WHETHER LIMITATION ACT,1963 IS APPLICABLE TO IBC ,2016?

WHETHER LIMITATION ACT,1963 IS APPLICABLE TO IBC ,2016?

LIMITATION ACT ,1963

The Limitation Act, 1963, proposes a time limit for diverse suits within which an injured party can approach the court. The purpose of limitation laws is as follows:

·       To force a litigant to be meticulous in pursuing remedies in a Court of law; and

·       To circuitously penalize those who are not active i.e. who did not approach the Court and/ or did not initiate legal action to recuperate their dues.

The importance of the Limitation Act is not to extinguish the privileges but it is originated on public policy setting a life period for legal relief for over-all welfare. An aggrieved person who did not quickly react to claim his privileges should lose them as shale claims makes the court no time to attend sharply to more current and crucial matters.

Article 137 of the Limitation Act 1963

According to the Article 137 of the Limitation Act 1963 ‘The period of limitation for any other application for which no period of limitation is provided elsewhere in this Division is three years and the limitation commences from the date when the right to apply accrues’.

Deem Roll-Tech Limited v. M/S R.L. Steel & Energy Ltd

In Deem Roll-Tech Limited v. M/S R.L. Steel & Energy Ltd, NCLT held that in the absence of any specific bar in the IBC to the application of the Limitation Act, 1963 coupled with the provisions of Sec. 433 of the Act as contained in the Companies Act 2013 which makes Limitation Act applicable to this Tribunal the debt as claimed by the petitioner is barred by limitation and hence cannot be the basis for invoking IBC before this Tribunal"

In Black Pearls Hotels Pvt. Ltd. vs Planet M Retail Ltd 

The consideration that arose was whether the application preferred by Appellant-operational creditor (Black pearls hotel Pvt ltd.) was barred by limitation. The appellant contended that Insolvency and Bankruptcy code, 2016 came into force with effect from 1st December, 2016. Therefore the right to apply under I&B code accrues only on or after 1st December, 2016, and not before the said date thus the application cannot be said to be barred by limitation.

The judgment of the Appellate tribunal was appealed by the corporate debtor before the Supreme Court by way of a civil appeal, the Supreme Court dismissed the appeal while keeping the question on the applicability of Limitation Act to the Code open, which once again leaves the question unanswered. 

NCLAT in Neelkanth Township held that limitation Act does not applicable to IBC 2016

Nevertheless, the position seems to have now been changed with the ruling given by Appellate Tribunal NCLAT in Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Limited.25The NCLAT held that there is nothing on the record that Limitation Act, 1963 is applicable to I&B Code. There is no provision of the I&B Code which suggest that the Law of Limitation is applicable.

B.K Educational Services Pvt Ltd vs. Parag Gupta & Associates, 

Where Supreme Court stayed the order of National Company Law Appellate Tribunal which stated that the provisions of the limitation act were not applicable for initiation of Corporate Insolvency Resolution Process under Insolvency and Bankruptcy code. The matter came up in an appeal filed by B.K Educational Services Pvt Ltd against the order of NCLAT contending that the NCLAT failed to consider various decisions of the Supreme Court wherein the court had held that the Limitation Act was based upon the policy to fix a life span of legal remedy for the purpose of general welfare. 

Where Supreme Court in this case stayed the order of National Company Law Appellate Tribunal which stated that the provisions of the limitation act were not applicable for initiation of Corporate Insolvency Resolution Process under Insolvency and Bankruptcy code. 

Speculum Plast Pvt. Ltd. vs. PTC Techno Pvt. Ltd

NCLAT held that the Limitation Act is not applicable for initiation of CIRP. law is settled in terms of the judgment of NCLAT that Limitation Act is not applicable to proceedings under the Code in absence of any authoritative pronouncement by Hon’ble Supreme Court

SUPREME COURT YET TO DECIDE WHETHER LIMITATION ACT IS APPLICABLE TO IBC 2016

The Hon'ble Supreme Court, in the appeal filed against the Neelkanth Judgment, has not decided the question of the limitation being applicable to insolvency proceedings and kept the same open, there is presently no conclusive position on the controversy as on date.