COVID-19 pandemic exclusion applies to the entire balance period of limitation, not just ninety days.

In brief

The question

Whether the Appellant was entitled to the "balance period of limitation" exceeding 90 days from 01.03.2022, or was restricted to a flat 90-day extension under the Supreme Court’s Suo Motu COVID-19 orders.

The court held

The NCLAT held that the applications were not barred by time.

It also directed

It clarified that the 90-day extension from 01.03.2022 is a minimum floor, and litigants with a longer remaining balance period are entitled to the full balance.

The Tribunal allowed the appeals, set aside the impugned orders, and revived the Section 95 applications for fresh consideration by the NCLT.

01Facts

The Appellant (SBI) filed applications under Section 95 of the IBC against four Personal Guarantors of two Corporate Debtors—M/s Kandla Energy and Chemicals Ltd. and Shri Jalaram Rice Industries Pvt. Ltd.

¶ 3

In the first set of appeals (893 & 894), the DRT issued a decree on 25.06.2018; the Section 95 application was filed on 24.01.2023.

¶ 3(ii)-(iii)

In the second set (1280 & 1281), the DRT decree was passed on 19.03.2018; Section 95 applications were filed on 25.02.2023.

¶ 3(iii)-(iv)

The Adjudicating Authority (NCLT, Ahmedabad) dismissed all applications as barred by time, holding that under the Supreme Court's Suo Motu extension orders, the limitation only extended up to 30.05.2022 (90 days from 01.03.2022).

¶ 3(iv), 27

02Issues

i.Whether the Appellant was entitled to the "balance period of limitation" exceeding 90 days from 01.03.2022, or was restricted to a flat 90-day extension under the Supreme Court’s Suo Motu COVID-19 orders.

¶ 7, 20

03Law Applied

The court applied Section 95 and Section 238A of the IBC, 2016, read with Article 137 of the Limitation Act, 1963, which prescribes a three-year period to file applications.

¶ 26

It primarily relied on the Supreme Court’s directions in In Re: Cognizance for Extension of Limitation, M.A. No. 21 of 2022, which mandated the exclusion of the period from 15.03.2020 to 28.02.2022 for limitation purposes.

¶ 10, Direction I

Furthermore, it applied the principle from Arif Azim Co. Ltd. v. Aptech Ltd. and Prakash Corporates v. Dee Vee Projects Ltd., establishing that if the balance period of limitation remaining as of 01.03.2022 is greater than 90 days, the longer period applies.

¶ 10, Direction III

Provisions in the judgment · 12 · Linked ones open on LawLens

Insolvency and Bankruptcy Code, 2016. Section 95 Section 9 Section 10 Section 7

Arbitration and Conciliation Act, 1996 Section 23

Negotiable Instruments Act, 1881 Section 138

Limitation Act, 1963 Section 5 Section 12 Section 13 Section 14 Section 15 Section 137

04Reasoning

The NCLAT found that the Adjudicating Authority misinterpreted Paragraph 5.III of the Supreme Court's order dated 10.01.2022.

¶ 20, 27

The court reasoned that since the original three-year limitation periods (expiring in March and June 2021) fell within the "protected" COVID-19 window (15.03.2020 to 28.02.2022), the Appellant was entitled to exclude that entire duration.

¶ 23, 26

For appeals 893 & 894, the "balance period" as of 15.03.2020 was 1 year, 3 months, and 9 days; adding this to 01.03.2022 extended the deadline to 10.06.2023.

¶ 25

For appeals 1280 & 1281, the balance was 1 year and 3 days, extending the deadline to 04.03.2023.

¶ 25

Since the applications were filed in January and February 2023 respectively, they were well within the "longer period" permitted by the Supreme Court’s directions.

¶ 25

05Holding

The NCLAT held that the applications were not barred by time.

It clarified that the 90-day extension from 01.03.2022 is a minimum floor, and litigants with a longer remaining balance period are entitled to the full balance.

¶ 20, 26

The Tribunal allowed the appeals, set aside the impugned orders, and revived the Section 95 applications for fresh consideration by the NCLT.

¶ 29

LawLens.National Company Law Appellate Tribunal

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