# SESH NATH SINGH & ANR v. BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD. AND ANR

- **Citation:** [2021] 3 S.C.R. 806
- **Court:** Supreme Court of India
- **Decided:** 2021-03-22
- **Case number:** Civil Appeal No. 9198 of 2019
- **Bench:** Indira Banerjee, Hemant Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sesh-nath-singh-anr-v-baidyabati-sheoraphuli-co-operative-bank-ltd-and-anr-35027
- **Pages:** 53

## Headnote

Insolvency and Bankruptcy Code, 2016: Object and Reasons
of the enactment of the Code - Held : Is to consolidate and amend
the laws relating to reorganisation and insolvency resolution of
corporate persons, partnership firms and individuals in a time bound
manner, for maximization of the value of the assets of such persons,
to promote entrepreneurship, availability of credit and to balance
the interest of all the stakeholders.
Insolvency and Bankruptcy Code, 2016: s.7 - Application
under - When any corporate debtor commits a default, a financial
creditor, an operational creditor or the corporate debtor itself may
initiate corporate insolvency resolution process in respect of such
corporate debtor, in such manner as provided in Chapter II of the
IBC - A financial creditor may either by itself or jointly with other
financial creditors, as may be notified by the Government, file an
application for initiation of the corporate insolvency resolution
process against a corporate debtor before the Adjudicating
Authority, when a default has occurred - The trigger point for an
application under s.7 of the IBC is the occurrence of a default.
Insolvency and Bankruptcy Code, 2016: Applicability of
Limitation Act to application made under the Code before the NCLT
- Held: There is no specific period of limitation prescribed in the
Limitation Act, 1963 for an application under the IBC before the
NCLT - An application for which no period of limitation is provided
anywhere else in the Schedule, is governed by Art.137 of the Schedule
to the Limitation Act - Under Art.137 of the Schedule to the
Limitation Act, the period of limitation prescribed for such an
application is three years from the date of accrual of the right to
apply - Limitation Act, 1963 - Art.137.
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807
Limitation Act, 1963: s.5 - Delay in filing appeal/any
application - s.5 of the Limitation Act provides that any appeal or
any application, other than an application under any of the
provisions of Order XXI of the Code of Civil Procedure, 1908, may
be admitted after the prescribed period of limitation, if the appellant
or the applicant satisfies the Court, that he had sufficient cause for
not preferring the appeal or making the application within such
period - Explanation in s.5 of the Limitation Act clarifies that, the
fact that the appellant or the applicant may have been misled by
any order, practice or judgment of the High Court in ascertaining
or computing the prescribed period, may be sufficient cause within
the meaning of this Section.
Limitation Act, 1963: s.5 - Condonation of delay in filing an
application or appeal - The condition precedent for condonation
of the delay in filing an application or appeal, is the existence of
sufficient cause - Whether the explanation furnished for the delay
would constitute 'sufficient cause' or not would depend upon facts
of each case - There cannot be any straight jacket formula for
accepting or rejecting the explanation furnished by the applicant/
appellant for the delay in taking steps - Acceptance of explanation
furnished should be the rule and refusal an exception, when no
negligence or inaction or want of bona fides can be imputed to the
defaulting party.
Limitation Act, 1963: s.5 - Requirement to file application,
not mandatory - s.5 of the Limitation Act does not speak of any
application - Although, it is the general practice to make a formal
application under s.5, in order to enable the Court or Tribunal to
weigh the sufficiency of the cause for the inability of the appellant/
applicant to approach the Court/Tribunal within the time prescribed
by limitation, there is no bar to exercise by the Court/Tribunal of its
discretion to condone delay, in the absence of a formal application
- A plain reading of s.5 makes it amply clear that it is not mandatory
to file an application in writing before relief can be granted under
the said section - Had such an application been mandatory, s.5 of
the Limitation Act would have exp

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[2021] 3 S.C.R.
 [2021] 3 S.C.R. 806
806
SESH NATH SINGH & ANR.
v.
BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK
LTD. AND ANR.
(Civil Appeal No. 9198 of 2019)
MARCH 22, 2021
[INDIRA BANERJEE AND HEMANT GUPTA, JJ.]
Insolvency and Bankruptcy Code, 2016: Object and Reasons
of the enactment of the Code - Held : Is to consolidate and amend
the laws relating to reorganisation and insolvency resolution of
corporate persons, partnership firms and individuals in a time bound
manner, for maximization of the value of the assets of such persons,
to promote entrepreneurship, availability of credit and to balance
the interest of all the stakeholders.
Insolvency and Bankruptcy Code, 2016: s.7 - Application
under - When any corporate debtor commits a default, a financial
creditor, an operational creditor or the corporate debtor itself may
initiate corporate insolvency resolution process in respect of such
corporate debtor, in such manner as provided in Chapter II of the
IBC - A financial creditor may either by itself or jointly with other
financial creditors, as may be notified by the Government, file an
application for initiation of the corporate insolvency resolution
process against a corporate debtor before the Adjudicating
Authority, when a default has occurred - The trigger point for an
application under s.7 of the IBC is the occurrence of a default.
Insolvency and Bankruptcy Code, 2016: Applicability of
Limitation Act to application made under the Code before the NCLT
- Held: There is no specific period of limitation prescribed in the
Limitation Act, 1963 for an application under the IBC before the
NCLT - An application for which no period of limitation is provided
anywhere else in the Schedule, is governed by Art.137 of the Schedule
to the Limitation Act - Under Art.137 of the Schedule to the
Limitation Act, the period of limitation prescribed for such an
application is three years from the date of accrual of the right to
apply - Limitation Act, 1963 - Art.137.
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Limitation Act, 1963: s.5 - Delay in filing appeal/any
application - s.5 of the Limitation Act provides that any appeal or
any application, other than an application under any of the
provisions of Order XXI of the Code of Civil Procedure, 1908, may
be admitted after the prescribed period of limitation, if the appellant
or the applicant satisfies the Court, that he had sufficient cause for
not preferring the appeal or making the application within such
period - Explanation in s.5 of the Limitation Act clarifies that, the
fact that the appellant or the applicant may have been misled by
any order, practice or judgment of the High Court in ascertaining
or computing the prescribed period, may be sufficient cause within
the meaning of this Section.
Limitation Act, 1963: s.5 - Condonation of delay in filing an
application or appeal - The condition precedent for condonation
of the delay in filing an application or appeal, is the existence of
sufficient cause - Whether the explanation furnished for the delay
would constitute 'sufficient cause' or not would depend upon facts
of each case - There cannot be any straight jacket formula for
accepting or rejecting the explanation furnished by the applicant/
appellant for the delay in taking steps - Acceptance of explanation
furnished should be the rule and refusal an exception, when no
negligence or inaction or want of bona fides can be imputed to the
defaulting party.
Limitation Act, 1963: s.5 - Requirement to file application,
not mandatory - s.5 of the Limitation Act does not speak of any
application - Although, it is the general practice to make a formal
application under s.5, in order to enable the Court or Tribunal to
weigh the sufficiency of the cause for the inability of the appellant/
applicant to approach the Court/Tribunal within the time prescribed
by limitation, there is no bar to exercise by the Court/Tribunal of its
discretion to condone delay, in the absence of a formal application
- A plain reading of s.5 makes it amply clear that it is not mandatory
to file an application in writing before relief can be granted under
the said section - Had such an application been mandatory, s.5 of
the Limitation Act would have expressly provided so.
Limitation Act, 1963: s.14(2) - Exclusion of period for
commutation of limitation period - Held: In computing the period
of limitation for any application, the time during which the petitioner
SESH NATH SINGH v. BAIDYABATI SHEORAPHULI COOPERATIVE BANK LTD.
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had been prosecuting, with due diligence, another civil proceeding,
whether in a court of first instance, or of appeal or revision, against
the same party, for the same relief, shall be excluded, where such
proceeding is prosecuted in good faith in a Court which, from defect
of jurisdiction or other cause of like nature, is unable to entertain
it - The conditions for exclusion are that the earlier proceedings
should have been for the same relief, the proceedings should have
been prosecuted diligently and in good faith and the proceedings
should have been prosecuted in a forum which, from defect of
jurisdiction or other cause of a like nature, was unable to entertain
it - Where such proceedings have ended, the outer limit to claim
exclusion under s.14 would be the date on which the proceedings
ended.
Limitation Act, 1963: s.14 - Applicability to an application
under s.7 of the IBC - Held: Legislature has in its wisdom chosen
not to make the provisions of the Limitation Act verbatim applicable
to proceedings in NCLT/NCLAT, but consciously used the words 'as
far as may be' - The words 'as far as may be' are not meant to be
otiose - Those words are to be understood in the sense in which
they best harmonise with the subject matter of the legislation and
the object which the Legislature has in view - The Courts would not
give an interpretation to those words which would frustrate the
purposes of making the Limitation Act applicable to proceedings in
the NCLT/NCLAT 'as far as may be' - In
other
words,
the
provisions of the Limitation Act would apply mutatis mutandis to
proceedings under the IBC in the NCLT/NCLAT - Insolvency and
Bankruptcy Code, 2016 -s.238A - Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.
Insolvency and Bankruptcy Code, 2016: s.238A - Words 'as
far as may be' - meaning of - Held: The use of words 'as far as may
be', occurring in s.238A of the IBC tones down the rigour of the
words 'shall' in the said Section which is normally considered as
mandatory - The expression 'as far as may be' is indicative of the
fact that all or any of the provisions of the Limitation Act may not
apply to proceedings before the Adjudicating Authority (NCLT) or
the Appellate authority (NCLAT) if they are patently inconsistent
with some provisions of the IBC - At the same time, the words 'as
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far as may be' cannot be construed as a total exclusion of the
requirements of the basic principles of s.14 of the Limitation Act,
but permits a wider, more liberal, contextual and purposive
interpretation by necessary modification, which is in harmony with
the principles of the said Section.
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.13(4) - The Chief
Metropolitan Magistrate or the Judicial Magistrate, as the case
may be, exercising powers under s.14 of the SARFAESI Act, functions
as a Civil Court/Executing Court - Proceedings under the SARFAESI
Act would, therefore, be deemed to be civil proceedings in a Court
- Moreover, proceedings under the SARFAESI Act under s.13(4)
are appealable to the DRT under s.18 of the SARFAESI Act -
Argument that proceedings under the SARFAESI Act would not qualify
for exclusion under s.14 of the Limitation Act, because those
proceedings were not conducted in a Civil Court, cannot be
sustained.
Limitation Act, 1963: s.14 - Keeping in mind the scope and
ambit of proceedings under the IBC before the NCLT/NCLAT, the
expression 'Court' in s.14(2) would be deemed to be any forum for
a civil proceeding including any Tribunal or any forum under the
SARFAESI Act - Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002.
Limitation Act, 1963: s.5 and s.14 - s.5 and s.14 of the
Limitation Act are not mutually exclusive - Even in a case where
s.14 does not strictly apply, the principles of s.14 can be invoked to
grant relief to an applicant under s.5 of the Limitation Act by
purposively construing 'sufficient cause' - It is well settled that
omission to refer to the correct section of a statute does not vitiate
an order - Delay can be condoned irrespective of whether there is
any formal application, if there are sufficient materials on record
disclosing sufficient cause for the delay - NCLAT rightly refused to
stay the proceedings before the NCLT - The judgment and order of
the NCLT does not warrant interference.
Dismissing the appeal, the Court
HELD: 1. As stated in its Object and Reasons, the objective
of the IBC is to consolidate and amend the laws relating to
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reorganisation and insolvency resolution of corporate persons,
partnership firms and individuals in a time bound manner, for
maximization of the value of the assets of such persons, to
promote entrepreneurship, availability of credit and to balance
the interest of all the stakeholders. An effective legal framework
for timely resolution of insolvency and bankruptcy would support
development of credit markets and encourage entrepreneurship.
It would also ease business, and facilitate more investments
leading to higher economic growth and development. The IBC
seeks to designate the NCLT and DRT as the Adjudicating
Authorities for resolution of insolvency, liquidation and
bankruptcy. [Para 35][829-A-C]
2.1 Section 6 of the IBC provides that, when any corporate
debtor commits a default, a financial creditor, an operational
creditor or the corporate debtor itself may initiate corporate
insolvency resolution process in respect of such corporate debtor,
in such manner as provided in Chapter II of the IBC. A financial
creditor may either by itself or jointly with other financial
creditors, as may be notified by the Government, file an application
for initiation of the corporate insolvency resolution process
against a corporate debtor before the Adjudicating Authority,
when a default has occurred. The trigger point for an application
under Section 7 of the IBC is the occurrence of a default.
[Paras 36, 38][829-C-D; 831-F-G
Innoventive Industries Limited v. ICICI Bank and
Another (2018) 1 SCC 407 : [2017] 8 SCR 33 - relied
on.
2.2 The Limitation Act 1963, has been enacted to
consolidate and amend the law of limitation of suits and other
proceedings and for purposes connected therewith. The Limitation
Act applies to "suits and other proceedings and for purposes
connected therewith" as stated in its preamble. The expression
"other proceedings" are necessarily proceedings arising out of
and/or related to suits. Various statutes have, however, adopted
the provisions of the Limitation Act, by incorporation or
reference, either in its entirety or to a limited extent. For example,
Section 37 of the Arbitration Act, 1940 provided that all the
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provisions of the Indian Limitation Act, 1908 would apply to
arbitrations as they applied to proceedings in Court. Section 433
of the Companies Act, 2013 provides that the provisions of the
Limitation Act, 1963 shall, as far as may be, apply to proceedings
or appeals before the Tribunal or the Appellate Tribunal, as the
case may be. [Paras 45, 47][835-E-F; 836-A-B]
K. Venkateswara Rao And Anr. v. Bekkam Narasimha
Reddi & Ors. AIR 1969 SC 872 : [1969] SCR 679;
Nityananda M. Joshi and Others v. The Life Insurance
Corporation of India andothers (1969) 2 SCC
199:[1970] 1 SCR 396 - referred to.
2.3 The insolvency Committee of the Ministry of Corporate
Affairs, Government of India, in a report published in March 2018,
stated that the intent of the IBC could not have been to give a
new lease of life to debts which were already time barred.
Thereafter Section 238A was incorporated in the IBC by the
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
(Act 26 of 2018), with effect from 6th June 2018. Section 238A
reads that the provisions of the Limitation Act, 1963 shall, as far
as may be, apply to proceedings or appeals inter alia before the
NCLT/NCLAT. Section 238 gives overriding effect to the IBC,
notwithstanding anything inconsistent therewith contained in any
other law, for the time being in force, or any instrument having
effect, by virtue of any such law. [Paras 48, 49, 50][836-C-F]
3.1 There is no specific period of limitation prescribed in
the Limitation Act, 1963 for an application under the IBC before
the NCLT. An application for which no period of limitation is
provided anywhere else in the Schedule, is governed by Article
137 of the Schedule to the Limitation Act. Under Article 137 of
the Schedule to the Limitation Act, the period of limitation
prescribed for such an application is three years from the date of
accrual of the right to apply. [Para 51][836-G]
3.2 There can be no dispute with the proposition that the
period of limitation for making an application under Section 7 or
9 of the IBC is three years from the date of accrual of the right to
sue, that is, the date of default. [Para 52][836-H]
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Gaurav Hargovindbhai Dave v. Asset Reconstruction
Company (India) Ltd. and Anr. (2019) 10 SCC 572:
[2019] 13 SCR 224 - relied on.
3.3 Section 5 of the Limitation Act provides that any appeal
or any application, other than an application under any of the
provisions of Order XXI of the Code of Civil Procedure, 1908,
may be admitted after the prescribed period of limitation, if the
appellant or the applicant satisfies the Court, that he had sufficient
cause for not preferring the appeal or making the application within
such period. The explanation in Section 5 of the Limitation Act
clarifies that, the fact that the appellant or the applicant may have
been misled by any order, practice or judgment of the High Court
in ascertaining or computing the prescribed period, may be
sufficient cause within the meaning of this Section. [Para 53]
[837-B-D]
B.K. Educational Services Private Limited v. Parag
Gupta and Associates (2019) 11 SCC 633 : [2018] 12
SCR 794 - relied on.
Radha Export (India) Private Limited v. K.P. Jayaram
and Anr. (2020) 10 SCC 538; Babulal Vardharji Gurjar
v. Veer Gurjar Aluminium Industries Pvt. Ltd. and
another (2020) 15 SCC 1 - referred to.
4.1 Section 238A of the IBC provides that the provisions
of the Limitation Act shall, as far as may be, apply to proceedings
before the Adjudicating Authority(NCLT) and the NCLAT. The
NCLT/NCLAT has the discretion to entertain an application/
appeal after the prescribed period of limitation. The condition
precedent for exercise of such discretion is the existence of
sufficient cause for not preferring the appeal and/or the application
within the period prescribed by limitation. [Paras 58, 59]
[838-D-E]
Ramlal Motilal and Chhotelal v. Rewa Coalfields Ltd.
AIR 1962 SC 361 : [1962] SCR 762; Madras High
Court in Krishna v. Chattappan 1890 ILR Mad 269;
Shakuntla Devi Jain vs. Kuntal Kumar AIR 1969 SC
575 : [1969] SCR1006; State of West Bengal v.
Administrator, Howrah Municipality and Others (1972)
1 SCC 366: [1972] 2 SCR 874 - relied on.
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4.2 The condition precedent for condonation of the delay
in filing an application or appeal, is the existence of sufficient
cause. Whether the explanation furnished for the delay would
constitute 'sufficient cause' or not would dependent upon facts
of each case. There cannot be any straight jacket formula for
accepting or rejecting the explanation furnished by the applicant/
appellant for the delay in taking steps. Acceptance of explanation
furnished should be the rule and refusal an exception, when no
negligence or inaction or want of bona fides can be imputed to
the defaulting party. [Para 61][839-A-B]
4.3 It is true that a valuable right may accrue to the other
party by the law of limitation, which should not lightly be defeated
by condoning delay in a routine manner. At the same time, when
stakes are high, the explanation should not be rejected by taking
a pedantic and hyper technical view of the matter, causing thereby
irreparable loss and injury to the party against whom the lis
terminates. The courts are required to strike a balance between
the legitimate rights and interests of the respective parties.
[Para 62][839-A-B]
4.4 Section 5 of the Limitation Act, 1963 does not speak of
any application. The Section enables the Court to admit an
application or appeal if the applicant or the appellant, as the case
may be, satisfies the Court that he had sufficient cause for not
making the application and/or preferring the appeal, within the
time prescribed. Although, it is the general practice to make a
formal application under Section 5 of the Limitation Act, 1963, in
order to enable the Court or Tribunal to weigh the sufficiency of
the cause for the inability of the appellant/applicant to approach
the Court/Tribunal within the time prescribed by limitation, there
is no bar to exercise by the Court/Tribunal of its discretion to
condone delay, in the absence of a formal application. [Para
63][839-D-F]
5.1 Section 238A of the IBC makes the provisions of the
Limitation Act, as far as may be, applicable to proceedings before
the NCLT and the NCLAT. The IBC does not exclude the
application of Section 6 or 14 or 18 or any other provision of the
Limitation Act to proceedings under the IBC in the NCLT/
NCLAT. All the provisions of the Limitation Act are applicable
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to proceedings in the NCLT/NCLAT, to the extent feasible.
There is no reason why Section 14 or 18 of the Limitation Act,
1963 should not apply to proceeding under Section 7 or Section
9 of the IBC. [Paras 67, 68][840-G-H; 841-A]
5.2 Section 14(2) of the Limitation Act provides that in
computing the period of limitation for any application, the time
during which the petitioner had been prosecuting, with due
diligence, another civil proceeding, whether in a court of first
instance, or of appeal or revision, against the same party, for the
same relief, shall be excluded, where such proceeding is
prosecuted in good faith in a Court which, from defect of
jurisdiction or other cause of like nature, is unable to entertain
it. The conditions for exclusion are that the earlier proceedings
should have been for the same relief, the proceedings should
have been prosecuted diligently and in good faith and the
proceedings should have been prosecuted in a forum which, from
defect of jurisdiction or other cause of a like nature, was unable
to entertain it. [Para 70][841-D-E]
State of Goa v. Western Builders (2006) 6 SCC 239:
[2006] 3 Suppl. SCR 288; Consolidated Engineering
Enterprises v. Principal Secretary, Irrigation
Department and Ors. (2008) 7 SCC 169 : [2008] 5 SCR
1108; Commissioner, M.P. Housing Board and Ors. v.
Mohanlal & Co. (2016) 14 SCC 199 - relied on.
Union of India v. Popular Construction Co. (2001) 8
SCC 470 : [2001] 3 Suppl. SCR 619 - referred to.
6.1 There can be little doubt that Section 14 applies to an
application under Section 7 of the IBC. The IBC does not exclude
the operation of Section 14 of the IBC. The question is whether
prior proceedings under the SARFAESI Act do not qualify for
the exclusion of time under Section 14, inasmuch as they are not
civil proceedings in a Court. [Para 75][845-E-F]
6.2 Even if it were to be held that the benefit of Section 14
would be available to an applicant under IBC, for proceedings
initiated bona fide and prosecuted with due diligence under the
SARFAESI Act, another question raised in this appeal is, whether
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exclusion of time under Section 14 of the Limitation Act, would
only be available if the proceedings which could not be
entertained for defect of jurisdiction, or other cause of a like
nature, had ended, in view of the Explanation at the end of Section
14, which says that for the purposes of the said Section, the day
on which the earlier proceeding was instituted and the day on
which it ended shall both be counted for exclusion of time.
[Para 76][845-G-H; 846-A]
6.3 Section 14 of the Limitation Act is to be read as a whole.
A conjoint and careful reading of Sub-Sections (1), (2) and (3) of
Section 14 makes it clear that an applicant who has prosecuted
another civil proceeding with due diligence, before a forum which
is unable to entertain the same on account of defect of jurisdiction
or any other cause of like nature, is entitled to exclusion of the
time during which the applicant had been prosecuting such
proceeding, in computing the period of limitation. The substantive
provisions of Sub-sections (1), (2) and (3) of Section 14 do not
say that Section 14 can only be invoked on termination of
the earlier proceedings, prosecuted in good faith. [Para 77]
[846-B-D]
Bihta Co-operative Development Cane Marketing Union
Ltd. and Anr. v. Bank of Bihar and Ors. AIR 1967 SC
389: 1967 SCR 848; Sundaram Pillai and Others v.
V.R. Pattabiraman and Others (1985) 1 SCC 591 :
[1985] 2 SCR 643 - referred to.
7.1 Explanation (a) cannot be construed in a narrow pedantic
manner to mean that Section 14 can never be invoked until and
unless the earlier proceedings have actually been terminated for
want of jurisdiction or other cause of such nature. Explanation
(a), which is clarificatory, only restricts the period of exclusion to
the period between the date of initiation and the date of
termination. An applicant cannot claim any further exclusion.
[Para 81][847-E]
7.2 Section 14 excludes the time spent in proceeding in a
wrong forum, which is unable to entertain the proceedings for
want of jurisdiction, or other such cause. Where such proceedings
have ended, the outer limit to claim exclusion under Section 14
would be the date on which the proceedings ended. In the instant
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case, the proceedings under the SARFAESI Act may not have
formally been terminated. The proceedings have however been
stayed by the High Court by an interim order, on the prima facie
satisfaction that the proceedings initiated by the financial creditor,
which is a cooperative bank, was without jurisdiction. The writ
petition filed by the Corporate Debtor was not disposed of even
after almost four years. The carriage of proceedings was with the
Corporate Debtor. The interim order was still in force, when
proceedings under Section 7 of the IBC were initiated, as a result
of which the Financial Creditor was unable to proceed further
under the SARFAESI Act. [Paras 84, 85][848-C-E]
7.3 In the instant case, even if it is assumed that the right
to sue accrued on 31.3.2013 when the account of Corporate
Debtor was declared NPA, the financial creditor initiated
proceedings under SARFAESI Act on 18th January 2014, that is
the date on which notice under Section 13(2) was issued,
proceeded with the same, and even took possession of the assets,
until the entire proceedings were stayed by the High Court by
its order dated 24th July 2017. The proceedings under Section 7
of the IBC were initiated on 10th July 2018. [Para 86][848-F]
7.4 Since the proceedings in the High Court were still
pending on the date of filing of the application under Section 7 of
the IBC in the NCLT, the entire period after the initiation of
proceedings under the SARFAESI Act could be excluded. If the
period from the date of institution of the proceedings under the
SARFAESI Act till the date of filing of the application under
Section 7 of the IBC in the NCLT is excluded, the application in
the NCLT is well within the limitation of three years. Even if the
period between the date of the notice under Section 13(2) and
date of the interim order of the High Court staying the
proceedings under the SARFAESI Act, on the prima facie ground
of want of jurisdiction is excluded, the proceedings under Section
7 of IBC are still within limitation of three years. [Para 87]
[848-G-H; 849-A-B]
7.5 An Adjudicating Authority under the IBC is not a
substitute forum for a collection of debt in the sense it cannot
reopen debts which are barred by law, or debts, recovery whereof
have become time barred. The Adjudicating Authority does not
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resolve disputes, in the manner of suits, arbitrations and similar
proceedings. However, the ultimate object of an application under
Section 7 or 9 of the IBC is the realization of a 'debt' by invocation
of the Insolvency Resolution Process. In any case, since the cause
of action for initiation of an application, whether under Section 7
or under Section 9 of the IBC, is default on the part of the
Corporate Debtor, and the provisions of the Limitation Act 1963,
as far as may be, have been applied to proceedings under the
IBC, there is no reason why Section 14 or 18 of the Limitation
Act would not apply for the purpose of computation of the period
of limitation. [Para 88][849-B-D]
8.1 Unlike statutes like the Arbitration Act, 1940 and the
Arbitration and Conciliation Act 1996, which make the provisions
of the Limitation Act, as they apply to Court proceedings, also
applicable to arbitration proceedings, Section 238A of the IBC
makes the Limitation Act applicable to proceedings in NCLT/
NCLAT 'as far as may be' and/or in other words, to the extent
they may be applied. [Para 90][849-F-G]
8.2 Legislature has in its wisdom chosen not to make the
provisions of the Limitation Act verbatim applicable to
proceedings in NCLT/NCLAT, but consciously used the words
'as far as may be'. The words 'as far as may be' are not meant to
be otiose. Those words are to be understood in the sense in
which they best harmonise with the subject matter of the
legislation and the object which the Legislature has in view. The
Courts would not give an interpretation to those words which
would frustrate the purposes of making the Limitation Act
applicable to proceedings in the NCLT/NCLAT 'as far as may
be'. In other words, the provisions of the Limitation Act would
apply mutatis mutandis to proceedings under the IBC in the
NCLT/NCLAT. [Paras 91, 92][849-H; 850-A-C]
New India Sugar Mill Limited v. Commissioner of Sales
Tax, Bihar AIR 1963 SC 1207 : [1963] Suppl. SCR
459; Busching Schmitz Private Ltd. v. P.T. Menghani
AIR 1977 SC 1569 : [1977] 3 SCR 312 - relied on.
8.3 The Court should adopt an object oriented approach
keeping in mind the principle that legislative futility is to be ruled
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out so long as interpretative possibility permits. The object
oriented approach cannot be carried to the extent of doing
violence to the plain language used, by rewriting the section or
substituting words in place of the actual words used by
Legislature. [Para 93][850-D]
9.1 The use of words 'as far as may be', occurring in Section
238A of the IBC tones down the rigour of the words 'shall' in the
aforesaid Section which is normally considered as mandatory. The
expression 'as far as may be' is indicative of the fact that all or
any of the provisions of the Limitation Act may not apply to
proceedings before the Adjudicating Authority (NCLT) or the
Appellate authority (NCLAT) if they are patently inconsistent
with some provisions of the IBC. At the same time, the words
'as far as may be' cannot be construed as a total exclusion of the
requirements of the basic principles of Section 14 of the Limitation
Act, but permits a wider, more liberal, contextual and purposive
interpretation by necessary modification, which is in harmony with
the principles of the said Section. [Para 94][850-E-G]
9.2 If, in the context of proceedings under Section 7 or 9 of
the IBC, Section 14 were to be interpreted with rigid and pedantic
adherence to its literal meaning, to hold that only civil proceedings
in Court would enjoy exclusion, the result would be that an
applicant would not even be entitled to exclusion of the period of
time spent in bona fide invoking and diligently pursuing an earlier
application under the same provision of IBC, for the same relief,
before an Adjudicating Authority, lacking territorial jurisdiction
This could not possibly have been the legislative intent.
[Para 95][850-G-H; 851-A-B]
S.A.L. Narayan Rao and Anr. v. Ishwarlal Bhagwandas
and Anr. AIR 1965 SC 1818 :[1966] SCR 190 -
followed.
9.3 The proceedings under the SARFAESI Act, 2002 are
undoubtedly civil proceedings. [Para 96][851-B]
9.4 There is no rationale for the view that the proceedings
initiated by a secured creditor against a borrower under the
SARFAESI Act for taking possession of its secured assets, were
intended to be excluded from the category of civil proceedings.
[Para 97][851-H; 852-A]
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United Bank of India v. Satyawati Tandon and Ors.
(2010) 8 SCC 110 : [2010] 9 SCR 1 - referred to.
9.5 Even though Section 13 of the SARFAESI Act enables
a secured creditor to enforce security interest created in its favour,
without the intervention of the Court or Tribunal, the SARFAESI
Act does not exclude the intervention of Courts and/or Tribunals
altogether. [Para 98][852-D-E]
10.1 The Chief Metropolitan Magistrate or the Judicial
Magistrate, as the case may be, exercising powers under Section
14 of the SARFAESI Act, functions as a Civil Court/Executing
Court. Proceedings under the SARFAESI Act would, therefore,
be deemed to be civil proceedings in a Court. Moreover,
proceedings under the SARFAESI Act under Section 13(4) are
appealable to the DRT under Section 18 of the SARFAESI Act.
Argument that proceedings under the SARFAESI Act would not
qualify for exclusion under Section 14 of the Limitation Act,
because those proceedings were not conducted in a Civil Court,
cannot be sustained. [Para 99][857-C-D]
10.2 Another civil proceeding whether in a Court of first
instance or of appeal or revision, against the party, for the same
relief, would have to be construed to include any civil Proceeding
in a forum, whether of first instance, or appellate, or revisional,
against the same party for similar relief, more so, having regard
to the language and tenor of Section 238A of the Limitation Act
which applies the provisions of the Limitation Act "as far as may
be", to proceedings in the NCLT/NCLAT. [Para 100][857-E]
10.3 Keeping in mind the scope and ambit of proceedings
under the IBC before the NCLT/NCLAT, the expression 'Court'
in Section 14(2) would be deemed to be any forum for a civil
proceeding including any Tribunal or any forum under the
SARFAESI Act. [Para 101][857-F]
10.4 In any case, Section 5 and Section 14 of the Limitation
Act are not mutually exclusive. Even in a case where Section 14
does not strictly apply, the principles of Section 14 can be invoked
to grant relief to an applicant under Section 5 of the Limitation
Act by purposively construing 'sufficient cause'. It is well settled
that omission to refer to the correct section of a statute does not
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vitiate an order. At the cost of repetition it is reiterated that delay
can be condoned irrespective of whether there is any formal
application, if there are sufficient materials on record disclosing
sufficient cause for the delay. [Para 102][857-G-H; 858-A]
10.5 The NCLAT rightly refused to stay the proceedings
before the NCLT. The judgment and order of the NCLT does not
warrant interference. [Para 103][858-A]
Mobilox Innovations Private Limited v. Kirusa Software
Private Limited
(2018) 1 SCC 353 : [2017]
10 SCR 1006; M/s. Reliance Asset Reconstruction
Company Limited v. M/s. Hotel Poonja International
Private Limited 2020 SCC Online NCLAT 920 -
referred to.
Case Law Reference
[2017] 10 SCR 1006
referred to
Para 28
[2017] 8 SCR 33
relied on
Para 39
[1969] SCR 679
referred to
Para 46
[1970] 1 SCR 396
referred to
Para 46
[2019] 13 SCR 224
relied on
Para 52
[2018] 12 SCR 794
relied on
Para 54
(2020) 10 SCC 538
referred to
Para 55
(2020) 15 SCC 1
referred to
Para 56
[1962] SCR 762
relied on
Para 60
[1969] SCR 1006
relied on
Para 60
[1972] 2 SCR 874
relied on
Para 60
[2006] 3 Suppl. SCR 288
relied on
Para 71
[2001] 3 Suppl. SCR 619
referred to
Para 71
[2008] 5 SCR 1108
relied on
Para 72
(2016) 14 SCC 199
relied on
Para 74
[1967] SCR 848
referred to
Para 78
[1985] 2 SCR 643
referred to
Para 79
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[1963] Suppl. SCR 459
relied on
Para 92
[1977] 3 SCR 312
relied on
Para 93
[1966] SCR 190
followed
Para 96
[2010] 9 SCR 1
referred to
Para 97
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9198
Of 2019.
From the Judgment and Order dated 22.11.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal(AT)
(Insolvency) No. 672 of 2019.
Siddhartha Dave, Sr. Adv., Ms. Pallavi Langar, Ms. Poushali
Banerjee, Aditya Vaibhav Singh, Advs for the appellants.
Pranay Agarwal, Ms. Ankita Baid, Rajeev Singh, J. Sai Deepak,
Aavinash Kumar Sharma, Umang Srivastava, Ms. Anjali Gupta, Rajeev
Singh, Advs. for the respondents.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
This appeal under Section 62 of the Insolvency and Bankruptcy
Code 2016, hereinafter referred to as the 'IBC', is against a judgment
and order dated 22nd November 2019, passed by the National Company
Law Appellate Tribunal (NCLAT), dismissing Company Appeal (AT)
(Insolvency) No.672 of 2019, filed by the Appellants, challenging an
order dated 25th April 2019, of the National Company Law Tribunal
(NCLT), Kolkata Bench, admitting the application filed by the
Respondent No.1 as Financial Creditor, under Section 7 of the IBC being
CP(IB) No.1202/KB/2018, thereby initiating the Corporate Insolvency
Resolution Process (CIRP) against the Corporate Debtor, Debi Fabtech
Private Ltd.
2. The Corporate Debtor was inter alia engaged in the business
of export of textile and garments. On or about 8th February 2012, the
Corporate Debtor requested the Financial Creditor for cash credit facility
of Rs.1,00,00,000/- (Rupees One Crore).
3. By a letter of sanction dated 15th February, 2012, the Financial
Creditor granted Cash Credit Facility of Rs.1,00,00,000/- to the Corporate
Debtor, after which a Cash Credit Account No.482 was opened in the
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name of the Corporate Debtor. The Corporate Debtor duly executed a
hypothecation agreement with the Financial Creditor on 17th February,
2012.
4. According to the Financial Creditor, in May 2012 itself the
Corporate Debtor defaulted in repayment of its debt to the Financial
Creditor, in terms of cash credit facility granted by the Financial Creditor
to the Corporate Debtor. The said Cash Credit Account No.482 became
irregular. The Financial Creditor declared the said Account of the
Corporate Debtor a Non Performing Asset (NPA) on 31st March 2013.
5. On or about 18th January 2014, the Financial Creditor issued
notice to the Corporate Debtor under Section 13(2) of the Securitization
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 hereinafter referred to, in short as the 'SARFAESI
Act', calling upon the Corporate Debtor to discharge in full, its outstanding
liability of Rs.1,07,88,536.00 inclusive of interest as on 28.09.2013 to the
Financial Creditor within sixty days from the date of notice, failing which
action would be taken under Section 13(4) of the said Act.
6. The Corporate Debtor made a representation dated 3.3.2014
to the Financial Creditor under Section 13(3A) of the SARFAESI Act
objecting to the notice under Section 13(2) of the SARFAESI Act.
7. By a letter dated 15th July 2014, the Financial Creditor rejected
the aforesaid representation of the Corporate Debtor and once again
requested Corporate Debtor to clear the outstanding amount of
Rs.1,07,88,536.00 as claimed in the notice dated 18th January 2014 under
Section 13(2) of the SARFAESI Act, within 15 days from the date of
receipt of the said letter, with further interest and other charges till date
of payment and to regularize the Cash Credit Account No.482 in order
to avail better services from the Financial Creditor.
8. On 13th December 2014, the Financial Creditor issued a notice
being Ref No. HC/1180/14-15 dated 13.12.2014 to the Corporate Debtor
under Section 13(4)(a) of the SARFAESI Act, calling upon the Corporate
Debtor to handover peaceful possession of the secured immovable assets
as detailed in the schedule, failing which the Financial Creditor would be
forced to seek the assistance of the District Magistrate, Hooghly for
taking possession of the aforesaid secured assets.
9. On or about 19th December 2014, the Corporate Debtor filed
writ application in the Calcutta High Court under Article 226 of the
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Constitution of India being W.P. No.33799 (W) of 2014 inter alia
challenging the said notices issued by the Financial Creditor under Section
13(2) and 13(4) of the SARFAESI Act.
10. While the said writ petition was pending in the High Court, the
Authorized Officer of the Financial Creditor issued a notice dated 24th
December 2014, notifying the Corporate Debtor, the guarantors and the
public in general, that the Authorized Officer of the Financial Creditor
had taken possession of the secured assets of the Corporate Debtor, as
specified in the Schedule to the said notice, on 24th December 2014,
under Section 13(4) of the SARFAESI Act.
11. On 11th May 2017, the District Magistrate Hooghly issued an
order under the SARFAESI Act for possession by the Financial Creditor
of the assets of the Corporate Debtor hypothecated to the Financial
Creditor.
12. On 24th July 2017, the High Court passed an interim order
restraining the Financial Creditor from taking steps against the Corporate
Debtor under the SARFAESI Act until further orders. The High Court
was of the prima facie view that the Financial Creditor being a
Cooperative Bank, it could not invoke the provisions of the SARFAESI
Act. It appears that the Writ Petition is still pending consideration in the
High Court.
13. On or about 10th July 2018, the Financial Creditor filed an
application in the Kolkata Bench of NCLT for initiation of the Corporate
Insolvency Resolution Process (CIRP) against the Corporate Debtor
under Section 7 of the IBC.
14. Notice of the petition under Section 7 of the IBC was duly
served on the Corporate Debtor. The Corporate Debtor appeared through
one Sesh Nath Singh, being the Appellant No.1, and opposed the petition.
On behalf of the Corporate Debtor, it was contended that the Writ Petition
filed by the Corporate Debtor, challenging the maintainability of the
proceedings under the SARFAESI Act, was pending adjudication in the
High Court.
15. The maintainability of the application under Section 7 of IBC
was also opposed before the NCLT, on the purported ground that a
Special Officer had been appointed as Administrator over the Financial
Creditor, only to hold elections. Such Special Officer could not, therefore,
initiate any proceeding on behalf of the Financial Creditor. The Corporate
SESH NATH SINGH v. BAIDYABATI SHEORAPHULI COOPERATIVE BANK LTD.