JIGNESH SHAH & ANR. versus UNION OF INDIA & ANR.

Citation: [2019] 12 S.C.R. 678 · Decided: 25-09-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

Cited by 12 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 12 S.C.R.
JIGNESH SHAH & ANR.
v.
UNION OF INDIA & ANR.
(Writ Petition (Civil) No. 455 of 2019)
SEPTEMBER 25, 2019
[R. F. NARIMAN, R. SUBHASH REDDY
AND SURYA KANT, JJ.]
Insolvency and Bankruptcy Code, 2016: s. 238A – Limitation
– Application of Limitation Act, 1963 to applications u/s 7 under
IBC – Execution of share purchase agreement between MCX, MCX–
E and Financial Services Company in 2009 whereby Financial
Services Company agreed to purchase equity shares of MCX–E
from MCX – Pursuant thereto, LF, a group company of MCX, issued
a ‘Letter of Undertaking’ to Financial Services Company to
purchase shares of MCX–SX after a period of one year, but before
a period of three years, from the date of investment – Expiry of
the said period – In 2012 Financial Services Company exercised
its option to sell its entire holding of shares in MCX–SX – However,
LF’s case that it was under no legal or contractual obligation to
buy the said shares – Suit by Financial Services Company for
specific performance of the Letter of Undertaking by LF – High
Court passing an injunction order by restraining LF from alienating
its assets pending disposal of the suit – In 2016, Financial Services
Company filing winding up petition against LF u/s. 433(e) in the
High Court – However, due to introduction of IBC, 2016, transfer
of the winding up petition to the NCLT as an application u/s. 7 –
NCLT admitted the petition holding that the bar of limitation not
attracted – Appeal by shareholders of LF – Dismissed by NCLAT
– On appeal, held: Trigger point for the purpose of limitation for
filing of a winding up petition would be the date of default in
payment of the debt – Though it is clear that a winding up
proceeding is a proceeding ‘in rem’ and not a recovery proceeding,
the trigger of limitation for the winding up petition would be the
date of default – On facts, statutory notice given on 03.11.2015
   [2019] 12 S.C.R. 678
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does not refer to any facts as to the commercial insolvency of LF
– Statutory notice only refers to the suit proceedings and attachment
by the Economic Offences Wing in December 2013 – Company’s
insolvency neither been pleaded nor is on facts – In Form-1, upon
transfer of the winding up proceedings to the NCLT, date of default
is 19.08.2012; making it clear that three-years from that date had
long since elapsed when the winding up petition was filed in 2016
– Thus, the winding up Petition being beyond the period of three-
years mentioned in Article 137 of the Limitation Act is time-barred,
and cannot therefore be proceeded with – Impugned judgment of
the NCLAT and the judgment of the NCLT set aside – Limitation
Act, 1963 – Article 137 – Companies Act, 1956 – ss. 433 and 434.
Disposing of Writ Petition (Civil) No.455 of 2019, Special
Leave Petition (Diary No.13468 of 2019), Transfer Petition (Civil)
No.817 of 2019 and allowing Civil Appeal (Diary No. 16521 of
2019), the Court
HELD: 1.1 A suit for recovery based upon a cause of action
that is within limitation cannot in any manner impact the separate
and independent remedy of a winding up proceeding. In law, when
time begins to run, it can only be extended in the manner
provided in the Limitation Act. For example, an
acknowledgement of liability under Section 18 of the Limitation
Act would certainly extend the limitation period, but a suit for
recovery, which is a separate and independent proceeding
distinct from the remedy of winding up would, in no manner,
impact the limitation within which the winding up proceeding is
to be filed, by somehow keeping the debt alive for the purpose
of the winding up proceeding. [Para 19] [701-B-D]
1.2 The Financial Services Company pursued with
reasonable diligence the cause of action which arose in August,
2012 by filing a suit against LF for specific performance of the
Letter of Undertaking in June, 2013. What has been lost by the
said party’s own inaction or laches, is the filing of the Winding
up Petition long after the trigger for filing of the said petition
had taken place; the trigger being the debt that became due to
Financial Services, in repayment of which default has taken
place. [Para 21] [703-D-E]
JIGNESH SHAH & ANR. v. UNION OF INDIA & ANR.
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SUPREME COURT REPORTS
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1.3 A reading of the Section 433(e) and Section 434 of the
Companies Act, 1956 would show that the starting point of the
period of limitation is when the company is una

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