IBC: Limitation to file a petition under Insolvency and Bankruptcy Code is 3 years; SC.

Supreme Court of India

Justice R F Nariman and Justice Surya Kant

The SC {VASHDEO R BHOJWANI v. ABHYUDAYA CO-OPERATIVE BANK LTD & ANR.} holds 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.

In the present case at the relevant time, a default of Rs. 6.7 Crores was found as against the respondent No.2. The respondent No.2 had been declared a NPA by Abhyudaya Cooperative Bank Limited on 23.12.1999. Ultimately, a Recovery Certificate dated 24.12.2001 was issued for this amount. A Section 7 petition was filed by the Respondent No.1 on 21.07.2017 before the NCLT claiming that this amount together with interest, which kept ticking from 1998, was payable to the respondent as the loan granted to Respondent No.2 had originally been assigned, and, thanks to a merger with another Cooperative Bank in 2006, the respondent became a Financial Creditor to whom these moneys were owed. A petition under Section 7 was admitted on 05.03.2018 by the NCLT, stating that as the default continued, no period of limitation would attach and the petition would, therefore, have to be admitted. The said order(s) was set aside by the SC.

It was held by the SC that the claim in the present case being time barred, there is no doubt that is due and payable in law. The SC sets aside the orders of the NCLT and NCLAT, and consequently, dismissing the petition under IBC as time barred.