The Appellate Authority has also on a number of occasions dealt with the issue of status of time barred debts under the Code. Some of the landmark cases are discussed herein.
The NCLAT in the case of Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustee Ltd.8, while holding that the application under Section 7 of the Code in relation to the debt claim related to the years 2011, 2012 and 2013 is not time barred, categorically stated:
“… The I&B Code, 2016 is not an Act for recovery of money claim, it relates to initiation of Corporate Insolvency Resolution Process. If there is a debt which includes interest and there is default of debt and having continuous course of action, the argument that the claim of money by Respondent is barred by Limitation cannot be accepted.”
Further, in the case of Black Pearl Hotels Pvt. Ltd. v. Planet M Retail Ltd.9, even though NCLAT did not directly deal with the issue of applicability of the Limitation Act, it ruled that the Limitation Act would apply to the proceedings before the Code. It observed that even if it is assumed that the Limitation Act does apply to the Code, then as the Code has come into force from December 1, December 2016, the right to apply under the Code will accrue only on or after December 1, 2016.
The issue of status of time barred debts was one of the main issues litigated in the case of M/s Speculum Plast Private Limited v. PTC Techno Private10, wherein the NLCAT held that Limitation Act is not applicable to the proceedings under the Code as: (i) the Code is a special law and a complete code in itself, and (ii) legislative intent makes It amply clear that the application of the Limitation Act is necessarily from the Code. It was further held that Section 433 of the 2013 Act was not applicable to the Code as it has not been specifically incorporated under the Code. The appellate authority also held that in the interest of public policy to prescribe a time limit for making a legal claim the doctrine of laches may be examined in the event a delayed claim is brought before an adjudicating authority. One important criterion in examination of doctrine of laches will be whether a claim is a continuing cause of action. NLCAT in this case also held the Limitation Act prescribed a period of three years from the date that the right to apply accrues – this means that as the Code has come into force from December 1, 2016, the right to apply under the Code will accrue only on or after December 1, 2016.
B. Analysis
From the above it is clear that the issue of applicability of the Limitation Act to the proceedings under the Code is far from settled. The lack of clear judicial pronouncement on the said issue raises concerns especially in light of the cases such as Black Pearl11 and Speculum12 which may result in several insolvency proceedings to be initiated in relation to debts that may have accrued years ago (before the Code came into force).
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8Company Appeal (AT) (Insolvency) No. 44 of 2017
9Company Appeal (AT) (Insolvency) No.91 of 2017
10Company Appeal (AT) (Insolvency) No. 47 of 2017
11Supra at 9
12Supra at 10
13Civil appeal Nos. 23988/2017