certain number of years. Whoever wishes to dispute this presumption must do so within the period, otherwise his right, if has one will be forfeited as a penalty for his neglect, vigilantibus non dormientibus jura subvenient (Laws come to the assistance of the vigilant and not of the sleepy)" 65. It is also necessary to ensure that the rights of debt, in property or rights in general should not be in a state of constant uncertainty, doubt and suspense. In Abbott CJ in Battley v. Faulkner [(1820) 3 B & Ald 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 Cour....
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....ng delay, normally should not be entertained for triggering 'Corporate Insolvency Resolution Process' under Section 7 and 9 of the 'I & B Code'. 72. However, the aforesaid principle for triggering an application under Section 10 of the 'I & B Code' cannot be made applicable as the 'Corporate Applicant' does not claim money but prays for initiation of 'Corporate Insolvency Resolution Process' against itself, having defaulted to pay the dues of creditors. In so far it relates to filing of claim before the Insolvency Resolution Professional', in case of stale claim, long delay and in absence of any continuous cause of action, it is open to resolution applicant to decide whether such claim is to be accepted or not, and on submission of resolution plan, the 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. ....