Supreme Court maintains status quo in IBC limitation dispute

It matters to citizens and businesses as it clarifies the procedural requirements and time limits for initiating insolvency proceedings against corporate debtors under the Insolvency and Bankruptcy Code, 2016.

Who it concerns: The judgment concerns Babulal Vardhaji Gurjar (Appellant/Director), Veer Gurjar Aluminium Industries Pvt. Ltd. (Respondent No. 1/Corporate Debtor), and JM Financial Assets Reconstruction Company Pvt. Ltd. (Respondent No. 2/Financial Creditor). It also involves the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).

What the document says

• The Supreme Court is hearing an appeal against an NCLAT order that rejected the contention that the Section 7 IBC application was barred by limitation.
• The NCLT admitted the application for CIRP on 09.08.2018, and the NCLAT dismissed the appeal on 14.05.2019, holding the application was within limitation.
• The financial creditor claimed a default amount of ₹1,01,15,73,308 as on 28-02-2018, with the date of default stated as 08.07.2011 (date of NPA classification).
• The appellant argued the application was time-barred under Article 137 of the Limitation Act (3 years) from the date of default (2011), while the respondent argued fresh limitation periods arose from consistent acknowledgments in balance sheets.
• The NCLAT had previously held that the 12-year limitation period under Article 61(b) applied due to mortgage security, and that the application was within time since the IBC came into force in 2016.

Also in the document

• The Supreme Court issued an interim order on 09.08.2019 directing status quo in the proceedings while the appeal is pending.
• The case involves a dispute over whether the limitation period for IBC applications is calculated from the date of default or from subsequent acknowledgments of debt.
• The financial creditor is an assignee of loans originally disbursed by Corporation Bank, Indian Overseas Bank, and Bank of India.