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Babulal Vardharji Gu... v. Veer Gurjar Aluminiu...
Factual and Procedural Background
The respondent filed Company Petition No. CP (IB)-488/I&BP/MB/2018 before the National Company Law Tribunal (NCLT), Mumbai, under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The NCLT admitted the petition on 09 August 2018 and passed consequential directions initiating the corporate-insolvency-resolution process against the appellant.
The appellant challenged that order before the National Company Law Appellate Tribunal (NCLAT) in Company Appeal (AT) (Insolvency) No. 549/2018. On 17 September 2018 the NCLAT dismissed the appeal. The present civil appeal before the Supreme Court seeks to set aside the NCLAT’s dismissal.
Legal Issues Presented
- Whether the respondent’s Section 7 application was barred by limitation, given that the alleged default occurred on 08 July 2011 while the petition was filed in March 2018.
- Whether the NCLT and NCLAT erred in failing to examine the limitation objection, thereby acting without jurisdiction.
Arguments of the Parties
Appellant’s Arguments
- The respondent’s claim is barred by limitation because the default occurred on 08 July 2011, more than three years before the insolvency petition was filed.
- Limitation goes to the root of jurisdiction; hence, the NCLT could not admit a time-barred claim.
Respondent’s Arguments
- The plea of limitation is “unstatable” because entries in the appellant’s books of account and related documents acknowledge the debt and extend the limitation period.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| B.K. Educational Services Pvt. Ltd. v. Paras Gupta & Associates, AIR 2018 SC 5601 | The Limitation Act applies to applications filed under Section 7 of the I&B Code. | Relied upon to hold that the question of limitation is jurisdictional and must be examined before admitting a Section 7 application. |
Court's Reasoning and Analysis
1. The Supreme Court noted that although the limitation ground was raised in the appeal memo before the NCLAT, neither the NCLT nor the NCLAT examined it.
2. Citing B.K. Educational Services, the Court emphasised that limitation applies to insolvency applications under Section 7 and therefore affects the tribunals’ jurisdiction.
3. Because the objection “goes to the root of the matter,” the Court considered it necessary that the NCLAT adjudicate the limitation issue with proper pleadings and evidence.
4. The Court therefore set aside the NCLAT judgment and remanded the appeal for fresh consideration limited to the limitation question.
5. Directions were issued: (a) the appellant may file an additional affidavit detailing facts relevant to limitation by 05 March 2019; (b) the respondent may file a reply within one week; (c) the NCLAT shall decide the issue expeditiously, preferably within five weeks; and (d) ad-interim relief earlier granted by the Supreme Court shall continue for six weeks.
Holding and Implications
Appeal Allowed; Impugned Order Set Aside; Matter Remanded to the NCLAT to Decide Limitation Issue.
Implications: The decision restores the appeal before the NCLAT solely on the question of limitation and reinforces the precedential position that the Limitation Act applies to insolvency proceedings under Section 7 of the I&B Code. No new substantive precedent was set, but the ruling underscores the jurisdictional importance of limitation in insolvency matters. No costs were awarded.
1. Appeal admitted.
2. Heard learned counsel for the parties.
3. This appeal takes exception to the judgment and order dated 17.09.2018 passed by the National Company Law Appellate Tribunal at New Delhi, in Company Appeal (AT) (Insolvency) No. 549/2018.
4. The National Company Law Appellate Tribunal dismissed the appeal preferred by the appellant against the order passed by the National Company Law Tribunal, Mumbai admitting the application bearing No. CP (IB) - 488/I & BP/MB/2018 vide order dated 09.08.2018.
5. For the nature of order that we propose to pass, it is not necessary to reproduce the factual matrix of the case. Suffice it to observe that the respondent filed the aforementioned Company Petition before the National Company Law Tribunal under Section 7 of the I.&B. Code. The same was admitted on 09.08.2018 and consequential directions came to be issued in the matter. In the appeal preferred before the National Company Law Appellate Tribunal, one of the grounds agitated in the appeal memo was that the claim of the respondent was admittedly barred by time. For, admittedly, the default was committed on 08.07.2011 whereas the petition had been filed in March 2018.
6. Although, we find that the ground articulated in the appeal memo is vague, but, as the objection regarding limitation goes to the root of the matter and touches upon the jurisdiction of the National Company Law Tribunal to proceed with the claim of the respondent; and since the recent decision of this Court in B.K. Educational Services Pvt. Ltd. v. Paras Gupta & Associates, AIR 2018 SC 5601 has held that the question of limitation is applicable even to applications filed under Section 7 of the I.&B. Code, it would be just and necessary to answer the said objection appropriately, in accordance with law.
7. Indisputably, neither the National Company Law Tribunal nor the National Company Law Appellate Tribunal, in the present case, has examined the said contention. Indeed, according to the respondent, the plea of claim being barred by limitation is unstatable and, to buttress this argument, the respondent has relied upon the entries in the books of account of the appellant and other related documents. However, that is a matter which ought to be agitated before the National Company Law Appellate Tribunal in the first place.
8. Accordingly, we relegate the parties before the National Company Law Appellate Tribunal for fresh consideration of the objection raised by the appellant that the claim of the respondent is barred by limitation. The appellant is granted liberty to file additional affidavit in the remanded appeal, giving the factual matrix on the basis of which the ground of limitation is founded, so that the respondent can meet that case appropriately.
9. The appellant must file such affidavit on or before 05.03.2019 before the National Company Law Appellate Tribunal in the remanded Company Appeal. The respondents are free to file their response to the said affidavit within one week. Advance copy of the affidavits be exchanged between the parties well in time. The National Company Law Appellate Tribunal is directed to decide the said issue expeditiously and preferably within five weeks from today. Ad-interim relief granted by this Court on 12.11.2018 will continue for a period of 6 weeks from today.
10. The appeal is allowed. The impugned order is set aside and the parties are relegated before the National Company Law Appellate Tribunal by remanding the stated appeal for deciding the issue of limitation as aforementioned. No costs.
SUPREME COURT OF INDIA
RECORD OF PROCEEDINGS
Civil Appeal No(s). 10710/2018
Babulal Vardharji Gurjar.….Appellant(s)
v.
Veer Gurjar Aluminium Industries Pvt. Ltd. Mr. Sundrarajan Devanathan, IRP Ltd. & Anr.….Respondent(s)
(FOR ADMISSION and IA No. 154168/2018-PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS)
Date : 26-02-2019 These matters were called on for hearing today.
(Before A.M. Khanwilkar and Ajay Rastogi, JJ.)
For Appellant(s) Ms. Meenakshi Arora, Sr. Adv.
Mr. Piyush Singh, Adv.
Mr. Aditya Parolia, Adv.
Mr. Kshitij Kumar, Adv.
Ms. Soumya V., Adv.
Mr. Rajesh Singh, Adv.
Mr. Gaurav Goel, AOR
For Respondent(s) Mr. Guru Krishna Kumar, Sr. Adv.
Mr. Sonal Jain, AOR
Ms. Heena Sharma, Adv.
Mr. Kuldeep Singh, Adv.
Mr. ishkaran Singh, Adv.
Mr. Abhishek Anand, Adv.
Mr. Anant A. Pavgi, Adv.
Mr. Tushar Tyagi, Adv.
Mr. Neeraj Kumar Gupta, AOR
UPON hearing the counsel the Court made the following
11. The Civil Appeal is allowed in terms of the signed order.
12. Pending applications, if any, stand disposed of.
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