BABULAL VARDHARJI GURJAR versus VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR.

Citation: [2020] 13 S.C.R. 368 · Decided: 14-08-2020 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 8 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 13 S.C.R.
   [2020] 13 S.C.R. 368
BABULAL VARDHARJI GURJAR
v.
VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. & ANR.
(Civil Appeal No. 6347 of 2019)
AUGUST 14, 2020
[A.M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
Insolvency and Bankruptcy Code, 2016 – ss.7 and 238-A –
Limitation Act, 1963 – s.18 and Art.137 – On or about 22.12.2007,
the Lender Banks sanctioned and extended various loans, advances
and facilities to the corporate debtor-respondent no.1 – The
respondent no.1 defaulted in payment of the amount due against
such loans, advances and facilities, its account was classified as
Non-Performing Asset on 08.07.2011 – Recovery proceedings
against the corporate debtor by the consortium of lenders u/s.19 of
the Recovery of Debts due to the Banks and Financial Institution
Act, 1993 before the DRT was started – On or about 21.03.2018,
the respondent no.2, while stating its capacity as the financial
creditor, for being the assignee of the loans and advances disbursed
by the creditor Bank to the corporate debtor, filed an application u/
s.7 of the Code before the Adjudicating Authority and sought
initiation of Corporate Insolvency Resolution Process (CIRP) in
respect of respondent no.1 – The Adjudicating Authority (NCLT)
admitted the said application and initiated CIRP u/s.7 of the Code
– Before the Appellate Tribunal (NCLAT), the appellant-the director
of the respondent no.1 company contended that the claim was barred
by time – However, the appeal was dismissed by the Appellate
Tribunal – Aggrieved, the appellant filed appeal before the Supreme
Court – The Supreme Court remanded the matter to the Appellate
Tribunal for deciding the issue of limitation with respect to the
application u/s.7 of the Code – The Appellate Tribunal held that the
right to apply u/s. 7 of the Code accrued only on 01.12.2016 i.e.
when the Code came into force and hence, the application filed by
the Financial creditor in the year 2018 is not barred by limitation;
and that the period of limitation is 12 years for recovery of possession
of the mortgaged property, therefore, the claim is not barred by
limitation – On appeal, held: The period of limitation for an
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application seeking initiation of CIRP u/s.7 of the Code is governed
by Art.137 of the Limitation Act and is, therefore, three years from
the date when right to apply accrues – In the instant case, the
application made by the respondent no.2 u/s.7 of the Code in the
month of March 2018, seeking initiation of CIRP in respect of the
corporate debtor with specific assertion to the date of default as
08.07.2011 is clearly barred by limitation for having filed much
later than the period of three years from the date of default as stated
in the application – The NCLT had not even examined the question
of limitation – Whereas, the NCLAT had decided the question of
limitation on entirely irrelevant considerations – There is nothing in
the Code to even remotely indicate if the period of limitation for the
purpose of an application u/s.7 is to commence from the date of
commencement of the Code itself – The NCLAT proceeded only on
assumption, without any foundation and without any basis – Further,
the reasoning of the NCLAT that property being mortgaged, the
period of limitation is of twelve years is again erroneous and do
not stand in conformity with the dictum of the Supreme Court – As
in the B.K. Educational Service, it was held in no uncertain terms
that the limitation provided in Art.137 governs the application u/s.
7 of the Code – Therefore, the impugned orders deserve to be set
aside and the application filed by the respondent no.2 is rejected
as being barred by limitation.
Allowing the appeal, the Court
HELD : 1. When Section 238-A of the Insolvency and
Bankruptcy Code, 2016  is read with the consistent decisions of
this Court in Innoventive Industries, B.K. Educational Services,
Swiss Ribbons, K. Sashidhar, Jignesh Shah, Vashdeo R. Bhojwani,
Gaurav Hargovindbhai Dave and Sagar Sharma respectively, the
following basics undoubtedly come to the fore: (a) that the Code
is a beneficial legislation intended to put the corporate debtor
back on its feet and is not a mere money recovery legislation; (b)
that CIRP is not intended to be adversarial to the corporate debtor
but is aimed at protecting the interests of the corporate debtor;
(c) that intention of the Code is not to give a new lease of life to
debts which are time-barred; (d) that 

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