M/S TECH SHARP ENGINEERS PVT. LTD. versus SANGHVI MOVERS LIMITED

Citation: [2022] 13 S.C.R. 922 · Decided: 19-09-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 13 S.C.R.
[2022] 13 S.C.R. 922
922
M/S TECH SHARP ENGINEERS PVT. LTD.
v.
SANGHVI MOVERS LIMITED
(Civil Appeal No. 296 of 2020)
SEPTEMBER 19, 2022
[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]
Insolvency and Bankruptcy Code, 2016: s.9 – Initiation of
Corporate Insolvency Resolution Process (CIRP) – Applicability of
Limitation Act – Pursuant to agreement, respondent let out a crane
on hire to the appellant – Respondent raised invoices on the
appellant between 03.01.2013 and 04.03.2013 for a sum of
Rs.38,84,709/- – On 14.10.2013, Respondent issued statutory notice
to Appellant-Company for its winding up for payment of invoices–
Appellant replied to notice on 07.11.2013, acknowledging its
liability to the Respondent – Respondent filed a winding up petition
before High Court which was returned for curing of defects, first
time on 05.01.2016 and second time on 24.05.2016 – IBC came
into force on 01.12.2016 – Respondent again issued a demand notice
on 14.11.2017 u/s. 8(1) of IBC calling upon appellant to repay its
dues – On 30.03.2018, the Respondent filed petition u/s. 9 of the
IBC for initiation of CIRP in the NCLT, which was dismissed for
being barred by limitation – Respondent approached NCLAT which
set aside the order passed by NCLT and remitted the case back to
NCLT for admission – NCLAT directed that before admission of the
case, it would be open to the Respondent to settle the matter with
the Appellant and that right to apply under s.9 accrued to appellant
on 01.12.2016, when IBC came into force and, therefore, application
u/s.9 filed by the Appellant is within the period of three years from
the date of right to apply accrued – Hence instant appeal – Held:
The pendency of the proceedings in a parallel forum is not sufficient
cause for the delay in filing an application u/s.9 of the IBC –
Material date is on which the right to sue accrued and if the cause
of action continued – By the time the application was filed, the
claim had become barred by limitation as is clear from the averments
in the winding up petition, that there was no acknowledgment of
liability after 07.11.2013 and last payment was made in June 2013
– No help will be provided by ss. 14 and 18 of the Limitation Act as
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the last acknowledgment was in 2013 and the High Court neither
suffered from any defect of jurisdiction to entertain the winding up
application nor was unable to entertain the winding up application
for any other cause of a like nature – Initiation of proceedings in
High Court would not save limitation for initiation of proceedings
for initiation of CIRP in the NCLT – Order of NCLAT is unsustainable
in law.
Allowing the appeal, the Court
HELD: 1. The condition precedent for condonation of the
delay in filing an application or appeal, is the existence of sufficient
cause. Whether the explanation furnished for the delay would
constitute “sufficient cause” or not would be dependent upon
facts of each case. There cannot be any straitjacket formula for
accepting or rejecting the explanation furnished by the Appellant/
applicant for the delay in taking steps. When an appeal is filed
against an order rejecting an application on the ground of
limitation, the onus is on the Appellant to make out sufficient
cause for the delay in filing the application. The date of
enforcement of the IBC and/or the date on which an application
could have first been filed under the IBC are not relevant in
computation of limitation. It would be absurd to hold that the
CIRP could be initiated by filing an application under Section 7
or Section 9 of the IBC, within three years from the date on which
an application under those provisions of the IBC could have first
been made before the NCLT even though the right to sue may
have accrued decades ago. [Paras 16 and 17][928-E-G]
2. The fact that an application for initiation of CIRP, may
have been filed within three years from the date of enforcement
of the relevant provisions of the IBC is inconsequential. What is
material is the date on which the right to sue accrues, and whether
the cause of action continuous. The pendency of the proceedings
in a parallel forum, invoked by the Respondent, is not sufficient
cause for the delay in filing an application under Section 9 of the
IBC. By the time the application was filed, the claim had become
barred by limitation. In a notice dated 24.05.2014 issued by the
Respondent demanding payment, it was contended that the

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