COVID-era limitation exclusion applies in full to balance periods exceeding ninety days under Suo Motu directions.

In brief

The question

Whether the Adjudicating Authority erred in interpreting the Supreme Court’s directions in Suo Motu Writ Petition (C) No. 3 of 2020 regarding the extension and exclusion of limitation periods due to COVID-19.

The court held

The Appellate Tribunal held that the SBI’s applications were not barred by time because the "exclusion" of the COVID-19 period entitled the Appellant to the full remaining balance of the three-year limitation period starting from 01.03.2022, rather than just 90 days.

It also directed

The NCLT's orders were set aside, and the Section 95 applications were revived for fresh consideration on merits.

The appeals were allowed.

01Facts

The Appellant (SBI) extended financial facilities to Corporate Debtors M/s Kandla Energy and Chemicals Ltd. and Shri Jalaram Rice Industries Pvt. Ltd.

pp. 3-4

The Respondents executed personal guarantees in favor of SBI.

pp. 3-4

Following defaults in 2014, SBI obtained recovery decrees from the Debt Recovery Tribunal (DRT) on 25.06.2018 and 19.03.2018 respectively.

pp. 4-5

SBI subsequently filed applications under Section 95 of the IBC against the Personal Guarantors in early 2023.

pp. 4-5

The Adjudicating Authority (NCLT, Ahmedabad) dismissed these applications as time-barred, holding that under the Supreme Court's Suo Motu extension orders, the limitation period expired on 30.05.2022.

pp. 4-5, 21-22

SBI appealed, contending a misinterpretation of the limitation exclusion rules.

02Issues

i.Whether the Adjudicating Authority erred in interpreting the Supreme Court’s directions in Suo Motu Writ Petition (C) No. 3 of 2020 regarding the extension and exclusion of limitation periods due to COVID-19.

pp. 6-7

ii.Whether the Section 95 applications filed by SBI were barred by limitation under Article 137 of the Limitation Act, 1963, read with Section 238A of the IBC.

pp. 19-21

03Law Applied

The court applied Section 238A of the IBC, which attracts the Limitation Act, 1963 to insolvency proceedings.

p. 21

It primarily relied on the Supreme Court’s directions in Cognizance for Extension of Limitation, In re (Suo Motu Writ Petition (C) No. 3 of 2020), specifically the order dated 10.01.2022, which mandated the exclusion of the period from 15.03.2020 to 28.02.2022 for computing limitation.

¶ 10

The court followed the precedent in Prakash Corporates v. Dee Vee Projects Ltd., which established that "exclusion" results in an enlargement of time over the prescribed period.

¶ 12

Arif Azim Company Ltd. v. Aptech Ltd., which clarified that balance limitation remaining as of 15.03.2020 becomes available from 01.03.2022.

¶ 14

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 Tribunal found that the NCLT erroneously applied a flat 90-day extension from 01.03.2022.

It reasoned that Paragraph 5.III of the Supreme Court’s 10.01.2022 order explicitly states that if the "actual balance period" remaining is greater than 90 days, the longer period applies.

¶ 10, 20

In the first set of appeals, since the three-year limitation was set to expire on 24.06.2021, the period of 1 year, 3 months, and 9 days that intersected with the COVID-19 exclusion period (15.03.2020 to 28.02.2022) remained as "balance."

¶ 25

Adding this balance to 01.03.2022 extended the deadline to 10.06.2023.

¶ 25

Similarly, for the second set, the balance was 1 year and 3 days, extending the deadline to 04.03.2023.

¶ 25

Consequently, the applications filed in January and February 2023 were well within the legally computed limitation periods.

¶ 25-26