LexB.K. EDUCATIONAL SERVICES PRIVATE LIMITED versus PARAG GUPTA AND ASSOCIATES
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A B C D E F G H 794 SUPREME COURT REPORTS [2018] 12 S.C.R. B. K. EDUCATIONAL SERVICES PRIVATE LIMITED v. PARAG GUPTA AND ASSOCIATES (Civil Appeal No. 23988 of 2017) OCTOBER 11, 2018 [R. F. NARIMAN AND NAVIN SINHA, JJ.] Insolvency and Bankruptcy Code, 2016 – s.238A (As inserted by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 w.e.f. 06.06.2018) – s.238A, if retrospective in nature – Held: s.238A being clarificatory of law and being procedural in nature, must be held to be retrospective – Amendment of s.238A would not serve its object unless it is construed as being retrospective, as otherwise, applications seeking to resurrect time-barred claims would have to be allowed, not being governed by the law of limitation – Limitation Act, 1963. Insolvency and Bankruptcy Code, 2016 – s.238A (As inserted by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 w.e.f. 06.06.2018) and ss.7 & 9 – Application for initiation of ‘Corporate Insolvency Resolution Process’ – Whether Limitation Act, 1963 will apply to applications that are made u/s.7 and/or s.9 of the Code on and from its commencement on 01.12.2016 – Held: Since, Limitation Act is applicable to applications filed u/ss. 7 and 9 of the Code from the inception of the Code, Art.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 u/Art.137 of the Limitation Act, save and except in those cases where, in facts of the case, s.5 of the Limitation Act may be applied to condone delay in filing such application – Limitation Act, 1963 – Art.137 and s.5. Remanding the appeals to NCLAT, the Court HELD: 1.1 In the present case, it is clear that the amendment of Section 238A Insolvency and Bankruptcy Code, 2016 would not serve its object unless it is construed as being retrospective, as otherwise, applications seeking to resurrect 794 [2018] 12 S.C.R. 794 A B C D E F G H 795 time-barred claims would have to be allowed, not being governed by the law of limitation. [Para 15] [815-D] 1.2 The Insolvency Law Committee Report of March, 2018 reflected that the legislature did not contemplate enabling a creditor who has allowed the period of limitation to set in to allow such delayed claims through the mechanism of the Code. The Code cannot be triggered in the year 2017 for a debt which was time-barred, say, in 1990, as that would lead to the absurd and extreme consequence of the Code being triggered by a stale or dead claim, leading to the drastic consequence of instant removal of the present Board of Directors of the corporate debtor permanently, and which may ultimately lead to liquidation and, therefore, corporate death. This being the case, the expression “debt due” in the definition sections of the Code would obviously only refer to debts that are “due and payable” in law, i.e., the debts that are not time-barred. [Para 21] [821-D-F] 3. It is 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 27] [828-B-C] M.P. Steel Corporation v. CCE (2015) 7 SCC 58; Allied Motors (P) Ltd. v. CIT (1997) 3 SCC 472 : [1997] 2 SCR 780; Andhra Pradesh Power Coordination Committee and Ors. v. Lanco Kondapalli Power Ltd. and Ors. (2016) 3 SCC 468 – relied on. State of Madhya Pradesh and Anr. v. Bhailal Bhai and Ors. [1964] 6 SCR 261; Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407 : [2017] 8 SCR 33; National Sewing Thread Co. Ltd. v. James Chadwick and Bros. Ltd. [1953] SCR 1028; State of Kerala v. V.R. Kalliyanikutty (1999) 3 SCC 657 : [1999] B. K. EDUCATIONAL SERVICES PVT. LTD. v. PARAG GUPTA AND ASSOCIATES A B C D E F G H 796 SUPREME COURT REPORTS [2018] 12 S.C.R. 2 SCR 372 ; Union of India v. Uttam Steels Ltd. (2015) 13 SCC 209 : [2015] 4 SCR 770; SBI v. V. Ramakrishnan (2018) SCC Online SC 963; State of Jharkhand v. Shivam Coke Industries (2011) 8 SCC 656 : [20
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