On September 18, 2019, the Supreme Court passed a judgment in the case of Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Limited (Civil Appeal no. 4952 of 2019) pertaining to calculation of limitation period under the Insolvency and Bankruptcy Code, 2016 (“IBC”).
Brief facts
The borrower was declared NPA on July 21, 2011. An application under section 7 of the IBC was filed on October 3, 2017. The NCLT applied article 62 of the Limitation Act, 1963 and held the period of limitation to be 12 (twelve) years from the date when the money sued for becomes due. Accordingly, it held that the application was filed within the limitation period and admitted the application. The NCLAT held that the time of limitation would begin to run for the purposes of limitation only from December 1, 2016 i.e. when the IBC was brought into force. Consequently, it dismissed the appeal.
Judgment
The Supreme Court held that Article 62 of the Limitation Act, 1963 is applicable only to suits, and the present application would fall within the residuary Article 137 of the Limitation Act, 1963. It further held that the time period would be calculated from July 21, 2011 i.e. when the right to sue accrued. Since 3 (three) years have elapsed since then in 2014, the section 7 application filed in 2017 was held to be clearly out of time.
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