Sabarmati Gas Ltd. v. Shah Alloys Ltd.(Supreme Court of India-Civil Appeal No. 1669 of 2020)

An application under IBC could be filed by the creditor beyond prescribed period of limitation.

In above case, SC held that:-

“When the limitation period for initiating CIRP under Section 9, IBC is to be reckoned from the date of default, as opposed to the date of commencement of IBC and the period prescribed therefor, is three years as provided by Section 137 of the Limitation Act, 1963 and the same would commence from the date of default and is extendable only by application of Section 5 of the Limitation Act, 1963 it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the period of limitation.”

Our Comments

This is a much needed judgment as though in the case of B.K. Educational Services, SC while exhaustively dealing with applicability of limitation act to IBC proceedings did specifically observed that “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.”, practical experience suggested that hardly people preferred any application for condonation of delay if there was a lapse of more than 3 years from the date of default and such applications, upon filing came to be dismissed for being beyond the period of limitation.  We have in our article on the subject written prior to above SC judgment, specifically addressed the issue and expressed our opinion that delay could always be condoned in terms of s.5 of Limitation Act as IBC proceedings are not a civil suit. Now, in light of above judgment, it is clear that the jurisprudence as to what amounts to “sufficient cause” in terms of s.5 of Limitation Act, 1963 will be applicable for IBC s.7 or s.9 applications and applications could be filed even beyond a period of 3 years from the date of default in appropriate cases. 

Author of this Article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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