TaxTMI 
TaxTMI 
2018 (10) TMI 777
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....e." 2. The question raised by the appellants in these appeals is as to whether the Limitation Act, 1963 will apply to applications that are made under Section 7 and/or Section 9 of the Code on and from its commencement on 01.12.2016 till 06.06.2018. In all these cases, the Appellate Authority has held that the Limitation Act, 1963 does not so apply. Even on the assumption that Article 137 of the Limitation Act, 1963 is attracted to such applications, in any case, such applications being filed only on or after commencement of the Code on 01.12.2016, since three years have not elapsed since this date, all these applications, in any event, could be said to be within time. Having held this, by the impugned order dated 07.11.2017 in Civil Appeal No.23988 of 2017, the Appellate Tribunal went on to hold: "68. In view of the settled principle, while we hold that the Limitation Act, 1963 is not applicable for initiation of 'Corporate Insolvency Resolution Process', we further hold that the Doctrine of Limitation and Prescription is necessary to be looked into for determining the question whether the application under Section 7 or Section 9 can be entertained after long delay, am....
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.... Section 238A must be held to be retrospective. Further, according to them, in any case, the law of limitation, pertaining to the domain of procedure, must be held to apply retrospectively in any case. For this proposition, they cited several judgments which will be referred to later in this judgment. They also referred to and relied upon the definitions under Sections 3(11), 3(12), and Section 5(6) of the Code, which, when contrasted with Section 3(6), would show that though "claim" in Section 3(6) refers to a right to payment, the definitions of "debt" and "default" in Sections 3(11) and 3(12) respectively, refer to liability or obligation in respect of a claim which is "due" and this being the case, a time-barred debt cannot be said to be "due" so as to trigger the Code. The learned counsel further attacked the Appellate Tribunal judgment by stating that an application filed in 2017 under Section 7 or 9 of the Code, praying that the Code be triggered for a debt that has become time-barred long back, say in 2011, would lead to absurdity as it could never have been the intention of the legislature to resuscitate stale and dead claims leading to the drastic consequence of the takin....
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....id provision. For this purpose, he relied upon a number of judgments and Sections 25(3), 60 and 61 of the Indian Contract Act, 1872. He also handed up a chart in which, according to him, the following Tribunals, depending upon the particular Act in question, would either be governed or not governed by the Limitation Act as follows:- Tribunal Name Discharges functions of Whether there is a provision for application of Limitation Act? Telecom Disputes Settlement and Appellate Tribunal Appellate Tribunal under Airports Economic Regulatory Authority of India Act, 2008 no Appellate Tribunal under Information Technology Act, 2000 Yes - Section 60 Appellate Tribunal under Telecom Regulatory Authority of India Act, 1997 No National Company Law Appellate Tribunal Appellate Tribunal under Competition Act, 2002 No Appellate Authority under Insolvency & Bankruptcy Code, 2016 No** Appellate Tribunal under Companies Act, 2013 Yes - Section 433 National Company Law Tribunal Tribunal under Companies Act, 2013 Yes - Section 433 Adjudicating Authority under Insolvency & Bankruptcy Code, 2....
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.... as follows: "28. APPLICATION OF LIMITATION ACT, 1963 28.1 The question of applicability of the Limitation Act, 1963 ("Limitation Act") to the Code has been deliberated upon in several judgments of the NCLT and the NCLAT. The existing jurisprudence on this subject indicates that if a law is a complete code, then an express or necessary exclusion of the Limitation Act should be respected. Ravula Subba Rao and Anr. v. The Commissioner of Income Tax, Madras, (1956) SCR 577 In light of the confusion in this regard, the Committee deliberated on the issue and unanimously agreed that the intent of the Code could not have been to give a new lease of life to debts which are time-barred. It is settled law that when a debt is barred by time, the right to a remedy is time-barred. Punjab National Bank and Ors. v. Surendra Prasad Sinha AIR 1992 SC 1815 This requires being read with the definition of 'debt' and 'claim' in the Code. Further, debts in winding up proceedings cannot be time-barred, Interactive Media and Communication Solution Private Limited v. Go Airlines, 199 (2013) DLT 267 and there appears to be no rationale to exclude the extension of this principle of law to t....
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.... right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;" xxx xxx xxx "(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; (12) "default" means non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be;" "5. Definitions.-In this Part, unless the context otherwise requires,- xxx xxx xxx (6) "dispute" includes a suit or arbitration proceedings relating to- (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty;" Vide Section 3(37), words and expressions used, but not defined i....
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....ion of documents; (c) receiving evidence on affidavits; (d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or a copy of such record or document from any office; (e) issuing commissions for the examination of witnesses or documents; (f) dismissing a representation for default or deciding it ex parte; (g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and (h) any other matter which may be prescribed." (emphasis supplied) Pertinently, the Eleventh Schedule (Amendments to the Companies Act, 2013) to the Code reads as follows: "1. In Section 2,- xxx xxx xxx (b) after clause (94), the following clause shall be inserted, namely- '(94-A) "winding up" means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.'" 8. It may also be noticed that under Section 434(1)(c) of the Companies Act, all proceedings under the Companies Act, including the proceedings relating to winding up of companie....
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....hall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent." 9. It is thus clear that Section 433 of the Companies Act, 2013 would apply to the Tribunal even when it decides applications under Sections 7 and 9 of the Code. 10. The matter can be viewed from a slightly different angle. In National Sewing Thread Co. Ltd. v. James Chadwick and Bros. Ltd., 1953 SCR 1028, this Court dealt with an appeal to the High Court from any decision of the Registrar under Section 76 of the Trade Marks Act. It was argued that the provisions of clause 15....
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....of the law and being procedural in nature, must be held to be retrospective, it is necessary to refer to a few judgments of this Court. In M.P. Steel Corporation v. CCE, (2015) 7 SCC 58, this Court held: "54. It is settled law that periods of limitation are procedural in nature and would ordinarily be applied retrospectively. This, however, is subject to a rider. In New India Insurance Co. Ltd. v. Shanti Misra [(1975) 2 SCC 840 : (1976) 2 SCR 266], this Court held: (SCC p. 844, para 5) 5. "On the plain language of Sections 110- A and 110-F there should be no difficulty in taking the view that the change in law was merely a change of forum i.e. a change of adjectival or procedural law and not of substantive law. It is a well-established proposition that such a change of law operates retrospectively and the person has to go to the new forum even if his cause of action or right of action accrued prior to the change of forum. He will have a vested right of action but not a vested right of forum. If by express words the new forum is made available only to causes of action arising after the creation of the forum, then the retrospective operation of the law is taken away....
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....ion we would like to mention New India Insurance Co. Ltd. v. Shanti Misra [(1975) 2 SCC 840 : (1976) 2 SCR 266]. The husband of the respondent in that case died in an accident in 1966. A period of two years was available to the respondent for instituting a suit for recovery of damages. In March 1967 the Claims Tribunal under Section 110 of the Motor Vehicles Act, 1939 was constituted, barring the jurisdiction of the civil court and prescribed 60 days as the period of limitation. The respondent filed the application in July 1967. It was held that not having filed a suit before March 1967 the only remedy of the respondent was by way of an application before the Tribunal. So far the period of limitation was concerned, it was observed that a new law of limitation providing for a shorter period cannot certainly extinguish a vested right of action. In view of the change of the law it was held that the application could be filed within a reasonable time after the constitution of the Tribunal; and, that the time of about four months taken by the respondent in approaching the Tribunal after its constitution, could be held to be either reasonable time or the delay of about two months could b....
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....s modified expressly or by necessary implication. Procedural law establishes a mechanism for determining those rights and liabilities and a machinery for enforcing them. Right of appeal being a substantive right always acts prospectively. It is trite law that every statute is prospective unless it is expressly or by necessary implication made to have retrospective operation. 24. Right of appeal may be a substantive right but the procedure for filing the appeal including the period of limitation cannot be called a substantive right, and an aggrieved person cannot claim any vested right claiming that he should be governed by the old provision pertaining to period of limitation. Procedural law is retrospective meaning thereby that it will apply even to acts or transactions under the repealed Act. 25. Law on the subject has also been elaborately dealt with by this Court in various decisions and reference may be made to a few of those decisions. This Court in Garikapati Veeraya v. N. Subbiah Choudhry [AIR 1957 SC 540], New India Insurance Co. Ltd. v. Shanti Misra [(1975) 2 SCC 840 : (1976) 2 SCR 266], Hitendra Vishnu Thakur v. State of Maharashtra [(1994) 4 SCC 602 : 1....
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....y be applied retrospectively, save and except that the new law of limitation cannot revive a dead remedy. This was said in the context of a new law of limitation providing for a longer period of limitation than what was provided earlier. In the present case, these observations are apposite in view of what has been held by the Appellate Tribunal. An application that is filed in 2016 or 2017, after the Code has come into force, cannot suddenly revive a debt which is no longer due as it is time-barred. 13. In State of Kerala v. V.R. Kalliyanikutty, (1999) 3 SCC 657, ("V.R. Kalliyanikutty"), this Court dealt with whether a time-barred debt can be recovered by resorting to recovery proceedings under the Kerala Revenue Recovery Act of 1968. In stating that the said Act cannot extend to recovery of a time- barred debt, this Court stated in paragraph 8, "8. ...... In every case the exact meaning of the word "due" will depend upon the context in which that word appears." It was held in that case that Section 17(3) of the Kerala Revenue Recovery Act, 1968 made it clear that a person making payment under protest will have a right to institute a suit for refund of the whole or p....
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...., not being governed by the law of limitation. 16. We may also refer to a recent decision of this Court in SBI v. V. Ramakrishnan, (2018) SCC Online SC 963, where this Court, after referring to the selfsame Insolvency Law Committee Report, held that the amendment made to Section 14 of the Code, in which the moratorium prescribed by Section 14 was held not to apply to guarantors, was held to be clarificatory, and therefore, retrospective in nature, the object being that an overbroad interpretation of Section 14 ought to be set at rest by clarifying that this was never the intention of Section 14 from the very inception. 17. We now come to some of the judgments cited by Shri Dholakia. In State of Jharkhand v. Shivam Coke Industries, (2011) 8 SCC 656, this Court, in construing Section 46(4) of the Bihar Finance Act, 1981, held that the Limitation Act could not be read into the exercise of a suo motu power of revision. This was for the reason that the Limitation Act applies to courts and not to quasi-judicial bodies. In so holding, the Court went on to hold: "46. We would, however, agree with the position that such a power cannot be exercised by the revisional authority ....
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....act Act, a barred debt is good consideration for a fresh promise to pay the amount. When a debtor makes a payment without any direction as to how it is to be appropriated, the creditor has the right to appropriate it towards a barred debt. (Vide Section 60 of the Contract Act). It has also been held that a creditor is entitled to recover the debt from the surety, even though a suit on it is barred against the principal debtor. Vide Mahant Singh v. U Ba Yi [(1939) LR 66 IA 198], Subramania Aiyar v. Gopala Aiyar [(1910) ILR 33 Mad 308] and Dil Muhammad v. Sain Das [AIR 1927 Lah 396]. And when a creditor has a lien over goods by way of security for a loan, he can enforce the lien for obtaining satisfaction of the debt, even though an action thereon would be time-barred. Vide Narendra Lal Khan v. Tarubala Dasi [(1921) ILR 48 Cal 817, 823]. ......"^6 (at 1134-1135) Section 25(3) of the Contract Act was referred to by this judgment. This Section is based on the fact that under the Indian Contract Act, 1872, "consideration" is defined in Section 2(d) as including past consideration, a notion that was unknown to English law. This doctrine came from Field's Draft Civil Code, 186....
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....debts "due and recoverable". In the former case, Section 11(1)(d) of the Bihar Buildings (Lease, Rent and Eviction) Control Act, 1982 provided for eviction of a tenant where the amount of two months' rent "lawfully payable by the tenant and due from him" was in arrears. This Court followed Bombay Dyeing (supra), stating as follows: "6. Section 11 of the said Act, 1982 deals with eviction of tenants. It begins with non obstante clause. It states that notwithstanding anything contained in any contract or law to the contrary, no tenant shall be liable to be evicted except in execution of a decree passed by the court on one or more of the grounds mentioned in Sections 11(1)(a) to (f). In this case we are concerned with the ground of default which falls under Section 11(1)(d) and which states that where the amount of two months' rent, lawfully payable by the tenant and due from him is in arrears by reason of non-payment within the time fixed by the contract or in the absence of such contract by the last day of the month next following that for which rent is payable then such default would constitute ground for eviction. It is interesting to note that the expression used in S....
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....overable". 21. It is important to remember that interpretation is the art of matching the text with the context. In a slightly different context, under Section 86 of the Electricity Act, this Court, in Andhra Pradesh Power Coordination Committee and Ors. v. Lanco Kondapalli Power Ltd. and Ors., (2016) 3 SCC 468, refused to apply the principle of these cases stating: "30. ...... In the absence of any provision in the Electricity Act creating a new right upon a claimant to claim even monies barred by law of limitation, or taking away a right of the other side to take a lawful defence of limitation, we are persuaded to hold that in the light of nature of judicial power conferred on the Commission, claims coming for adjudication before it cannot be entertained or allowed if it is found legally not recoverable in a regular suit or any other regular proceeding such as arbitration, on account of law of limitation. We have taken this view not only because it appears to be more just but also because unlike labour laws and the Industrial Disputes Act, the Electricity Act has no peculiar philosophy or inherent underlying reasons requiring adherence to a contrary view. 31.....
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....n the Innoventive Industries Ltd. (supra) as follows: "28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corpo....
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....s the context otherwise requires,- xxx xxx xxx (8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; Explanation.-For the purposes of this sub- clause,- (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the ....
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.... xxx xxx xxx (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute, if any, or record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;" It will be seen from a reading of Section 8(2)(a) that the corporate debtor shall, within a period of 10 days of the receipt of the demand notice, bring to the notice of the operational creditor the existence of a "dispute". We have seen that "dispute" as defined in Section 5(6) includes a suit or arbitration proceeding relating to certain matters. Again, under Section 8(2)(a), the corporate debtor may, in the alternative, disclose the pendency of a suit or arbitration proceedings filed before the receipt of the demand notice. It is clear therefore, that at least in the case of an operational creditor, "default" must be non-payment of amounts that have become due and payable in law. The "dispute" or pendency of a suit or arbitration proceedings would necessarily bring in....
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....laims to be resuscitated. In this view of the matter, we are afraid that this judgment also would have no bearing. 25. The chart handed up by Shri Dholakia, in which he wished to demonstrate that various tribunals under different Acts either apply or do not apply the Limitation Act, again leads us nowhere. Depending upon the intention of the legislature in each of the enactments mentioned in the chart, either the legislature thought it fit to apply the Limitation Act, or it did not, depending upon the subject matter of the Act in question. We have held that at least insofar as the Code is concerned, the intention of the legislature, from the very beginning, was to apply the Limitation Act to the NCLT and the NCLAT while deciding applications filed under Sections 7 and 9 of the Code and appeals therefrom. Section 433 of the Companies Act, which applies to the Tribunal and the Appellate Tribunal, expressly applies the Limitation Act to the Appellate Tribunal, the NCLAT, as well. Also, the argument that the NCLAT is an appellate tribunal which is common to three statutes, under one of which, viz., the Competition Act, no period of limitation has been prescribed, would not lead to a....
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....on 433 of the Companies Act as well as Section 238A of the Code, apply the provisions of the Limitation Act "as far as may be". Obviously, therefore, where periods of limitation have been laid down in the Code, these periods will apply notwithstanding anything to the contrary contained in the Limitation Act. From this, it does not follow that the baby must be thrown out with the bathwater. This argument, therefore, must also be rejected. 27. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 28. In view of our finding that the Limitation Act has in fact been applied from the inception of the Code, it is unnecessary for us to go into the arguments ba....