India: Limiting The Limitation: The Curious Case Of Limitation Act And IBC

I. INTRODUCTION

The law regime pertaining to insolvency in India has developed over time, resulting in consolidation of laws regarding rehabilitation of the corporate entities and their liquidation.

One such consolidation came in the form of the Insolvency and Bankruptcy Code, 2016 ("IBC" or "Code"). However, IBC too, like all other legislations, came with its share of problems, ambiguities, loopholes, and inconsistencies, which were remedied either by judicial intervention and/or by subsequent amendments by the Legislature.

From the applicability of Section 14 moratorium on personal guarantors and the retrospective applicability of Section 14(3)(b) of IBC¹ to failure to take into account the period post initiation of Corporate Insolvency Resolution Process ("CIRP") and prior to formation of Committee of Creditors while introducing Section 12A pertaining to withdrawal of Petition²; much has been interpreted, reviewed and decided by the Judiciary ever since the inception of the IBC.

Apart from giving effect to the true spirit of IBC, the Courts in India have dealt with and decided a very important and key issue of applicability of Limitation Act, 1963 on the proceedings and applications under IBC³.

More recently, the National Company Law Appellate Tribunal ("NCLAT") in its judgments in Ishrat Ali Vs. Cosmos Cooperative Bank Ltd. & Anr.⁴ and V. Padmakumar Vs. Stressed Assets Stabilisation Fund (SASF) & Anr.⁵ had the occasion to analyse and decide the issue of acknowledgement of a debt (debt as defined in the IBC for the purpose filing an application under Section 7 of the IBC) in the books of accounts and initiation of a fresh period of limitation in terms of Section 18 of the Limitation Act.

In the present Article, we have analysed the key developments surrounding the jurisprudence pertaining to the applicability of Limitation Act to the IBC and have also examined the holding of NCLAT in the cases of Ishrat Ali (supra) and V. Padmakumar (supra).

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Footnotes

1 State Bank of India v. V. Ramakrishnan & Anr.AIR 2018 SC 3876

2 Swiss Ribbons Private Limited & Ors. v. Union of India and Ors., (2019) 4 SCC 17

3 B. K. Educational Services Private Limited v. Parag Gupta and Associates, (2019) 11 SCC 633

4 Company Appeal (AT) (Insolvency) No. 1121 of 2019

5 Company Appeal (AT) (Insolvency) No. 57 of 2020

Originally published 12 May 2020

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