Case Note & Summary
The Supreme Court allowed the appeal filed by Vashdeo R Bhojwani against Abhyudaya Co-operative Bank Ltd and another, setting aside the orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT). The dispute arose from a default of Rs. 6.7 Crores by respondent No.2, declared a Non-Performing Asset (NPA) on 23.12.1999. A Recovery Certificate was issued on 24.12.2001. On 21.07.2017, the bank filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the NCLT, claiming the amount with interest. The NCLT admitted the petition on 05.03.2018, holding that no period of limitation would attach as the default continued. The NCLAT dismissed the appeal on 05.09.2018, similarly holding that limitation did not apply. The Supreme Court examined whether the application was barred by limitation. Relying on its judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates, the Court held that Article 137 of the Limitation Act, 1963 applies to IBC applications from inception, and the right to sue accrues when a default occurs. Since the default occurred in 1999 and the Recovery Certificate was issued in 2001, the application filed in 2017 was beyond three years and thus time-barred. The Court rejected the argument that Section 23 of the Limitation Act (continuing wrong) applied, citing Balkrishna Savalram Pujari vs. Shree Dnyaneshwar Maharaj Sansthan, which held that a complete injury, such as the issuance of a Recovery Certificate, is not a continuing wrong. Consequently, the Court allowed the appeal, set aside the NCLT and NCLAT orders, and held that no debt was due and payable in law.
Headnote
A) Limitation Act - Article 137 - Applicability to IBC - The right to sue under Article 137 accrues when a default occurs; if default occurred over three years prior to filing of application under Section 7 or 9 of IBC, the application is barred unless delay is condoned under Section 5 of Limitation Act - Held that the Limitation Act applies to IBC applications from inception (Para 3). B) Limitation Act - Section 23 - Continuing Wrong - Section 23 applies to continuing wrongs, not continuing rights; a wrongful act causing complete injury is not a continuing wrong even if damage continues - Held that issuance of Recovery Certificate in 2001 injured the appellant's rights completely, and limitation began from that date (Para 4). C) Insolvency and Bankruptcy Code - Section 7 - Time-Barred Debt - A debt that is time-barred under the Limitation Act is not 'due and payable' in law - Held that the claim based on a 2001 Recovery Certificate filed in 2017 is barred by limitation (Para 5).
Issue of Consideration
Whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed in 2017 based on a default that occurred in 1999 and a Recovery Certificate issued in 2001, is barred by limitation under Article 137 of the Limitation Act, 1963.
Final Decision
Appeal allowed. Orders of NCLT and NCLAT set aside. No order as to costs.
Law Points
- Limitation Act
- 1963
- Article 137
- Section 23
- Insolvency and Bankruptcy Code
- 2016
- Sections 7 and 9
- Continuing wrong
- Default
- Recovery Certificate
