BABULAL VARDHARJI GURJAR v. VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR.

INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

42. 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. (emphasis in bold supplied) C

23Copy pinpoint23. After the aforesaid decisions dated 31.08.2017 in Innoventive Industries and dated 11.10.2018 in B.K. Educational Services, this Court again examined the overall scheme and spirit of the provisions of IBC in the case of Swiss Ribbons (supra) on 25.01.2019. The relevant enunciations in Swiss Ribbons have already been noticed hereinbefore. D

24Copy pinpoint24. Thereafter, the case of K. Sashidhar (supra) was decided on 05.02.2019. Therein, the principal issue related with the dispensation governing the process of approval or rejection of resolution plan by the Committee of Creditors33 but, having regard to the variety of contentions urged, this Court took note of the decisions elaborately dealing with the legislative history of the Code including that in Innoventive Industries E (supra). During the course of submissions, the said decision in B.K. Educational Services was also cited and hence, the same was referred to and the ratio therein was explained in the following passage: “78. As regards the decision in B.K. Educational, the Court was called upon to consider the question as to whether the Limitation F 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 1-12-2016 till 6-6-2018. That question was examined in the context of Section 238-A inserted in the I&B Code by the self-same Amendment Act of 2018. The Court after adverting to the G contents of the report of the Insolvency Law Committee of March 2018 and other provisions of the Code and other enactments, opined that Section 238-A was clarificatory in nature and being a procedural law, came to hold that it had 33 ‘CoC’ for short. H

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A retrospective effect. The Court held that taking any other view would result in an incongruous situation as the provisions of the Limitation Act would apply in some set of cases to be decided by the same Tribunal and not in other set of cases. Besides, the Court adverted to the principle that right to sue accrues on the date when default occurs B and if the default occurred even three years prior to the date of filing of the application, the same cannot be treated as “debt that is due and payable” or “debt” due.” (emphasis in bold supplied)

25Copy pinpoint25. As noticed, the abovementioned decision in K. Sashidhar was rendered on 05.02.2019 wherein, the principles in B.K. Educational Services were undoubtedly restated by this Court. However, thereafter, the case of Jignesh Shah (supra) came to be decided by a three-Judge Bench of this Court on 25.05.2019. A particular passage in this three- Judge Bench decision in Jignesh Shah (as occurring in paragraph 21, D SCC p. 770) has been relied upon by both the parties to assert that the law so declared by this Court supports their case. 25.1 In order to comprehend the meaning and import of the referred observations in paragraph 21 of Jignesh Shah, the text thereof is required to be read in its context. Therefore, it shall be worthwhile to take note of E the relevant factual and background aspects of the case of Jignesh Shah. Therein, IL&FS Financial Services Ltd. (‘IL&FS’) had filed a winding up petition against La-Fin Financial Services Pvt. Ltd. (‘La- Fin’) which was transferred to National Company Law Tribunal, Mumbai Branch and then, was heard as Section 7 application under the Code. F The background had been that on 20.08.2009, a share-purchase agreement was executed, whereby IL&FS agreed to purchase 442 lakhs equity shares of MCX Stock Exchange Limited (‘MCX-SX’) from Multi- Commodity Exchange India Limited (‘MCX’). Pursuant to this agreement, La-Fin, as a group company of MCX, issued a letter of undertaking to IL&FS on 20.08.2009 stating that La-Fin or its appointed nominees would offer to purchase from IL&FS the shares of MCX-SX after a period of one year, but before three years, from the date of investment. Thereafter, on 03.08.2012, IL&FS proposed to sell its entire holding of shares in MCX-SX and called upon La-Fin to purchase these shares in terms of the undertaking. On 16.08.2012, La-Fin replied with denial of any legal or contractual obligation to buy the aforesaid shares.

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

Ultimately, on 19.06.2013, IL&FS filed Suit No. 449 of 2013 in the A Bombay High Court for specific performance of the letter of undertaking by La-Fin or, in the alternative, for damages while stating that the cause of action arose on 16.08.2012 when La-Fin refused to honour its obligation. Interim injunction was granted in the said suit on 13.10.2014. Thereafter, on 03.11.2015, a statutory notice under Sections 433 and B 434 of the Companies Act, 1956 was issued by IL&FS to La-Fin while referring to the attachment of the properties of La-Fin by Economic Offences Wing of the Mumbai Police and stating that La-Fin was obviously in no financial position to pay the amount it owed to IL&FS. This notice was followed up by the winding up petition that was filed on 21.10.2016 by IL&FS against La-Fin in the Bombay High Court under C Section 433(e) of the Companies Act, 1956. As noticed, this company petition was transferred to NCLT and was heard as an application under Section 7 of the Code. This transferred petition was admitted by NCLT while forming the opinion that as per the share-purchase agreement and the letter of understanding, a financial debt had been incurred by La-Fin. D The appeal filed by the appellant Jignesh Shah was also dismissed by NCLAT. Hence, the orders passed by NCLT and NCLAT were challenged in this Court. A writ petition was also filed challenging the constitutionality of certain provisions of the Code. This has been the backdrop in which, the statutory bar of limitation against the petition filed by IL&FS was argued before this Court with reference to Section E 238-A of the Code and the decision in B.K. Educational Services (supra). 25.2. This Court accepted the contentions urged on behalf of the appellants and while reproducing the relevant passages from B.K. Educational Services, held that the bar of limitation was operating over the application filed by IL&FS in the following words:- “12. This judgment clinches the issue in favour of the Petitioner/ Appellant. With the introduction of Section 238A into the Code, the provisions of the Limitation Act apply to applications made under the Code. Winding up petitions filed before the Code came into force are now converted into petitions filed under the Code. What has, therefore, to be decided is whether the Winding up Petition, on the date that it was filed, is barred by lapse of time. If such petition is found to be time-barred, then Section 238A of the Code will not give a new lease of life to such a time-barred petition. H

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A On the facts of this case, it is clear that as the Winding up Petition was filed beyond three years from August, 2012 which is when, even according to IL & FS, default in repayment had occurred, it is barred by time.” (emphasis in bold supplied) B 25.3. Though with the aforesaid finding, the matter stood concluded that the petition filed by IL&FS was barred by limitation but thereafter, the Court also proceeded to examine another line of submissions of the parties as regards effect of the suit for recovery over the proceedings under Section 433 of the Companies Act, 1956, where it C was argued on behalf of the appellants that existence of such a suit cannot be construed as having either revived the period of limitation or having extended it, insofar as concerning the proceeding for winding up. This Court accepted the said contention of the appellants and in that context, made the observations that are relied upon by the parties and read as under:- D “21. The aforesaid judgments correctly hold that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy of a winding- up proceeding. In law, when time begins to run, it can only be extended in the manner provided in the Limitation Act. For example, an acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period, but a suit for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding-up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding- up proceeding.” 25.4. Moreover, after reading the provisions contained in Sections 433(e) and 434 of the Companies Act, 1956, for winding up in case of company being unable to pay its debts, this Court made yet further observations in Jignesh Shah (supra) that the trigger for limitation in such an action occurs when a default takes place after which the debt remains outstanding; and that date alone is relevant for reckoning the period of limitation. After reproducing Section 433(e) and 434 of the Companies Act, 1956, this Court said,-

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

“28. A reading of the aforesaid provisions would show that the starting point of the period of limitation is when the company is unable to pay its debts, and that Section 434 is a deeming provision which refers to three situations in which a Company shall be deemed to be “unable to pay its debts” Under Section 433(e). In the first situation, if a demand is made by the creditor to whom the company is indebted in a sum exceeding one lakh then due, requiring the company to pay the sum so due, and the company has for three weeks thereafter “neglected to pay the sum”, or to secure or compound for it to the reasonable satisfaction of the creditor. “Neglected to pay” would arise only on default to pay the sum due, which would clearly be a fixed date depending on the facts of each case. Equally in the second situation, if execution or other process is issued on a decree or order of any Court or Tribunal in favour of a creditor of the company, and is returned unsatisfied in whole or in part, default on the part of the debtor company occurs. This again is clearly a fixed date depending on the facts of each case. And in the third situation, it is necessary to prove to the “satisfaction of the Tribunal” that the company is unable to pay its debts. Here again, the trigger point is the date on which default is committed, on account of which the Company is unable to pay its debts. This again is a fixed date that can be proved on the facts of each case. Thus, Section 433(e) read with Section 434 of the Companies Act, 1956 would show that the trigger point for the purpose of limitation for filing of a winding up petition Under Section 433(e) would be the date of default in payment of the debt in any of the three situations mentioned in Section 434.” F (emphasis in bold supplied)

26Copy pinpoint26. Before examining the purport, effect and impact of the principles emanating from the aforesaid decision in Jignesh Shah, it is rather expedient to take note of the enunciations in a few later decisions of this Court, on the very same issue concerning the operation of law of limitation G in regard to the application under Section 7 of the Code, which have been cited in the present appeal.

27Copy pinpoint27. One such decision had been in the case of Vashdeo R. Bhojwani (supra) that was rendered on 02.09.2019. In that case, a default of Rs. 6.7 crores was found against the corporate debtor whose account H

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was declared NPA by the lender bank on 23.12.1999 and ultimately, a A recovery certificate dated 24.12.2001 was issued for this amount. Later on, the financial creditor filed an application under Section 7 of the Code before the Adjudicating Authority on 21.07.2017 claiming that the said amount together with interest, which kept ticking from 1998, was payable to it as assignee. The application under Section 7 was admitted on B 05.03.2018 by the Adjudicating Authority stating that ‘as the default continued, no period of limitation would attach and the petition would, therefore, have to be admitted’. The Appellate Tribunal dismissed the appeal against the aforesaid order of admission while stating that ‘since the cause of action in the present case was continuing, no limitation period would attach’; and while further holding that the C recovery certificate of 2001 plainly showed that there was a default and there was no statable defence. After taking note of the relevant facts and the foundation of the orders passed by the Adjudicating Authority and the Appellate Tribunal, this Court disapproved the same while finding that the case was covered by the decision in B.K. Educational Services D (supra) and while reiterating the passage above-noted. To get out of the rigour of the ratio of B.K. Educational Services, a reference was made to the provisions of the Limitation Act providing for fresh period of limitation in the case of continuing cause of action and it appears that Section 23 of the old Limitation Act of 1908 was referred to34. This Court rejected such contention while observing as under: E

34 We have indicated the provision contained in Limitation Act, 1908 for the reason that in the cited decision, Section 23 has been referred and the decision of this Court reported in [1959] Supp. (2) SCR 476 has been cited. The corresponding provision, as regards continuing cause of action for specific category of cases is now contained in F Section 22 of the Limitation Act, 1963 which is akin to the earlier Section 23 of the Limitation Act,1908 but with slight modifications. For the sake of reference, these provisions are extracted as under:

Section 23 of the Limitation Act, 1908 “Continuing breaches and wrongs - In the case of a continuing breach of contract and in the case of a continuing wrong independent of contract, a fresh period of limitation G begins to run at every moment of the time during which the breach or the wrong, as the case may be, continues.”

Section 22 of the Limitation Act, 1963 “Continuing breaches and torts. - In the case of a continuing breach of contract or in the case of a continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues.” H

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

“4. In order to get out of the clutches of para 27, it is urged that A Section 23 of the Limitation Act would apply as a result of which limitation would be saved in the present case. This contention is effectively answered by a judgment of three learned Judges of this Court in Balakrishna Savalram Pujari and Others vs. Shree Dhyaneshwar Maharaj Sansthan & Others, [1959] Supp. (2) B SCR 476. In this case, this Court held as follows: “ … In dealing with this argument it is necessary to bear in mind that Section 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues then the act constitutes a continuing wrong. In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury. It is only in regard to acts which can be properly characterised as continuing wrongs that Section 23 can be invoked. Thus considered it is difficult to hold that the trustees’ act in denying altogether the alleged rights of the Guravs as hereditary worshippers and in claiming and obtaining possession from them by their suit in 1922 was a continuing wrong. The decree obtained by the trustees in the said litigation had injured effectively and completely the appellants’ rights though the damage caused by the said decree subsequently continued.” Following this judgment, it is clear that when the recovery certificate dated 24-12-2001 was issued, this certificate injured effectively and completely the appellant’s rights as a result of which limitation would have begun ticking. G

5. This being the case, and the claim in the present suit being time-barred, there is no doubt that is due and payable in law. We allow the appeal and set aside the orders of NCLT and NCLAT. There will be no order as to costs.” (emphasis in bold supplied) H

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28Copy pinpoint28. A few days after the decision in Vashdeo R. Bhojwani, a three-Judge Bench of this Court had another occasion to apply and explain the ratio in B.K. Educational Services. That was in the case of Gaurav Hargovindbhai Dave (supra), decided on 18.09.2019. Therein, the financial creditor had stated in the relevant column of Form No. 1 of the application under Section 7 of the Code the date of default to be the date B of NPA i.e., 21.07.2011. The application under Section 7 was filed on 03.10.2017. The Adjudicating Authority applied Article 62 of the Limitation Act and reached to the conclusion that since the limitation period was twelve years from the date on which money sued has become due, the claim was within limitation and hence, admitted the application. The C NCLAT applied another reasoning that the time of limitation would begin to run only from 01.12.2016, the date on which the Code was brought into force. This Court took note of the contentions of both the parties and while accepting the submissions that time began to run on 21.07.2011 (the date of NPA), held that the application filed under Section 7 was time-barred. The relevant passages of the said decision in Gaurav D Hargovindbhai Dave (supra) could be usefully reproduced as under:- “4. Mr Aditya Parolia, learned counsel appearing on behalf of the appellant has argued that Article 137 being a residuary article would apply on the facts of this case, and as right to sue accrued only on and from 21.07.2011, three years having elapsed since then in 2014, the Section 7 application filed in 2017 is clearly out of time. He has also referred to our judgment in B.K. Educational Services Private Limited v. Parag Gupta and Associates, 2018 SCC OnLine SC 1921 in order to buttress his argument that it is Article 137 of the Limitation Act which will apply to the facts of this case.

5. Mr Debal Banerjee, learned Senior Counsel, appearing on behalf of the respondents, countered this by stressing, in particular, para 7 of B.K. Educational Services Private Limited (supra) and reiterated the finding of the NCLT that it would be Article 62 of the Limitation Act that would be attracted to the facts of this case. He further argued that, being a commercial Code, a commercial interpretation has to be given so as to make the Code workable.

6. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

that it would only apply to suits. The present case being A “an application” which is filed under Section 7, would fall only within the residuary Article 137. As rightly pointed out by learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21.07.2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr Banerjee’s reliance on para 7 of B.K. Educational Services Private Limited (supra), suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred.

7. This being the case, we fail to see how this para could possibly help the case of the respondents. Further, it is not for us to interpret, commercially or otherwise, articles of the Limitation Act when it is clear that a particular article gets attracted. It is well settled that there is no equity about limitation - judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature.

8. This being the case, the appeal is allowed and the judgments of the NCLT and NCLAT are set aside.” (emphasis in bold supplied) E

29Copy pinpoint29. Close on the heels of Gaurav Hargovindbhai Dave (supra), this Court dealt with similar issue yet again in the case of Sagar Sharma (supra), decided on 30.09.2019. Therein, apart from disapproving the proposition that the date of commencement of the Code could be the starting point of limitation (as noticed hereinabove), this Court again pointed out the fallacy in applying the period of limitation related to mortgage liability to the application under Section 7 of the Code and said, – “2…..However, we find in the impugned judgment that Article 62 (erroneously stated to be Article 61) was stated to be attracted to the facts of the present case, considering that there was a deed of mortgage which was executed between the parties in this case. We may point out that an application under Section 7 of the Code does not purport to be an application to enforce any mortgage liability. It is an application made by a financial creditor stating that a default, as defined under the Code, has been made, H

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A which default amounts to Rs 1,00,000 (Rupees one lakh) or more which then triggers the application of the Code on settled principles that have been laid down by several judgments of this Court.” (emphasis in bold supplied)

30Copy pinpoint30. When Section 238-A of the Code is read with the above- B noted consistent decisions of this Court in Innoventive Industries, B.K. Educational Services, Swiss Ribbons, K. Sashidhar, Jignesh Shah, Vashdeo R. Bhojwani, Gaurav Hargovindbhai Dave and Sagar Sharma respectively, the following basics undoubtedly come to the fore: (a) that the Code is a beneficial legislation intended to put the corporate debtor back on its feet and is not a mere money recovery legislation; (b) that CIRP is not intended to be adversarial to the corporate debtor but is aimed at protecting the interests of the corporate debtor; (c) that intention of the Code is not to give a new lease of life to debts which are time-barred; (d) that the period of limitation for an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Limitation Act and is, therefore, three years from the date when right to apply accrues; (e) that the trigger for initiation of CIRP by a financial creditor is default on the part of the corporate debtor, that is to say, that the right to apply under the Code accrues on the date when default occurs; (f) that default referred to in the Code is that of actual non-payment by the corporate debtor when a debt has become due and payable; and (g) that if default had occurred over three years prior to the date of filing of the application, the application would be time-barred save and except in those cases where, on facts, the delay in filing may be condoned; and (h) an application under Section 7 of the F Code is not for enforcement of mortgage liability and Article 62 of the Limitation Act does not apply to this application. Whether Section 18 Limitation Act could be applied to the present case

31Copy pinpoint31. While the aforesaid principles remain crystal clear with the consistent decisions of this Court, the only area of dispute, around which the contentions of learned counsel for the parties have revolved in the present case, is about applicability of Section 18 of the Limitation Act and effect of the observations occurring in paragraph 21 of the decision in Jignesh Shah (supra). H

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

32Copy pinpoint32. We have noticed all the relevant and material observations A and enunciations in the case of Jignesh Shah hereinbefore. Prima facie, it appears that illustrative reference to Section 18 of the Limitation Act, in paragraph 21 of the decision in Jignesh Shah, had only been in relation to the suit or other proceedings, wherever it could apply and where the period of limitation could get extended because of acknowledgment of liability. Noticeably, in contradistinction to the proceeding of a suit, this B Court observed that a suit for recovery, which is a separate and independent proceeding distinct from the remedy of winding up would, in no manner, impact the limitation within which the winding up proceeding is to be filed35. It is difficult to read the observations in the aforesaid paragraph 21 of Jignesh Shah to mean that the ratio of B.K. C Educational Services has, in any manner, been altered by this Court. As noticed, in B.K. Educational Services, it has clearly been held that the limitation period for application under Section 7 of the Code is three years as provided by Article 137 of the Limitation Act, which commences from the date of default and is extendable only by application of Section 5 of Limitation Act, if any case for condonation of delay is made out. D The findings in paragraph 12 in Jignesh Shah makes it clear that the Court indeed applied the principles so stated in B.K. Educational Services, and held that the winding up petition filed beyond three years from the date of default was barred by time. 32.1. Even in the later decisions, this Court has consistently applied E the declaration of law in B.K. Educational Services (supra). As noticed, in the case of Vashdeo R. Bhojwani (supra), this Court rejected the contention suggesting continuing cause of action for the purpose of application under Section 7 of the Code while holding that the limitation started ticking from the date of issuance of recovery certificate dated 24.12.2001. Again, in the case of Gaurav Hargovindbhai Dave (supra), F where the date of default was stated in the application under Section 7 of the Code to be the date of NPA i.e., 21.07.2011, this Court held that the limitation began to run from the date of NPA and hence, the application filed under Section 7 of the Code on 03.10.2017 was barred by limitation. 32.2. In view of the above, we are not inclined to accept the G arguments built up by the respondents with reference to one part of observations occurring in paragraph 21 of the decision in Jignesh Shah (supra). 35 What has been observed in relation to the proceeding for winding up, perforce, applies to the application seeking initiation of CIRP under IBC. H

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33Copy pinpoint33. Apart from the above and even if it be assumed that the principles relating to acknowledgement as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said provision and principles come in operation in the present case nor they enure to the benefit of respondent No. 2 for the fundamental reason that in the B application made before NCLT, the respondent No. 2 specifically stated the date of default as ‘8.7.2011 being the date of NPA’. It remains indisputable that neither any other date of default has been stated in the application nor any suggestion about any acknowledgement has been made. As noticed, even in Part-V of the application, the respondent No. C 2 was required to state the particulars of financial debt with documents and evidence on record. In the variety of descriptions which could have been given by the applicant in the said Part-V of the application and even in residuary Point No. 8 therein, nothing was at all stated at any place about the so called acknowledgment or any other date of default. 33.1. Therefore, on the admitted fact situation of the present case, where only the date of default as ‘08.07.2011’ has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgement or any other date of default, in our view, the submissions sought to be developed on behalf of the respondent No. 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, the respondent No. 2 never came out with any pleading other than stating the date of default as ‘08.07.2011’ in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgement. In this view of the matter, reliance on the decision in Mahaveer Cold Storage Pvt. Ltd. does not advance the cause of the respondent No. 2.

34Copy pinpoint34. The submissions made on behalf of respondents that the rules of limitation are not meant to destroy the rights of the parties and reference to the decision in N. Balakrishnan (supra) are also misplaced. H

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

Application of the rules of limitation to CIRP (by virtue of Section 238- A A of the Code read with the above-referred consistent decisions of this Court) does not, in any manner, deal with any of the rights of respondent No. 2; it only bars recourse to the particular remedy of initiation of CIRP under the Code. Equally, the other submissions made on behalf of the respondents about any stringent application of the law of limitation which was introduced to the Code only after filing of the application by respondent No. 2; or about the so called prejudice likely to be caused to other banks and financial institutions are also of no substance, particularly in the light of the principles laid down and consistently followed by this Court right from the decision in B.K. Educational Services (supra). These contentions have only been noted to be rejected. Needless to add that when the application made by the respondent No. 2 for CIRP is barred by limitation, no proceedings undertaken therein after the order of admission could be of any effect. All such proceedings remain non- est and could only be annulled. The reasonings of NCLAT

35Copy pinpoint35. The foregoing discussion practically concludes the principal part of contentions urged in this matter but, to put the record straight, we may also deal with the reasonings adopted by NCLAT in the impugned order dated 14.05.2019. As noticed hereinbefore, though NCLAT has referred to the pendency of the application under Section 19 of the Act of 1993 as also the fact that corporate debtor had made a prayer for E OTS in the month of July, 2018 but, has not recorded any specific finding about the effect of these factors. Only two reasons essentially appear to have weighed with NCLAT to hold that the application in question is within limitation: One, that the right to apply under Section 7 of the Code accrued to the respondent financial creditor on 01.12.2016 when the Code came into force; and second, that the period of limitation for recovery of possession of the mortgaged property is twelve years. The reasonings so adopted by NCLAT do not stand in conformity with the law declared by this Court and could only be disapproved.

36Copy pinpoint36. The question as to whether date of enforcement of the Code (i.e., 01.12.2016) provides the starting point of limitation for an application under Section 7 of the Code and hence, the application in question, made in the year 2018, is within limitation, is not even worth devoting much time. A bare look at paragraph 21 of the impugned order leaves nothing to guess that such observations by the Appellate Tribunal had only been assumptive in nature without any foundation and without any basis. There is nothing in the Code to even remotely indicate if the period of limitation H

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A for the purpose of an application under Section 7 is to commence from the date of commencement of the Code itself. Similarly, nothing provided in the Limitation Act could be taken as the basis to support the proposition so stated by the Appellate Tribunal. In fact, such observations had been in the teeth of law declared by this Court in the case of B. K. Educational Services (supra). B 36.1. It appears that at the given point of time, NCLAT had been readily adopting such a proposition in other cases too, so as to treat similar applications within limitation. This approach of NCLAT was specifically disapproved by this Court in Sagar Sharma (supra) where, after observing that in B. K. Educational Services (supra) it had already been made clear that the date of the Code’s coming into force on 01.12.2016 was wholly irrelevant to the triggering of any limitation period for the purposes of the Code, this Court said,- “3. Article 141 of the Constitution of India mandates that our judgments are followed in letter and spirit. The date of coming into force of the IB Code does not and cannot form a trigger point of limitation for applications filed under the Code. Equally, since “applications” are petitions which are filed under the Code, it is Article 137 of the Limitation Act which will apply to such applications.”

37Copy pinpoint37. The other observations as made and the reasoning as adopted by the Appellate Tribunal in paragraphs 29 and 30 of the impugned order, that the property having been mortgaged, the claim is not barred by limitation because of the period of limitation of twelve years with regard to mortgaged property, had again been erroneous and do not stand in conformity with the dictum of this Court. 37.1. The Appellate Tribunal was conscious of the decision of this F Court in B. K. Educational Services (supra) wherein it had been held in no uncertain terms that the limitation provided in Article 137 governs the application under Section 7 of the Code. When Article 137, being the residuary provision on the period of limitation for “other applications” is held applicable by this Court for the purpose of reckoning the period of G limitation for an application under Section 7 of the Code, it remains rather inexplicable as to how the Appellate Tribunal could have applied any other Article of Limitation Act (and that too relating to suits) for the purpose of such an application? 37.2. In the totality of circumstances, we are also constrained to refer to paragraph 24 of the very same order wherein, the Appellate H

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INDUSTRIES PVT. LTD. [DINESH MAHESHWARI, J.]

Tribunal has noticed its own decision in the case of Binani Industries, A holding that the period of limitation prescribed in the First Division of the Schedule to the Limitation Act (providing limitation period for suits) is not applicable to the proceedings under the Code. However, the observations and findings in the later part of the impugned order are contrary even to those occurring in the said paragraph 24 of the very same order. B 37.3. It again appears that in other cases too, similar reasoning prevailed with the Adjudicating Authorities as also the Appellate Tribunal, where the Articles of the Limitation Act relating to the suits concerning mortgaged property (and thereby the period of limitation of twelve years) were sought to be applied to hold that similar applications under Section C 7 of the Code were not barred by limitation. Such propositions were specifically disapproved by a three-Judge Bench of this Court in the case of Gaurav Hargovindbhai Dave (supra) decided on 18.09.2019. As noticed hereinbefore, in Gaurav Hargovindbhai Dave (supra) this Court disapproved the approach of Adjudicating Authority in applying Article 62 of the Limitation Act to such an application under Section 7 of D the Code with the observations that Article 62 is out of way, for it applies only to suits; and application under Section 7 falls within the ambit of residuary Article 137. In Sagar Sharma (supra), this Court again pointed out the fallacy in applying the period of limitation related to mortgage liability for the purpose of application under Section 7 of the Code. E 37.4. In view of the above, there remains nothing to doubt that the Appellate Tribunal had been in error in applying the period of limitation provided for mortgage liability for the purpose of limitation applicable to the application in question. The observations and findings in paragraphs 29 and 30 of the impugned order are also required to be disapproved. Summation F

38Copy pinpoint38. The discussion foregoing leads to the inescapable conclusion that the application made by the respondent No. 2 under Section 7 of the Code in the month of March 2018, seeking initiation of CIRP in respect of the corporate debtor with specific assertion of the date of default as 08.07.2011, is clearly barred by limitation for having been filed much G later than the period of three years from the date of default as stated in the application. The NCLT having not examined the question of limitation; the NCLAT having decided the question of limitation on entirely irrelevant considerations; and the attempt on the part of the respondents to save the limitation with reference to the principles of acknowledgment having been found unsustainable, the impugned orders deserve to be set aside H

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A and the application filed by the respondent No. 2 deserves to be rejected as being barred by limitation. Other proceedings not to be affected

39Copy pinpoint39. Before concluding on this matter, we would hasten to observe that admittedly, at the time of moving of the application under Section 7 B of the Code by the respondent No. 2, a petition under Section 19 of the Act of 1993 was pending before DRT against the corporate debtor. In view of admission of the application under Section 7 of the Code by NCLT, the said petition under Section 19 of the Act of 1993 (and any other pending matter against the corporate debtor) could not have proceeded during the period of moratorium in terms of Section 14 of the C Code. Now, by virtue of this judgment, the said application under Section 7 of the Code shall stand rejected for being barred by limitation and all the proceedings thereunder shall stand annulled. As a necessary consequence, the moratorium in terms of Section 14 of the Code shall get lifted and, therefore, those stalled proceedings should now be taken up and dealt with by the respective Courts/Tribunals/Authorities, of course, strictly in accordance with law. In the interest of justice, we also make it clear that the observations in this judgment are relevant only in regard to the issue determined that the application under Section 7 of the Code is barred by limitation and not beyond. In other words, nothing in this judgment shall have bearing on any other proceeding that shall be dealt with on its own merits and in accordance with law. Conclusion

40Copy pinpoint40. In view of the above, this appeal is allowed to the extent indicated and with the observations foregoing. The impugned orders dated 14.05.2019 as passed by the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) Insolvency No. 549 of 2018 and dated 09.08.2018 as passed by the National Company Law Tribunal, Mumbai Bench in CP(IB)-488/I&BP/MB/2018 are set aside; and the application made by the respondent No. 2 under Section 7 of the Code, seeking initiation of Corporate Insolvency Resolution Process in respect of respondent No. 1 is rejected for being barred by limitation. G Consequently, all the proceedings undertaken in the said application under Section 7 of the Code, including appointment of IRP, stand annulled. No costs.

Ankit Gyan Appeal allowed.