# B. K. EDUCATIONAL SERVICES PRIVATE LIMITED v. PARAG GUPTA AND ASSOCIATES

- **Citation:** [2018] 12 S.C.R. 794
- **Court:** Supreme Court of India
- **Decided:** 2018-10-11
- **Case number:** Civil Appeal No. 23988 of 2017
- **Bench:** R. F. Nariman, Navin Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/b-k-educational-services-private-limited-v-parag-gupta-and-associates-32327
- **Pages:** 35

## Headnote

Insolvency and Bankruptcy Code, 2016 - s.238A (As inserted
by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
w.e.f. 06.06.2018) - s.238A, if retrospective in nature - Held: s.238A
being clarificatory of law and being procedural in nature, must be
held to be retrospective - Amendment of s.238A would not serve its
object unless it is construed as being retrospective, as otherwise,
applications seeking to resurrect time-barred claims would have to
be allowed, not being governed by the law of limitation - Limitation
Act, 1963.
Insolvency and Bankruptcy Code, 2016 - s.238A (As inserted
by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
w.e.f. 06.06.2018) and ss.7 & 9 - Application for initiation of
'Corporate Insolvency Resolution Process' - Whether Limitation Act,
1963 will apply to applications that are made u/s.7 and/or s.9 of
the Code on and from its commencement on 01.12.2016 - Held:
Since, Limitation Act is applicable to applications filed u/ss. 7 and
9 of the Code from the inception of the Code, Art.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 u/Art.137 of the Limitation Act, save and except in those
cases where, in facts of the case, s.5 of the Limitation Act may be
applied to condone delay in filing such application - Limitation
Act, 1963 - Art.137 and s.5.
Remanding the appeals to NCLAT, the Court
HELD: 1.1 In the present case, it is clear that the
amendment of Section 238A Insolvency and Bankruptcy Code,
2016 would not serve its object unless it is construed as being
retrospective, as otherwise, applications seeking to resurrect
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[2018] 12 S.C.R. 794
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795
time-barred claims would have to be allowed, not being governed
by the law of limitation. [Para 15] [815-D]
1.2 The Insolvency Law Committee Report of March, 2018
reflected that the legislature did not contemplate enabling a
creditor who has allowed the period of limitation to set in to allow
such delayed claims through the mechanism of the Code. The
Code cannot be triggered in the year 2017 for a debt which was
time-barred, say, in 1990, as that would lead to the absurd and
extreme consequence of the Code being triggered by a stale or
dead claim, leading to the drastic consequence of instant removal
of the present Board of Directors of the corporate debtor
permanently, and which may ultimately lead to liquidation and,
therefore, corporate death. This being the case, the expression
"debt due" in the definition sections of the Code would obviously
only refer to debts that are "due and payable" in law, i.e., the
debts that are not time-barred. [Para 21] [821-D-F]
3. It is 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.
[Para 27] [828-B-C]
M.P. Steel Corporation v. CCE (2015) 7 SCC 58; Allied
Motors (P) Ltd. v. CIT (1997) 3 SCC 472 : [1997]
2 SCR 780; Andhra Pradesh Power Coordination
Committee and Ors. v. Lanco Kondapalli Power Ltd.
and Ors. (2016) 3 SCC 468 - relied on.
State of Madhya Pradesh and Anr. v. Bhailal Bhai and
Ors. [1964] 6 SCR 261; Innoventive Industries Ltd. v.
ICICI Bank & Anr. (2018) 1 SCC 407 : [2017]
8 SCR 33; National Sewing Thread Co. Ltd. v. James
Chadwick and Bros. Ltd. [1953] SCR 1028; State of
Kerala v. V.R. Kalliyanikutty (1999) 3 SCC 657 : [1999]
B. K. EDUCATIONAL SERVICES PVT. LTD. v. PARAG G

## Text

_Characters 0–39,927 of 79,390. This is a partial read: ask again with offset=39927 for what follows._

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SUPREME COURT REPORTS
[2018] 12 S.C.R.
B. K. EDUCATIONAL SERVICES PRIVATE LIMITED
v.
PARAG GUPTA AND ASSOCIATES
(Civil Appeal No. 23988 of 2017)
OCTOBER 11, 2018
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Insolvency and Bankruptcy Code, 2016 - s.238A (As inserted
by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
w.e.f. 06.06.2018) - s.238A, if retrospective in nature - Held: s.238A
being clarificatory of law and being procedural in nature, must be
held to be retrospective - Amendment of s.238A would not serve its
object unless it is construed as being retrospective, as otherwise,
applications seeking to resurrect time-barred claims would have to
be allowed, not being governed by the law of limitation - Limitation
Act, 1963.
Insolvency and Bankruptcy Code, 2016 - s.238A (As inserted
by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
w.e.f. 06.06.2018) and ss.7 & 9 - Application for initiation of
'Corporate Insolvency Resolution Process' - Whether Limitation Act,
1963 will apply to applications that are made u/s.7 and/or s.9 of
the Code on and from its commencement on 01.12.2016 - Held:
Since, Limitation Act is applicable to applications filed u/ss. 7 and
9 of the Code from the inception of the Code, Art.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 u/Art.137 of the Limitation Act, save and except in those
cases where, in facts of the case, s.5 of the Limitation Act may be
applied to condone delay in filing such application - Limitation
Act, 1963 - Art.137 and s.5.
Remanding the appeals to NCLAT, the Court
HELD: 1.1 In the present case, it is clear that the
amendment of Section 238A Insolvency and Bankruptcy Code,
2016 would not serve its object unless it is construed as being
retrospective, as otherwise, applications seeking to resurrect
794
[2018] 12 S.C.R. 794
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795
time-barred claims would have to be allowed, not being governed
by the law of limitation. [Para 15] [815-D]
1.2 The Insolvency Law Committee Report of March, 2018
reflected that the legislature did not contemplate enabling a
creditor who has allowed the period of limitation to set in to allow
such delayed claims through the mechanism of the Code. The
Code cannot be triggered in the year 2017 for a debt which was
time-barred, say, in 1990, as that would lead to the absurd and
extreme consequence of the Code being triggered by a stale or
dead claim, leading to the drastic consequence of instant removal
of the present Board of Directors of the corporate debtor
permanently, and which may ultimately lead to liquidation and,
therefore, corporate death. This being the case, the expression
"debt due" in the definition sections of the Code would obviously
only refer to debts that are "due and payable" in law, i.e., the
debts that are not time-barred. [Para 21] [821-D-F]
3. It is 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.
[Para 27] [828-B-C]
M.P. Steel Corporation v. CCE (2015) 7 SCC 58; Allied
Motors (P) Ltd. v. CIT (1997) 3 SCC 472 : [1997]
2 SCR 780; Andhra Pradesh Power Coordination
Committee and Ors. v. Lanco Kondapalli Power Ltd.
and Ors. (2016) 3 SCC 468 - relied on.
State of Madhya Pradesh and Anr. v. Bhailal Bhai and
Ors. [1964] 6 SCR 261; Innoventive Industries Ltd. v.
ICICI Bank & Anr. (2018) 1 SCC 407 : [2017]
8 SCR 33; National Sewing Thread Co. Ltd. v. James
Chadwick and Bros. Ltd. [1953] SCR 1028; State of
Kerala v. V.R. Kalliyanikutty (1999) 3 SCC 657 : [1999]
B. K. EDUCATIONAL SERVICES PVT. LTD. v. PARAG GUPTA
AND ASSOCIATES
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SUPREME COURT REPORTS
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2 SCR 372 ; Union of India v. Uttam Steels Ltd. (2015)
13 SCC 209 : [2015] 4 SCR 770; SBI v. V.
Ramakrishnan (2018) SCC Online SC 963; State of
Jharkhand v. Shivam Coke Industries (2011) 8 SCC
656 : [2011] 9 SCR 1110 ; Bombay Dyeing & Mfg. Co.
Ltd. v. State of Bombay [1958] SCR 1122; Bhimsen
Gupta v. Bishwanath Prasad Gupta (2004) 4 SCC 95 :
[2004] 2 SCR 65; Bhogilal Chunilal Pandya v. State
of Bombay [1959] Supp. (1) SCR 310; France B.
Martins v. Mafalda Maria Teresa Rodrigues (1999) 6
SCC 627: [1999] 1 Suppl. SCR 685 - referred to.
In re Sir Harilal Nemchand Gosalia AIR 1950 Bom 74;
Lachmeshwar Prasad Shukul and Ors. v. Keshwar Lal
Chaudhuri and Ors. AIR 1941 FC 5 - referred to.
Case Law Reference
[1964] 6 SCR 261
referred to
Para 4
[2017] 8 SCR 33
referred to
Para 5
[1953] SCR 1028
referred to
Para 10
(2015) 7 SCC 58
relied on
Para 12
[1999] 2 SCR 372
referred to
Para 13
[2015] 4 SCR 770
referred to
Para 14
[1997] 2 SCR 780
relied on
Para 15
[2011] 9 SCR 1110
referred to
Para 17
[1958] SCR 1122
referred to
Para 18
[2004] 2 SCR 65
referred to
Para 20
(2016) 3 SCC 468
relied on
Para 21
[1959] Supp. (1) SCR 310
referred to
Para 23
[1999] 1 Suppl. SCR 685
referred to
Para 24
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 23988
of 2017
From the Judgment and Order dated 07.11.2017 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
Insolvency No. 76 of 2017
WITH
Civil Appeal Nos. 439, 436, 3137, 4979, 5819, 7286 of 2018.
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Mohan Parasaran, Sr. Adv., Joydip Bhattacharya, Abid Ali Beeran
P, Robin R.David, Pritpal Singh, Munawar Naseem, Ms. Ruchi Khurana,
Febin V.Maihe, Dhiraj A. Philip, M/S. Dua Associates, K. Bhimraj
Achary, Abhishek Sarvaria, Sudhansu Palo, Dhruv Guptaa, Apruv,
D. Abhinav Rao, R. Parthaasaraathy, Ashwin Kumar D.S., Ms. Aditi
Dani, D. L. Chidananda, M. A.Venkat Subramanian, Rakesh K. Sharma,
A. Leo George Rozario, Nishant, Sanchit Garga, Pahlad Singh Sharma,
Advs. for the appellant.
Ashish Dholakia, Rohan Chawla, P. S.Sudheer, Rishi Maheshwari,
Ms. Anne Mathew, Ms. Shruti Jose, Tanmay Mehta, Hasan Murtaza,
Advs. for the respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. The present appeals are concerned with
Section 238A of the Insolvency and Bankruptcy Code, 2016 ("Code"),
which was inserted by the Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 with effect from 06.06.2018. The said Section
is as follows:
"238A. Limitation.-The provisions of the Limitation Act, 1963
(36 of 1963) shall, as far as may be, apply to the proceedings or
appeals before the Adjudicating Authority, the National Company
Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt
Recovery Appellate Tribunal, as the case may be."
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
B. K. EDUCATIONAL SERVICES PVT. LTD. v. PARAG GUPTA
AND ASSOCIATES
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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, amounting to
laches and thereby the person forfeited his claim.
69. If there is a delay of more than three years from the date of
cause of action and no laches on the part of the Applicant, the
Applicant can explain the delay. Where there is a continuing
cause of action, the question of rejecting any application on the
ground of delay does not arise.
70. Therefore, if it comes to the notice of the Adjudicating
Authority that the application for initiation of 'Corporate
Insolvency Resolution Process' under section 7 or Section 9 has
been filed after long delay, the Adjudicating Authority may give
opportunity to the Applicant to explain the delay within a reasonable
period to find out whether there are any laches on the part of the
Applicant.
71. The stale claim of dues without explaining 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."
3. By reason of this finding, the order of the Tribunal was set
aside, and the matter was remanded for a hearing on all points other
than the point of limitation.
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4. Learned counsel appearing on behalf of the appellants have
argued, relying upon the Report of the Insolvency Law Committee of
March, 2018, that the object of the Amendment Act which introduced
Section 238A into the Code was to clarify the law and, thus, 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 taking away of the management of the corporate
debtor, which may ultimately result in its corporate death. Also, according
to learned counsel for the appellants, if one were to read the definition of
"Adjudicating Authority" in Section 5(1) of the Code, together with
Sections 408, 424 and 433 of the Companies Act, 2013, it would become
clear that proceedings before the National Company Law Tribunal
("NCLT") arising under the Code would be covered by the Limitation
Act via Section 433 of the Companies Act from the very inception or
commencement of the Code. According to them, it is important to
remember that the Eleventh Schedule to the Code, which made
amendments in various Acts, did not introduce the limitation provision of
the Companies Act so as to govern the Code as it was unnecessary, as
Section 433 applied vide Section 5(1) of the Code read with Section 408
of the Companies Act. In any event, they argued that even on the
assumption that the Limitation Act does not apply to the applications
referred to above, the principle in State of Madhya Pradesh and Anr.
v. Bhailal Bhai and Ors., (1964) 6 SCR 261 has to be followed, and
the doctrine of laches applies. In applying this doctrine, the period
prescribed by the Limitation Act will be taken to be a guide, and any
B. K. EDUCATIONAL SERVICES PVT. LTD. v. PARAG GUPTA
AND ASSOCIATES [R. F. NARIMAN, J.]
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application filed relating to debts that are beyond what is prescribed
under the Limitation Act would be hit by this doctrine in any case.
5. On the other hand, Shri Ashish Dholakia, learned advocate
appearing on behalf of some of the respondents, argued, based upon our
judgment in Innoventive Industries Ltd. v. ICICI Bank & Anr.,
(2018) 1 SCC 407, that the Code is a complete Code dealing with
insolvency and not debt recovery and that, therefore, the periods of
limitation that are stated therein would show that the Limitation Act
would not apply. In any case, as has been held by various judgments of
this Court, the Limitation Act cannot apply to the NCLT as it is a tribunal
and not a court. He cited a number of judgments to point out the
difference between amounts that are "due and payable" as opposed to
amounts that are "due and recoverable". According to him, since the
language used in Section 3(11) is "due" and in Section 3(12), "due and
payable", it would be clear that a time-barred debt would be subsumed
within the said expression as it is not a debt that is "due and recoverable"
under the said 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
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Also, according to the learned advocate, incongruous results would obtain
if we were to hold that Section 433 of the Companies Act, would apply
to provide a period of limitation to the NCLT deciding cases under the
Code. He argued that the National Company Law Appellate Tribunal
("NCLAT") is an appellate tribunal which is common to three statutes,
namely, the Competition Act, 2002, the Companies Act, 2013, and the
Insolvency and Bankruptcy Code, 2016. Under the Competition Act, no
period of limitation is prescribed within which a complaint may be made
to the Competition Commission. Therefore, when the Appellate Tribunal
decides a case under the Competition Act, it will decide the case on
merits despite the period of limitation having elapsed, whereas, if the
argument of the appellants is correct, the same Appellate Tribunal will
decide a case under the Code applying a period of limitation and barring
applications that fall outside such period. This is an incongruous situation
which could not possibly have been intended by the legislature. He also
is a
r
of
ct?
60
433

National
Company
Law
Tribunal
Tribunal under Companies Act,
2013
Yes - Section 433
Adjudicating
Authority
under
Insolvency & Bankruptcy Code,
2016
No**

Securities
Appellate
Tribunal
Appellate
Tribunal
under
Securities & Exchange Board of
India Act, 1992
Yes - Section 15W
Appellate
Tribunal
under
Depositories Act, 1996
Yes - Section 23D
Appellate
Tribunal
under
Securities Contracts (Regulation)
Act, 1956
Yes - Section 22D
Appellate Tribunal under Pension
Fund Regulatory and Development
Authority Act, 2013
No

**Prior
to
the
Insolvency
&
Bankruptcy
(Second
Amendment) Act,
2018

B. K. EDUCATIONAL SERVICES PVT. LTD. v. PARAG GUPTA
AND ASSOCIATES [R. F. NARIMAN, J.]
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went on to argue that Section 238A of the Code could not be retrospective
as it would take away a vested right of the application filed under Section
7 or Section 9 to be decided without applying the Limitation Act pre
06.06.2018. He went on to argue that if the doctrine of laches were to
be applied, it would have to be applied along with other doctrines such as
acquiescence and estoppel on the facts of each case, there being no
hard and fast rule that once a period of limitation was over, the application
must be dismissed. He also relied upon several decisions to buttress his
contentions.
6. Having heard the learned counsel for both sides, it is important
to first set out the reason for the introduction of Section 238A into the
Code. This is to be found in the Report of the Insolvency Law Committee
of March, 2018, 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.1 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 timebarred.2 This requires being read with the definition of 'debt'
and 'claim' in the Code. Further, debts in winding up proceedings
cannot be time-barred,3 and there appears to be no rationale to
exclude the extension of this principle of law to the Code.
28.2 Further, non-application of the law on limitation creates the
following problems: first, it re-opens the right of financial and
operational creditors holding time-barred debts under the
Limitation Act to file for CIRP, the trigger for which is default on
a debt above INR one lakh. The purpose of the law of limitation
1 Ravula Subba Rao and Anr. v. The Commissioner of Income Tax, Madras, (1956) SCR
 577.
2 Punjab National Bank and Ors. v. Surendra Prasad Sinha AIR 1992 SC 1815.
3 Interactive Media and Communication Solution Private Limited v. Go Airlines, 199
 (2013) DLT 267.
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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"4. Though the Code is not a debt recovery law, the
trigger being 'default in payment of debt' renders the exclusion
of the law of limitation counter-intuitive. Second, it re-opens the
right of claimants (pursuant to issuance of a public notice) to file
time-barred claims with the IRP/RP, which may potentially be a
part of the resolution plan. Such a resolution plan restructuring
time-barred debts and claims may not be in compliance with the
existing laws for the time being in force as per section 30(4) of
the Code.
28.3 Given that the intent was not to package the Code as a
fresh opportunity for creditors and claimants who did not exercise
their remedy under existing laws within the prescribed limitation
period, the Committee thought it fit to insert a specific section
applying the Limitation Act to the Code. The relevant entry under
the Limitation Act may be on a case to case basis. It was further
noted that the Limitation Act may not apply to applications of
corporate applicants, as these are initiated by the applicant for
its own debts for the purpose of CIRP and are not in the form of
a creditor's remedy."
The Report of the Committee would indicate that it has applied its mind
to judgments of the NCLT and the NCLAT. It has also applied its mind
to the aspect that the law is a complete Code and the fact that the
intention of such a Code could not have been to give a new lease of life
to debts which are time-barred.
7. We will first take up the position in law of the applicability of
the Limitation Act, on a reading of the Code together with a cognate
legislation, the Companies Act, 2013. Sections 3(6), 3(11), 3(12), and
5(6) of the Code read as follows:
"3. Definitions.-In this Part, unless the context otherwise
requires,-
(6) "claim" means-
(a) a right to payment, whether or not such right is reduced
to judgment, fixed, disputed, undisputed, legal, equitable,
secured or unsecured;
4 Rajinder Singh v. Santa Singh, AIR 1973 SC 2537.
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(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 in the
Code, but defined inter alia in the Companies Act, 2013 shall have the
meanings respectively assigned to them in that Act. Section 5(1) of the
Code defines Adjudicating Authority as follows:
"5. Definitions.-In this Part, unless the context otherwise
requires,-
(1) "Adjudicating Authority", for the purposes of this Part, means
National Company Law Tribunal constituted under section 408
of the Companies Act, 2013 (18 of 2013);"
This Section, therefore, requires that we look at Section 408 of the
Companies Act. Section 408 of the Companies Act states:
"408. Constitution of National Company Law Tribunal.-
The Central Government shall, by notification, constitute, with
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effect from such date as may be specified therein, a Tribunal to
be known as the National Company Law Tribunal consisting of
a President and such number of Judicial and Technical members,
as the Central Government may deem necessary, to be appointed
by it by notification, to exercise and discharge such powers and
functions as are, or may be, conferred on it by or under this Act
or any other law for the time being in force."
It is important to notice that the NCLT is set up to discharge such powers
and functions that are conferred on it not merely under the Companies
Act but also under "any other law for the time being in force". Section
433 of the Companies Act states as follows:
"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."
What is conspicuous by its absence in this Section are the expressions
"under this Act" or "subject to the provisions of this Act". By way of
contrast, Section 424(2) uses the expression "under this Act" as follows:
"424. Procedure before Tribunal and Appellate Tribunal.-
xxx xxx xxx
(2) The Tribunal and the Appellate Tribunal shall have, for the
purposes of discharging their functions under this Act or under
the Insolvency and Bankruptcy Code, 2016, the same powers as
are vested in a civil court under the Code of Civil Procedure,
1908 (5 of 1908) while trying a suit in respect of the following
matters, namely:-
(a) summoning and enforcing the attendance of any person
and examining him on oath;
(b) requiring the discovery and production 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;
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(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 companies, pending immediately
before such date, before any District Court or High Court, shall stand
transferred to the Tribunal and the Tribunal may proceed to deal with
such proceedings from the stage before they are transferred. This Section
is also important in that it indicates that proceedings under the Companies
Act relating to arbitration, compromise, arrangements and reconstruction
and winding up of companies, that were pending before the District
Court or the High Court, may now be transferred to the Tribunal. Each
of these proceedings would directly be governed by the Limitation Act
as they are proceedings before Courts. Obviously, upon transfer of such
proceedings to the Tribunal, it cannot be stated that because these
proceedings are now before the Tribunal, the Limitation Act will cease
to apply. Also, in fresh applications that are made after the Code comes
into force, it cannot be said that to such applications, the Limitation Act
will not apply, but to applications that are transferred from the District
Court or the High Court, the provisions of the Limitation Act will apply.
In particular, winding up proceedings pending before a High Court are
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liable to be transferred to the NCLT for further decision by applying the
Code and not the Companies Act. This becomes clear on a reading of
Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016,
which reads as follows:
"5. Transfer of pending proceedings of Winding up on the
ground of inability to pay debts.-(1) All petitions relating to
winding up of a company under clause (e) of section 433 of the
Act5 on the ground of inability to pay its debts pending before a
High Court, and, where the petition has not been served on the
respondent under rule 26 of the Companies (Court) Rules, 1959
shall be transferred to the Bench of the Tribunal established under
sub-section (4) of Section 419 of the Companies Act, 2013
exercising territorial jurisdiction to be dealt with in accordance
with Part ll of the Code:
 Provided that the petitioner shall submit all information,
other than information forming part of the records transferred in
accordance with rule 7, required for admission of the petition
under sections 7, 8 or 9 of the Code, as the case may be, including
details of the proposed insolvency professional to the Tribunal
upto 15th day of July, 2017, failing which the petition shall 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.
5 Rule 2(2) of the Companies (Transfer of Pending Proceedings) Rules, 2016 defines
the "Act" as meaning the Companies Act, 1956.
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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 of the Letters Patent
would not be attracted to such an appeal preferred under Section 76.
This was negatived by this Court stating:
"......The Trade Marks Act does not provide or lay down any
procedure for the future conduct or career of that appeal in the
High Court, indeed Section 77 of the Act provides that the High
Court can if it likes make rules in the matter. Obviously after the
appeal had reached the High Court it has to be determined
according to the rules of practice and procedure of that Court
and in accordance with the provisions of the charter under which
that Court is constituted and which confers on it power in respect
to the method and manner of exercising that jurisdiction. The
rule is well settled that when a statute directs that an appeal
shall lie to a Court already established, then that appeal must be
regulated by the practice and procedure of that Court. ......
Though the facts of the cases laying down the above rule
were not exactly similar to the facts of the present case, the
principle enunciated therein is one of general application and has
an apposite application to the facts and circumstances of the
present case. Section 76 of the Trade Marks Act confers a right
of appeal to the High Court and says nothing more about it. That
being so, the High Court being seized as such of the appellate
jurisdiction conferred by Section 76 it has to exercise that
jurisdiction in the same manner as it exercises its other appellate
jurisdiction and when such jurisdiction is exercised by a Single
Judge, his judgment becomes subject to appeal under clause 15
of the Letters Patent there being nothing to the contrary in the
Trade Marks Act."
(at 1033-1034)
11. Given the fact that the "procedure" that would apply to the
NCLT would be the procedure contained inter alia in the Limitation
Act, it is clear that the NCLT would have to decide applications made to
it under the Code in the same manner as it exercises its other jurisdiction
under the Companies Act. This being the position in law, it is clear that
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when various provisions of the Companies Act were amended by the
Eleventh Schedule to the Code, it was unnecessary to apply and adapt
Section 433 of the Companies Act to the Code, as was done to various
other Sections of the Companies Act.
12. Coming to the next argument that, in any case, Section 238A,
being clarificatory 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 wellestablished 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. Otherwise the general rule is to make it
retrospective."
55. In answering a question which arose under Section 110-A
of the Motor Vehicles Act, this Court held: (Shanti Misra case
[(1975) 2 SCC 840 : (1976) 2 SCR 266] , SCC p. 846, para 7)
7. "... '(1) Time for the purpose of filing the application under
Section 110-A did not start running before the constitution of
the tribunal. Time had started running for the filing of the suit
but before it had expired the forum was changed. And for the
purpose of the changed forum, time could not be deemed to
have started running before a remedy of going to the new forum
is made available.
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(2) Even though by and large the law of limitation has been
held to be a procedural law, there are exceptions to this principle.
Generally the law of limitation which is in vogue on the date of
the commencement of the action governs it. But there are
certain exceptions to this principle. The new law of limitation
providing a longer period cannot revive a dead remedy. Nor
can it suddenly extinguish a vested right of action by
providing for a shorter period of limitation.'"
(emphasis in original)
56. This statement of the law was referred to with approval in
Vinod Gurudas Raikar v. National Insurance Co. Ltd. [(1991)
4 SCC 333] as follows: (SCC p. 337, para 7)
7. "It is true that the appellant earlier could file an application
even more than six months after the expiry of the period of
limitation, but can this be treated to be a right which the appellant
had acquired. The answer is in the negative. The claim to
compensation which the appellant was entitled to, by reason
of the accident was certainly enforceable as a right. So far the
period of limitation for commencing a legal proceeding is
concerned, it is adjectival in nature, and has to be governed by
the new Act-subject to two conditions. If under the repealing
Act the remedy suddenly stands barred as a result of a shorter
period of limitation, the same cannot be held to govern the
case, otherwise the result will be to deprive the suitor of an
accrued right. The second exception is where the new
enactment leaves the claimant with such a short period for
commencing the legal proceeding so as to make it unpractical
for him to avail of the remedy. This principle has been followed
by this Court in many cases and by way of illustration 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
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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 be condoned under the proviso to Section 110-A(3)."
Both these judgments were referred to and followed in Union
of India v. Harnam Singh [(1993) 2 SCC 162 : 1993 SCC (L&S)
375 : (1993) 24 ATC 92], see para 12.
57. The aforesaid principle is also contained in Section 30(a) of
the Limitation Act, 1963:
30. "Provision for suits, etc., for which the prescribed period
is shorter than the period prescribed by the Indian
Limitation Act, 1908.-Notwithstanding anything contained
in this Act-
(a) any suit for which the period of limitation is shorter than
the period of limitation prescribed by the Indian Limitation
Act, 1908, may be instituted within a period of seven years
next after the commencement of this Act or within the period
prescribed for such suit by the Indian Limitation Act, 1908,
whichever period expires earlier."
58. The reason for the said principle is not far to seek. Though
periods of limitation, being procedural law, are to be applied
retrospectively, yet if a shorter period of limitation is provided by
a later amendment to a statute, such period would render the
vested right of action contained in the statute nugatory as such
right of action would now become time-barred under the amended
provision.
59. This aspect of the matter is brought out rather well in
Thirumalai Chemicals Ltd. v. Union of India [(2011) 6 SCC
739 : (2011) 3 SCC (Civ) 458] as follows: (SCC pp. 748-49,
paras 22-26)
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22. "Law is well settled that the manner in which the appeal
has to be filed, its form and the period within which the same
has to be filed are matters of procedure, while the right
conferred on a party to file an appeal is a substantive right.
The question is, while dealing with a belated appeal under
Section 19(2) of FEMA, the application for condonation of
delay has to be dealt with under the first proviso to sub-section
(2) of Section 52 of FERA or under the proviso to sub-section
(2) of Section 19 of FEMA. For answering that question it is
necessary to examine the law on the point.
Substantive and procedural law
23. Substantive law refers to a body of rules that creates,
defines and regulates rights and liabilities.