Section 18 of the Limitation Act applicable to Proceedings under the Insolvency and Bankruptcy Code, 2016 – India – Insolvency/Bankruptcy

To print this article, all you need to do is be registered or log in to Mondaq.com.

The Honorable Supreme Court voids its order dated April 18, 2022 in State Bank of India v Krishidhan Seeds Private Limited1 observed that section 18 of the Limitation Act, 1963 is applicable to proceedings under the Insolvency and Bankruptcy Code, 2016.

Quick facts

The National Company Law Tribunal has dismissed the application filed under Section 7 of the Insolvency and Bankruptcy Code 2016 by the State Bank of India for the commencement of the insolvency resolution process of company for statute of limitations, stating that the Respondent’s loan account had been declared to be an NPA on June 10, 2014, while the procedure provided for in Article 7 of the Insolvency and Bankruptcy Code 2016 had been instituted on September 19, 2018, i.e. beyond a period of three years from the date on which the right to take the appropriate legal measures had accrued. The National Court of Company Law further observed that in the decision in the case V Padmakumar vs Stressed Assets Stabilization Fund and another2the National Company Law Appellate Tribunal ruled that a statement contained in the balance sheet cannot be considered an admission of liability under section 18 of the Limitation Act, 1963. The order of the National Company Law Tribunal was upheld on appeal to the National Company Law Appeals Tribunal.

Section 18 of the Insolvency and Bankruptcy Code Proceedings Limitation Act 1963 2016

The Honorable Supreme Court observed that Section 18 of the Limitation Act 1963 could indeed be held applicable to proceedings under the Insolvency and Bankruptcy Code 2016, as was also held in Sesh Nath Singh vs. Baidyabati Sheoraphuli Coop. bank ltd.3 The Honorable Supreme Court further observed that an acknowledgment in an unqualified balance sheet may be relied upon for the purposes of proceedings under the Insolvency and Bankruptcy Code, 2016, in recognition of the earlier ruling in Asset Reconstruction Company (India) Limited v Bishal Jaiswal and another4.

Conclusion

The provisions of section 18 of the Limitation Act 1963 are not extraneous and are effectively applicable to proceedings under the Insolvency and Bankruptcy Code 2016 and an acknowledgment in an unqualified balance sheet can provide a legitimate basis for determining whether the statute of limitations would continue to be extended, so long as recognition occurred within three years of the original date of default, as recognized by the Supreme Court in this case.

Footnotes

1. Civil Appeal No. 910 of 2021

2. 2020 CSC Online NCLAT 417

3. (2021) 7 SCC 313

4. (2021) 6 SCC 366

For more information, please contact SS Rana & Co. email: [email protected] or call (+91- 11 4012 3000). Our website can be accessed at www.ssrana.in

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Restructuring from India

Turning a blind eye to operational creditor assessments

King, Stubb and Kasiva

The Insolvency and Bankruptcy Code 2016 (hereinafter referred to as the “Code”) has been executed with the aim of collaborating, consolidating the concept of insolvency into one legislation and providing a single forum for. ..

Comments are closed.