2020 (9) TMI 1188 - Tri - Insolvency and Bankruptcy

Seeking condonation of delay of 230 days in preferring Company Petition - availability of Section of the Limitation Act 1963 to an Application filed under Section 7 or Section 9 by a Creditor - HELD THAT - The Hon ble Supreme Court of India in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT has stated that Limitation Act is applicable since the inception of the Code (IBC 2016) while posing itself with a query as to whether the Limitation Act 1963 will apply to Applications that are made under Section 7 and or Section 9 of the Code (IBC 2016) on and from its commencement on 01.12.2016 to 06.06.2018 (date of amendment of insertion of Section 238-A coming into effect) Referring to the Report of the Insolvency Law Committee of March 2018 in this regard and after extracting paragraph 28.1 to 28.3 of the said Report and highlighting that the Code (IBC 2016) could not have been to give a new lease of life to debts which are time barred and has thereby gone to give a finding that the Limitation Act is applicable from the inception of the Code. The reasons hence given in the Application that since the Limitation Act 1963 came to be applied only from 06.06.2018 and in the circumstances in effect there has been a laxity on the part of the Applicant to approach this Tribunal also does not hold much water in view of the observations made by the Hon ble Supreme Court of India that bringing into effect the amendment on and from 06.06.2018 by insertion of Section 238-A of IBC 2016 is more by way of only a clarification about the applicability of the Limitation Act and cannot be claimed to be made applicable only from the date when the Amendment Act came into force on 06.06.2018. The pleadings have failed to clearly bring out as to how the number of day s delay as stated in the Application of 230 days has been computed giving out clearly the start and end date. Even when the learned Counsel for the Respondent specifically raised the issue Learned Counsel for the Applicant was not in a position to answer the issue - thus no sufficient cause has been demonstrated to involve Section 5 of the Limitation Act 1963 even assuming it can be applied at all. The Application seeking for condonation of delay in filing a Petition / Application under Section 9 of IBC 2016 invoking Section 5 of the Limitation Act 1963 stands dismissed.

Summary

Issues Involved:
1. Condonation of Delay
2. Application of Limitation Act, 1963 to IBC, 2016
3. Calculation of Delay Period
4. Sufficient Cause for Delay

Detailed Analysis:
1. Condonation of Delay:
The primary issue was whether the delay of 230 days in filing the Company Petition under the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) could be condoned. The Applicant, M/S. FNA Multi-trade Private Limited, sought condonation of this delay under Section 5 of the Limitation Act, 1963.

2. Application of Limitation Act, 1963 to IBC, 2016:
The Tribunal examined whether Section 5 of the Limitation Act, 1963 applies to Company Petitions filed under IBC, 2016. The Respondent argued that the Petition was barred by limitation as it was filed after three years from the date of the invoice, which gives rise to the cause of action. The Tribunal referred to the Supreme Court's decision in B.K. Educational Services Private Limited vs. Parag Gupta And Associates (2019) 11 SCC 633, which held that the Limitation Act is applicable to applications filed under Sections 7 and 9 of IBC, 2016 from the inception of the Code. The Tribunal noted that the period of limitation is to be reckoned under Article 137 of the Limitation Act, 1963, which provides a three-year period from when the right to apply accrues.

3. Calculation of Delay Period:
The Tribunal found that the last payment date was 22.12.2015, and the three-year limitation period expired on 22.12.2018. The Application for condonation of delay was filed on 09.04.2019, well after the expiration of the limitation period. The Tribunal emphasized that the Applicant did not clearly explain how the 230 days of delay were calculated, nor did it provide sufficient reasons for the delay.

4. Sufficient Cause for Delay:
The Applicant argued that the delay was due to the Director's illness and medical treatment, which prevented timely filing. However, the Tribunal found that the Applicant did not provide sufficient cause for the delay, noting that the inaction of other Directors or staff was not explained. The Tribunal held that even assuming Section 5 of the Limitation Act could apply, no sufficient cause was demonstrated to condone the delay.

Conclusion:
The Tribunal concluded that the Application seeking condonation of delay in filing the Petition under Section 9 of IBC, 2016 invoking Section 5 of the Limitation Act, 1963, stands dismissed without costs. The Tribunal reiterated that the Limitation Act is applicable from the inception of the Code and that the period of limitation must be strictly adhered to, as emphasized by the Supreme Court in various judgments.