Applicability
of “Limitation Act” under Insolvency and
Bankruptcy Code, 2016
Insolvency and Bankruptcy Code,
2016 (hereinafter referred as “Insolvency Code”) was an act to consolidate and
amend the laws relating to reorganization and insolvency resolution of
corporate persons, partnership firms and individuals in a time bound
manner. It was a question unanswered for
long as to applicability of provisions of Limitation Act for claims filed by
creditors under Insolvency and Bankruptcy Code, 2016.
The pace of judiciary authorities
to give judgments is at no surprise to us. Recently, National Company Law
Appellate Tribunal had passed a judgment to conclude on long awaited question
on subject matter.
In case of Neelkanth Township & Construction Pvt. Ltd Versus Urban
Infrastructure Trustee Ltd, the light was thrown on provisions of
Limitation Act, 2013 and Insolvency and Bankruptcy Code, 2016.
Facts
of the case-
In the given case respondent i.e.
Urban Infrastructure Trustee Ltd were allotted optionally Fully Convertible
Debentures (OFCDs) by Neelkanth Township & Construction Pvt an applicant. The
said debentures were allotted in 3 tranches as provided hereinunder-
|
Sr. No
|
Particular
|
Certificate issuance date
|
Maturity date
|
|
1
|
1,27,000
OFCDs
|
26.12.2007
|
25.12.2012
|
|
2
|
1,24,000
OFCDs
|
15.02.2008
|
14.02.2013
|
|
3
|
48,49,000
OFCDs
|
30.09.2009
|
30.04.2011
|
Plea-
Considering the maturity dates of
OFCDs and date of application made by respondent, it was pleaded by applicant
that time period of 3 years, as mentioned in Limitation Act is lapsed, and that
the said case shall not be admitted in the ground of barring provisions of
Limitation Act.
Judgment-
The view of National Company Law Tribunal
(NCLT), Mumbai which was challenged by applicant, was sustained by National
Company Law Appellate Tribunal (NCLAT) . While producing the judgment, NCLAT
upheld that-
“There is nothing on record that
Limitation Act, 2013 is applicable to insolvency Code. Also that the learned
counsel for the appellant also failed to lay on hand on any of the provisions
of Insolvency Code to suggest that the law of Limitation Act is applicable.
It was held that the Insolvency
Code was not an act for recovery of money claim, but was an initiation of
Corporate Insolvency Process. That if there was debt which included interest
and there was default of debt of having continues course of action, the
argument that the claim of money by respondent is barred by limitation cannot
be accepted”
Conclusion- Considering the Judgment passed
by NCLAT it is well established that the provisions of Limitation Act shall not
be applicable to Insolvency Code serving a big relief to creditors to file their
claims for liquidation under section 7 or section 59 of the Code.
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