NEW DELHI MUNICIPAL COUNCIL versus MINOSHA INDIA LIMITED on 27 April 2022

SUPREME COURT REPORTS

[2022] 16 S.C.R.

NEW DELHI MUNICIPAL COUNCIL

A

v.

MINOSHA INDIA LIMITED

(Civil Appeal No. 3470 of 2022)

BAPRIL 27, 2022

[K.M. JOSEPH AND HRISHIKESH ROY, JJ.]

Insolvency and Bankruptcy Code, 2016 – Arbitration andconciliation Act, 1996 – Limitation Act, 1963 – Limitation Period –Insolvency – Appointment of Arbitrator – Freezing of limitationCduring the moratorium period – Appellant (NDMC) placed apurchase order with the Respondent (MIL) – Due to the failure onpart of the Respondent to perform its obligation as per the existingagreement, NDMC terminated the agreement – On June 7, 2016,the Respondent (MIL) issued the notice for commencement of theDarbitral proceeding as per the provisions provided under the A&CAct, 1996 – Before the commencement of the arbitral proceedings,insolvency proceedings started against the Respondent(MIL) on May14, 2018 by the orders of NCLT – On November 28, 2019, theResolution Plan to resolve the insolvency of the Respondent wassanctioned by the Tribunal – On the same date i.e. November 28,E2019, the Respondent(MIL) filed an application for appointment ofthe arbitrator before the High Court of Delhi as per s. 11(6) of the1996 Act – The application for appointment of the arbitrator wasallowed by the High Court on December 14, 2020 – Appellant didnot raised any objection to the issue of limitation before the HighFCourt – Before the Supreme Court, the appellant (NDMC) contendedthat the notice of commencement of the arbitration proceedings wasdated June 7, 2016 and the application for appointment of anarbitrator has to be filed within the period of 3 years from the dateon which the notice of commencement of the arbitral proceedingscommenced – The application for appointment of arbitrator wasGmade by the respondent on November 28, 2019 which is beyond thetime period of three years – Also, the Respondent is not protectedby the moratorium imposed under Section 60(6) read with Section14 of the IBC, 2016 (period of limitation) – Held: an application H

under Section 7, 9 or 10, does bring in a period which is intendedto bring a corporate debtor back to life if possible, ‘a period ofcalm’, in the words of the respondent – But this is a period duringwhich the management of the corporate debtor is displaced,ironically, a period of turbulent churning – While it may be truethat proceedings by the corporate debtor through the resolutionprofessional is contemplated, it is not impossible to contemplate thatthe resolution professional for whatever reason it may be, does notdischarge his duties and conduct proceedings in all matters as heshould – This as can be the rationale for the Law Giver excludingthe period of limitation in regard to suits or applications at theinstance of the corporate debtor under Section 60(6) – In the instantcase, an order of Moratorium under Section 14, the entire periodof the Moratorium is liable to be excluded in computing the periodof limitation even in a suit or an application by a corporate debtor.

Dismissing the appeal, the Court

HELD: 1. The principles of interpretation of statutes havebeen invoked in the varying contexts and are to be applied onthe basis of the facts of the case, the nature of the law and a hostof principles. Undoubtedly, the golden rule of interpretation isthe interpretation which thrives on the ordinary meaning of thewords as they are used. This principle of literal interpretation ofstatutes has over a period of time indeed yielded to aninterpretation which is purposive or which seeks to accommodatethe object of the law giver. Suffice it to say that if the words of astatute are not ambiguous, the scope of interpretation dwindles.It is not for the Court to rewrite a statute. There may be occasionswhere the Court may even go to the extent of leaving out a wordor not giving effect to certain part in order to give full meaning tothe law by way of gleaning and giving effect to the intention of thelegislature. [Para 19][1087-F-H; 1088-A-B]

2. No doubt, another principle, which has rightfully vied forthe Court’s approval in this regard, is that, an interpretation whichfurthers the object and purpose of the law, must weigh with theCourt, the most. [Para 21][1088-G]

A

B

C

D

E

F

G

A3. Under Section 17, the management of the affairs of thecorporate debtor is taken over by the interim resolutionprofessional. The powers of the Board of Directors or the partnersof the corporate debtor shall stand suspended and it would beexercised by the interim resolution professional. When theauthority changes hands from the interim resolution professionalBto the resolution professional, the previous managementcontinues to be excluded. The committee of creditors comes intobeing. Under the supervision, ‘as it were’, of the committee ofcreditors, all the matters are proceeded with. The resolution plansare received by the resolution professional and the resolutionCplan which is finally approved by the committee of creditors andstill further at the hands of the adjudicating authority, would resultin the curtains being wrung down on the moratorium underSection 31(3). During this entire period, what is noteworthy isthat while in law and in form, the corporate debtor continues toexist and represented by the interim resolution professional toDbegin with and the resolution professional thereafter, the erstwhilemanagement of the corporate debtor is displaced. When theresolution plan is approved, a new management takes over. Allthis is contemplated when the CIRP is successful. Undoubtedly,if it is unsuccessful, the corporate debtor slips into liquidation.ETherefore, on the one hand, an application under Section 7, 9 or10, does bring in a period which is intended to bring a corporatedebtor back to life if possible, ‘a period of calm’, in the words ofthe respondent. But this is a period during which the managementof the corporate debtor is displaced, ironically, a period ofturbulent churning. While it may be true that proceedings by theFcorporate debtor through the resolution professional iscontemplated, it is not impossible to contemplate that theresolution professional for whatever reason it may be, does notdischarge his duties and conduct proceedings in all matters ashe should. We are noting this as this can be the rationale for theGLaw Giver excluding the period of limitation in regard to suits orapplications at the instance of the corporate debtor under Section60(6). [Para 24][1091-A-F]

4. As far as understanding the meaning of Section 60(6) isconcerned, there cannot be a slightest doubt that the period ofMoratorium is excluded even in the case of a suit or applicationbrought by a corporate debtor, viz., in regard to the period of themoratorium. It is true that on the one hand what is tabooed inSection 14 when a Moratorium is put into place is inter alia theinstitution of suits or continuance of pending suits or proceedingsagainst the corporate debtor including proceeding in executionof inter alia, the decree or order of an arbitration panel. [Para25][1091-G-H; 1092-A]

5. We have already undertaken the task of understandingthe purport of the Code and the context in which section 60(6)has been put in place. This Court cannot possibly sit in judgmentover the wisdom of the Law Giver. The period of limitation isprovided under the Limitation Act. The law giver hascontemplated that when a moratorium has been put in place, thesaid period must be excluded. We cannot overlook also theemployment of words ‘any suit or application’. This is apart, nodoubt, from the words ‘by a corporate debtor’. Interpreting thestatute in the manner which the appellant seeks would result inour denying the benefit of extending the period of limitation tothe corporate debtor, a result, which we think, would not bewarranted by the clear words used in the statute. [Para 27][1093-B-D]

6. This Court is of the view that section 60(6) of the IBCdoes contemplate exclusion of the entire period during whichthe moratorium was in force in respect of corporate debtor inregard to a proceeding as contemplated therein at the hands ofthe corporate debtor. [Para 28][1093-E]

Noharlal Verma v. District Co-Operative Central BankLimited, Jagdalpur (2008) 14 SCC 445: [2008] 14 SCR774; Reserve Bank of India v. Peerless General Financeand Investment Co. Ltd. and Ors. (1987) 1 SCC 424:[1987] 2 SCR 1; Suthendran v. Immigration AppealTribunal (1976) 3 All England Law Reports 611;Harbhajan Singh v. Press Council of India and Ors.(2002) 3 SCC 722: [2002] 2 SCR 369; New India AB

C

D

E

F

G

H

AAssurance Company Ltd. v. Nusli Neville Wadia and Ors.(2008) 3 SCC 279: [2007] 13 SCR 598: Tirath Singhv. Bachittar Singh and Others AIR 1955 SC 830: [1955]SCR 457 – referred to.

Justice G.P. Singh’s Principles of StatutoryBInterpretation, Fourteenth Edition, Page No. 145-referred to.

Case Law Reference

DCIVIL APPELLATE JURISDICTION : Civil Appeal No. 3470of 2022.

From the Judgment and Order dated 14.12.2020 of the High Courtof Delhi at New Delhi in Arbitration Petition No.668 of 2020.

Gourab Banerji, Sr. Adv., Harsha Peecharra, Yoginder Handoo,ERakesh Talukdar, Ashwin Kataria, Garvit Solanki, Advs. for the Appellant.

Neeraj Kishan Kaul, Sr. Adv., Mahesh Agarwal, Ms. Sayree BasuMullik, Rishabh Parikh, Rohan Talwar, Deepak Joshi, Raghav Agrawal,Ms. Aarzoo Aneja, E. C. Agrawala, Advs. for the Respondent.

FThe Judgment of the Court was delivered by

K. M. JOSEPH, J.

1. Leave granted.

2. The foremost question which falls for determination by thisCourt is the impact of Section 60(6) of the Insolvency and BankruptcyGCode (hereinafter referred to as ‘IBC’ for brevity) and whether theaforesaid provision gives rise to a new lease of life to a proceeding atthe instance of the corporate debtor on the basis of a moratorium whichis put in place by virtue of the order passed under section 14 of the IBCand whether corporate debtor can take advantage of the same to bringH

the application in this case filed under Section 11(6) of the Arbitrationand Conciliation Act, 1996 (hereinafter referred to as ‘the 1996 Act’).

3. Pursuant to an agreement dated 20.02.2015, the appellant placeda purchase order of Rs.16,20,00,000/- with the respondent. The appellant,however, issued a termination notice to the respondent on account of itsalleged inaction and conduct which is described as non-responsive. Thisled to the respondent approaching the High Court of Delhi which finallyculminated in a direction by the High Court to afford an opportunity ofhearing to the respondent and to consider its representation. Theappellant, however, rejected the representation by communication dated17.05.2016. Invoking the provision in the contract providing for arbitration,the respondent addressed communication dated 07.06.2016. Theappellant sent its reply on 20.7.2016 where it, inter alia, did not consentfor either of the names suggested by the respondent and instead proposedto proceed for arbitration through the Delhi International ArbitrationCentre (DIAC). On 14.5.2018 the National Company Law Tribunal(NCLT) Mumbai admitted an application under Section 10 of the IBCand declared the moratorium. On 28.11.2019, a resolution plan wasapproved by the NCLT. On 25.11.2020, the respondent filed anapplication under Section 11(6) of the 1996 Act. By the impugned orderdated 14.12.2020, the High Court of Delhi has allowed the applicationfiled under Section 11(6) and appointed a former Chief Justice of a HighCourt to be the arbitrator. It is apposite at this point itself to noticecertain parts of the impugned order in this regard:

“6. Learned counsel are also ad idem that, in view of Section12(5) of the 1996 Act read with the Seventh Schedulethereto, the arbitral mechanism, contemplated by the afore-extracted Clauses from the Purchase Order and theAgreement, cannot be allowed to operate, as theChairperson of the NDMC would be disabled fromappointing the arbitrator. This position stands crystallizedin a number decisions, including the judgments of theSupreme Court in Bharat Broadband Network Ltd. v.United Telecoms Ltd. (2019) 5 SCC 755 and PerkinsEastman Architects DPC v. IISCC (India) Limited AIR2020 SC 59, and of this Court in Proddatur Cable TVDIGI Services v. SITI Cable Network Limited MANU/DE/0178/2020.

AB

C

D

E

F

G

H

7. The petitioner wrote to the respondent on 7[th] June, 2016,suggesting the names of two retired Judges of this Court asthe sole arbitrator to arbitrate on the dispute.

A

8. The respondent, however, vide its response, dated 20[th]July, 2016, suggested that the matter could be referred toBthe Delhi International Arbitration Centre (DIAC), for beingarbitrated.

9. Today, before me, learned counsel request the Court toappoint an independent arbitrator, who would conduct thearbitration under the aegis of the DIAC, and in accordanceCwith the procedure established in that regard.

10. Learned counsel are also agreeable to pay the fees ofthe learned sole arbitrator in accordance with the FourthSchedule to the 1996 Act.”

It is in view thereto that the appointment of the arbitrator was Dmade.

4. We have heard Shri Gourab Banerjee, learned senior counselfor the appellant, and Shri N. K. Kaul, learned senior counsel on behalfof the respondent.

Shri Gourab Banerjee, learned senior counsel, would contend thatEbeing a plea relating to limitation and since the aspect of limitation pertainsto jurisdiction the mere fact that the counsel for the appellant in the HighCourt has consented to the order appointing the arbitrator will not standin the way of the appellant pointing out that the application under section11(6) was clearly beyond time. In this regard, Section 3 of the LimitationFAct, 1963 (hereinafter referred to as ‘1963 Act’) is harnessed. It ispointed out that irrespective of whether the parties set up the case oflimitation, it is the bounden duty of the Court to dismiss the suit or anapplication or proceeding which is barred by limitation. In this regard,learned senior counsel also relied upon the judgment of this Court reportedin Noharlal Verma v. District Cooperative Central Bank Limited,GJagdalpur (2008) 14 SCC 445:

“32. Now, limitation goes to the root of the matter. If a suit,appeal or application is barred by limitation, a court or anadjudicating authority has no jurisdiction, power or authority H

to entertain such suit, appeal or application and to decide iton merits.

33. Sub-section (1) of Section 3 of the Limitation Act, 1963reads as under:

“3. Bar of limitation.—(1) Subject to the provisionscontained in Sections 4 to 24 (inclusive), every suitinstituted, appeal preferred, and application made afterthe prescribed period shall be dismissed althoughlimitation has not been set up as a defence.”

(emphasis supplied)

Bare reading of the aforesaid provision leaves no roomfor doubt that if a suit is instituted, appeal is preferred orapplication is made after the prescribed period, it has to bedismissed even though no such plea has been raised ordefence has been set up. In other words, even in absenceof such plea by the defendant, respondent or opponent, thecourt or authority must dismiss such suit, appeal orapplication, if it is satisfied that the suit, appeal or applicationis barred by limitation.”

5. He apparently anticipates the contention based on Section 60(6)of the IBC. Learned senior counsel for the appellant would point outthat no reliance should be permitted to be placed on Section 60(6) of theIBC by the respondent. He would point out that Section 60(6), no doubt,appears to, in so many words, countenance the exclusion of the periodduring which there is a moratorium in effect in the launching of theproceeding even by the corporate debtor. He would point out that aperusal of the scheme of the IBC would reveal that upon an applicationbeing admitted under Sections 7, 9 or 10, the moratorium springs intoexistence. However, the contents of Section 14 and the result it produceswould show that in no way does it forbid or act as an embargo againstthe corporate debtor launching a proceeding. There is, in other words,no warrant for exclusion of the period for a suit or proceeding by thecorporate debtor. In this regard, he seeks further reinforcement by virtueof the fact that IBC contemplates that the resolution professional is clothedwith the power to conduct proceedings including the proceedings underthe 1996 Act. In this regard, support is sought to be drawn from provisionsof Section 25 of the IBC. Section 25(2)(b) inter alia reads as follows:

A

B

C

D

EF

G

H

1080SUPREME COURT REPORTS

[2022] 16 S.C.R.

A“25

……………………………………………………………..............……………………………………………………………..............

(2) For the purposes of sub-section (1), the resolution professionalBshall undertake the following actions, namely:—

……………………………………………………………..............

……………………………………………………………..............

(b) represent and act on behalf of the corporate debtor with thirdparties, exercise rights for the benefit of the corporate debtor inCjudicial, quasi-judicial or arbitration proceedings;

……………………………………………………………..............

……………………………………………………………..............

He would, therefore, contend that when not only there is no expressDembargo against the corporate debtor from pursuing any proceeding butthe law, in fact, contemplates the resolution professional launching theproceedings and representing and acting on behalf of the corporate debtorin judicial, quasi-judicial or arbitration proceedings during a moratorium,the present application under section 11(6) which is admittedly barredEbut for exclusion of the time under Section 60(6) is to be treated as timebarred. In this regard, he would commend to the Court that the Courtmay employ the principles of interpretation which have commended itselfof late, in particular, viz., an interpretation, which advances the objectand the purpose of the law. A mere adherence to the literal meaning ofthe law should be avoided particularly in the context of the provision ofFthe IBC having regard to the deleterious results, which it would produceon third parties like the appellant. In other words, when there was nobarrier on the corporate debtor during the period of limitation to lay anapplication under Section 11(6) in the facts of this case, and the periodwould at any rate expire on 20.07.2019 on the basis of reply datedG20.07.2016 of the appellant to the respondent, Section 60(6) will notassist the respondent.6. He would submit that this Court may bear in mind the admonitionof this Court on an earlier occasion contained in the judgment of this H

NEW DELHI MUNICIPAL COUNCIL v. MINOSHA INDIALIMITED [K. M. JOSEPH, J.]

Court reported in Reserve Bank of India v. Peerless General Finance &Investment Co. Ltd. and others[1]:

“33. Interpretation must depend on the text and thecontext. They are the bases of interpretation. One maywell say if the text is the texture, context is what givesthe colour. Neither can be ignored. Both are important.That interpretation is best which makes the textualinterpretation match the contextual. A statute is bestinterpreted when we know why it was enacted. Withthis knowledge, the statute must be read, first as a wholeand then section by section, clause by clause, phrase byphrase and word by word. If a statute is looked at, in thecontext of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections,clauses, phrases and words may take colour and appeardifferent than when the statute is looked at without theglasses provided by the context. With these glasses wemust look at the Act as a whole and discover what eachsection, each clause, each phrase and each word is meantand designed to say as to fit into the scheme of the entireAct. No part of a statute and no word of a statute canbe construed in isolation. Statutes have to be construedso that every word has a place and everything is in itsplace. It is by looking at the definition as a whole in thesetting of the entire Act and by reference to whatpreceded the enactment and the reasonsfor it that theCourt construed the expression “Prize Chit”in Srinivasa [(1980) 4 SCC 507 : (1981) 1 SCR 801 : 51Com Cas 464] and we find no reason to depart from theCourt’s construction.”

7. In this regard, he would point out that the Court may contemplatethat there may be suits which a corporate debtor also during the periodof the moratorium may not be in a position to bring. He gives an exampleof interpleader suit. It may be in such cases alone that the Courts mustgive meaning to the exclusion of the period of limitation in favour of acorporate debtor in Section 60(6). He would further contend that theacceptance of the case of the respondent under Section 60(6) wouldrender the phrase in section 60(6), viz., ‘for which an order of 1 (1987) 1 SCC 424

A

B

C

D

E

F

G

H

1 (1987) 1 SCC 424

A

B

C

D

E

F

G

H

Amoratorium has been made under this part’ otiose. The said phrase,in other words, is employed in order to confine the benefit of the exclusionto only suits which would be covered by or come under a cloud as aresult of the moratorium. The present application under section 11(6) isclearly not one such proceeding. In other words, it is his case that thewords ‘for which an order of moratorium has been made under thisBpart’ which is to be treated as a descriptive part, describes the case ofsuch proceedings to which the third part will apply, the third part beingthe period during which the moratorium is in place, shall be excluded.The Court may place an interpretation which gives meaning to eachword/phrase in the provision. If a blanket benefit was contemplated byCthe Legislature applicable to all suits and applications by or against thecorporate debtor, the provision would be differently worded. He wouldillustrate this with reference to examples by adding and rewriting theprovisions. Section 60(6) is intended to confer the consequential benefitupon the corporate debtor and, hence, the scope of Section 60(6) shouldnot be wider than the scope of the moratorium itself. An interpretationDwhich balances the competing public interest of third parties subservedby limitation and the corporate debtors financial benefit may be placed.In this regard, he contended that the very object of the law of limitationor rather the policy which underlies it, is that the long dormant claimsmust not be allowed to be brought in a Court or other authority. AnotherEprinciple which is pressed into service is that the defendant or therespondent, as the case may be, would have lost materials or evidenceto bolster its case if a stale claim is sprung on him causing grave prejudiceto him. Reasonable diligence must inform actions brought. In this case,this aspect has special relevance according to the learned senior counselfor the appellant for the reason that the matter relates to the year 2015.FThe respondent not having brought the application for appointment of anarbitrator within the period of limitation which is ordinarily available, theappellant is disabled from establishing its case before the arbitrator asmany of the documents are not available and witnesses may not beavailable as appellant’s employees have retired. All of this would produceGsubstantially adverse results on the appellant. None of this was in thecontemplation of the law giver and the acceptance of the respondent’scase would involve giving a free run to those who sleep on their rightsand bring a delayed claim much beyond the period of limitation.

8. In this regard, it is also pointed out that there is a resolution planwhich is approved and its impact may be perceived. The case of therespondent, it is pointed out, even according to the respondent, is that therespondent discovered late on going through the files that the applicationhad to be filed. All of this is incomprehensible when the corporate debtorcontinued during the period of the moratorium, i.e., the corporate bodycontinued and it was under the management of the Resolution Professionalwho was duly clothed with the authority to proceed for the appointmentof an arbitrator under Section 11(6), even during the moratorium. Byreason of the fact that the management is taken over, the corporatebody does not vanish. So all throughout, there is a corporate body andthere is nothing in law which stood in the way of it lodging an applicationunder Section 11(6). The moratorium certainly has nothing to do withthe delayed launching, as it did not bar the launching of proceedingsunder Section 11(6). It is therefore, contended that the Court may notaccept the case based on Section 60(6) of the IBC.

9. Per contra, Shri N. K. Kaul, learned senior counsel for therespondent would stoutly oppose the appeal. In the very first place hewould submit that the conduct of the appellant which is a public authorityshould not commend itself to the Court. He would point out that in theletter dated 20.07.2016, actually the stand of the respondent was that itagreed for arbitration but it wanted the arbitration to be carried out throughDIAC. Thereafter, he would draw our attention to the finding in theimpugned Order, which reads:

“25. That the Respondent vide its letter dated 20.07.2016replied to the aforesaid Notice dated 07.06.2016, whereinthe Respondent did not provide consent for either of thenames suggested by the Petitioner and instead proposedto proceed with arbitration through Delhi ArbitrationCentre. Thus, there has been no mutual agreementbetween the parties in respect of the appointment of anindependent Sole arbitrator.”

10. Not unnaturally, he also took us to paragraphs 6 to 10 whichwe have already adverted to. The matter does not end there. He wouldsubmit that following the order of the High Court, proceedings werecommenced before the Arbitrator. 19.02.2021, 25.03.2021, 06.07.2021and a date in May, 2021 are pointed to as dates on which proceedings AB

C

D

E

F

G

H

Awere held before the Arbitrator. He would complain that the conduct ofthe appellant does not reflect honesty as is expected of the State. It isfurther pointed out that the fact that arbitration proceedings hadcommenced was not brought to this Court’s notice when this Court issuednotice in the matter and passed an interim order.

B11. He would further highlight that in effect, the impugned orderis a consent order. Therefore, irrespective of the Court’s decision onthe question of law which has been raised relating to the ambit of Section60(6), the appeal cannot be permitted to succeed. As far as the truescope of Section 60(6) is concerned, he would submit that section 14brings in a period which he describes as a ‘calm period’. In other words,Che would contend that when an order of moratorium is passed in aCorporate Insolvency Resolution Process (CIRP) under the IBC, it isintended to bring about a period during which a resurrection or revival ofthe corporate body is attempted. A hiatus is put in place in respect ofother proceedings as contemplated under Section 14. He would contendDthat be it a literal interpretation that this Court may place or a contextualinterpretation, the result is inevitable that the period of moratorium willstand excluded even as far as a suit or an application by a corporatedebtor is concerned. As far as the literal interpretation goes, the lawgiver has not left anything for imagination and there would be no merit inthe case of the appellant. As far as the object of the Code is concerned,EParliament contemplated that every attempt should be made to bringback an ailing corporate debtor to life. The argument based on Section25(2)(b) of the IBC is sought to be met by pointing out that while it doesgive power to the Resolution Professional to represent the company inproceedings including proceedings under the 1996 Act and there can beFno doubt that the Resolution Professional could have taken steps underSection 11(6), that should not be the end of the inquiry. The questionmust be answered with reference to the express words used in Section60(6) and also bearing in mind what actually happens on the groundonce a moratorium is put in place and the corporate debtor undergoes aCIRP.G

12. The learned senior counsel for the respondent also enlists inhis support, the report of the Joint Committee of the Insolvency andBankruptcy Code 2015, which reads as follows:

“29. Adjudicating Authority for Corporate persons – ClauseH60 and 79 (14(e)

FICCI in the memorandum submitted to theCommittee was of the view that the exclusion of moratoriumperiod from calculation of limitation period applies only inthe context of suit or application in the name or on behalf ofthe corporate debtor. It is not clear as such exclusion alsoapplies in respect of suits against the company by thecreditors which are also subject to stay under the moratoriumprovisions.It was, therefore, suggested that the words “oragainst the corporate debtor” may be added after the words“corporate debtor” under Clause 60(6) of the Bill.

The Committee while agreeing to the suggestionof FICCI, decide that clause 60(6) may be modified asunder: - “Notwithstanding anything contained in the LimitationAct, 1963 or in any other law for the time being inforce, in computing the period of limitation specifiedfor any suit or application by or against a corporatedebtor for which an order of moratorium has beenmade under this Part, the period during which suchmoratorium is in place shall be excluded’.

Further clause 6091) provides that Adjudicating Authorityfor corporate persons including personal guarantors shallbe National Company Law Tribunal. Since clause 79(14)(e)is contrary to clause 60(1), as a consequential amendment,clause 79(14)(e) may be omitted.”

13. Learned senior counsel for the respondent does not disputethat the moratorium in any way stands in the way of a proceeding beinglaunched by the corporate debtor. In the facts of this case, the applicationbeing one under Section 11(6) of the 1996 Act, such an application couldhave been maintained during the period of the moratorium. It couldhave been maintained as we have already noted by the ResolutionProfessional but this does not whittle down the benefit of the exclusionunder Section 60(6).

14. It is, therefore, according to him, clear that the provision, evenoriginally, did provide for the exclusion of time for proceedings by thecorporate debtors while exclusion of time against the debtor, was a later A

B

C

D

E

F

G

H

Aaddition. The law always was that the exclusion under Section 60(6)was contemplated in favour of the corporate debtors.

15. The learned senior counsel for the appellant did attempt toemphasise the impact of the following sentence:

“……..It is not clear as such exclusion also applies in respectof suits against the company by the creditors which arealso subject to stay under the moratorium provisions.”

B

The appellant would also contend that the fact of the arbitrationbeing on going was disclosed to this Court.

ANALYSISC

16. Section 14 of the IBC reads as follows:

“14. (1) Subject to provisions of sub-sections (2) and (3),on the insolvency commencement date, the AdjudicatingAuthority shall by order declare moratorium for prohibitingall of the following, namely:—

D

(a) the institution of suits or continuation of pending suits orproceedings against the corporate debtor including executionof any judgment, decree or order in any court of law, tribunal,arbitration panel or other authority; E

(b) transferring, encumbering, alienating or disposing of bythe corporate debt or any of its assets or any legal right orbeneficial interest therein;

(c) any action to foreclose, recover or enforce any securityinterest created by the corporate debtor in respect of itsproperty including any action under the Securitisation andReconstruction of Financial Assets and Enforcement ofSecurity Interest Act, 2002; F

(d) the recovery of any property by an owner or lessorwhere such property is occupied by or in the possession ofthe corporate debtor.

G

(2) The supply of essential goods or services to the corporatedebtor as may be specified shall not be terminated orsuspended or interrupted during moratorium period.

H

(3) The provisions of sub-section (1) shall not apply to suchtransactions as may be notified by the Central Governmentin consultation with any financial sector regulator.

(4) The order of moratorium shall have effect from the dateof such order till the completion of the corporate insolvencyresolution process:

Provided that where at any time during the corporateinsolvency resolution process period, if the AdjudicatingAuthority approves the resolution plan under sub-section(1) of section 31 or passes an order for liquidation ofcorporate debtor under section 33, the moratorium shallcease to have effect from the date of such approval orliquidation order, as the case may be.

17. Section 60(6) of the IBC must next be noticed:

“60……………………………….....................................

.......................................................................................

(6) Notwithstanding anything contained in the Limitation Act,1963 or in any other law for the time being in force, incomputing the period of limitation specified for any suit orapplication by or against a corporate debtor for which anorder of moratorium has been made under this Part, theperiod during which such moratorium is in place shall beexcluded.”

18. We must, in the first place, notice that the Courts would notindulge in interpretation of a report of a body and when there is bettermaterial in the form of the Act itself available for interpretation.

19. The principles of interpretation of statutes have been invokedin the varying contexts and are to be applied on the basis of the facts ofthe case, the nature of the law and a host of principles. Undoubtedly,the golden rule of interpretation is the interpretation which thrives on theordinary meaning of the words as they are used. This principle of literalinterpretation of statutes has over a period of time indeed yielded to aninterpretation which is purposive or which seeks to accommodate theobject of the law giver. Suffice it to say that if the words of a statute arenot ambiguous, the scope of interpretation dwindles. It is not for the A

B

C

D

E

F

G

H

ACourt to rewrite a statute. There may be occasions where the Courtmay even go to the extent of leaving out a word or not giving effect tocertain part in order to give full meaning to the law by way of gleaningand giving effect to the intention of the legislature. The principle thatliteral meaning must be accepted is undoubtedly subject to the principlethat it will make way when such interpretation will lead to an absurdityBor grave injustice which a law giver could not have contemplated.

20. It is necessary to refer to the Principles of Interpretation ofStatute in context of the submissions, which have been made. In (1976)3 All England Law Reports 611, Lord Simon of Glaisdale, in the case ofSuthendran v. Immigration Appeal Tribunal has given an exposition ofCthe golden rule of interpretation, which is the same as understanding thewords of a Statute in their natural and ordinary sense, with reference tothe grammatical meaning and the same has been adverted and approvedby this Court in Harbhajan Singh v. Press Council of India and others[2]:

“9.…

D

“9.…

D

‘Parliament is prima facie to be credited with meaningwhat is said in an Act of Parliament. The drafting of statutes,so important to people who hope to live under the rule of law,will never be satisfactory unless courts seek whenever possibleto apply “the golden rule” of construction, that is to read theEstatutory language, grammatically and terminologically, in theordinary and primary sense which it bears in its context,without omission or addition. Of course, Parliament is to becredited with good sense; so that when such an approachproduces injustice, absurdity, contradiction or stultification ofFstatutory objective the language may be modified sufficiently’”to avoid such disadvantage, though no further.

21. No doubt, another principle, which has rightfully vied for theCourt’s approval in this regard, is that, an interpretation which furthersthe object and purpose of the law, must weigh with the Court, the most.GIn this regard, we may notice the following view expressed by Justice S.B. Sinha in New India Assurance Co. Ltd. v. Nusli Neville Wadia andanother[3]:

2 (2002) 3 SCC 722H3 (2008) 3 SCC 279

“51. … With a view to read the provisions of the Act in aproper and effective manner, we are of the opinion that literalinterpretation, if given, may give rise to an anomaly or absurditywhich must be avoided. So as to enable a superior court tointerpret a statute in a reasonable manner, the court mustplace itself in the chair of a reasonable legislator/author. Sodone, the rules of purposive construction have to be resortedto which would require the construction of the Act in such amanner so as to see that the object of the Act is fulfilled,which in turn would lead the beneficiary under the statutoryscheme to fulfil its constitutional obligations as held by theCourt inter alia in Ashoka Marketing Ltd. [(1990) 4 SCC406]

52. Barak in his exhaustive work on “Purposive Construction”explains various meanings attributed to the term “purpose”.It would be in the fitness of discussion to refer to PurposiveConstruction in Barak’s words:

“Hart and Sachs also appear to treat ‘purpose’ as a subjectiveconcept. I say ‘appear’ because, although Hart and Sachsclaim that the interpreter should imagine himself or herself inthe legislator’s shoes, they introduce two elements ofobjectivity : First, the interpreter should assume that thelegislature is composed of reasonable people seeking toachieve reasonable goals in a reasonable manner; and second,the interpreter should accept the non-rebuttable presumptionthat members of the legislative body sought to fulfil theirconstitutional duties in good faith. This formulation allowsthe interpreter to inquire not into the subjective intent of theauthor, but rather the intent the author would have had, hadhe or she acted reasonably.”

(Aharon Barak, Purposive Interpretation in Law, (2007) atp. 87.)”

22. In Justice G.P. Singh’s Principles of Statutory Interpretation14th Edition, page 145 while dealing with the application of Heydon’sRule, we find the following statements:

“It has also been said that the application of the rule inHeydon’s case should not be taken to extremes; that if there AB

C

D

EF

G

H

Awere many problems before the enactment of the statute itdoes not follow that in an effort to solve some of them theParliament intended to solve all; and that loyalty to the ruledoes not require the adoption of a construction which leadsmanifestly to absurd results. These propositions stated byLORD ROSKILL in Anderton v. Ryan [(1985) 2 ALL ERB355] are unexceptional but their misapplication may lead to anarrow construction defeating the object of the statute asactually happened in that case which was overruled within ayear in R. V. Shivpuri [(1986) 2 ALL ER 334]. Further, if thestatutory language in its primary or ordinary meaning in theCcontext has a wider effect, it cannot be artificially confinedto remedy the single identified mischief which is conceivedto have occasioned the statutory provision for once a mischiefhas been drawn to the attention of the parliamentary draftsmanhe would have considered whether any concomitant mischiefsshould be dealt with as a necessary corollary.”D

23. This Court in Tirath Singh v. Bachittar Singh and Others [4]approved of the following statement in Maxwells Interpretation of Statues10[th] Edition Page 229.

“Where the language of a statute, in its ordinary meaningEand grammatical construction, leads to a manifest contradictionof the apparent purpose of the enactment, or to someinconvenience or absurdity, hardship or injustice, presumablynot intended, a construction may be put upon it which modifiesthe meaning of the words, and even the structure of thesentence.”F

24. Under the IBC, by virtue of the order admitting the application,be it under Sections 7, 9 or 10, and imposing moratorium, proceedings asare contemplated in Section 14 would be tabooed. This undoubtedlydoes not include an application under Section 11(6) of the 1996 Act bythe corporate debtor or for that matter, any other proceeding by theGcorporate debtor against another party. At least there is no expressexclusion of the jurisdiction of the Court or authorities to entertain anysuch proceeding at the hands of the corporate debtor. However, wemust not be oblivious to the other provisions as well. Under Section 17,

the management of the affairs of the corporate debtor is taken over bythe interim resolution professional. The powers of the Board of Directorsor the partners of the corporate debtor shall stand suspended and itwould be exercised by the interim resolution professional. When theauthority changes hands from the interim resolution professional to theresolution professional, the previous management continues to beexcluded. The committee of creditors comes into being. Under thesupervision, ‘as it were’, of the committee of creditors, all the mattersare proceeded with. The resolution plans are received by the resolutionprofessional and the resolution plan which is finally approved by thecommittee of creditors and still further at the hands of the adjudicatingauthority, would result in the curtains being wrung down on the moratoriumunder Section 31(3). During this entire period, what is noteworthy is thatwhile in law and in form, the corporate debtor continues to exist andrepresented by the interim resolution professional to begin with and theresolution professional thereafter, the erstwhile management of thecorporate debtor is displaced. When the resolution plan is approved, anew management takes over. All this is contemplated when the CIRP issuccessful. Undoubtedly, if it is unsuccessful, the corporate debtor slipsinto liquidation. Therefore, on the one hand, an application under Section7, 9 or 10, does bring in a period which is intended to bring a corporatedebtor back to life if possible, ‘a period of calm’, in the words of therespondent. But this is a period during which the management of thecorporate debtor is displaced, ironically, a period of turbulent churning.While it may be true that proceedings by the corporate debtor throughthe resolution professional is contemplated, it is not impossible tocontemplate that the resolution professional for whatever reason it maybe, does not discharge his duties and conduct proceedings in all mattersas he should. We are noting this as this can be the rationale for the LawGiver excluding the period of limitation in regard to suits or applicationsat the instance of the corporate debtor under Section 60(6).

25. As far as understanding the meaning of Section 60(6) isconcerned, there cannot be a slightest doubt that the period of Moratoriumis excluded even in the case of a suit or application brought by a corporatedebtor, viz., in regard to the period of the moratorium. It is true that onthe one hand what is tabooed in Section 14 when a Moratorium is putinto place is inter alia the institution of suits or continuance of pendingsuits or proceedings against the corporate debtor including proceeding in AB

C

D

E

F

G

H

AB

C

D

E

F

G

H

Aexecution of inter alia, the decree or order of an arbitration panel. So,also the provision prohibits any action to foreclose, recover or enforceany security interest created by the corporate debtor in respect of itsproperty including any action under the Securitization and Reconstructionof Financial Assets and Enforcement of Security Interest Act 2002. Stillfurther, the recovery of any property by an owner or lessor in theBoccupation of the corporate debtor is forbidden. These provisions do notin any manner appear to stand in the way of the corporate debtorinstituting or proceeding with a suit or a proceeding against others. Section60(6) on the other hand excludes the period during which the Moratoriumunder Section 14 is in place in computing the period of limitation. AnCambiguity is introduced, namely the need to exclude the period of limitationfor a suit or an application, at the instance of the corporate debtor whena Moratorium ushered in by an order under Section 14 does not poseany bar against a suit or an application at the instance of the corporatedebtor. The words for which an order of Moratorium has been madeunder this part is intended to be the point of reference or the premise forDthe exclusion of the time for the purpose of computing the period oflimitation. Besides being the point of reference and being the sine quanon for applying Section 60(6), it also specifies the period of time whichwill be excluded in computing of the period of limitation. In other words,present an order of Moratorium under Section 14, the entire period ofEthe Moratorium is liable to be excluded in computing the period oflimitation even in a suit or an application by a corporate debtor.

26. The contention of the learned Senior Counsel for the appellantbased on the approval of the resolution plan and the effect of Section 31apparently of the IBC does not appeal to us. What Section 31 of the Act, FIBC undoubtedly proclaims is that on approval of the resolution plan bythe adjudicating authority the plan becomes binding on a corporate debtor,its employees, members, creditors, the Central Government any StateGovernment or any local authority as provided therein, guarantors andothers stakeholders involved in the resolution plan. We are unable to perceive how the appellant can derive support from the said provision.GIn fact, taking the scheme of the IBC Section 60(6) would become anintegral part of the scheme which will enure to the benefit of the resolutionapplicant which is enabled to take suitable measures to ventilate itslegitimate grievances by excluding the period during which a Moratoriumwas enforced for the purpose of computing the period of limitation.

H

27. In other words, notwithstanding the period of limitation underthe Limitation Act, the Law Giver has thought it fit to provide that inrespect of a corporate debtor if there has been an order of moratoriummade in Part II, the period during which such moratorium was in placeshall be excluded. ‘For which an order of moratorium’ cannot bear theinterpretation which is sought to be placed by the appellant. Theinterpretation placed by the appellant is clearly against the plain meaningof the words which have been used. We have already undertaken thetask of understanding the purport of the Code and the context in whichsection 60(6) has been put in place. This Court cannot possibly sit injudgment over the wisdom of the Law Giver. The period of limitation isprovided under the Limitation Act. The law giver has contemplated thatwhen a moratorium has been put in place, the said period must beexcluded. We cannot overlook also the employment of words ‘any suitor application’. This is apart, no doubt, from the words ‘by a corporatedebtor’. Interpreting the statute in the manner which the appellant seekswould result in our denying the benefit of extending the period of limitationto the corporate debtor, a result, which we think, would not be warrantedby the clear words used in the statute.

28. Therefore, we are of the view that section 60(6) of the IBCdoes contemplate exclusion of the entire period during which themoratorium was in force in respect of corporate debtor in regard to aproceeding as contemplated therein at the hands of the corporate debtor.

29. In light of the view we have taken, we consider it unnecessaryto go into the question relating to whether in view of the consent givenby the appellant to the appointment of the arbitrator, the appellant shouldbe debarred from raising the plea of limitation. The appeal will standdismissed. There will be no orders as to costs.

Ankit Gyan and Amarendra Kumar(Assisted by : Ajay, LCRA)

Appeal dismissed.

A

B

C

D

E

F

G

H