SAGAR SHARMA & ANR. versus PHOENIX ARC PVT. LTD. & ANR. on 30 September 2019

1. By our judgment dated 11.10.2018 in B.K. Educational ServicesPrivate Limited vs. Parag Gupta and Associates (2018 SCC OnLineSC 1921 in paragraphs 2, 20, 38, 43, 48 & 49) we had made it clear thatthe Insolvency and Bankruptcy Code’s coming into force on 01.12.2016is wholly irrelevant to the triggering of any limitation period for thepurposes of the Code. However, we find that in the impugned judgmentthe following statement is made:

“13. Admittedly, ‘I&B Code’ has come into force since1[st] December, 2016, therefore, the right to apply accrued to1[st] Respondent on 1[st] December, 2016. Therefore, we hold thatthe application under Section 7 was not barred by limitation.”

2. We had also made it clear beyond any doubt that for applicationsthat will be filed under Section 7 of the Code, Article 137 of the LimitationAct will apply. However, we find in the impugned judgment that Article62 (erroneously stated to be Article 61) was stated to be attracted to thefacts of the present case, considering that there was a deed of mortgagewhich was executed between the parties in this case. We may point outthat an application under Section 7 of the Code does not purport to be anapplication to enforce any mortgage liability. It is an application madeby a financial creditor stating that a default, as defined under the Code,has been made, which default amounts to Rs. 1,00,000/- (one lakh) ormore which then triggers the application of the Code on settled principlesthat have been laid down by several judgments of this Court.

3. Article 141 of the Constitution of India mandates that ourjudgments are followed in letter and spirit. The date of coming intoforce of the IBC Code does not and cannot form a trigger point oflimitation for applications filed under the Code. Equally, since“applications” are petitions which are filed under the Code, it is Article137 of the Limitation Act which will apply to such applications.

4. Accordingly, we set aside the judgment under appeal and directthat the matter be determined afresh. It will be open for both sides to A

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Aargue the case on facts on the footing that Article 137 of the LimitationAct alone will apply.

5. The appeal is allowed in the aforesaid terms.

6. The NCLT order dated 29.01.2019 shall remain stayed until further orders from the NCLAT.B

7. Mr. Rakesh Dwivedi, learned Senior Counsel, wishes to raisea plea based on Section 22 of the Limitation Act before the NCLAT.We record this statement.

C Devika Gujral

Appeal allowed.

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