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 = In view of admission of the application under Section 7 of the Code by NCLT, the 69 said petition under Section 19 of the Act of 1993 (and any other pending matter against the corporate debtor) could not have proceeded during the period of moratorium in terms of Section 14 of the Code. Now, by virtue of this judgment, the said application under Section 7 of the Code shall stand rejected for being barred by limitation and all the proceedings thereunder shall stand annulled. As a necessary consequence, the moratorium in terms of Section 14 of the Code shall get lifted and, therefore, those stalled proceedings should now be taken up and dealt with by the respective Courts/Tribunals/Authorities, of course, strictly in accordance with law. In the interest of justice, we also make it clear that the observations in this judgment are relevant only in regard to the issue determined that the application under Section 7 of the Code is barred by limitation and not beyond.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6347 OF 2019
BABULAL VARDHARJI GURJAR ……Appellant(s)
VS.
VEER GURJAR ALUMINIUM INDUSTRIES
PVT. LTD. & ANR. .…Respondent(s)
JUDGMENT
Dinesh Maheshwari, J.
Introductory with brief outline and issue involved

  1. This appeal under Section 62 of the Insolvency and Bankruptcy
    Code, 20161
    is directed against the judgment and order dated 14.05.2019
    passed by the National Company Law Appellate Tribunal, New Delhi2
    in
    Company Appeal (AT) Insolvency No. 549 of 2018 whereby, the Appellate
    Tribunal has rejected the contention that the application made by
    respondent No. 2 under Section 7 of the Code, seeking initiation of
    Corporate Insolvency Resolution Process3
    in respect of the debtor
    company (respondent No. 1 herein), is barred by limitation; and has
    1 Hereinafter also referred to as ‘the Code’ or ‘IBC’.
    2 Hereinafter also referred to as ‘the Appellate Tribunal’ or ‘NCLAT’.
    3 ‘CIRP’ for short.
    1
    declined to interfere with the order dated 09.08.2018, passed by the
    National Company Law Tribunal, Mumbai Bench4
    in CP(IB)-
    488/I&BP/MB/2018, for commencement of CIRP as prayed for by the
    respondent No. 2.
  2. A brief introduction of the parties and the subject matter as also a
    thumbnail sketch of the relevant orders passed in this matter and the
    issue involved shall be apposite at the very outset.
    2.1. The appellant Shri Babulal Vardhaji Gurjar has been the director
    of the respondent No. 1 company viz., Veer Gurjar Aluminium Industries
    Pvt. Ltd.5 On or about 21.03.2018, the respondent No. 2 JM Financial
    Assets Reconstruction Company Pvt. Ltd.6
    , while stating its capacity as
    the financial creditor, for being the assignee of the loans and advances
    disbursed by creditor bank to the corporate debtor, filed the said
    application under Section 7 of the Code before the Adjudicating Authority
    and sought initiation of CIRP in respect of the respondent No. 1.
    2.2. After having considered the submissions on behalf of the financial
    creditor and the corporate debtor, the Adjudicating Authority, by its order
    dated 09.08.2018, admitted the application so made by the financial
    creditor and appointed an interim resolution professional7
    . Consequent to
    this order dated 09.08.2018, the corporate debtor (respondent No. 1) is
    now represented by the interim resolution professional.
    4 Hereinafter also referred to as ‘the Adjudicating Authority’ or ‘the Tribunal’ or ‘NCLT’.
    5 Hereinafter also referred to as ‘the corporate debtor’.
    6 Hereinafter also referred to as ‘the financial creditor’.
    7 ‘IRP’ for short.
    2
    2.3. Being aggrieved by the aforesaid order dated 09.08.2018, the
    appellant preferred an appeal before NCLAT and contended against
    maintainability of the application moved by the respondent No. 2. The
    appeal so filed by the appellant was summarily dismissed by the
    Appellate Tribunal by its order dated 17.09.2018. However, the order so
    passed by the Appellate Tribunal was not approved by this Court in the
    judgment dated 26.02.2019, passed in Civil Appeal No. 10710 of 2018,
    after finding that the issue relating to limitation, though raised, was not
    decided by the Appellate Tribunal. Hence, the matter was remanded to
    NCLAT for specifically dealing with the issue of limitation. After such
    remand, the Appellate Tribunal, by its impugned order dated 14.05.2019,
    has held that neither the application under Section 7 as made in this case
    is barred by limitation nor the claim of the respondent No. 2 is so barred
    and has, therefore, again dismissed the appeal. Being aggrieved, the
    appellant has approached this Court over again by way of the instant
    appeal.
  3. In the impugned order dated 14.05.2019, the Appellate Tribunal
    has observed that the Code having come into force on 01.12.2016, the
    application made in the year 2018 is within limitation. The Appellate
    Tribunal has assigned another reason that mortgage security having been
    provided by the corporate debtor, the limitation period of twelve years is
    available for the claim made by the financial creditor as per Article 61 (b)
    3

of the Limitation Act, 19638

9
and hence, the application is within
limitation.

  1. In this appeal, the order so passed by the Appellate Tribunal is in
    challenge. The appellant would contend that limitation period for an
    application under Section 7 of the Code is three years as per Article 137
    of the Limitation Act, where the date of alleged “default” is the starting
    point of limitation; and in the present case, such date of default being
    specifically mentioned as 08.07.2011, the application filed by the
    respondent No. 2 in the month of March 2018 is barred by limitation. On
    the other hand, the respondents would argue that the liability in relation to
    the debt in question having been consistently acknowledged by the
    corporate debtor in its balance sheets and annual reports, fresh period of
    limitation is available from the date of every such acknowledgment and
    hence, the application is within time.
    4.1. Thus, the basic issue involved in this matter is as to whether the
    application made by respondent No. 2 under Section 7 of the Code is
    within limitation.
  2. On 09.08.2019, after having heard learned counsel for the
    appellant and the respondent No. 2 preliminarily, we issued notice to the
    8 Hereinafter, the Limitation Act, 1963 is also referred to as ‘the Limitation Act’.
    9 Note: The Articles providing for different periods of limitation are contained in the Schedule to the
    Limitation Act, 1963 that is divided in three major Divisions viz., First Division (relating to suits);
    Second Division (relating to appeals); and Third Division (relating to applications). Each Division is
    further divided in parts with reference to the subject matter. However, the Articles in the Schedule
    are arranged ad seriatim. Hence, for brevity and continuity, the Articles are mentioned with
    reference to ‘the Limitation Act’ only. The Schedule and particular Part/Division have been referred
    wherever required contextually.
    4
    respondent No. 1 and by way of interim order, directed status quo in
    regard to the proceedings in question.
    The relevant factual and background aspects: Application by the
    financial creditor
  3. The substance of the relevant factual and background aspects, as
    emanating from the contents of the application under Section 7 moved by
    the respondent No. 2 and the observations made by NCLT and NCLAT in
    the impugned orders as also those noticed from the submissions made by
    the respective parties, could now be summarised as infra.
    6.1. On or about 22.12.2007, the lender banks viz., Corporation Bank,
    Indian Overseas Bank and Bank of India sanctioned and extended
    various loans, advances and facilities to the corporate debtor viz., Veer
    Gurjar Aluminium Industries Pvt. Ltd., who was engaged in manufacturing
    of aluminium ingots from aluminium scrap. The corporate debtor executed
    various security documents in favour of the lender banks in the years
    2008 and 2009, including those of equitable mortgage against the
    facilities so obtained. The Corporation Bank proceeded to
    rephase/enhance the facilities to the corporate debtor from time to time
    and lastly on 27.08.2010 wherefor, various additional security documents
    were executed by the corporate debtor. It has been asserted by the
    respondent No. 2 that the Corporation Bank had assigned to it the rights
    in relations to debts of the corporate debtor by way of Assignment
    Agreement dated 30.03.2013; and a deed of modification of charge over
    the assets of the corporate debtor was also executed on 26.04.2013.
    5
    6.2. The corporate debtor having defaulted in payment of the amount
    due against such loans, advances and facilities, its account with
    Corporation Bank was classified as Non-Performing Asset10 on
    08.07.2011 and that with Indian Overseas Bank was classified as NPA on
    05.08.2011. Then, on 15.11.2011, demand notice under Section 13(2) of
    the Securitisation and Reconstruction of Financial Assets and
    Enforcement of Securities Interest Act, 200211 was issued by Indian
    Overseas Bank to the corporate debtor and its guarantors. These steps
    were followed up with recovery proceedings against the corporate debtor
    by the consortium of lenders and respondent No. 2 in OA No. 172/2013
    before the Debts Recovery Tribunal, Aurangabad12 under Section 19 of
    the Recovery of Debts Due to the Banks and Financial Institution Act,
    199313
    .
    6.3. Even when the aforesaid proceedings were pending before DRT,
    on or about 21.03.2018, the respondent No. 2 moved an application
    before the Adjudicating Authority under Section 7 of the Code, in Form 1
    as provided in the Insolvency and Bankruptcy (Application to Adjudicating
    Authority) Rules, 201614
    , for initiation of CIRP in relation to the corporate
    debtor while stating its own capacity as the financial creditor, for being the
    assignee of loans and advances disbursed by Corporation Bank to the
    10 ‘NPA’ for short.
    11 Hereinafter also referred to as ‘the SARFAESI Act’.
    12 ‘DRT’ for short.
    13 Hereinafter also referred to as ‘the Act of 1993’.
    14 Hereinafter also referred to as ‘the Rules of 2016’.
    6
    corporate debtor15. Several details and particulars stated in the said
    application need not be recounted but, the particulars of amount claimed
    to be in default and the date when such default occurred, as stated in
    point No. 2 of Part III of the application, are relevant for the present
    purpose and could be usefully extracted as under16:-
    “2 AMOUNT CLAIMED TO
    BE IN DEFAULT AND
    THE DATE ON WHICH
    THE DEFAULT
    OCCURRED (ATTACH
    THE WORKINGS FOR
    COMPUTATION OF
    AMOUNT AND DATES*
    OF DEFAULT IN
    TABULAR FORM)
    The aggregating amount of
    default is 1,011,573,308
    (Rupees One Hundred and
    One Crore, Fifteen Lakh
    Seventy Three Thousand Three
    hundred and Eight only) as on
    28-02-2018 including expenses
    with further interest @ 14.50%
    plus penal interest of 2% from
    01-Mar-2018 till payment/or
    realization.
    Dates of default 8.7.2011 being
    the date of NPA
    The workings for computation
    of amount and days of default
    in tabular form is annexed
    hereto and marked as Exhibit
    B).
    The statement of Account along
    with Certificate under Bankers
    Book Evidence Act, 1891 is
    annexed hereto and marked as
    Exhibit B-1.”
    6.4. It may also be usefully indicated that Part-V of the application,
    drawn as per the format in Form 1, required the applicant to state the
    “Particulars of Financial Debt [Documents, Records and Evidence of
    15 Note: In its written submissions, the respondent No. 2 has mentioned the date of filing this
    application as ‘28.02.2018’ but the copy of application placed on record as Annexure A-5 (pp. 135-
    158) bears the date as ’21.03.2018’.
    16 Note: this extraction is from the copy of application placed on record as Annexure A-5 (at p.
    140-142). The expression “DATES” marked with * in the second column is reproduced as found
    mentioned at p. 141 but, in the format appended to the Rules of 2016, this entry carries the
    expression “DAYS”.
    7
    Default]”. The applicant stated the particulars of various securities held,
    date of their creation etc., as also the particulars relating to the said O.A.
    No. 172 of 2013 before DRT and notices issued thereunder. In Point No.
    5 of the said Part-V of the application, the applicant was required to
    attach “the latest and complete copy of the financial contract reflecting all
    amendments and waivers to date”. In this regard, again, various
    agreements for loan, promissory notes, tripartite agreements, consortium
    agreements and supplemental agreements were mentioned by the
    applicant. In Point No. 8, the applicant was required to give out other
    documents “in order to prove the existence of financial debt, the amount
    and date of default”. The contents on this Point No. 8 of Part-V of the
    application could be reproduced as under:-
    “8.LIST OF OTHER DOCUMENTS ATTACHED TO THIS
    APPLICATION IN ORDER TO PROVE THE EXISTENCE OF
    FINANCIAL DEBT, THE AMOUNT AND DATE OF DEFAULT
    i. Registered notice dated 05.07.2011 issued by Indian
    Overseas Bank to the corporate debtor to repay the overdue
    amount. Hereto annexed and marked as Exhibit MM is the
    copy of said registered notice.
    ii. Demand notice dated 15.11.2011 issued under
    section 13 (2) of the Securitisation Act by Indian Overseas
    Bank being consortium leader. Hereto annexed and marked
    as Exhibit NN is the copy of said Demand notice.
    iii. Publication of Demand Notice issued in two
    newspaper i.e Business Standard and Saamna under the
    SARFEASI Act dated 28.12.2011. Hereto annexed and
    marked Exhibit OO is the copy of said Paper Publication.
    iii. (sic). Objection to the Demand Notice and the reply to
    the said Objections by IOB dated 14.01.2012 and 21.01.2012
    respectively. Hereto annexed and marked as Exhibit PP and
    Exhibit QQ is the copy of said objection and reply letter.
    v. Registered Assignment Agreement dated
    30.03.2013 between Corporation Bank and (Financial
    Creditor thereby Corporation Bank assigned the debt due
    8
    from Corporate debtor along with the underlying securities in
    favour of the Financial Creditor/ Applicant. Hereto annexed
    and marked as Exhibit RR is the copy of said Registered
    Assignment Agreement dated 30.03.2013 between
    Corporation Bank and Financial Creditor.”
    6.5. The application so made by respondent no. 2 came to be
    registered as CP(IB)-488/I&BP/MB/2018 before the Adjudicating Authority
    (NCLT). On being noticed, the corporate debtor submitted its reply in
    opposition and raised various objections on the contents and frame of the
    application. It was also contended that various proceedings had been
    initiated with the sole aim of browbeating the corporate debtor and forcing
    it to pay the unrealistic claim of the applicant. With specific reference to
    the proceedings under the SARFAESI Act, it was contended that as per
    the notice under Section 13 (2), the account of corporate debtor with
    Indian Overseas Bank was classified as NPA on 05.08.2011 but, it was
    not mentioned as to when the loan account with Corporation Bank was
    classified as NPA. The corporate debtor also contended that its loan
    account had not been properly maintained by the respective banks due to
    the defect in accounting system and it was clear that the claim was
    arbitrary, inflated and not recoverable. With reference to the proceedings
    pending before DRT in OA No. 172/2013, it was also contended that IBC
    would not apply to cases where the bank has approached DRT or has
    adopted the proceeding under the SARFAESI Act and, for this reason, the
    present proceedings were not maintainable before the Adjudicating
    Authority.
    9
    6.6. The applicant financial creditor filed a rejoinder and refuted all the
    objections of the corporate debtor while asserting, inter alia, that the
    Corporation Bank declared the account of the corporate debtor as NPA on
    08.07.2011 and this fact was mentioned in the demand notice issued
    under Section 13(2) of SARFAESI Act, as sent by Indian Overseas Bank
    on behalf of the consortium of banks.
    Initiation order dated 09.08.2018
  4. The Adjudicating Authority, in its order dated 09.08.2018, dealt
    with the submissions of the parties and, while rejecting the objections of
    corporate debtor in relation to the frame of application and the
    correctness of loan accounts, held that the applicant was entitled to
    initiate CIRP under Section 7 of the Code when there was a debt and
    there was default; and that being a statutory remedy available to the
    financial creditor, the corporate debtor cannot question its maintainability
    only for the applicant having adopted other proceedings under other
    enactments. As regards the question of debt and default, the NCLT, inter
    alia, observed and held as under:-
    “16. The Corporate Debtor contended that demand notice
    issued under the SARFAESI Act, by Indian Overseas Bank
    does not contain the date of NPA of the loan of Corporation
    Bank. The petitioner in the rejoinder submitted that the date
    of NPA of Corporation Bank was mentioned as 08.07.2011 in
    the SARFAESI Notice. This Bench has gone through the
    SARFAESI Notice and the date of NPA of Corporation Bank
    is mentioned as 08.07.2011 at pg. no. 579. Hence this
    contention of the Corporate Debtor fails. Further the
    explanation to Section 7(1) of IB Code provides that a default
    includes a default in respect of a financial debt owed not only
    10
    to the Applicant Financial Creditor but also to any other
    Financial Creditor of the Corporate Debtor. In view of
    admission of date of NPA of Indian Overseas Bank by the
    Petitioner in the reply this case squarely falls under the ambit
    of explanation to Section 7(1) of the Code which is a proof of
    debt and default of debt due to another Financial Creditor.
    This Petition can be admitted based on the reply filed by the
    Corporate Debtor.”
    7.1. The Adjudicating Authority also referred to the decision of this
    Court in the case of Innoventive Industries Ltd. v. ICICI Bank: (2018) 1
    SCC 407 as regards the scheme of the Code and the requirements of
    Section 7 thereof and observed,-
    “21…..The rational and reasoning which can be drawn from the
    above lines of the citations clearly indicate mainly two aspects
    and that is existence of debt and the default which the present
    facts of the case clearly demonstrate. So any amount of
    argument that deals with issues which are not pertinent and
    trivial to the main issues concerned does not or cannot come in
    the way of adjudication of the lis in favour of the Petitioners. The
    present facts of the case are fully and comprehensively covered
    by the wordings of the above citations.
  5. The above discussion clearly shows that there is a debt
    owed by the Corporate Debtor in favour of Corporation Bank
    and subsequently on assignment of the debts by the said bank
    to the Petitioner, the Corporate Debtor is liable to make the
    payment to the Petitioner. Further there is ample proof to come
    to the conclusion that the Corporate Debtor defaulted in making
    payment to Corporation Bank and thereafter to the assignor, the
    Petitioner herein.
  6. This Adjudicating Authority, on perusal of the documents
    filed by the Creditor, is of the view that the Corporate Debtor
    defaulted in repaying the loan availed and also placed the name
    of the Insolvency Resolution Professional to act as Interim
    Resolution Professional and there being no disciplinary
    proceedings pending against the proposed resolution
    professional, therefore the Application under sub-section (2) of
    section 7 is taken as complete….”
    11
    7.2. Accordingly, the Adjudicating Authority (NCLT) admitted the
    application for consideration; passed necessary order of moratorium; and
    appointed the interim resolution professional.
    Previous round of proceedings in appeal
  7. Aggrieved by the aforesaid order dated 09.08.2018, the appellant,
    erstwhile director of the corporate debtor, approached the National
    Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency)
    No. 549 of 2018 under Section 61 of the Code, challenging admission of
    the application made by the respondent No. 2.
    8.1. The appeal so filed by the appellant was considered and
    summarily dismissed by the Appellate Tribunal by way of its order dated
    17.09.2018. The Appellate Tribunal took note of the contention urged on
    behalf of the appellant that a petition under Section 19 of the Act of 1993
    was pending before DRT wherein question had been raised as to whether
    the amount was payable to the assignee or not. As regards this, the
    Appellate Tribunal observed that initiation of CIRP cannot be annulled
    merely for pendency of a petition under Section 19 of the Act of 1993; and
    in terms of Section 14 of the Code, all such pending matters cannot
    proceed during the period of moratorium.
    8.2. It was also contended on behalf of the appellant that there was no
    debt payable. After noticing this contention, the Appellate Tribunal called
    upon the appellant to file an affidavit that no amount was received or the
    amount received had already been paid and therefore, there was no debt
    12
    or default. In response, learned counsel for the appellant expressed
    inability to file any such affidavit for the reason that the corporate debtor
    had indeed availed the loan from the bank/s. After noticing this stand of
    the appellant, the Appellate Tribunal felt disinclined to interfere with the
    order passed by the Adjudicating Authority and hence, dismissed the
    appeal while observing as under:-
    “2. Learned counsel appearing on behalf of the Appellant
    submitted that a petition under Section 19 of ‘The Recovery
    of Debts Due to Banks and Financial Institutions Act, 1993’ is
    pending before Debt Recovery Tribunal, Aurangabad.
    Wherein question has been raised is whether the amount is
    payable to the assignee or not.
  8. However, the initiation of Corporate Insolvency Resolution
    Process cannot be annulled merely on the ground of
    pendency of a petition under Section 19 of ‘The Recovery of
    Debts Due to Banks and Financial Institutions Act, 1993’. In
    fact in terms of Section 14 of I&B Code all such pending
    proceeding cannot proceed during the period of moratorium.
  9. Learned counsel appearing on behalf of the Appellant
    contended that there is no debt payable. However, when we
    asked the counsel to file an addition affidavit signed by the
    Appellant making specific statement that they have not
    received any amount or amount received has already been
    paid and therefore there is no debt or there is no default, it is
    informed by the counsel for the Appellant that such affidavit
    cannot be filed by the Appellant as the Corporate Debtor had
    taken loan from the Bank.
  10. In view of the aforesaid stand taken by Appellant, we are
    not inclined to interfere with the impugned order dated 9th
    August, 2018. In absence of any merit, the appeal is
    dismissed. No costs.”
  11. Aggrieved by the aforesaid order dated 17.09.2018, the appellant
    approached this Court under Section 62 of the Code in Civil Appeal No.
    10710 of 2018, which was considered and decided by way of the order
    dated 26.02.2019.
    13
    9.1. In the order dated 26.02.2019, this Court took note of the fact that
    in appeal before the Appellate Tribunal, one of the grounds agitated was
    that the claim of the respondent was barred by time for, admittedly, the
    default was committed on 08.07.2011 whereas the application was filed in
    the month of March, 2018.
    9.2. After noticing that the principal issue relating to limitation, though
    raised by the appellant, was not even decided by the Appellate Tribunal;
    and after referring to the decision in B.K. Educational Services Pvt. Ltd.
    v. Paras Gupta & Associates: AIR 2018 SC 5601, wherein it was held
    that the Limitation Act is applicable to application filed under Section 7 of
    the Code, this Court remanded the matter to the Appellate Tribunal for
    deciding the issue of limitation with respect to the application in question
    in accordance with law while setting aside the impugned order dated
    17.09.2018 and while granting liberty to the parties to submit additional
    affidavit/s in support of their respective contentions. This Court observed
    and ordered, inter alia, as under:-
    “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.
    Vs. Paras Gupta & Associates – AIR 2018 SC 5601 has held
    that the question of limitation is applicable even the
    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.
    Indisputably, neither the National Company Law Tribunal
    nor the National Company Law Appellate Tribunal, in the
    present case, has examined the said contention. Indeed,
    14
    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.
    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 impugned order dated 14.05. 2019 by NCLAT after remand
  12. In compliance of the aforesaid order of this Court dated
    26.02.2019, the Appellate Tribunal (NCLAT) took up the said appeal for
    consideration afresh and proceeded to dismiss the same by way of its
    impugned order dated 14.05.2019 while holding that the application in
    question is not barred by limitation.
    10.1. In the introductory paragraphs 1 to 4 of the impugned order dated
    14.05.2019, the Appellate Tribunal referred to the subject matter of appeal
    as also the orders passed in the previous round of proceedings; and in
    paragraphs 5 and 6, took note of the rival contentions. Thereafter, in
    paragraphs 7 to 14, the Appellate Tribunal took note of the background
    facts including those pertaining to the loans taken by the corporate debtor
    and creation of securities by way of mortgage of immovable properties
    and hypothecation of stock-in-trade and plant and machinery; the
    assignment in favour of respondent No. 2 by the lender bank; the loan
    having been shown by the corporate debtor in its annual reports;
    pendency of the petition under Section 19 of the Act of 1993 for recovery
    15
    of the due amount of loan; and a letter dated 31.07.2018 said to have
    been sent on behalf of the corporate debtor to the respondent No. 2 for
    one time settlement17
    .
    10.1.1. In paragraph 15 of the impugned order, the Appellate Tribunal
    referred to the decision of this Court in the case of B. K. Educational
    Services (supra) as also Section 238-A of the Code to notice that law of
    limitation is applicable to the application under Section 7 of the Code.
    However, in paragraph 16, the Appellate Tribunal made the observation
    that ‘for filing the application under Section 7 of the I&B Code, Article 132
    of Part 2 (other application) is applicable’; and proceeded to reproduce
    the said Article 132 of the Limitation Act.18 Thereafter, in paragraphs 17 to
    19, the Appellate Tribunal referred to the frame of Schedule to the
    Limitation Act and its Divisions, dealing with suits, appeals and
    applications respectively. Coming to the crux of the matter, in paragraph
    20 of the impugned order, the Appellate Tribunal referred to Article 137
    dealing with ‘OTHER APPLICATIONS’, as occurring in Part II of Third
    Division of Schedule to the Limitation Act and reproduced the same while
    observing that this Article 137 is applicable to the application/s under
    Section 7 or Section 9 or Section 10 of the Code.
    10.2. After the aforementioned observations and overview of the facts
    and the law applicable, the Appellate Tribunal, in paragraph 21 of the
    17 ‘OTS’ for short.
    18 Such a reference by the Appellate Tribunal to Article 132 of the Limitation Act appears to be
    entirely inapt because that relates to the application to High Court for certificate of fitness to appeal
    to this Court and provides for the limitation of sixty days from the date of decree or order. Be that
    as it may, the observation with extraction of Article 132 appears to be a matter of accidental slip;
    and we would leave the said Paragraph 16 of the impugned order at that only.
    16
    impugned order, stated the first reason for its conclusion that the
    application in question is not barred by limitation in the manner that the
    right to apply under Section 7 of the Code accrued to the respondent
    financial creditor only on 01.12.2016 when the Code came into existence.
    The Appellate Tribunal said, –
    “21. The I&B Code has come into existence on 1st
    December, 2016 and thereafter the right to apply accrued to
    respondent – ‘Financial Creditor’ under Section 7 of the I&B
    code only on 1st December, 2016. The application having
    filed in the year 2018, we hold that the application under
    Section 7 is not barred by limitation.”
    10.3. Thereafter, in paragraph 22, the Appellate Tribunal extracted the
    relevant passages from the decision in Innoventive Industries (supra)
    wherein this Court has explained as to how the CIRP is triggered in the
    scheme of IBC; and has underscored the requirement of existence of
    “default” on the part of the corporate debtor wherefor and whereby a
    financial creditor could maintain an action under Section 7 of the Code as
    also the essential elements of the process of such an action, including the
    form and manner of moving the application in conformity with the Rules of
    2016 and initial enquiry by the Adjudicating Authority on the question as to
    whether a default has occurred. Then, in paragraph 23 of the impugned
    order, the Appellate Tribunal also took note that in Innoventive
    Industries, this Court has further held that during such consideration by
    the Adjudicating Authority, the corporate debtor is entitled to point out that
    default has not occurred in the sense that the “debt” is not due; and that a
    debt ‘may not be due if it is not payable in law or in fact’.
    17
    10.4. Thereafter, in paragraph 24, the Appellate Tribunal, with reference
    to its own decision in Company Appeal (AT) (Insolvency) No. 82 of
    2018: Binani Industries Ltd. v. Bank of Baroda and Anr., observed that
    the Code does not relate to litigation nor the proceedings were of suit or
    money suit; and the period of limitation prescribed in First Division of the
    Limitation Act is not applicable to the proceedings under the Code.
    However, thereafter in paragraph 25 of the impugned order, the Appellate
    Tribunal observed that though the law of limitation as prescribed in First
    Division, Second Division and Part I of Third Division of the Schedule to
    the Limitation Act is not applicable, the corporate debtor could take a plea
    that “debt” is not due, as it is not payable in law being barred by limitation.
    These paragraphs 24 and 25 of the impugned order read as under: –
    “24. In ‘Binani Industries Ltd. vs. Bank of Baroda & Anr.’ –
    Company Appeal (AT) (Insolvency) NO. 82 of 2018’ this
    Appellate Tribunal held that ‘Insolvency & Bankruptcy Code’
    does not relate to litigation nor it is a suit or money suit. In
    that background the period of limitation prescribed in the First
    Division is not applicable through I&B Code proceedings.
  13. Though we have held that the law of limitation for filing a
    suit (First Division) or Appeals (Second Division) or
    application under Part I (Third division) are not applicable, the
    ‘Corporate Debtor’ can take a plea that ‘debt’ is not due, as it
    is not payable in law being barred by limitation.”
    10.5. After the aforementioned observations, the Appellate Tribunal
    indicated the question to be examined in the matter in paragraph 26 and
    proceeded to decide the same in the ensuing paragraphs. In paragraphs
    27 and 28 of the impugned order, the Appellate Tribunal referred to the
    undisputed fact that the financial creditor had already filed a petition
    18
    under Section 19 of the Act of 1993 that was pending; and also observed
    that the appellant has suppressed the fact that on 31.07.2018, the
    corporate debtor approached the financial creditor for one time
    settlement. After these observations, the Appellate Tribunal referred to the
    facts that nine properties of the corporate debtor had been mortgaged
    with the financial creditor and that the financial creditor had adopted the
    proceedings for enforcement of mortgage security and had recovered
    possession pursuant to the order passed by DRT. Having thus referred to
    the other proceedings and particularly the enforcement of mortgage
    security, the Appellate Tribunal referred to the limitation period of twelve
    years for recovery of possession of mortgaged property as per Article
    61(b) of the Limitation Act in paragraphs 29 and 30 and concluded that
    the property having been mortgaged, the claim is not barred by limitation
    as the period of limitation is twelve years with regard to the mortgaged
    property. These considerations, observations and findings led the
    Appellate Tribunal to hold and conclude in paragraph 31 of the impugned
    order that the application under Section 7 of the Code is not barred by
    limitation. These paragraphs 26 to 31 of the impugned order read as
    under:-
    “26. In the present case, it is to be noticed whether the ‘debt’
    is not payable in law by the ‘Corporate Debtor’ and/or the
    ‘default’ being barred by limitation.
  14. We have noticed that immediately on ‘default’,
    Respondent No. 2 – ‘Financial Creditor’ has already moved
    before the DRT under Section 19 of the ‘The Recovery of
    Debts Due to the Banks and Financial Institution Act, 1993’
    19
    and O.A. No. 172 of 2017 which is still pending. This fact has
    also been accepted and pleaded by the Appellant.
  15. The Appellant has suppressed the fact that recently the
    ‘Corporate Debtor’ by letter dated 31st July, 2018
    approached Respondent No. 2 (Financial Creditor) for one
    time settlement. There is a finding that there is a continuous
    cause of action. The appellant has not disputed that 9
    properties i.e. land and building have been mortgaged by the
    ‘Corporate Debtor’ with Respondent No. 2 – ‘Financial
    Creditor’. Respondent No. 2 also preferred a criminal
    proceeding on 27th June, 2017 as the enforcement mortgage
    of which possession was taken by 2nd Respondent after the
    order passed by the DRT, Aurangabad.
  16. Part V (First Division) of Limitation Act relates to ‘Suits
    relating to immovable property’ to recover possession of the
    property mortgaged and afterwards transferred by the
    mortgagee for a valuable consideration. The period of
    limitation is 12 years since the transfer becomes known to
    the plaintiff [Article 61(b)].
  17. In view of the aforesaid position of law, the property
    having mortgaged, we also hold that the claim is not barred
    by limitation as the period of limitation is 12 years with regard
    to mortgaged property and in terms of Section 5 (7) read with
    Section 5(8) as the property is mortgaged, Respondent No. 2
    also comes within the meaning of ‘Financial Creditor’.
  18. Therefore, we hold that the application under Section 7 is
    not barred by limitation nor the claim of Respondent No. 2 is
    barred by limitation. We reject the plea that no ‘debt’ is
    payable by the ‘Corporate Debtor’ in the eyes of law. We find
    no merit in this appeal. It is accordingly dismissed. No costs”
  19. For what has been noticed hereinabove, it could be reasonably
    deciphered that the Appellate Tribunal has rejected the plea of bar of
    limitation essentially on two major considerations: One, that the right to
    apply under Section 7 of the Code accrued to the respondent financial
    creditor only on 01.12.2016 when the Code came into force19; and
    second, that the period of limitation for recovery of possession of the
    19 Paragraph 21 of the impugned order ibid.
    20
    mortgaged property is twelve years20
    . Noticeably, though the Appellate
    Tribunal has referred to the pendency of the application under Section 19
    of the Act of 1993 as also the fact that corporate debtor had made a
    prayer for OTS in the month of July, 2018 but, has not recorded any
    specific finding about the effect of these factors.
    Broad features of rival submissions
  20. Assailing the orders so passed by NCLAT and asserting that the
    application made by the respondent No. 2 is barred by limitation, the
    erstwhile director of the corporate debtor has preferred this appeal which
    has been duly opposed by the applicant financial creditor (respondent No.
    2) as also the IRP for the corporate debtor (respondent No. 1). The broad
    features and substance of the rival submissions could be noticed as infra.
    The Appellant
  21. The learned senior counsel for the appellant has contended that in
    the impugned order dated 14.05.2019, the NCLAT has failed to apply the
    law declared by this Court in a series of decisions to the effect that for an
    application under Section 7 of the Code, Article 137 of Limitation Act is
    applicable and not Article 61 (b); and the limitation for such an application is
    three years from the date of the alleged default. According to the learned
    senior counsel, neither Article 61 (b) of Limitation Act applies nor even
    Section 18 thereof and, therefore, on the admitted date of default as stated
    by the respondent No. 2, the application in question remains hopelessly
    barred by limitation.
    20 Paragraphs 29 and 30 of the impugned order ibid.
    21
    13.1. The learned senior counsel has elaborated on the submissions with
    reference to the decision of this Court in the case of B.K. Educational
    Services (supra) and has contended that therein, it is categorically held
    that Article 137 of the Limitation Act applies to the application under Section
    7 of the Code and hence, the limitation period is of three years, which is to
    be counted from the date of default.
    13.2. With reference to the process envisaged by the Code and the Rules
    of 2016, where the financial creditor is required to mention the date of
    default in the application and also to adduce evidence of default, the
    learned senior counsel has argued that in the application under
    consideration, which was filed on 21.03.2018, the respondent No. 2
    mentioned the date of default as 08.07.2011 and, for the evidence of
    default, only the documents pertaining to the NPA were attached i.e., until
    the year 2011. Hence, according to the learned counsel, on the averments
    as taken and evidence as adduced, the application so filed by the
    respondent No. 2 is clearly barred by limitation and deserves to be rejected
    outright.
    13.3. The learned senior counsel has further referred to the decision in K.
    Sashidhar v. Indian Overseas Bank: 2019 SCC Online SC 25721 and has
    submitted that therein, this Court has reaffirmed the position that right to
    sue under the Code accrues on the date when default occurs and if the
    default had occurred three years prior to the date of filing of the application,
    the same would not amount to debt due and payable under the Code. The
    21 Now reported in (2019) 12 SCC 150
    22
    learned counsel has yet further submitted that in Civil Appeal No. 11020 of
    2018: Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd. &
    Anr.22, where default had occurred in the year 2001 when the Recovery
    Certificate was issued and the NCLT and NCLAT held that the claim was
    not time-barred for the cause of action being a continuing one, this Court
    has held that there was no doubt that the claim was due and payable, but
    the same was barred by limitation as applicable under IBC. Proceeding
    further, the learned senior counsel has referred to the decision rendered by
    a three-Judge Bench of this Court in Civil Appeal No. 4952 of 2019:
    Gaurav Hargovindbhai Dave v. Asset Reconstruction Company
    (India) Ltd. & Anr.23 to submit that therein, it is specifically held that the
    application under Section 7 of IBC would fall within the purview of Article
    137 of the Limitation Act and the time of three years begins to run from the
    date of default and no new life would be given to the time-barred debts. The
    learned senior counsel has also referred to the order of NCLAT dated
    02.05.2019 in Company Appeal (AT)(Insolvency) No. 655 of 2018, which
    was in challenge before this Court in Gaurav Hargovindbhai Dave (supra),
    to point out that NCLAT had taken the application under Section 7 of IBC to
    be within limitation also because of OTS offers made by the corporate
    debtor to the financial creditor and even this proposition did not meet with
    approval of this Court. The learned counsel would submit that in Vashdeo
    R.Bhojwani (supra), this Court has taken the date of default to be that of
    22 Now reported in (2019) 9 SCC 158
    23 Now reported in (2019) 10 SCC 572
    23
    issuance of Recovery Certificate and in Gaurav Hargovindbai Dave
    (supra), this Court has taken the date of NPA to be the date of default; and
    this Court has construed the date of default to be the one when the debt
    became due and payable strictly as per Section 3(12) of IBC whereunder,
    default means ‘non-payment of debt when whole or any part of instalment
    of the amount of debt has become due and payable and is not paid by the
    debtor or the corporate debtor, as the case may be.’
    13.4. The learned senior counsel has further submitted that the
    reasonings adopted by NCLAT stand thoroughly disapproved by this Court
    in the decisions above-referred as also that in Civil Appeal No. 7673 of
    2019: Sagar Sharma & Anr. v. Phoenix Arc Pvt. Ltd. & Anr.24 and,
    therefore, the impugned order cannot be sustained from any angle.
    13.5. The learned senior counsel has yet further referred to the threeJudge Bench decision in the case of Jignesh Shah and Anr. v. Union of
    India and Anr. : 2019 SCC Online 125425 and has submitted that therein
    too, this Court has analysed in detail the applicability of the Limitation Act to
    the applications of winding up being transferred to NCLT and has held that
    enforcement of IBC in 2016 will not give a new life to the time-barred debts;
    and if the application is filed beyond three years from the date of default,
    then the same will be barred by time.
    13.6. The learned senior counsel has argued that the debt shown in the
    balance sheet does not revive the limitation period of three years as
    24 Now reported in (2019) 10 SCC 353
    25 Now reported in (2019) 10 SCC 750
    24
    applicable to the IBC under Article 137 of the Limitation Act for the reasons
    that the debt as shown in the balance sheet is not covered by Section 18 of
    the Limitation Act; and even otherwise, Section 18 of the Limitation Act
    cannot revive the “default” relevant for IBC and could only revive limitation
    with respect to the cause of action. The learned senior counsel has
    emphasised on the submissions that Section 18 of the Limitation Act could
    revive limitation in some cases but not for every remedy which is separate
    and distinct; and when limitation period of three years under Article 137 of
    the Limitation Act, in relation to the application under Section 7 of the Code,
    starts from the date of default, acknowledgment of the debt in the balance
    sheet will not give any fresh date of default because default occurs only
    once and cannot be continuing. The learned counsel has also submitted
    that the NCLAT has wrongly relied on the alleged proposal for OTS which
    was never filed before NCLT and also was denied by the appellant herein;
    and in any case, the proposal for OTS, if at all made on 31.07.2018, cannot
    revive the date of default as per declaration of NPA on 08.07.2011 nor does
    it attract Section 18 of the Limitation Act.
    13.7. As regards relevant considerations and approach, the learned
    senior counsel for the appellant has submitted, with reference to paragraph
    64 of the decision in Swiss Ribbons Private Limited and Anr. v. Union
    of India and Ors.: (2019) 4 SCC 17, that the legislative policy has moved
    from “cause of action” to determination of “default” and in the present case,
    25
    default having occurred when the account became NPA as on 08.07.2011,
    the application remains barred by limitation.
    Respondent No. 2
  22. Per contra, the learned senior counsel appearing for the financial
    creditor (respondent No. 2) has contended that this appeal is devoid of
    substance and is liable to be dismissed on merits as also on conduct of the
    appellant.
    14.1. The learned senior counsel would maintain that the debt of the
    corporate debtor, payable to the respondent No. 2, has neither been
    disputed nor denied by the appellant; rather it is stated in ground P in the
    memo of appeal (page 36 of paper-book) that the corporate debtor is and
    has always been willing to settle the amount of outstanding loan in one time
    settlement with the respondent No. 2. The learned counsel would submit
    that the late attempt on the part of the appellant to dispute the OTS letter
    issued by the respondent No. 1 is baseless and fallacious because such a
    contention has been raised for the first time in this second round of appeal
    in this Court; and that the appellant is rather guilty of taking false pleadings
    and of perjury in his attempts to mislead.
    14.2. While refuting the submissions made on behalf of the appellant, it
    has been strenuously argued by the learned senior counsel for the
    respondent No. 2 that the application under Section 7 of the Code is not
    barred by limitation only because of initial date of default being mentioned
    therein as 08.07.2011. The learned counsel would submit that the
    26
    contentions on behalf of the appellant are unsustainable since the debt in
    question had been legally and unequivocally admitted to be due and
    payable in writing by the respondent No. 1 all throughout from the year 2011
    until 2017 in its balance sheets filed along with annual returns before the
    Registrar of Companies; and the debt had been shown as the loan amount
    outstanding to Corporation Bank, who had assigned the same to the
    respondent No. 2.
    14.3. While heavily relying on the observations in Jignesh Shah (supra),
    learned senior counsel has contended that as per the law declared by this
    Court, the provisions of Section 18 of the Limitation Act certainly extend the
    period of limitation under the Code on any acknowledgment of debt by the
    corporate debtor. The learned counsel has referred to the provisions of the
    Companies Act, 201326, particularly Section 95 thereof, as also to the
    observations of this Court in M/s. Mahabir Cold Storage v. CIT, Patna:
    1991 Supp (1) SCC 402 to submit that the registers of a company are of
    prima facie evidence; and the balance sheet disclosing loans and
    borrowings and forming part of annual returns, indeed constitute the
    admission and acknowledgment of the corporate debtor of its indebtedness.
    Therefore, according to the learned counsel, the loan amount
    acknowledged to be due and payable by the corporate debtor in the
    balance sheets and annual reports, continuously from the year 2011 and
    until the year 2017, becomes an admitted fact of evidence and thereby, the
    26 Hereinafter also referred to as ‘the Companies Act’.
    27
    period of limitation is extended by dint of applicability of Section 18 of the
    Limitation Act.
    14.4. The learned senior counsel has re-emphasised on the submissions
    that the suggestions of the appellant, that no extension of limitation period
    under Section 18 of the Limitation Act is permissible in the Code because
    date of default is sacrosanct and only three years period from that date is
    permissible, remain untenable in law. The learned counsel has contended
    that at the time of filing such application by the respondent No. 2, there was
    no provision in the Code importing any defined period of limitation and
    neither there was any mandatory legal requirement of stating in the
    application format as to how the claim was within limitation nor there was
    any statutory requirement to furnish any specific evidence thereof and
    therefore, the Section 7 application as framed and filed by respondent No. 2
    was well within the period of limitation.
    14.5. As regards the requisite approach in applying the law of limitation to
    the application under Section 7 of the Code, the learned senior counsel
    has strenuously argued that the amendment applying the provisions of the
    Limitation Act to the Code came into force with effect from 06.06.2018 but
    only after filing of the application by respondent No. 2; and testing a post
    facto applicable statutory provision of retrospective nature in a watertight
    stringent manner would result in a fatal flaw in equity and the same may
    also prejudice scores of legal recourse by many other banks and financial
    institutions currently in Courts/Tribunals on mere technicality that was
    28
    unforeseen and unconceived in past and hence, the documents making out
    a case for extension of limitation period could not be filed. Other way round,
    according to the learned counsel, the unrestrained applicability of Section
    238-A of the Code in an anomalous manner suggested on behalf of the
    appellant would compel all the financial institutions to immediately proceed
    and file the application under Section 7 before the expiry of three years
    exactly from the date of default, in spite of the fact that any borrower, in
    order to overcome its financial constraints to repay might be ready and
    willing to comply with the requirements of Section 18 of the Limitation Act
    for extension of period of limitation. The learned counsel has relied on the
    decision of this Court in N.Balakrishnan v. Krishnamurthy : (1998) 7
    SCC 123 to submit that the rules of limitation are not meant to destroy the
    rights of the parties.
    14.6. The learned senior counsel has, therefore, submitted that the
    application filed by respondent No. 2 under Section 7 of the Code as
    financial creditor is within the period of limitation as prescribed and as
    extended legally by application of the relevant provisions of the Limitation
    Act. Thus, according to the learned counsel, the application has rightly been
    admitted by NCLT and the present appeal deserves to be dismissed.
    Respondent No. 1
  23. The learned counsel appearing for the IRP (respondent No. 1) has
    more or less argued on the same lines and has submitted that the
    29
    application in question is well within the period of limitation when examined
    in the light of the applicable provisions of the Code and the Limitation Act.
    15.1. According to the learned counsel, the application filed by the
    respondent No. 2 remains within limitation for the reasons: (a) that the
    liability of loan is long standing and same is recorded in the balance sheets
    of corporate debtor for the Financial Years 2011-12, 2012-13, 2013-14,
    2014-15, 2015-16 and 2016-17; (b) that by way of letter dated 31.07.2018,
    request for OTS was made on behalf of the corporate debtor; and (c) OA
    No. 172/2013 was filed before DRT well within the stipulated time period
    and the same is still pending. It has been contended that in view of these
    indisputable facts, the claim of the financial creditor cannot be said to be
    dead or stale claim and hence, is not barred by limitation, particularly when
    the financial creditor has been availing of another civil remedy available to it
    and had filed the application under Section 19 of the Act of 1993 well within
    limitation.
    15.2. The learned counsel has further contended that the impugned order
    of NCLAT is correct on facts and is in consonance with the intent and spirit
    of law laid down by this Court in B.K.Educational Services (supra) that the
    claim of the creditor should not be a dead or a stale claim. The learned
    counsel has further contended that mere date of default or date of
    classification of an account as NPA does not put a full stop on ‘further cause
    of action’ or ‘continuing cause of action’ available to the financial creditor.
    The learned counsel would submit that on the settled principle of law, the
    30
    interpretation of statute should always be in furtherance to its objective and
    to give effect to the intent of legislature; and if, for the sake of arguments,
    the contention of the appellant is accepted that an application under Section
    7 of IBC could be filed only within three years from the date of NPA, it would
    frustrate the objective of IBC to restructure the stressed assets and ensure
    maximisation of the value of stressed assets.
    15.3. The learned counsel has again relied on Section 18 of the Limitation
    Act and the aforesaid decisions in Jignesh Shah and Mahaveer Cold
    Storage to submit that the contention of the appellant that cause of action
    arose in 2011 and right to sue started ticking in the said year is baseless, as
    the corporate debtor had continuously admitted its liability in its audited
    balance sheets until the year 2017 and further admitted its liability with an
    offer for OTS. Therefore, according to the learned counsel, the contention
    that the debt is barred by limitation cannot be taken by the corporate debtor
    in the given facts and circumstances besides that such a contention is
    contrary to the undisputed facts and admission of liability.
    15.4. The learned counsel for the respondent No. 1 has also attempted to
    refer to the proceedings already undertaken in this matter pursuant to the
    order of admission by NCLT, including the meetings of, and resolutions by,
    CoC; and consequent moving of application by IRP before NCLT for
    liquidation of the corporate debtor before passing of the interim order in this
    appeal.
    31
  24. In distillation of what has been noticed hereinabove, it is apparent
    that while not disputing the basics on the applicability of law of limitation to
    the application in question, the main plank of submissions of the learned
    counsel for respondents has been that the applicability of Section 18 of the
    Limitation Act, providing for extension of the period of limitation upon
    making of acknowledgment by the party against whom a right is claimed, is
    not taken away and, for such acknowledgments (of liability) having been
    consistently and continuously made in the balance sheets and annual
    reports by the corporate debtor as also in its offer for OTS, the fresh period
    of limitation would be available from the date of every such
    acknowledgment. Hence, with heavy reliance on the principles relating to
    “acknowledgment” under Section 18 of the Limitation Act, the learned
    counsel for the respondents would assert that the application in question is
    not barred by limitation. On the other hand, the gravamen of submissions
    on behalf of the appellant has been that looking to the scheme of the Code
    and the decisions of this Court, the application in question is governed by
    Article 137 of the Limitation Act; that three years’ time period prescribed
    therein commences from the date of default; and that acknowledgment of
    debt in the balance sheet or annual report does not give any fresh period of
    limitation because default occurs only once and does not furnish a
    continuing right to apply.
    16.1. Apart from the aforesaid, as noticed, the Appellate Tribunal has
    concluded in favour of the respondents for different reasons viz., that the
    32
    right to apply under Section 7 of the Code accrued only on 01.12.2016
    when the Code came into force and hence, the application filed by the
    financial creditor in the year 2018 is not barred by limitation; and that the
    period of limitation is twelve years for recovery of possession of the
    mortgaged property and, therefore, the claim is not barred by limitation.
    The relevant provisions of the Code and the Limitation Act
  25. For determination of the core issue as to whether the application
    made by respondent No. 2 before NCLAT under Section 7 of the Code is
    within limitation and for dealing with the submissions made by the
    respective learned counsel as also the reasonings adopted by the
    Appellate Tribunal, at the first it would be appropriate to take note of the
    relevant statutory provisions in the Insolvency and Bankruptcy Code,
    2016 and the Limitation Act, 1963.
    17.1. The expressions generally used in the Insolvency and Bankruptcy
    Code, 2016 are defined in Section 3 thereof. The relevant definitions
    occurring in Section 3 of the Code are as under: –
    “3. Definitions. —In this Code, unless the context otherwise
    requires,—

(6) “claim” means—
(a) a right to payment, whether or not such right is reduced to
judgment, fixed, disputed, undisputed, legal, equitable,
secured or unsecured;
(b) right to remedy for breach of contract under any law for
the time being in force, if such breach gives rise to a right to
payment, whether or not such right is reduced to judgment,
fixed, matured, unmatured, disputed, undisputed, secured or
unsecured;
33
(8) “corporate debtor” means a corporate person who owes
a debt to any person;


(10): “creditor” means any person to whom a debt is owed
and includes a financial creditor, an operational creditor, a
secured creditor, an unsecured creditor and a decree-holder;
(11) “debt” means a liability or obligation in respect of a claim
which is due from any person and includes a financial debt
and operational debt;
(12) “default” means non-payment of debt when whole or
any part or instalment of the amount of debt has become due
and payable and is not [paid]27 by the debtor or the corporate
debtor, as the case may be;


(30): “secured creditor” means a creditor in favour of whom
security interest is created;
**** **** ****”
17.2. Part II of the Code deals with insolvency resolution and liquidation
of corporate persons and the extent of application of this Part II is
specified in Section 4 that reads as under:-
“4. Application of this Part. – (1) This Part shall apply to
matters relating to the insolvency and liquidation of corporate
debtors where the minimum amount of the default is one lakh
rupees:
Provided that the Central Government may, by notification,
specify the minimum amount of default of higher value which
shall not be more than one crore rupees.”
17.3. The expressions employed in Part II of the Code are defined in
Section 5 thereof. The relevant definitions are as under:-
“5. Definitions.—In this Part, unless the context otherwise
requires,—


(6) “dispute” includes a suit or arbitration proceedings
relating to—
(a) the existence of the amount of debt;
27 The expression in parenthesis was substituted for “repaid” by Amendment Act No. 26 of 2018
with retrospective effect from 06.06.2018.
34
(b) the quality of goods or service; or
(c) the breach of a representation or warranty;
(7): “financial creditor” means any person to whom a
financial debt is owed and includes a person to whom such
debt has been legally assigned or transferred to;
**** **** ****”
17.4. The provisions relating to initiation of CIRP, with which we are
primarily concerned in this matter, are contained in Section 7 of the Code
and read as under:-
“7. Initiation of corporate insolvency resolution process
by financial creditor.— (1) A financial creditor either by itself
or jointly with [other financial creditors, or any other person
on behalf of the financial creditor, as may be notified by the
Central Government,]28 may file an application for initiating
corporate insolvency resolution process against a corporate
debtor before the Adjudicating Authority when a default has
occurred.
Explanation.— For the purposes of this sub-section, a default
includes a default in respect of a financial debt owed not only
to the applicant financial creditor but to any other financial
creditor of the corporate debtor.
(2) The financial creditor shall make an application under
sub-section (1) in such form and manner and accompanied
with such fee as may be prescribed.
(3) The financial creditor shall, along with the application
furnish—
(a) record of the default recorded with the information utility
or such other record or evidence of default as may be
specified;
(b) the name of the resolution professional proposed to act as
an interim resolution professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within fourteen days of
the receipt of the application under sub-section (2), ascertain
the existence of a default from the records of an information
utility or on the basis of other evidence furnished by the
financial creditor under sub-section (3).
(5) Where the Adjudicating Authority is satisfied that—
28 The expressions in parenthesis were substituted for “other financial creditors” by Amendment
Act No. 26 of 2018 with retrospective effect from 06.06.2018.
35
(a) a default has occurred and the application under subsection (2) is complete, and there is no disciplinary
proceedings pending against the proposed resolution
professional, it may, by order, admit such application; or
(b) default has not occurred or the application under subsection (2) is incomplete or any disciplinary proceeding is
pending against the proposed resolution professional, it may,
by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting
the application under clause (b) of sub-section (5), give a
notice to the applicant to rectify the defect in his application
within seven days of receipt of such notice from the
Adjudicating Authority.
(6) The corporate insolvency resolution process shall
commence from the date of admission of the application
under sub-section (5).
(7) The Adjudicating Authority shall communicate—
(a) the order under clause (a) of sub-section (5) to the
financial creditor and the corporate debtor;
(b) the order under clause (b) of sub-section (5) to the
financial creditor, within seven days of admission or rejection
of such application, as the case may be.”
17.5. Section 238-A, inserted in the Code by way Amendment Act No.
26 of 2018, is deemed to have come into effect from 06.06.2018. This
Section 238-A, being directly relevant for the present purpose, could also
be usefully reproduced as under:-
“238-A. Limitation. – The provisions of the Limitation Act,
1963 shall, as far as may be, apply to the proceedings or
appeals before the Adjudicating Authority, the National
Company Law Appellate Tribunal, the Debt Recovery
Tribunal or the Debt Recovery Appellate Tribunal, as the case
may be.”
17.6. Section 18 of the Limitation Act, providing for the extension of period
of limitation on acknowledgment of the liability, which is strongly relied upon
by the respondents, reads as under:-
“18. Effect of acknowledgment in writing. —
36
(1) Where, before the expiration of the prescribed period for a
suit or application in respect of any property or right, an
acknowledgment of liability in respect of such property or
right has been made in writing signed by the party against
whom such property or right is claimed, or by any person
through whom he derives his title or liability, a fresh period of
limitation shall be computed from the time when the
acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is
undated, oral evidence may be given of the time when it was
signed; but subject to the provisions of the Indian Evidence
Act, 1872 (1 of 1872), oral evidence of its contents shall not
be received.
Explanation.–For the purposes of this section,–
(a) an acknowledgment may be sufficient though it omits
to specify the exact nature of the property or right, or
avers that the time for payment, delivery, performance or
enjoyment has not yet come or is accompanied by a
refusal to pay, deliver, perform or permit to enjoy, or is
coupled with a claim to set-off, or is addressed to a
person other than a person entitled to the property or
right;
(b) the word “signed” means signed either personally or
by an agent duly authorised in this behalf; and
(c) an application for the execution of a decree or order
shall not be deemed to be an application in respect of
any property or right.”
17.7. As regards the period of limitation for the application in question,
Article 137, as contained in Part II of Third Division of the Schedule to the
Limitation Act (relating to the applications not otherwise provided for),
shall have bearing in the matter and may be taken note of as under29:-
29 It may be usefully observed that the Appellate Tribunal has referred to Article 61(b) of the
Limitation Act that relates to suits on mortgages. As shall be noticed hereafter later, such a
reference does not fit in the issue at hand from any angle. However, we may extract Articles 61(b)
and 62 of the Limitation, just for the sake of reference, as under:-
“PART V – SUITS RELATING TO IMMOVABLE PROPERTY.
29 “Description of suit 29 Period of Limitation 29 Time from which
period begins to run
29 61. By a mortgagor-


29 Twelve years 29 When the transfer
becomes known to the
plaintiff.
37
“Description of
application
Period of
limitation
Time from
which period
begins to run

  1. Any other
    application for which
    no period of limitation
    is provided elsewhere
    in this division
    Three years When the
    right to
    apply
    accrues.”
    The relevant basics of the Insolvency and Bankruptcy Code, 2016
  2. Now, a brief insight into the expositions of this Court on the reasons,
    purport, meaning and effect of the provisions of IBC and changes brought
    about by it to the then existing law, particularly those having bearing on the
    questions at hand, shall be useful.
    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
    When the money sued for becomes due.”
    Twelve years
    (b) to recover possession of immovable property mortgaged and afterwards transferred by the
    mortgagee for a valuable consideration

62.To enforce payment of money secured by a mortgage or otherwise charged upon
immovable property
38
maximisation of value of assets of such persons and balance of interest
of all the stakeholders.30
18.2. One of the earliest decisions, wherein this Court dealt with the
provisions of IBC in sufficient detail while explaining the raison d’être for this
enactment and a paradigm shift in law, had been in the case of
Innoventive Industries (supra) that was decided on 31.08.2017. Therein,
this Court, inter alia, pointed out that ‘one of the important objectives of the
Code is to bring the insolvency law in India under a single unified umbrella
with the object of speeding up of the insolvency process’.
18.2.1. In the case of Innoventive Industries, this Court was essentially
concerned with the question as to whether the proceedings under IBC could
be stalled where there was a moratorium to the company concerned under
the Maharashtra Relief Undertakings (Special Provisions) Act, 1958.
Amongst other aspects, this Court ruled, with reference to the non obstante
clause contained in Section 238 of the Code that the same being of
Parliamentary enactment, would prevail over the limited non obstante
clause of the State enactment; and thus, the Maharashtra Act cannot stand
in the way of Corporate Insolvency Resolution Process under the Code31
.
30 As observed by this Court in Civil Appeal Nos. 8512-8527 of 2019 etc.: Anuj Jain v. Axis
Bank Limited and Ors., decided on 26.02.2020.
31 Section 238 of the Code reads as under: –
“238. Provisions of this Code to override other laws. —The provisions of
this Code shall have effect, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or any instrument having
effect by virtue of any such law.”
39
During the course of an extensive examination of the relevant provisions,
this Court also analysed the scheme of Corporate Insolvency Resolution
Process under the Code and, in relation to the initiation of such CIRP by the
financial creditor, exposited as follows: –
“27. The scheme of the Code is to ensure that when a
default takes place, in the sense that a debt becomes
due and is not paid, the insolvency resolution process
begins. Default is defined in Section 3(12) in very wide terms
as meaning non-payment of a debt once it becomes due and
payable, which includes non-payment of even part thereof or
an instalment amount. For the meaning of “debt”, we have to
go to Section 3(11), which in turn tells us that a debt means a
liability of obligation in respect of a “claim” and for the
meaning of “claim”, we have to go back to Section 3(6) which
defines “claim” to mean a right to payment even if it is
disputed. The Code gets triggered the moment default is
of rupees one lakh or more (Section 4). The corporate
insolvency resolution process may be triggered by the
corporate debtor itself or a financial creditor or operational
creditor. A distinction is made by the Code between debts
owed to financial creditors and operational creditors. A
financial creditor has been defined under Section 5(7) as a
person to whom a financial debt is owed and a financial debt
is defined in Section 5(8) to mean a debt which is disbursed
against consideration for the time value of money. As
opposed to this, an operational creditor means a person to
whom an operational debt is owed and an operational debt
under Section 5(21) means a claim in respect of provision of
goods or services.

  1. When it comes to a financial creditor triggering the
    process, Section 7 becomes relevant. Under the Explanation
    to Section 7(1), a default is in respect of a financial debt
    owed to any financial creditor of the corporate debtor — it
    need not be a debt owed to the applicant financial creditor.
    Under Section 7(2), an application is to be made under subsection (1) in such form and manner as is prescribed, which
    takes us to the Insolvency and Bankruptcy (Application to
    Adjudicating Authority) Rules, 2016. Under Rule 4, the
    application is made by a financial creditor in Form 1
    40
    accompanied by documents and records required therein.
    Form 1 is a detailed form in 5 parts, which requires
    particulars of the applicant in Part I, particulars of the
    corporate debtor in Part II, particulars of the proposed interim
    resolution professional in Part III, particulars of the financial
    debt in Part IV and documents, records and evidence of
    default in Part V. Under Rule 4(3), the applicant is to dispatch
    a copy of the application filed with the adjudicating authority
    by registered post or speed post to the registered office of the
    corporate debtor. The speed, within which the adjudicating
    authority is to ascertain the existence of a default from the
    records of the information utility or on the basis of evidence
    furnished by the financial creditor, is important. This it must
    do within 14 days of the receipt of the application. It is at the
    stage of Section 7(5), where the adjudicating authority is
    to be satisfied that a default has occurred, that the
    corporate debtor is entitled to point out that a 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. The moment
    the adjudicating authority is satisfied that a default has
    occurred, the application must be admitted unless it is
    incomplete, in which case it may give notice to the applicant
    to rectify the defect within 7 days of receipt of a notice from
    the adjudicating authority. Under sub-section (7), the
    adjudicating authority shall then communicate the order
    passed to the financial creditor and corporate debtor within 7
    days of admission or rejection of such application, as the
    case may be.”
    (emphasis in bold supplied)
    18.3. The other decision in which this Court again traversed through the
    historical background and scheme of the Code had been in the wake of
    challenge to the constitutional validity of various of its provisions in the
    case of Swiss Ribbons (supra), decided on 25.01.2019.
    18.3.1. In Swiss Ribbons, while upholding the constitutional validity of
    IBC, this Court took note, inter alia, of the pre-existing state of law as also
    the objects and reasons for enactment of the Code; and while observing
    that the focus of the Code was to ensure revival and continuation of the
    41
    corporate debtor, where liquidation is to be availed of only as a last
    resort, this Court pointed out that on its scheme and framework, the Code
    was a beneficial legislation to put the corporate debtor on its feet, and not
    a mere recovery legislation for the creditors. This Court said, –
    “27. As is discernible, the Preamble gives an insight into
    what is sought to be achieved by the Code. The Code is first
    and foremost, a Code for reorganisation and insolvency
    resolution of corporate debtors. Unless such reorganisation
    is effected in a time-bound manner, the value of the assets of
    such persons will deplete. Therefore, maximisation of value
    of the assets of such persons so that they are efficiently run
    as going concerns is another very important objective of the
    Code. This, in turn, will promote entrepreneurship as the
    persons in management of the corporate debtor are removed
    and replaced by entrepreneurs. When, therefore, a resolution
    plan takes off and the corporate debtor is brought back into
    the economic mainstream, it is able to repay its debts, which,
    in turn, enhances the viability of credit in the hands of banks
    and financial institutions. Above all, ultimately, the interests of
    all stakeholders are looked after as the corporate debtor itself
    becomes a beneficiary of the resolution scheme—workers
    are paid, the creditors in the long run will be repaid in full,
    and shareholders/investors are able to maximise their
    investment. Timely resolution of a corporate debtor who is in
    the red, by an effective legal framework, would go a long way
    to support the development of credit markets. Since more
    investment can be made with funds that have come back into
    the economy, business then eases up, which leads, overall,
    to higher economic growth and development of the Indian
    economy. What is interesting to note is that the Preamble
    does not, in any manner, refer to liquidation, which is only
    availed of as a last resort if there is either no resolution plan
    or the resolution plans submitted are not up to the mark.
    Even in liquidation, the liquidator can sell the business of the
    corporate debtor as a going concern. (See ArcelorMittal32 at
    para 83, fn 3).
  2. It can thus be seen that the primary focus of the
    legislation is to ensure revival and continuation of the
    32 ArcelorMittal India (P) Ltd. v. Satish Kumar Gupta & Ors: (2019) 2 SCC 1
    42
    corporate debtor by protecting the corporate debtor
    from its own management and from a corporate death by
    liquidation. The Code is thus a beneficial legislation
    which puts the corporate debtor back on its feet, not
    being a mere recovery legislation for creditors. The
    interests of the corporate debtor have, therefore, been
    bifurcated and separated from that of its promoters/those
    who are in management. Thus, the resolution process is
    not adversarial to the corporate debtor but, in fact,
    protective of its interests. The moratorium imposed by
    Section 14 is in the interest of the corporate debtor itself,
    thereby preserving the assets of the corporate debtor during
    the resolution process. The timelines within which the
    resolution process is to take place again protects the
    corporate debtor’s assets from further dilution, and also
    protects all its creditors and workers by seeing that the
    resolution process goes through as fast as possible so that
    another management can, through its entrepreneurial skills,
    resuscitate the corporate debtor to achieve all these ends.”
    (emphasis in bold supplied)
    18.3.2. In Swiss Ribbons, this Court again explained the connotations as
    also contours of the provisions relating to initiation of CIRP by the financial
    creditor in the following passage:-
    “64. The trigger for a financial creditor’s application is nonpayment of dues when they arise under loan agreements. It
    is for this reason that Section 433(e) of the Companies Act,
    1956 has been repealed by the Code and a change in
    approach has been brought about. Legislative policy now
    is to move away from the concept of “inability to pay
    debts” to “determination of default”. The said shift
    enables the financial creditor to prove, based upon solid
    documentary evidence, that there was an obligation to pay
    the debt and that the debtor has failed in such obligation….”
    (emphasis in bold supplied)
  3. The expositions abovementioned make it clear that the Insolvency
    and Bankruptcy Code, 2016 has been enacted to consolidate and amend
    the laws relating to reorganisation and insolvency resolution of corporate
    persons and other entrepreneurs in a time bound manner so as to ensure
    43
    maximisation of value of assets of such persons and to balance the interest
    of all the stakeholders. 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.
    19.1. When the Corporate Insolvency Resolution Process is understood
    on the anvil of the aforementioned fundamentals on the spirit and intent of
    IBC, it is also evident that such a process is not intended to be adversarial
    to the corporate debtor but is essentially to protect its interests.
    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
    44
    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”.
    Operation of law of limitation over IBC proceedings
  4. Having taken note of the rudiments that the Code is a beneficial
    legislation intended to put the corporate debtor on its feet and it is not a
    mere money recovery legislation for the creditors; and having also noticed
    that CIRP is not intended to be adversarial to the corporate debtor but is
    essentially to protect its interests and that CIRP has its genesis in default on
    the part of the corporate debtor, we may now examine the operation of law
    of limitation over the proceedings under the Code.
  5. Section 238-A, providing that the provisions of the Limitation Act,
    1963 shall, as far as may be, apply to the proceedings or appeals, inter alia,
    before the Adjudicating Authority (NCLT) or the Appellate Tribunal (NCLAT),
    was not available in the Code when this Court delivered the decision in
    Innoventive Industries (supra) on 31.08.2017. However, this Court
    explained the scheme of the Code and nuances of CIRP by the financial
    creditor under Section 7, particularly as to when the process of insolvency
    resolution begins, the trigger moment being the default of rupees one lakh
    or more; and the requirement on the Adjudicating Authority to reach to the
    satisfaction that the required default has occurred. It appears that even
    when the applicable principles in relation to CIRP by the financial creditor
    were explained by this Court in Innoventive Industries (supra), the
    45
    question of applicability of the Limitation Act to the Code remained a matter
    of debate in various decisions of NCLT and NCLAT. Such a debate and the
    doubts generated thereby were dealt with by the Insolvency Law Committee
    who, in its report made in the month of March, 2018, recommended for
    introduction of the requisite provision in the Code so as to leave no room of
    doubt that the Limitation Act indeed applies to the proceedings under the
    Code. This ultimately led to the insertion of the said Section 238-A into the
    Code with retrospective effect from 06.06.2018. However, the validity of this
    Section 238-A was also questioned before this Court and this culminated
    into the elaborate decision of this Court in the case of B.K. Educational
    Services (supra) that was rendered on 11.10.2018.
  6. In B.K. Educational Services (supra), while upholding the validity
    of Section 238-A of the Code, this Court took note of the said report of the
    Insolvency Law Committee and observed as under:-
    “11. Having heard the learned counsel for both sides, it is
    important to first set out the reason for the introduction of
    Section 238-A into the Code. This is to be found in the Report
    of the Insolvency Law Committee of March 2018, as follows:
    “28. APPLICATION OF LIMITATION ACT, 1963
    28.1. The question of applicability of the Limitation Act, 1963
    (the Limitation Act) to the Code has been deliberated upon in
    several judgments of NCLT and NCLAT. The existing
    jurisprudence on this subject indicates that if a law is a
    complete code, then an express or necessary exclusion of
    the Limitation Act should be respected. In light of the
    confusion in this regard, the Committee deliberated on the
    issue and unanimously agreed that the intent of the Code
    could not have been to give a new lease of life to debts
    which are time-barred. It is settled law that when a debt is
    barred by time, the right to a remedy is time-barred. This
    requires being read with the definition of “debt” and “claim” in
    the Code. Further, debts in winding-up proceedings cannot
    46
    be time-barred, and there appears to be no rationale to
    exclude the extension of this principle of law to the Code.
    28.2. Further, non-application of the law on limitation creates
    the following problems: first, it re-opens the right of financial
    and operational creditors holding time-barred debts under the
    Limitation Act to file for CIRP, the trigger for which is default
    on a debt above INR one lakh. The purpose of the law of
    limitation is ‘to prevent disturbance or deprivation of what
    may have been acquired in equity and justice by long
    enjoyment or what may have been lost by a party’s own
    inaction, negligence or laches’. Though the Code is not a
    debt recovery law, the trigger being “default in payment of
    debt” renders the exclusion of the law of limitation counterintuitive. Second, it re-opens the right of claimants (pursuant
    to issuance of a public notice) to file time-barred claims with
    IRP/RP, which may potentially be a part of the resolution
    plan. Such a resolution plan restructuring time-barred debts
    and claims may not be in compliance with the existing laws
    for the time being in force as per Section 30(4) of the Code.
    28.3. Given that the intent was not to package the Code as a
    fresh opportunity for creditors and claimants who did not
    exercise their remedy under existing laws within the
    prescribed limitation period, the Committee thought it fit to
    insert a specific section applying the Limitation Act to the
    Code. The relevant entry under the Limitation Act may be on
    a case-to-case basis. It was further noted that the Limitation
    Act may not apply to applications of corporate applicants, as
    these are initiated by the applicant for its own debts for the
    purpose of CIRP and are not in the form of a creditor’s
    remedy.”
    (emphasis in original and supplied)
  7. The Report of the Committee would indicate that it has
    applied its mind to judgments of NCLT and NCLAT. It has
    also applied its mind to the aspect that the law is a
    complete Code and the fact that the intention of such a
    Code could not have been to give a new lease of life to
    debts which are time-barred.”
    (emphasis in bold supplied)
    22.1. Further, in B.K. Educational Services, this Court extensively
    dealt with the issues as to whether the Code being exhaustive in nature,
    would result in overriding the Limitation Act and as to whether the object
    of the legislature was to apply the limitation prescribed under the Code
    47
    retrospectively. This Court, relying on a plethora of judgments and the
    said Insolvency Law Committee Report of March, 2018 stated the views
    in no uncertain terms that,-
    “34……. the legislature did not contemplate enabling a
    creditor who has allowed the period of limitation to set in to
    allow such delayed claims through the mechanism of the
    Code. The Code cannot be triggered in the year 2017 for a
    debt which was time-barred, say, in 1990, as that would lead
    to the absurd and extreme consequence of the Code being
    triggered by a stale or dead claim, leading to the drastic
    consequence of instant removal of the present Board of
    Directors of the corporate debtor permanently, and which
    may ultimately lead to liquidation and, therefore, corporate
    death. This being the case, the expression “debt due” in the
    definition Sections of the Code would obviously only refer to
    debts that are “due and payable” in law, i.e., the debts that
    are not time-barred. That this is the case has already been
    held by us in the Innoventive Industries Ltd. (supra)…..

  1. The definition of “default” in Section 3(12) uses the
    expression “due and payable” followed by the expression
    “and is not paid by the debtor or the corporate debtor…”.
    “Due and payable” in Section 3(12), therefore, only refers to
    the whole or part of a debt, which when referring to the date
    on which it becomes “due and payable”, is not in fact paid by
    the corporate debtor. The context of this provision is therefore
    actual non-payment by the corporate debtor when a debt has
    become due and payable.

  1. It is thus clear that since the Limitation Act is applicable to
    applications filed under Sections 7 and 9 of the Code from
    the inception of the Code, Article 137 of the Limitation Act
    gets attracted. “The right to sue”, therefore, accrues when
    a default occurs. If the default has occurred over three
    years prior to the date of filing of the application, the
    application would be barred under Article 137 of the
    Limitation Act, save and except in those cases where, in
    the facts of the case, Section 5 of the Limitation Act may
    be applied to condone the delay in filing such application.
    (emphasis in bold supplied)
    48
  2. After the aforesaid decisions dated 31.08.2017 in Innoventive
    Industries and dated 11.10.2018 in B.K. Educational Services, this Court
    again examined the overall scheme and spirit of the provisions of IBC in the
    case of Swiss Ribbons (supra) on 25.01.2019. The relevant enunciations
    in Swiss Ribbons have already been noticed hereinbefore.
  3. Thereafter, the case of K. Sashidhar (supra) was decided on
    05.02.2019. Therein, the principal issue related with the dispensation
    governing the process of approval or rejection of resolution plan by the
    Committee of Creditors33 but, having regard to the variety of contentions
    urged, this Court took note of the decisions elaborately dealing with the
    legislative history of the Code including that in Innoventive Industries
    (supra). During the course of submissions, the said decision in B.K.
    Educational Services was also cited and hence, the same was referred to
    and the ratio therein was explained in the following passage:
    “78. As regards the decision in B.K. Educational, the Court
    was called upon to consider the question as to whether the
    Limitation Act, 1963 will apply to applications that are made
    under Section 7 and/or Section 9 of the Code on and from its
    commencement on 1-12-2016 till 6-6-2018. That question
    was examined in the context of Section 238-A inserted in the
    I&B Code by the self-same Amendment Act of 2018. The
    Court after adverting to the contents of the report of the
    Insolvency Law Committee of March 2018 and other
    provisions of the Code and other enactments, opined
    that Section 238-A was clarificatory in nature and being a
    procedural law, came to hold that it had retrospective
    effect. The Court held that taking any other view would
    33 ‘CoC’ for short.
    49
    result in an incongruous situation as the provisions of
    the Limitation Act would apply in some set of cases to be
    decided by the same Tribunal and not in other set of
    cases. Besides, the Court adverted to the principle that
    right to sue accrues on the date when default occurs and
    if the default occurred even three years prior to the date
    of filing of the application, the same cannot be treated as
    “debt that is due and payable” or “debt” due.”
    (emphasis in bold supplied)
  4. As noticed, the abovementioned decision in K. Sashidhar was
    rendered on 05.02.2019 wherein, the principles in B.K. Educational
    Services were undoubtedly restated by this Court. However, thereafter, the
    case of Jignesh Shah (supra) came to be decided by a three-Judge Bench
    of this Court on 25.05.2019. A particular passage in this three-Judge Bench
    decision in Jignesh Shah (as occurring in paragraph 21, SCC p. 770) has
    been relied upon by both the parties to assert that the law so declared by
    this Court supports their case.
    25.1 In order to comprehend the meaning and import of the referred
    observations in paragraph 21 of Jignesh Shah, the text thereof is required
    to be read in its context. Therefore, it shall be worthwhile to take note of the
    relevant factual and background aspects of the case of Jignesh Shah.
    Therein, IL&FS Financial Services Ltd. (‘IL&FS’) had filed a winding up
    petition against La-Fin Financial Services Pvt. Ltd. (‘La-Fin’) which was
    transferred to National Company Law Tribunal, Mumbai Branch and then,
    was heard as Section 7 application under the Code. The background had
    been that on 20.08.2009, a share-purchase agreement was executed,
    whereby IL&FS agreed to purchase 442 lakhs equity shares of MCX Stock
    50
    Exchange Limited (‘MCX-SX’) from Multi-Commodity Exchange India
    Limited (‘MCX’). Pursuant to this agreement, La-Fin, as a group company of
    MCX, issued a letter of undertaking to IL&FS on 20.08.2009 stating that LaFin or its appointed nominees would offer to purchase from IL&FS the
    shares of MCX-SX after a period of one year, but before three years, from
    the date of investment. Thereafter, on 03.08.2012, IL&FS proposed to sell
    its entire holding of shares in MCX-SX and called upon La-Fin to purchase
    these shares in terms of the undertaking. On 16.08.2012, La-Fin replied
    with denial of any legal or contractual obligation to buy the aforesaid
    shares. Ultimately, on 19.06.2013, IL&FS filed Suit No. 449 of 2013 in the
    Bombay High Court for specific performance of the letter of undertaking by
    La-Fin or, in the alternative, for damages while stating that the cause of
    action arose on 16.08.2012 when La-Fin refused to honour its obligation.
    Interim injunction was granted in the said suit on 13.10.2014. Thereafter, on
    03.11.2015, a statutory notice under Sections 433 and 434 of the
    Companies Act, 1956 was issued by IL&FS to La-Fin while referring to the
    attachment of the properties of La-Fin by Economic Offences Wing of the
    Mumbai Police and stating that La-Fin was obviously in no financial position
    to pay the amount it owed to IL&FS. This notice was followed up by the
    winding up petition that was filed on 21.10.2016 by IL&FS against La-Fin in
    the Bombay High Court under Section 433(e) of the Companies Act, 1956.
    As noticed, this company petition was transferred to NCLT and was heard
    as an application under Section 7 of the Code. This transferred petition was
    51
    admitted by NCLT while forming the opinion that as per the share-purchase
    agreement and the letter of understanding, a financial debt had been
    incurred by La-Fin. The appeal filed by the appellant Jignesh Shah was also
    dismissed by NCLAT. Hence, the orders passed by NCLT and NCLAT were
    challenged in this Court. A writ petition was also filed challenging the
    constitutionality of certain provisions of the Code. This has been the
    backdrop in which, the statutory bar of limitation against the petition filed by
    IL&FS was argued before this Court with reference to Section 238-A of the
    Code and the decision in B.K. Educational Services (supra).
    25.2. This Court accepted the contentions urged on behalf of the
    appellants and while reproducing the relevant passages from B.K.
    Educational Services, held that the bar of limitation was operating over the
    application filed by IL&FS in the following words:-
    “12. This judgment clinches the issue in favour of the
    Petitioner/Appellant. With the introduction of Section 238A
    into the Code, the provisions of the Limitation Act apply to
    applications made under the Code. Winding up petitions filed
    before the Code came into force are now converted into
    petitions filed under the Code. What has, therefore, to be
    decided is whether the Winding up Petition, on the date that it
    was filed, is barred by lapse of time. If such petition is found
    to be time-barred, then Section 238A of the Code will not give
    a new lease of life to such a time-barred petition. On the
    facts of this case, it is clear that as the Winding up
    Petition was filed beyond three years from August, 2012
    which is when, even according to IL & FS, default in
    repayment had occurred, it is barred by time.”
    (emphasis in bold supplied)
    25.3. Though with the aforesaid finding, the matter stood concluded that
    the petition filed by IL&FS was barred by limitation but thereafter, the Court
    52
    also proceeded to examine another line of submissions of the parties as
    regards effect of the suit for recovery over the proceedings under Section
    433 of the Companies Act, 1956, where it was argued on behalf of the
    appellants that existence of such a suit cannot be construed as having
    either revived the period of limitation or having extended it, insofar as
    concerning the proceeding for winding up. This Court accepted the said
    contention of the appellants and in that context, made the observations that
    are relied upon by the parties and read as under:-
    “21. The aforesaid judgments correctly hold that a suit for
    recovery based upon a cause of action that is within limitation
    cannot in any manner impact the separate and independent
    remedy of a winding-up proceeding. In law, when time begins
    to run, it can only be extended in the manner provided in the
    Limitation Act. For example, an acknowledgment of liability
    under Section 18 of the Limitation Act would certainly extend
    the limitation period, but a suit for recovery, which is a
    separate and independent proceeding distinct from the
    remedy of winding up would, in no manner, impact the
    limitation within which the winding-up proceeding is to be
    filed, by somehow keeping the debt alive for the purpose of
    the winding-up proceeding.”
    25.4. Moreover, after reading the provisions contained in Sections 433(e)
    and 434 of the Companies Act, 1956, for winding up in case of company
    being unable to pay its debts, this Court made yet further observations in
    Jignesh Shah (supra) that the trigger for limitation in such an action occurs
    when a default takes place after which the debt remains outstanding; and
    that date alone is relevant for reckoning the period of limitation. After
    reproducing Section 433(e) and 434 of the Companies Act, 1956, this Court
    said,-
    53
    “28. A reading of the aforesaid provisions would show that the
    starting point of the period of limitation is when the company
    is unable to pay its debts, and that Section 434 is a deeming
    provision which refers to three situations in which a Company
    shall be deemed to be “unable to pay its debts” Under
    Section 433(e). In the first situation, if a demand is made by
    the creditor to whom the company is indebted in a sum
    exceeding one lakh then due, requiring the company to pay
    the sum so due, and the company has for three weeks
    thereafter “neglected to pay the sum”, or to secure or
    compound for it to the reasonable satisfaction of the creditor.
    “Neglected to pay” would arise only on default to pay the sum
    due, which would clearly be a fixed date depending on the
    facts of each case. Equally in the second situation, if
    execution or other process is issued on a decree or order of
    any Court or Tribunal in favour of a creditor of the company,
    and is returned unsatisfied in whole or in part, default on the
    part of the debtor company occurs. This again is clearly a
    fixed date depending on the facts of each case. And in the
    third situation, it is necessary to prove to the “satisfaction of
    the Tribunal” that the company is unable to pay its debts.
    Here again, the trigger point is the date on which default is
    committed, on account of which the Company is unable to
    pay its debts. This again is a fixed date that can be proved on
    the facts of each case. Thus, Section 433(e) read with
    Section 434 of the Companies Act, 1956 would show that
    the trigger point for the purpose of limitation for filing of
    a winding up petition Under Section 433(e) would be the
    date of default in payment of the debt in any of the three
    situations mentioned in Section 434.”
    (emphasis in bold supplied)
  5. Before examining the purport, effect and impact of the principles
    emanating from the aforesaid decision in Jignesh Shah, it is rather
    expedient to take note of the enunciations in a few later decisions of this
    Court, on the very same issue concerning the operation of law of limitation
    in regard to the application under Section 7 of the Code, which have been
    cited in the present appeal.
    54
  6. One such decision had been in the case of Vashdeo R. Bhojwani
    (supra) that was rendered on 02.09.2019. In that case, a default of Rs. 6.7
    crores was found against the corporate debtor whose account was declared
    NPA by the lender bank on 23.12.1999 and ultimately, a recovery certificate
    dated 24.12.2001 was issued for this amount. Later on, the financial
    creditor filed an application under Section 7 of the Code before the
    Adjudicating Authority on 21.07.2017 claiming that the said amount together
    with interest, which kept ticking from 1998, was payable to it as assignee.
    The application under Section 7 was admitted on 05.03.2018 by the
    Adjudicating Authority stating that ‘as the default continued, no period of
    limitation would attach and the petition would, therefore, have to be
    admitted’. The Appellate Tribunal dismissed the appeal against the
    aforesaid order of admission while stating that ‘since the cause of action in
    the present case was continuing, no limitation period would attach’; and
    while further holding that the recovery certificate of 2001 plainly showed
    that there was a default and there was no statable defence. After taking
    note of the relevant facts and the foundation of the orders passed by the
    Adjudicating Authority and the Appellate Tribunal, this Court disapproved
    the same while finding that the case was covered by the decision in B.K.
    Educational Services (supra) and while reiterating the passage abovenoted. To get out of the rigour of the ratio of B.K. Educational Services, a
    reference was made to the provisions of the Limitation Act providing for
    fresh period of limitation in the case of continuing cause of action and it
    55
    appears that Section 23 of the old Limitation Act of 1908 was referred to34
    .
    This Court rejected such contention while observing as under:
    “4. In order to get out of the clutches of para 27, it is urged
    that Section 23 of the Limitation Act would apply as a result of
    which limitation would be saved in the present case. This
    contention is effectively answered by a judgment of three
    learned Judges of this Court in Balakrishna Savalram Pujari
    and Others vs. Shree Dhyaneshwar Maharaj Sansthan &
    Others, [1959] Supp. (2) SCR 476. In this case, this Court held
    as follows:
    “ … In dealing with this argument it is necessary to
    bear in mind that Section 23 refers not to a
    continuing right but to a continuing wrong. It is the
    very essence of a continuing wrong that it is an act
    which creates a continuing source of injury and
    renders the doer of the act responsible and liable for
    the continuance of the said injury. If the wrongful act
    causes an injury which is complete, there is no
    continuing wrong even though the damage resulting
    from the act may continue. If, however, a wrongful
    act is of such a character that the injury caused by it
    itself continues then the act constitutes a continuing
    wrong. In this connection it is necessary to draw a
    distinction between the injury caused by the wrongful
    act and what may be described as the effect of the
    said injury. It is only in regard to acts which can be
    properly characterised as continuing wrongs that
    34 We have indicated the provision contained in Limitation Act, 1908 for the reason that in the
    cited decision, Section 23 has been referred and the decision of this Court reported in [1959]
    Supp. (2) SCR 476 has been cited. The corresponding provision, as regards continuing cause of
    action for specific category of cases is now contained in Section 22 of the Limitation Act, 1963
    which is akin to the earlier Section 23 of the Limitation Act,1908 but with slight modifications. For
    the sake of reference, these provisions are extracted as under:
    Section 23 of the Limitation Act, 1908
    “Continuing breaches and wrongs.-In the case of a continuing breach of
    contract and in the case of a continuing wrong independent of contract, a fresh
    period of limitation begins to run at every moment of the time during which the
    breach or the wrong, as the case may be, continues.”
    Section 22 of the Limitation Act, 1963
    “Continuing breaches and torts.-In the case of a continuing breach of
    contract or in the case of a continuing tort, a fresh period of limitation begins to
    run at every moment of the time during which the breach or the tort, as the case
    may be, continues.”
    56
    Section 23 can be invoked. Thus considered it is
    difficult to hold that the trustees’ act in denying
    altogether the alleged rights of the Guravs as
    hereditary worshippers and in claiming and obtaining
    possession from them by their suit in 1922 was a
    continuing wrong. The decree obtained by the
    trustees in the said litigation had injured effectively
    and completely the appellants’ rights though the
    damage caused by the said decree subsequently
    continued.”
    Following this judgment, it is clear that when the recovery
    certificate dated 24-12-2001 was issued, this certificate
    injured effectively and completely the appellant’s rights
    as a result of which limitation would have begun ticking.
  7. This being the case, and the claim in the present suit being
    time-barred, there is no doubt that is due and payable in law.
    We allow the appeal and set aside the orders of NCLT and
    NCLAT. There will be no order as to costs.”
    (emphasis in bold supplied)
  8. A few days after the decision in Vashdeo R. Bhojwani, a threeJudge Bench of this Court had another occasion to apply and explain the
    ratio in B.K. Educational Services. That was in the case of Gaurav
    Hargovindbhai Dave (supra), decided on 18.09.2019. Therein, the
    financial creditor had stated in the relevant column of Form No. 1 of the
    application under Section 7 of the Code the date of default to be the date of
    NPA i.e., 21.07.2011. The application under Section 7 was filed on
    03.10.2017. The Adjudicating Authority applied Article 62 of the Limitation
    Act and reached to the conclusion that since the limitation period was
    twelve years from the date on which money sued has become due, the
    claim was within limitation and hence, admitted the application. The NCLAT
    applied another reasoning that the time of limitation would begin to run only
    from 01.12.2016, the date on which the Code was brought into force. This
    57
    Court took note of the contentions of both the parties and while accepting
    the submissions that time began to run on 21.07.2011 (the date of NPA),
    held that the application filed under Section 7 was time-barred. The relevant
    passages of the said decision in Gaurav Hargovindbhai Dave (supra)
    could be usefully reproduced as under:-
    “4. Mr Aditya Parolia, learned counsel appearing on behalf of
    the appellant has argued that Article 137 being a residuary
    article would apply on the facts of this case, and as right to
    sue accrued only on and from 21.07.2011, three years having
    elapsed since then in 2014, the Section 7 application filed in
    2017 is clearly out of time. He has also referred to our
    judgment in B.K. Educational Services Private Limited v.
    Parag Gupta and Associates, 2018 SCC OnLine SC 1921 in
    order to buttress his argument that it is Article 137 of the
    Limitation Act which will apply to the facts of this case.
  9. Mr Debal Banerjee, learned Senior Counsel, appearing on
    behalf of the respondents, countered this by stressing, in
    particular, para 7 of B.K. Educational Services Private
    Limited (supra) and reiterated the finding of the NCLT that it
    would be Article 62 of the Limitation Act that would be
    attracted to the facts of this case. He further argued that,
    being a commercial Code, a commercial interpretation has to
    be given so as to make the Code workable.
  10. 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 learned counsel appearing on
    behalf of the appellant, time, therefore, begins to run on
    21.07.2011, 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 7 of B.K. Educational
    Services Private Limited (supra), suffice it to say that the
    Report of the Insolvency Law Committee 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.
  11. 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
    58
    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. This being the case, the appeal is allowed and the
    judgments of the NCLT and NCLAT are set aside.”
    (emphasis in bold supplied)
  13. Close on the heels of Gaurav Hargovindbhai Dave (supra), this
    Court dealt with similar issue yet again in the case of Sagar Sharma
    (supra), decided on 30.09.2019. Therein, apart from disapproving the
    proposition that the date of commencement of the Code could be the
    starting point of limitation (as noticed hereinabove), this Court again pointed
    out the fallacy in applying the period of limitation related to mortgage liability
    to the application under Section 7 of the Code and said, –
    “2…..However, we find in the impugned judgment that Article
    62 (erroneously stated to be Article 61) was stated to be
    attracted to the facts of the present case, considering that
    there was a deed of mortgage which was executed between
    the parties in this case. We may point out that an
    application under Section 7 of the Code does not purport
    to be an application to enforce any mortgage liability. It is
    an application made by a financial creditor stating that a
    default, as defined under the Code, has been made, which
    default amounts to Rs 1,00,000 (Rupees one lakh) or more
    which then triggers the application of the Code on settled
    principles that have been laid down by several judgments of
    this Court.”
    (emphasis in bold supplied)
  14. 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
    59
    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
  15. While the aforesaid principles remain crystal clear with the
    consistent decisions of this Court, the only area of dispute, around which
    60
    the contentions of learned counsel for the parties have revolved in the
    present case, is about applicability of Section 18 of the Limitation Act and
    effect of the observations occurring in paragraph 21 of the decision in
    Jignesh Shah (supra).
  16. We have noticed all the relevant and material observations and
    enunciations in the case of Jignesh Shah hereinbefore. Prima facie, it
    appears that illustrative reference to Section 18 of the Limitation Act, in
    paragraph 21 of the decision in Jignesh Shah, had only been in relation to
    the suit or other proceedings, wherever it could apply and where the period
    of limitation could get extended because of acknowledgment of liability.
    Noticeably, in contradistinction to the proceeding of a suit, this Court
    observed that a suit for recovery, which is a separate and independent
    proceeding distinct from the remedy of winding up would, in no manner,
    impact the limitation within which the winding up proceeding is to be filed35
    .
    It is difficult to read the observations in the aforesaid paragraph 21 of
    Jignesh Shah to mean that the ratio of B.K. Educational Services has, in
    any manner, been altered by this Court. 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
    35 What has been observed in relation to the proceeding for winding up, perforce, applies to the
    application seeking initiation of CIRP under IBC.
    61
    condonation of delay is made out. The findings in paragraph 12 in Jignesh
    Shah makes it clear that the Court indeed applied the principles so stated in
    B.K. Educational Services, and held that the winding up petition filed
    beyond three years from the date of default was barred by time.
    32.1. Even in the later decisions, this Court has consistently applied the
    declaration of law in B.K. Educational Services (supra). As noticed, in the
    case of Vashdeo R. Bhojwani (supra), this Court rejected the contention
    suggesting continuing cause of action for the purpose of application under
    Section 7 of the Code while holding that the limitation started ticking from
    the date of issuance of recovery certificate dated 24.12.2001. Again, in the
    case of Gaurav Hargovindbhai Dave (supra), where the date of default
    was stated in the application under Section 7 of the Code to be the date of
    NPA i.e., 21.07.2011, this Court held that the limitation began to run from
    the date of NPA and hence, the application filed under Section 7 of the
    Code on 03.10.2017 was barred by limitation.
    32.2. In view of the above, we are not inclined to accept the arguments
    built up by the respondents with reference to one part of observations
    occurring in paragraph 21 of the decision in Jignesh Shah (supra).
  17. 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
    62
    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. As noticed, even in Part-V of
    the application, the respondent No. 2 was required to state the particulars of
    financial debt with documents and evidence on record. In the variety of
    descriptions which could have been given by the applicant in the said PartV 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
    63
    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. In this
    view of the matter, reliance on the decision in Mahaveer Cold Storage Pvt.
    Ltd. does not advance the cause of the respondent No. 2.
  18. The submissions made on behalf of respondents that the rules of
    limitation are not meant to destroy the rights of the parties and reference to
    the decision in N. Balakrishnan (supra) are also misplaced. Application of
    the rules of limitation to CIRP (by virtue of Section 238-A of the Code read
    with the above-referred consistent decisions of this Court) does not, in any
    manner, deal with any of the rights of respondent No. 2; it only bars
    recourse to the particular remedy of initiation of CIRP under the Code.
    Equally, the other submissions made on behalf of the respondents about
    any stringent application of the law of limitation which was introduced to the
    Code only after filing of the application by respondent No. 2; or about the so
    called prejudice likely to be caused to other banks and financial institutions
    are also of no substance, particularly in the light of the principles laid down
    and consistently followed by this Court right from the decision in B.K.
    Educational Services (supra). These contentions have only been noted to
    be rejected. Needless to add that when the application made by the
    64
    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.
    The reasonings of NCLAT
  19. The foregoing discussion practically concludes the principal part of
    contentions urged in this matter but, to put the record straight, we may also
    deal with the reasonings adopted by NCLAT in the impugned order dated
    14.05.2019. As noticed hereinbefore, though NCLAT has referred to the
    pendency of the application under Section 19 of the Act of 1993 as also the
    fact that corporate debtor had made a prayer for OTS in the month of July,
    2018 but, has not recorded any specific finding about the effect of these
    factors. Only two reasons essentially appear to have weighed with NCLAT
    to hold that the application in question is within limitation: One, that the right
    to apply under Section 7 of the Code accrued to the respondent financial
    creditor on 01.12.2016 when the Code came into force; and second, that
    the period of limitation for recovery of possession of the mortgaged property
    is twelve years. The reasonings so adopted by NCLAT do not stand in
    conformity with the law declared by this Court and could only be
    disapproved.
  20. 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. A bare
    65
    look at paragraph 21 of the impugned order leaves nothing to guess that
    such observations by the Appellate Tribunal had only been assumptive in
    nature without any foundation and without any basis. 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. In fact, such observations had been in the
    teeth of law declared by this Court in the case of B. K. Educational
    Services (supra).
    36.1. It appears that at the given point of time, NCLAT had been readily
    adopting such a proposition in other cases too, so as to treat similar
    applications within limitation. 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, this Court said,-
    “3. Article 141 of the Constitution of India mandates that our
    judgments are followed in letter and spirit. The date of
    coming into force of the IB Code does not and cannot form a
    trigger point of limitation for applications filed under the Code.
    Equally, since “applications” are petitions which are filed
    under the Code, it is Article 137 of the Limitation Act which
    will apply to such applications.”
    66
  21. 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. The Appellate Tribunal was conscious of the decision of this Court in
    B. K. Educational Services (supra) wherein it had been held in no
    uncertain terms that the limitation provided in Article 137 governs the
    application under Section 7 of the Code. 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?
    37.2. In the totality of circumstances, we are also constrained to refer to
    paragraph 24 of the very same order wherein, the Appellate Tribunal has
    noticed its own decision in the case of Binani Industries, holding that the
    period of limitation prescribed in the First Division of the Schedule to the
    Limitation Act (providing limitation period for suits) is not applicable to the
    proceedings under the Code. However, the observations and findings in the
    67
    later part of the impugned order are contrary even to those occurring in the
    said paragraph 24 of the very same order.
    37.3 It again appears that in other cases too, similar reasoning prevailed
    with the Adjudicating Authorities as also the Appellate Tribunal, where the
    Articles of the Limitation Act relating to the suits concerning mortgaged
    property (and thereby the period of limitation of twelve years) were sought
    to be applied to hold that similar applications under Section 7 of the Code
    were not barred by limitation. Such propositions were specifically
    disapproved by a three-Judge Bench of this Court in the case of Gaurav
    Hargovindbhai Dave (supra) decided on 18.09.2019. As noticed
    hereinbefore, in Gaurav Hargovindbhai Dave (supra) this Court
    disapproved the approach of Adjudicating Authority in applying Article 62 of
    the Limitation Act to such an application under Section 7 of the Code with
    the observations that Article 62 is out of way, for it applies only to suits; and
    application under Section 7 falls within the ambit of residuary Article 137. In
    Sagar Sharma (supra), this Court again pointed out the fallacy in applying
    the period of limitation related to mortgage liability for the purpose of
    application under Section 7 of the Code.
    37.4. In view of the above, there remains nothing to doubt that the
    Appellate Tribunal had been in error in applying the period of limitation
    provided for mortgage liability for the purpose of limitation applicable to the
    application in question. The observations and findings in paragraphs 29 and
    30 of the impugned order are also required to be disapproved.
    68
    Summation
  22. 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.
    Other proceedings not to be affected
  23. Before concluding on this matter, we would hasten to observe
    that admittedly, at the time of moving of the application under Section 7 of
    the Code by the respondent No. 2, a petition under Section 19 of the Act
    of 1993 was pending before DRT against the corporate debtor. In view of
    admission of the application under Section 7 of the Code by NCLT, the
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    said petition under Section 19 of the Act of 1993 (and any other pending
    matter against the corporate debtor) could not have proceeded during the
    period of moratorium in terms of Section 14 of the Code. Now, by virtue of
    this judgment, the said application under Section 7 of the Code shall
    stand rejected for being barred by limitation and all the proceedings
    thereunder shall stand annulled. As a necessary consequence, the
    moratorium in terms of Section 14 of the Code shall get lifted and,
    therefore, those stalled proceedings should now be taken up and dealt
    with by the respective Courts/Tribunals/Authorities, of course, strictly in
    accordance with law. In the interest of justice, we also make it clear that
    the observations in this judgment are relevant only in regard to the issue
    determined that the application under Section 7 of the Code is barred by
    limitation and not beyond. In other words, nothing in this judgment shall
    have bearing on any other proceeding that shall be dealt with on its own
    merits and in accordance with law.
    Conclusion
  24. In view of the above, this appeal is allowed to the extent
    indicated and with the observations foregoing. The impugned orders
    dated 14.05.2019 as passed by the National Company Law Appellate
    Tribunal, New Delhi in Company Appeal (AT) Insolvency No. 549 of 2018
    and dated 09.08.2018 as passed by the National Company Law Tribunal,
    Mumbai Bench in CP(IB)-488/I&BP/MB/2018 are set aside; and the
    application made by the respondent No. 2 under Section 7 of the Code,
    70
    seeking initiation of Corporate Insolvency Resolution Process in respect
    of respondent No. 1 is rejected for being barred by limitation.
    Consequently, all the proceedings undertaken in the said application
    under Section 7 of the Code, including appointment of IRP, stand
    annulled. No costs.
    ………………..………….J.
    (A.M.KHANWILKAR)
    ……..……………….…….J.
    (DINESH MAHESHWARI)
    New Delhi,
    Dated: 14th August, 2020.
    71