Supreme Court maintains status quo in IBC limitation dispute

This is a Supreme Court of India judgment (Civil Appeal No. 6347 of 2019) concerning whether an application for Corporate Insolvency Resolution Process (CIRP) filed by a financial creditor is barred by the Limitation Act, 1963. 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.

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).

• 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.

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