Status as on: 28/03/2021

Introduction

In a latest judgement (Sesh Nath Singh & Anr. V/s Baidyabati Sheoraphuli Co-Operative Bank Ltd. And Anr. CA No- 9198 of 2019) the Hon’ble Supreme Court has held that in an application under Section 7 of the Insolvency and Bankruptcy Code, the applicant can claim the benefit of Section 14 of the Limitation Act, in respect of proceedings under the SARFAESI Act.

The court, in its judgement said the following:

“There can be little doubt that Section 14 applies to an application under Section 7 of the IBC. At the cost of repetition, it is reiterated that the IBC does not exclude the operation of Section 14 of the Limitation Act”

What is Section 14 of the Limitation Act?

Under Section 14, if a party is proceeding in good faith in a court without jurisdiction any suit or application the time spent by the party should be prosecuting another civil proceeding with due diligence and that prosecution shall be in good faith shall be excluded. In short it allows for exclusion from the limitation period the time spent litigating before wrong forum.

Facts of the case –

The corporate debtor in this case relied on a NCLAT judgment in Ishrat Ali vs Cosmos Cooperative Bank Limited and Anr., the corporate debtor contended that in an application under Section 7 of the IBC, the applicant is not entitled to the benefit of Section 14 of the Limitation Act, 1963 in respect of proceedings under the SARFAESI Act.

Regarding this the Hon’ble court observed the following:

“If, in the context of proceedings under Section 7 or 9 of the IBC, Section 14 were to be interpretedwithrigid and pedantic adherence to its literalmeaning, to hold that only civil proceedings in Court would enjoy exclusion, the result would be that an applicant would not even be entitled toexclusion of the period of time spent in 41 bona fide invoking and diligently pursuing an earlier application under the same provision of IBC, for the same relief, before an Adjudicating Authority, lacking territorial jurisdiction This could not possibly have been the legislative intent.. In our considered opinion, the judgment of the NCLAT in the case of Ishrat Ali is unsustainable in law.” The proceedings under the SARFAESI Act, 2002 are undoubtedly civil proceedings.

Conclusion

The Hon’ble court went on to say that the IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible. This judgement will come as a relief for people who have spent their time in litigating in the wrong forum.

Disclaimer – The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinion before relying upon the article. For more information, please contact us at rera@centrik.in