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TMI Blog2025 (4) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to the Suit, under Section 9 of the Insolvency and Bankruptcy Code, 2016 ('IBC'), has to be excluded from computing the limitation. Liberty, therefore, had been given to the plaintiff to file an application under Section 14 of the Limitation Act, 1963. Notice was issued in the present application on 31st January 2024. 4. The brief facts in this regard are as under: (i) Defendant placed orders for supply of Seitz products from time to time. The supply was made to the defendant in India. Invoices were raised and parties made a running account. The latest invoice raised by the plaintiff against supply of goods was on 21st December 2016. On 05th July 2017, a credit-note of EUR. 90256.78/- was issued by the plaintiff, in favor of the defendant. Despite the issuance of credit note, defendant started defaulting in payments under various invoices. Plaintiff issued a demand notice dated 31st January 2018 in terms of Section 8 of IBC, which was replied to, by the defendant on 12th February 2018. (ii) On 13th March 2018, plaintiff filed an application under Section 9 of the IBC before the National Company Law Tribunal ('NCLT'), New Delhi. The Section 9 IBC application was dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal under a particular statute. 10. Further, reliance was placed on P. Sarathy v. State Bank of India (2000) 5 SCC 355, wherein it was held that Section 14 of the Limitation Act, 1963, uses the term "Court" and not "Civil Court" and could include any forum having the trappings of a Civil Court i.e. having the authority to adjudicate upon the rights of the parties. Submissions on behalf of the defendant 11. The defendant contended that the application is untenable and the exclusion, as claimed by the plaintiff, cannot be sustained. It was stressed that the captioned suit has been filed, relating to outstanding recoveries with respect to invoices of the year(s) 2014, 2015 and 2016 and limitation period, therefore, stood expired in the year(s) 2017, 2018 and 2019. 12. Defendant submitted that issuance of the credit note would not extend the period of limitation and that there was no running account. The application has been moved almost two years after registration of the suit in an attempt to make the suit maintainable. 13. It is contended that in an application under Section 14 of the Limitation Act, 1963, the parties have to satisfy the Court as regards the following aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under Rule 1 of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation.-For the purposes of this section,- (a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted; (b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding; (c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction" (emphasis supplied) ii. Section 9 of IBC, 2016: "9. Application for initiation of corporate insolvency resolution process by operational creditor- (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of Section 8, if the operational creditor does not receive payment from the corporate debtor or notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section." (emphasis supplied) iii. Section 238A of IBC 2016: "Limitation.- The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be." 16. A bare perusal of Section 14 of the Limitation Act, 1963 would incontrovertibly bear out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Societies Act was a court. It was held that the Registrar had not merely the trappings of a court but in many respects he was given the same powers as was given to an ordinary civil court by the Code of Civil Procedure including the powers to summon and examine witnesses on oath, the power to order inspection of documents and to hear the parties. The Court referred to the earlier decisions in Bharat Bank Ltd. v. Employees [1950 SCC 470 : AIR 1950 SC 188 : 1950 SCR 459] ; Maqbool Hussain v. State of Bombay [(1953) 1 SCC 736 : AIR 1953 SC 325 : 1953 SCR 730] and Brajnandan Sinha v. Jyoti Narain [AIR 1956 SC 66 : (1955) 2 SCR 955]. The Court approved the rule laid down in these cases that in order to constitute a court in the strict sense of the term, an essential condition is that the court should have, apart from having some of the trappings of a judicial tribunal, power to give a decision or a definitive judgment which has finality and authoritativeness which are the essential tests of a judicial pronouncement. 14. In Pritam Kaur v. Sher Singh [AIR 1983 P&H 363] the proceedings before the Collector under the Redemption of Mortgages (Punjab) Act (2 of 1913) were held to be civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made between "civil court" and "court" and the scope of Section 14 of the Limitation Act, 1963, was expanded to include any authority or tribunal having trappings of a civil court. The Court, however, went on to add a qualification that this refers only to proceedings which proved to be abortive. The Court highlighted that, proceedings, even if before a quasi-judicial tribunal, if they prove to be abortive, due to defect of jurisdiction or otherwise and where no decision could be rendered on merits, the time taken to participate in such proceedings ought to be excluded. It was made clear that civil proceedings need not be confined to suits, appeals or applications which are made only in a Court stricto sensu. The Court noted that the plaintiff must be put in the same position, as he was, when he started an abortive proceeding and all that is necessary is the absence of negligence or inaction and presence of bona fides. The following paragraphs of the said judgment may be instructive in this regard: "34. It now remains to consider the decision of a two-Judge Bench in P. Sarathy v. SBI [(2000) 5 SCC 355 : 2000 SCC (L&S) 699]. This judgment has held that an abortive proceeding b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly do not answer the case before them on merits but throw the case out on some technical ground. Obviously the word "court" in Section 14 takes its colour from the preceding words "civil proceedings". Civil proceedings are of many kinds and need not be confined to suits, appeals or applications which are made only in courts stricto sensu. This is made even more clear by the explicit language of Section 14 by which a civil proceeding can even be a revision which may be to a quasi-judicial tribunal under a particular statute. ..... 49. The language of Section 14, construed in the light of the object for which the provision has been made, lends itself to such an interpretation. The object of Section 14 is that if its conditions are otherwise met, the plaintiff/applicant should be put in the same position as he was when he started an abortive proceeding. What is necessary is the absence of negligence or inaction. So long as the plaintiff or applicant is bona fide pursuing a legal remedy which turns out to be abortive, the time beginning from the date of the cause of action of an appellate proceeding is to be excluded if such appellate proceeding is from an order in an original pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion "prosecuting with due diligence" to institution of a proceeding alone and not to the date on which the cause of action for such proceeding might arise in the case of appellate or revisional proceedings from original proceedings which prove to be abortive..." (emphasis supplied) (iii) Reliance was placed on Sesh Nath Singh (supra) where the Court was dealing with an appeal under Section 62 of IBC against a judgment and order passed by the NCLAT dismissing the appeal filed against the NCLT order. An objection had been taken that the application under Section 7 IBC was barred by limitation, however, was refuted on the ground that in the interregnum, proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act') had been pending. NCLAT had held that the proceedings under the SARFAESI Act, entitled exclusion of time, under Section 14 of the Limitation Act 1963. In assessing this issue, the Court stated that the authority under the IBC is not the substitute forum for a collection of debt, in the sense it cannot reopen debts barred by law and does not resolve disputes as in suits and arbitrations, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on termination of the earlier proceedings, prosecuted in good faith. ..... 86. An adjudicating authority under IBC is not a substitute forum for a collection of debt in the sense it cannot reopen debts which are barred by law, or debts, recovery whereof have become time-barred. The adjudicating authority does not resolve disputes, in the manner of suits, arbitrations and similar proceedings. However, the ultimate object of an application under Section 7 or 9 IBC is the realisation of a "debt" by invocation of the insolvency resolution process. In any case, since the cause of action for initiation of an application, whether under Section 7 or under Section 9 IBC, is default on the part of the corporate debtor, and the provisions of the Limitation Act, 1963, as far as may be, have been applied to proceedings under the IBC, there is no reason why Section 14 or 18 of the Limitation Act would not apply for the purpose of computation of the period of limitation. ..... 93. If, in the context of proceedings under Section 7 or 9 IBC, Section 14 were to be interpreted with rigid and pedantic adherence to its literal meaning, to hold that only civil proceedings in court would enjo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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