IDBI Bank Ltd. Vs. Hemangi Patel, - We have also held that a person would be entitled to initiate CIRP within a period of three years from the date on which the recovery certificate is issued. We are of the considered view that the view taken by the two-Judge Bench of this Court in Dena Bank [Dena Bank v. C. Shivakumar Reddy, (2021) 10 SCC 330] is correct in law and we affirm the same.

  NCLAT (2025.08.087) in  IDBI Bank Ltd. Vs. Hemangi Patel, [(2025) ibclaw.in 599 NCLAT,  Company Appeal (AT) (Insolvency) No. 991 of 2025 with Company Appeal (AT) (Insolvency) No. 992 of 2025 ] held that

• We have also held that a person would be entitled to initiate CIRP within a period of three years from the date on which the recovery certificate is issued. We are of the considered view that the view taken by the two-Judge Bench of this Court in Dena Bank [Dena Bank v. C. Shivakumar Reddy, (2021) 10 SCC 330] is correct in law and we affirm the same.

• Consequently, the holder of the recovery certificate would be a financial creditor within the meaning of clause (7) of Section 5 IBC. As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the recovery certificate.

Excerpts of the order;

These two appeals have been filed by the IDBI Bank, challenging the two identical orders passed on 05.05.2025 by the National Company Law Tribunal (NCLT), Indore Special Bench, Court – I in C.P. (IB) No.55/MP/2024 and C.P. (IB) No.54/MP/2024, rejecting Section 95 application filed by the IDBI Bank against the respondent, the personal guarantor herein.

# 2. Both the respondents in these appeals being personal guarantor of the same corporate debtor – Great Logistic and Parking Services Pvt. Ltd., it shall be sufficient to refer to the pleadings in Comp. App. (AT) (Ins.) No. 991/2025 for deciding both the appeals.

# 3. Brief facts of the case necessary to be noticed for deciding the appeals are:

i. The IDBI Bank extended credit facilities to corporate debtor – Great Logistic and Parking Services Pvt. Ltd., the respondent herein stood personal guarantor and executed a personal guarantee in favour of the creditor on 28.10.2010.

ii. The corporate debtor had defaulted in repayment of the cash credit facilities on 31.03.2016 leading the classification of the account as NPA.

iii. The creditor issued a guarantee invocation notice to the personal guarantor on 24.10.2016 and an OA was also filed before the Debt Recovery Tribunal (DRT) on 31.03.2017 and recovery certificate was issued in favour of the creditor on 25.01.2019, after issuing demand notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, (herein after referred to as ‘2019 Rules’) on 19.03.2024. The application under Section 95 was filed by the IDBI Bank on 02.09.2024.

iv. The adjudicating authority by the impugned order rejected the application as barred by time. It was held that from recovery certificate dated 25.01.2019, 3 years will expire on 25.01.2022 and even giving benefit of order of the Hon’ble Supreme Court in Suo Moto WP (Civil) No. 3 of 2022 in ‘Re: Cognizance for Extension of Limitation’, the limitation period would extend only till 11.01.2024 and the application having been filed on 02.09.2024 is beyond limitation period. Adjudicating authority by the impugned order rejected C.P. (IB) No.55/MP/2024 ad C.P. (IB) No.54/MP/2024, aggrieved by which orders, IDBI Bank has filed this appeal.

# 4. We have heard learned counsel for the appellant.

# 5. Learned counsel for the appellant challenging the order raised only one submission. Learned counsel for the appellant based his submissions relying on the judgment of the Hon’ble Supreme Court in the matter of ‘Tottempudi Salalith’ Vs. ‘State Bank of India & Ors.’ reported in [(2024 1 SCC 24] decided on 18.10.2023. Learned counsel for the appellant submitted that Hon’ble Supreme Court in the above case has held that decree passed by Court shall remain valid for a period of 12 years and during which claim can be filed in the IBC. It is submitted that in view of the judgment of the Hon’ble Supreme Court in the above case, limitation for filing Section 95 application has to be treated as 12 years hence the application filed was not barred by time.

# 6. We have considered the submission raised by the counsel for the appellant and perused the record.

# 7. We need to first notice the judgment of the Hon’ble Supreme Court in ‘Tottempudi Salalith’ (Supra) to find out the ratio of the judgment and as to whether counsel for the appellant is correct in his submission that Hon’ble Supreme Court in the said judgment has held that limitation for filing an application under IBC is 12 years. The above judgment of the Hon’ble Supreme Court arose from proceeding under Section 7 initiated by State Bank of India as lead bank. Consortium of Banks including the State Bank of India has extended various facilities to the corporate debtor – Totem Infrastructure Ltd. Notice under Section 13(2) was issued. An application was also filed before the DRT Hyderabad. OA No.154/2014, OA No.221/2014 & OA No.1653/2017 and one OA was filed before the DRT Bengaluru being OA No.1930/2014. Two recovery certificates was issued by the DRT Hyderabad on 08.09.2015, 17.10.2017 and another recovery certificate was issued on 04.08.2017. Application under Section 7 was filed on 06.09.2019 before NCLT based on three recovery certificates. On 12.01.2021, adjudicating authority admitted Section 7 application and declared moratorium and appointed the RP. The Managing Director of the corporate debtor filed an appeal before the NCLAT and point urged was point of limitation. The appellate tribunal did not accept the submission of the appellant that debt is barred by limitation. Appeal was dismissed. The appellant before the Hon’ble Supreme Court challenging the order of the NCLT & NCLAT raised two submissions including that the application was barred by limitation. Hon’ble Supreme Court relying on the earlier judgment in ‘Kotak Mahindra Bank Ltd.’ Vs. ‘A. Balakrishnan’ reported in [(2022) 9 SCC 186] in respect of recovery certificate issued by DRT has been examined and it was held that limitation shall be 3 years. In paragraph 9 of the judgment, following was laid down:

• “9. In [Kotak Mahindra Bank Ltd. v. A. Balakrishnan, (2022) 9 SCC 186 : (2022) 4 SCC (Civ) 548] , a three-Judge Bench of this Court had examined the question of limitation from the perspective of issue of recovery certificates in terms of provision of the Recovery of Debts and Bankruptcy Act, 1993 (the 1993 Act). We shall refer to this judgment henceforth as Kotak Mahindra-1 [Kotak Mahindra Bank Ltd. v. A. Balakrishnan, (2022) 9 SCC 186 : (2022) 4 SCC (Civ) 548] . It was opined by this Court in this judgment : (SCC pp. 203, 210, 214 & 218, paras 28, 56, 71 & 86)

• “28. It could thus be seen that this Court in Dena Bank v. C. Shivakumar Reddy [Dena Bank v. C. Shivakumar Reddy, (2021) 10 SCC 330] in SCC paras 136 and 141, has in unequivocal terms held that once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of recovery is also issued authorising the creditor to realise its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the recovery certificate. It has further been held that issuance of a certificate of recovery in favour of the financial creditor would give rise to a fresh cause of action to the financial creditor, to initiate proceedings under Section 7 IBC for initiation of the CIRP, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the certificate of recovery, if the dues of the corporate debtor to the financial debtor, under the judgment and/or decree and/or in terms of the certificate of recovery, or any part thereof remained unpaid.

• ***

• 56. Insofar as the contention of the respondents with regard to clause (a) of sub-section (1) of Section 14 IBC is concerned, we do not find that the words used in clause (a) of sub-section (1) of Section 14 IBC could be read to mean that the decree-holder is not entitled to invoke the provisions of IBC for initiation of CIRP. A plain reading of the said section would clearly provide that once CIRP is initiated, there shall be prohibition for institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority. The prohibition to institution of suit or continuation of pending suits or proceedings including execution of decree would not mean that a decree-holder is also prohibited from initiating CIRP, if he is otherwise entitled to in law. The effect would be that the applicant, who is a decree-holder, would himself be prohibited from executing the decree in his favour.

• ***

• 71. We have already hereinabove, done the exercise of considering the relevant provisions of IBC afresh and come to a conclusion that a liability in respect of a claim arising out of a recovery certificate would be a “financial debt” within the meaning of clause (8) of Section 5 IBC and a holder of the recovery certificate would be a “financial creditor” within the meaning of clause (7) of Section 5 IBC. We have also held that a person would be entitled to initiate CIRP within a period of three years from the date on which the recovery certificate is issued. We are of the considered view that the view taken by the two-Judge Bench of this Court in Dena Bank [Dena Bank v. C. Shivakumar Reddy, (2021) 10 SCC 330] is correct in law and we affirm the same.

• ***

• 86. To conclude, we hold that a liability in respect of a claim arising out of a recovery certificate would be a “financial debt” within the meaning of clause (8) of Section 5 IBC. Consequently, the holder of the recovery certificate would be a financial creditor within the meaning of clause (7) of Section 5 IBC. As such, the holder of such certificate would be entitled to initiate CIRP, if initiated within a period of three years from the date of issuance of the recovery certificate.”

# 8. Hon’ble Supreme Court, however, held that claim of acknowledgment under Section 18 on basis of letter dated 29.01.2020 cannot be accepted since the said acknowledgement was subsequent to expiry of 3 years. Hon’ble Supreme Court relied on earlier judgment of Hon’ble Supreme Court in the matter of ‘B.K. Educational Services Pvt. Ltd.’ Vs. ‘Parag Gupta & Associates’, reported in [(2019) 11 SCC 633], where Article 137 of the Limitation Act was held to be applicable and limitation as 3 years. Hon’ble Supreme Court held that recovery certificate will give a fresh cause of action and application brought within 3 years of issue of recovery certificate is well within time. With regard to two recovery certificates, with respect to which Section 7 was initiated within 3 years, Hon’ble Supreme Court held the same to be within limitation relying on Article 137 of the Limitation Act. In the above context, following was laid down in paragraph 24:

• “24. What has been filed before NCLT is a composite application based on three recovery certificates, two of which have been instituted within the three-year period as postulated in Article 137 of the Limitation Act. The third recovery certificate was issued in the year 2015. Thus, there is more than three years’ gap between the date of issue thereof and the date of filing of the application before NCLT. But a recovery certificate under the 1993 Act is also clothed with the character of a deemed decree. The provisions of Section 19(22-A) of the 1993 Act specifies:

• “19. Application to the Tribunal.—(1)-

• (22)                                                     *                                                      *                                                      *

• (22-A) Any recovery certificate issued by the Presiding Officer under sub-section (22) shall be deemed to be decree or order of the Court for the purposes of initiation of winding-up proceedings against a company registered under the Companies Act, 2013 (18 of 2013) or limited liability partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009) or insolvency proceedings against any individual or partnership firm under any law for the time being in force, as the case may be.”

# 9. Hon’ble Supreme Court noticed Article 136 of the Limitation Act for execution of any decree where limitation is 12 years which was noticed in paragraph 25. Hon’ble Supreme Court, however, categorically held that limitation for filing an application under Section 7 is 3 years under Article 137 which has been clearly held in paragraph 26. Hon’ble Supreme Court in paragraph 27 & 28 by noticing provisions of 19(22-A) of the 1993 Act has held that for lodging a claim in IBC shall retain the character of decree. The argument of appellant that application under Section 7 was barred by time was rejected which was clearly held in paragraph 30, which is to the following effect:

• “30. We are otherwise not satisfied with the argument of the appellant about maintainability of the application out of which this appeal arises on the ground of the application being barred under limitation. The application with respect to the two recovery certificates issued in the year 2017 is maintainable. In the event the Appellate Tribunal is of opinion that the CIRP could not lie so far as the recovery certificate of 2015 is concerned, as the decree would be still alive, the claim based on the said recovery certificate could be segregated from the composite claim and the Committee of Creditors shall, in that event, treat the sum reflected in the said recovery certificate as part of the claims made in pursuance of the public announcement. This direction we are issuing in exercise of our jurisdiction under Article 142 of the Constitution of India.”

# 10. From the above it is clear that Hon’ble Supreme Court in the above case which is relied by the appellant relying on the earlier judgment in the matter of ‘Kotak Mahindra Bank Ltd.’ (Supra) held that limitation for filing Section 7 application is only 3 years as per Article 137. We, thus are of the view that submission of the appellant relying on the above judgment that Hon’ble Supreme Court held that limitation will be 12 years with respect to a decree is wholly incorrect and is not borne out from the judgment.

# 11. We need to also refer to a 3 Judge bench judgment of the Hon’ble Supreme Court in the matter of ‘Gaurav Hargovindbhai Dave’ Vs. ‘Asset Reconstruction Ltd. & Anr.’, reported in [(2019) 10 SCC 572], where Hon’ble Supreme Court had occasion to consider limitation on basis of decree passed by the DRT with respect to Section 7 application under the IBC. Article 62 was relied by NCLT holding that limitation will be 12 years against which order, the appeal was dismissed. Appeal was filed in the Hon’ble Supreme Court where the question was considered and it was held that limitation for filing Section 7 application under Article 137 of the Limitation Act is only 3 years and for the application under Section 7, Article 62 which provide for limitation 12 years is not applicable. It is useful to extract paragraphs 3, 6 & 7 of the judgment, which is as follows:

• “3. An independent proceeding was then begun by Respondent 1 on 3-10-2017 being in the form of a Section 7 application filed under the Insolvency and Bankruptcy Code in order to recover the original debt together with interest which now amounted to about 124 crores of rupees. In Form-I that has statutorily to be annexed to the Section 7 application in Column II which was the date on which default occurred, the date of the NPA i.e. 21-7-2011 was filled up. The NCLT applied Article 62 of the Limitation Act which reads as follows:

“Description of suit	Period of limitation	Time from which period begins to run
62. To enforce payment of money secured by a mortgage or otherwise charged upon immovable property	Twelve years	When the money sued for becomes due.”

• Applying the aforesaid Article, the NCLT reached the conclusion that since the limitation period was 12 years from the date on which the money suit has become due, the aforesaid claim was filed within limitation and hence admitted the Section 7 application. The Nclat vide the impugned judgment [Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd., 2019 SCC OnLine NCLAT 329] held, following its earlier judgments [Pushpa Shah v. IL&FS Financial Services Ltd., 2019 SCC OnLine NCLAT 572], that the time of limitation would begin running for the purposes of limitation only on and from 1-12-2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. Consequently, it dismissed the appeal.

• 6. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being “an application” which is filed under Section 7, would fall only within the residuary Article 137. As rightly pointed out by the learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21-7-2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr Banerjee’s reliance on para 11 of B.K. Educational Services (P) Ltd. [B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633] , suffice it to say that the Report of the Insolvency Law Committee [Ed. : Report of the Insolvency Law Committee (March, 2018), Ministry of Corporate Affairs, Government of India] itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time-barred.

• 7. This being the case, we fail to see how this para could possibly help the case of the respondents. Further, it is not for us to interpret, commercially or otherwise, articles of the Limitation Act when it is clear that a particular article gets attracted. It is well settled that there is no equity about limitation – judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature.”

# 12. The above 3 Judge bench judgment clearly laid down that limitation for Section 7 application is only three years as per Article 137.

# 13. We thus do not find any substance in the submission of the counsel for the appellant that for filing an application under IBC 12 years limitation will apply. The judgment relied by the counsel for the appellant in ‘Tottempudi Salalith’ (Supra) also does not lay down any such proposition as contended by the counsel for the appellant. The adjudicating authority in the impugned order come to the conclusion that Section 95 application filed by the IDBI Bank was filed after expiry of three years period of limitation even after giving the benefit of judgment of the Hon’ble Supreme Court in Suo Moto WP (Civil) No. 3 of 2022 in ‘Re: Cognizance for Extension of Limitation’.

# 14. We do not find any error in the order of the adjudicating authority rejecting Section 95 application filed by the appellant as barred by time.

There is no merit in the appeals. Both the appeals are dismissed.

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State Bank of India Vs. Krishidhan Seeds Pvt. Ltd. - There cannot be two defaults in respect of the same debt.

NCLAT (17.11.2020) in State Bank of India Vs. Krishidhan Seeds Pvt. Ltd. [Company Appeal (AT) (Insolvency) No. 236 of 2020] held that ; There cannot be two defaults in respect of the same debt, one for the purpose of claim filed before the Debts Recovery Tribunal and the other for purposes of ‘I&B Code’ based on OTS proposal, more so when in application filed before the Adjudicating Authority in prescribed format date of default has unambiguously been reflected as 10th June, 2014. The application having been filed before the Adjudicating Authority beyond three years of occurrence of default is hopelessly time barred . . . 

Excerpts of the order;

17.11.2020: Appellant- ‘State Bank of India’ (Financial Creditor) has preferred instant appeal against impugned order dated 16.09.2020 passed by the Adjudicating Authority (National Company Law Tribunal), Indore Bench at Ahmedabad, Court-1, whereby and whereunder, its application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) has been rejected for being hit by limitation. The Appellant assails the impugned order primarily on the ground of there being an acknowledgment on the part of the Corporate Debtor in the form of revival letter extending the period of limitation which is said to have been overlooked by the Adjudicating Authority while passing the impugned order.

# 2. Shri Arun Kathpalia, Senior Advocate representing the Appellant has referred to Annexure A-14 to appeal paper book (page 687) which is a One Time Settlement proposal stated to be emanating from the Corporate Debtor. It is dated 13th June, 2015. In terms of this proposal, the Corporate Debtor, while expressing its inability to revive the company, proposed to raise funds from various investors for taking over of its business subject to settlement of its liabilities towards the lenders/ financial creditors. This, according to Shri Arun Kathpalia, Senior Advocate, amounts to acknowledgment of liability. He also referred to Annexure A-16 at page 706 of the appeal paper book in terms whereof the Corporate Debtor reiterated its One Time Settlement proposal. Banking on these communications Shri Arun Kathpalia, Senior Advocate submits that the time for limitation would begin to run from 6th November, 2015 when OTS proposal was reiterated and the application under Section 7 of the ‘I&B Code’ having been filed by the Appellant before the Adjudicating Authority on 19.09.2018 would be within the prescribed period of three years. He also referred to provision of Section 238A of the ‘I&B Code’ extending the provisions of the Limitation Act, 1963 to proceedings before the Adjudicating Authority and also relied upon the dictum of the Hon’ble Apex Court in various judgments including “B.K. Educational Services Private Limited Vs. Parag Gupta and Associates- (2019) 11 Supreme Court Cases 633”.

# 3. After hearing learned counsel for the Appellant and having waded through the record, we notice that the application filed by the Appellant under Section 7 of the ‘I&B Code’ before the Adjudicating Authority on 19.09.2018 was dismissed on 16.09.2020 in terms of the impugned order on the ground that the same was barred by limitation. It is well settled by now that the provisions of the Limitation Act, 1963 were applicable to proceedings under ‘I&B Code’ from its very inception and the provisions of Section 238A introduced subsequently are merely clarificatory in nature. The Hon’ble Apex Court has, in a catena of authorities held that the applications under Sections 7 and 9 of the ‘I&B Code’ not being a suit are governed under the residuary provision engrafted in Article 137 of the Limitation Act which prescribes a period of three years as limitation. In “B.K. Educational Services Private Limited” (Supra), it was held that the limitation period for application under Section 7 of the ‘I&B Code’’ is three years as provided by Article 137 of the Limitation Act which commences from the date of default and is extendable only by application of Section 5 of the Limitation Act, if a case for condonation of delay is made out. In “Jignesh Shah & Anr. Vs. Union of India & Anr. (2019) 10 Supreme Court Cases 750”, the Hon’ble Apex Court held that the winding up petition filed beyond three years from the date of default would be barred by limitation. In “Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Ltd & Anr.-(2019) 10 SCC 572”, where the date of default was stated in the application under Section 7 to be the date of NPA i.e. 21st July, 2011, the Hon’ble Apex Court held that limitation began to run from the date of NPA and hence application filed on 3rd October, 2017 was barred by limitation.

# 4. Adverting to the facts of this case, be it seen that in the application to Adjudicating Authority filed in prescribed format the date of default is recorded as 10th June, 2014 whereas the application under Section 7 came to filed on 19th September, 2018 i.e. more than four years after the default occurred. The time, for purposes of reckoning limitation in terms of Article 137 of the Limitation Act, would commence from the date of default i.e. 10th June, 2014 which would neither be shifted nor extended once a default has occurred. On the basis of such default the Financial Creditor, in the instant case, has approached Debts Recovery Tribunal on 20th October, 2015. In the given circumstances, it cannot lie in the mouth of the Appellant that the date of default gets extended on account of acknowledgment made in the OTS proposal emanating from the Corporate Debtor. There cannot be two defaults in respect of the same debt, one for the purpose of claim filed before the Debts Recovery Tribunal and the other for purposes of ‘I&B Code’ based on OTS proposal, more so when in application filed before the Adjudicating Authority in prescribed format date of default has unambiguously been reflected as 10th June, 2014. The application having been filed before the Adjudicating Authority beyond three years of occurrence of default is hopelessly time barred and it is not permissible for Appellant to take recourse to Section 18 of the Limitation Act for triggering Corporate Insolvency Resolution Process under Section 7 of the ‘I&B Code’ against the Corporate Debtor.

---------------------------

 

Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Private Limited & Anr. - Limitation for Section 7 application.

Supreme Court of India (14.08.2020) in Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Private Limited & Anr. [Civil Appeal No. 6347 of 2019] While setting aside the Order dated 14th May, 2019 of the NCLAT in Company Appeal (AT) Insolvency No. 549 of 2018 and Order dated 9th August, 2018 of the NCLT, Mumbai Bench in CP(IB)-488/I&BP/MB/2018, on the ground that the application filed under Section 7 of the Code is barred by limitation, the Hon’ble Supreme Court made the observations on the following issues:

1. Objectives of the Code

• i. Code vis a vis CD

• ii. Purpose of CIRP of CD

• iii. Trigger of CIRP

• iv. Satisfaction of AA as to occurrence of default’ before admitting

• v. Legislative policy of IBC

2. Operation of law of limitation over IBC proceedings.

3. Applicability of Section 18 of Limitation Act to CIRP proceedings under Section 7 of the Code

4, Date of enforcement of Code as starting point for application of limitation

5. Summary

Excerpts of the order;

# 18.1. As noticed from Preamble, the Code came to be enacted to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons and even of partnership firms and individuals in a time bound manner; the objectives, inter alia, being for maximisation of value of assets of such persons and balance of interest of all the stakeholders.

# 19. As regards corporate debtor, the primary focus of the Code is to ensure its revival and continuation by protecting it from its own management and, as far as feasible, to save it from liquidation. As tersely put by this Court in Swiss Ribbons (supra), the Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors.

# 19.2. In relation to a financial creditor, the trigger for CIRP is default by the corporate debtor of rupees one lakh or more against the debt/s. When seeking initiation of CIRP qua a corporate debtor, the financial creditor is required to make the application in conformity with the requirements of Section 7 of the Code while divulging the necessary information and evidence, as required by the Rules of 2016. After completion of all other requirements, for admitting such an application of the financial creditor, the Adjudicating Authority has to be satisfied, as per sub-section (5) of Section 7 of the Code, that “default” has occurred and, in this process of consideration by the Adjudicating Authority, the corporate debtor is entitled to point out that default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. As observed by this Court, the legislative policy now is to move away from the concept of “inability to pay debts” to

“determination of default”.

# 30. When Section 238-A of the Code is read with the above-noted consistent decisions of this Court in Innoventive Industries, B.K. Educational Services, Swiss Ribbons, K. Sashidhar, Jignesh Shah, Vashdeo R. Bhojwani, Gaurav Hargovindbhai Dave and Sagar Sharma respectively, the following basics undoubtedly come to the fore: 

• (a) that the Code is a beneficial legislation intended to put the corporate debtor back on its feet and is not a mere money recovery legislation; 

• (b) that CIRP is not intended to be adversarial to the corporate debtor but is aimed at protecting the interests of the corporate debtor; 

• (c) that intention of the Code is not to give a new lease of life to debts which are time-barred; 

• (d) that the period of limitation for an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Limitation Act and is, therefore, three years from the date when right to apply accrues; 

• (e) that the trigger for initiation of CIRP by a financial creditor is default on the part of the corporate debtor, that is to say, that the right to apply under the Code accrues on the date when default occurs; 

• (f) that default referred to in the Code is that of actual non-payment by the corporate debtor when a debt has become due and payable; and 

• (g) that if default had occurred over three years prior to the date of filing of the application, the application would be time-barred save and except in those cases where, on facts, the delay in filing may be condoned; and 

• (h) an application under Section 7 of the Code is not for enforcement of mortgage liability and Article 62 of the Limitation Act does not apply to this application.

Whether Section 18 Limitation Act could be applied to the present case

# 32. ……..  As noticed, in B.K. Educational Services, it has clearly been held that the limitation period for application under Section 7 of the Code is three years as provided by Article 137 of the Limitation Act, which commences from the date of default and is extendable only by application of Section 5 of Limitation Act, if any case for condonation of delay is made out.

# 33. Apart from the above and even if it be assumed that the principles relating to acknowledgement as per Section 18 of the Limitation Act are applicable for extension of time for the purpose of the application under Section 7 of the Code, in our view, neither the said provision and principles come in operation in the present case nor they enure to the benefit of respondent No. 2 for the fundamental reason that in the application made before NCLT, the respondent No. 2 specifically stated the date of default as ‘8.7.2011 being the date of NPA’. It remains indisputable that neither any other date of default has been stated in the application nor any suggestion about any acknowledgement has been made…………….In the variety of descriptions which could have been given by the applicant in the said Part- V of the application and even in residuary Point No. 8 therein, nothing was at all stated at any place about the so called acknowledgment or any other date of default.

# 33.1. Therefore, on the admitted fact situation of the present case, where only the date of default as ‘08.07.2011’ has been stated for the purpose of maintaining the application under Section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgement or any other date of default, in our view, the submissions sought to be developed on behalf of the respondent No. 2 at the later stage cannot be permitted. It remains trite that the question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. Indisputably, in the present case, the respondent No. 2 never came out with any pleading other than stating the date of default as ‘08.07.2011’ in the application. That being the position, no case for extension of period of limitation is available to be examined. In other words, even if Section 18 of the Limitation Act and principles thereof were applicable, the same would not apply to the application under consideration in the present case, looking to the very averment regarding default therein and for want of any other averment in regard to acknowledgement.

# 34. ………….  Needless to add that when the application made by the respondent No. 2 for CIRP is barred by limitation, no proceedings undertaken therein after the order of admission could be of any effect. All such proceedings remain non-est and could only be annulled.

# 36. The question as to whether date of enforcement of the Code (i.e., 01.12.2016) provides the starting point of limitation for an application under Section 7 of the Code and hence, the application in question, made in the year 2018, is within limitation, is not even worth devoting much time. ……….  There is nothing in the Code to even remotely indicate if the period of limitation for the purpose of an application under Section 7 is to commence from the date of commencement of the Code itself. Similarly, nothing provided in the Limitation Act could be taken as the basis to support the proposition so stated by the Appellate Tribunal.

# 36.1. ………  This approach of NCLAT was specifically disapproved by this Court in Sagar Sharma (supra) where, after observing that in B. K. Educational Services (supra) it had already been made clear that the date of the Code’s coming into force on 01.12.2016 was wholly irrelevant to the triggering of any limitation period for the purposes of the Code,

# 37. The other observations as made and the reasoning as adopted by the Appellate Tribunal in paragraphs 29 and 30 of the impugned order, that the property having been mortgaged, the claim is not barred by limitation because of the period of limitation of twelve years with regard to mortgaged property, had again been erroneous and do not stand in conformity with the dictum of this Court.

# 37.1. …….  When Article 137, being the residuary provision on the period of limitation for “other applications” is held applicable by this Court for the purpose of reckoning the period of limitation for an application under Section 7 of the Code, it remains rather inexplicable as to how the Appellate Tribunal could have applied any other Article of Limitation Act (and that too relating to suits) for the purpose of such an application?

# 38. The discussion foregoing leads to the inescapable conclusion that the application made by the respondent No. 2 under Section 7 of the Code in the month of March 2018, seeking initiation of CIRP in respect of the corporate debtor with specific assertion of the date of default as 08.07.2011, is clearly barred by limitation for having been filed much later than the period of three years from the date of default as stated in the application. The NCLT having not examined the question of limitation; the NCLAT having decided the question of limitation on entirely irrelevant considerations; and the attempt on the part of the respondents to save the limitation with reference to the principles of acknowledgment having been found unsustainable, the impugned orders deserve to be set aside and the application filed by the respondent No. 2 deserves to be rejected as being barred by limitation.

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