Pendency Of Proceedings In Parallel Forum Not Sufficient Cause For Delay In Filing Application U/s. 9 IBC: SC

The Supreme Court's Bench of Justice Indira Banerjee and Justice JK Maheshwari has observed that the pendency of the proceedings in a parallel forum, is not a sufficient cause for the delay in filing an application under Section 9 of the Insolvency and Bankruptcy Code.

In this case, the Respondent- Sanghvi Movers Limited, had filed an application under Section 9 of the IBC for initiation of the Corporate Insolvency Resolution Process (CIRP) in the National Company Law Tribunal.

However, the Adjudicating Authority (NCLT) rejected the application as barred by limitation, placing reliance on the judgment of Supreme Court in B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates.

The Respondent appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT set aside the order passed by the Adjudicating Authority (NCLT) rejecting the application of the Respondent under Section 9 of the IBC and remitted the case to the Adjudicating Authority for admission.

Aggrieved appellant- M/S Tech Sharp Engineers Pvt. Ltd. Approached Supreme Court.

Advocate R. Chandrachud represented appellant whereas Advocate T. R. B. Sivakumar represented the Respondent.

The Supreme Court noted that the NCLT/NCLAT has the discretion to entertain an application/appeal after the prescribed period of limitation. The Court further noted that the condition precedent for exercise of such discretion is the existence of sufficient cause for not preferring the appeal and/or the application within the period prescribed by limitation.

The Court observed that when an appeal is filed against an order rejecting an application on the ground of limitation, the onus is on the Appellant to make out sufficient cause for the delay in filing the application.

The Court also observed that "Proceedings in good faith in a forum which lacks jurisdiction or is unable to entertain for like nature may save limitation. Similarly, acknowledgment of liability may have the effect of commencing a fresh period of limitation."

"In this case, the last acknowledgment was in 2013 and the Madras High Court neither suffered from any defect of jurisdiction to entertain the winding up application nor was unable to entertain the winding up application for any other cause of a like nature.", the Court added.

The Court held that initiation of proceedings in Madras High Court would not save limitation for initiation of proceedings for initiation of CIRP in the NCLT under Section 7 of the IBC.

"A claim may not be barred by limitation. It is the remedy for realisation of the claim, which gets barred by limitation. The impugned order of the NCLAT is unsustainable in law. The appeal is allowed. The impugned order of the NCLAT is set aside.", the Court held.

Cause Title- M/S Tech Sharp Engineers Pvt. Ltd. V. Sanghvi Movers Limited

Click here to read/download the Judgment