Section 5 and Section 14 of the Limitation Act are not mutually exclusive: SC

In any case, Section 5 and Section 14 of the Limitation Act are not mutually exclusive. Even in a case where Section 14 does not strictly apply, the principles of Section 14 can be invoked to grant relief to an applicant under Section 5 of the Limitation Act by purposively construing ‘sufficient cause’. It is well settled that omission to refer to the correct section of a statute does not vitiate an order. At the cost of repetition it is reiterated that delay can be condoned irrespective of whether there is any formal application, if there are sufficient materials on record disclosing sufficient cause for the delay (Para.102).

SESH NATH SINGH & ANR. V BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR.

Civil Appeal No. 9198 Of 2019

March 22, 2021

The Hon’ble Supreme Court Justice INDIRA BANERJEE, HEMANT GUPTA decided the present appeal. The Corporate Debtor was engaged in the business of export of textile and garments. On 8th February 2012, the Corporate Debtor requested the Financial Creditor for cash credit facility of Rs.1, 00, 00,000/-. It was sanctioned on February 15 the Financial Creditor granted Cash Credit Facility after which a Cash Credit Account No.482 was opened in the name of the Corporate Debtor. There was default in repayment of its debt. the Financial Creditor issued notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 calling upon the Corporate Debtor to discharge in full, its outstanding liability of Rs.1, 07, 88,536.00 inclusive of interest as on 28.09.2013 within sixty days from the date of notice, failing which action would be taken under Section 13(4) of the said Act.

The Financial Creditor issued a notice to handover an immovable asset. The corporate debtor filed a writ petition in Calcutta High Court under Article 226, challenging the said notice issued by the financial creditor. The High Court was of the prima facie view that the Financial Creditor being a Cooperative Bank, it could not invoke the provisions of the SARFAESI Act. The Financial Creditor filed an application in the Kolkata Bench of NCLT for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under Section 7 of the IBC, challenging the maintainability of the proceedings under the SARFAESI Act, was pending adjudication in the High Court. The NCLT admitted the application filed by the Financial Creditor under Section 7 of IBC and declared a moratorium for the purposes referred to under Section 14 of the IBC.

The account of the Corporate Debtor had been declared NPA on 31st March, 2013 whereas the application under Section 7 of IBC had been filed on 27th August, 2018, after almost five years and five months from the date of accrual of the cause of action, and was therefore barred by limitation. (Para 18)

The Corporate Debtor been aggrieved by the order passed by NCLT, filed an appeal before NCLAT under section 61 of the IBC contending that the application filed by the Financial Creditor should not have been entertained, the same being barred by limitation. The NCLAT dismissed the appeal, held that Respondent had bona fide, within the period of limitation, initiated proceedings against the Corporate Debtor under the SARFAESI Act and was thus entitled to exclusion of time under Section 14(2) of the Limitation Act. The NCLAT, after exclusion of the period of about three years and six months till the date of the interim order of the High Court, during which the Financial Creditor had been proceeding under SARFAESI Act, found that the application of the Financial Creditor, under Section 7 of the IBC, was within limitation.

The learned counsel on behalf of the respondent, in its application filed in the NCLT under Section 7 of the IBC, enclosed a synopsis of relevant facts and significant dates, with supporting documents. The proceedings under the SARFAESI Act, 2002 were stayed by the Calcutta High Court, by an order dated 24th July 2017, on the ground of want of jurisdiction. About 11 months thereafter, while the writ petition filed by the Corporate Debtor was still pending in the High Court, and the interim stay of SARFAESI Act proceedings still continuing, the Financial Creditor initiated the application under Section 7 of the IBC.

The learned counsel on behalf of the appellant stated that the account of Corporate Debtor with the Financial Creditor had been declared NPA on 31st March, 2013. The period of 3 years expired on 31st March, 2016. The application under Section 7 of the IBC, filed before the NCLT on 10th July, 2018, after five years and three months from the date of declaration of the account of the Corporate Debtor as NPA, was fatally time barred. The Financial Creditor had not filed any application before the NCLT under Section 5 of the Limitation Act. The delay in filing the application under Section 7 of the IBC, could not, therefore, have been condoned. Since the proceedings initiated by the Financial Creditor under SARFAESI Act were still pending, it was not open to the Financial Creditor to take the benefit of Section 14(2) of the Limitation Act, 1963.

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,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. (Section 7 of the IBC)

Under Section 9(5) (i) (d) of the IBC, the Adjudicating Authority has to reject an application made by an operational creditor, if notice of dispute has been received by the operational creditor and there is no record of dispute in the information utility. There is no such provision in section 7 of the IBC. The Limitation Act 1963 has been enacted to consolidate and amend the law of limitation of suits and other proceedings and for purposes connected therewith. The expression “other proceedings” is necessarily proceedings arising out of and/or related to suits. In K. Venkateswara Rao and Anr. v. Bekkam Narasimha Reddi & Ors, this Court held that the Limitation Act did not apply to an election petition under the Representation of People Act, 1950, which is a complete Code.

Section 5 of the Limitation Act provides that any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period of limitation, if the appellant or the applicant satisfies the Court, that he had sufficient cause for not preferring the appeal or making the application within such period.

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. (Para 42 of B. K. Educational Services Private Limited V. Parag Gupta and Associates, Para 54)

S. Sundaram Pillai and Others v. V.R. Pattabiraman and Others 19 , it is well settled that an explanation added to a statutory provision is not a substantive provision in any sense of the term but is meant to explain or clarify certain ambiguities, which may have crept into statutory provisions. In Commissioner, M.P. Housing Board and Ors. v.Mohanlal & Co. Section 14 of the Limitation Act has to be interpreted liberally to advance the cause of justice. Section 14 would be applicable in cases of mistaken remedy or selection of a wrong forum.

Section 13 of the SARFAESI Act enables a secured creditor to enforce security interest created in its favour, without the intervention of the Court or Tribunal, the SARFAESI Act does not exclude the intervention of Courts and/or Tribunals altogether. The proceedings under the SARFAESI Act would not qualify for exclusion under Section 14 of the Limitation Act, because those proceedings were not conducted in a Civil Court, cannot be sustained.

Section 5 and Section 14 of the Limitation Act are not mutually exclusive. Even in a case where Section 14 does not strictly apply, the principles of Section 14 can be invoked to grant relief to an applicant under Section 5 of the Limitation Act by purposively construing ‘sufficient cause’. It is well settled that omission to refer to the correct section of a statute does not vitiate an order. At the cost of repetition it is reiterated that delay can be condoned irrespective of whether there is any formal application, if there are sufficient materials on record disclosing sufficient cause for the delay. The NCLAT rightly refused to stay the proceedings before the NCLT. The judgment and order of the NCLT does not warrant interference.

This appeal is accordingly dismissed.

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Shantha Gopika R