REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.23988 OF 2017

B.K. EDUCATIONAL SERVICES  PRIVATE LIMITED …APPELLANT

VERSUS

PARAG GUPTA AND ASSOCIATES …RESPONDENTS

WITH

CIVIL APPEAL NO.439 OF 2018 CIVIL APPEAL NO.436 OF 2018

CIVIL APPEAL NO.3137 OF 2018 CIVIL APPEAL NO.4979 OF 2018 CIVIL APPEAL NO.5819 OF 2018 CIVIL APPEAL NO.7286 OF 2018

J U D G M E N T

R.F. NARIMAN, J.

1.  The present appeals are concerned with Section 238A of

the  Insolvency  and  Bankruptcy  Code,  2016  (“Code”),  which

was inserted by the Insolvency and Bankruptcy Code (Second

1

Amendment) Act, 2018 with effect from 06.06.2018. The said

Section is as follows:

“238A. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery  Tribunal  or  the  Debt  Recovery  Appellate Tribunal, as the case may be.”

2. The question raised by the appellants in these appeals is as

to whether  the Limitation Act,  1963 will  apply to applications

that are made under Section 7 and/or Section 9 of the Code on

and from its commencement on 01.12.2016 till 06.06.2018. In

all  these  cases,  the  Appellate  Authority  has  held  that  the

Limitation Act, 1963 does not so apply. Even on the assumption

that Article 137 of the Limitation Act, 1963 is attracted to such

applications, in any case, such applications being filed only on

or after commencement of the Code on 01.12.2016, since three

years have not elapsed since this date, all these applications, in

any event, could be said to be within time. Having held this, by

the impugned order dated 07.11.2017 in Civil Appeal No.23988

of 2017, the Appellate Tribunal went on to hold:

2

“68. In view of the settled principle, while we hold that  the  Limitation  Act,  1963  is  not  applicable  for initiation  of  ‘Corporate  Insolvency  Resolution Process’,  we  further  hold  that  the  Doctrine  of Limitation  and  Prescription  is  necessary  to  be looked into for determining the question whether the application  under  Section  7  or  Section  9  can  be entertained  after  long  delay,  amounting  to  laches and thereby the person forfeited his claim.  

69. If there is a delay of more than three years from the date of  cause of  action and no laches on the part of the Applicant, the Applicant can explain the delay. Where there is a continuing cause of action, the  question  of  rejecting  any  application  on  the ground of delay does not arise.  

70. Therefore,  if  it  comes  to  the  notice  of  the Adjudicating  Authority  that  the  application  for initiation  of  ‘Corporate  Insolvency  Resolution Process’ under section 7 or Section 9 has been filed after long delay, the Adjudicating Authority may give opportunity  to  the  Applicant  to  explain  the  delay within a reasonable period to find out whether there are any laches on the part of the Applicant.

71. The stale claim of dues without explaining delay, normally  should  not  be  entertained  for  triggering ‘Corporate  Insolvency  Resolution  Process’  under Section 7 and 9 of the ‘I&B Code’.  

72. However, the aforesaid principle for triggering an application  under  Section  10  of  the  ‘I&B  Code’ cannot  be  made  applicable  as  the  ‘Corporate Applicant’  does  not  claim  money  but  prays  for initiation  of  ‘Corporate  Insolvency  Resolution Process’ against itself, having defaulted to pay the dues of creditors. In so far it relates to filing of claim before  the  ‘Insolvency  Resolution  Professional’,  in case of  stale claim, long delay and in absence of

3

any  continuous  cause  of  action,  it  is  open  to resolution applicant to decide whether such claim is to  be  accepted  or  not,  and  on  submission  of resolution  plan,  the  Committee  of  Creditors  may decide  such  question.  If  any  adverse  decision  is taken in regard to any creditor disputing the claim on ground of delay and laches, it  will  be open to the aggrieved  creditor  to  file  objection  before  the Adjudicating  Authority  against  resolution  plan  and for  its  necessary  correction  who  may  decide  the same in accordance with the observations as made above.”

3. By reason of this finding, the order of the Tribunal was set

aside, and the matter was remanded for a hearing on all points

other than the point of limitation.  

4. Learned counsel appearing on behalf of the appellants have

argued,  relying  upon  the  Report  of  the  Insolvency  Law

Committee of March, 2018, that the object of the Amendment

Act which introduced Section 238A into the Code was to clarify

the  law  and,  thus,  Section  238A  must  be  held  to  be

retrospective. Further, according to them, in any case, the law

of  limitation,  pertaining to the domain of  procedure,  must  be

held to apply retrospectively in any case. For this proposition,

they cited several judgments which will be referred to later in

this  judgment.  They  also  referred  to  and  relied  upon  the 4

definitions under Sections 3(11), 3(12), and Section 5(6) of the

Code, which, when contrasted with Section 3(6), would show

that though “claim” in Section 3(6) refers to a right to payment,

the  definitions  of  “debt”  and  “default”  in  Sections  3(11)  and

3(12) respectively, refer to liability or obligation in respect of a

claim which is “due” and this being the case, a time-barred debt

cannot  be  said  to  be  “due”  so  as  to  trigger  the  Code.  The

learned  counsel  further  attacked  the  Appellate  Tribunal

judgment  by  stating  that  an  application  filed  in  2017  under

Section 7 or 9 of the Code, praying that the Code be triggered

for a debt that has become time-barred long back, say in 2011,

would  lead  to  absurdity  as  it  could  never  have  been  the

intention of the legislature to resuscitate stale and dead claims

leading to the drastic consequence of the taking away of the

management  of  the  corporate  debtor,  which  may  ultimately

result in its corporate death. Also, according to learned counsel

for  the  appellants,  if  one  were  to  read  the  definition  of

“Adjudicating Authority”  in Section 5(1) of  the Code, together

with Sections 408, 424 and 433 of the Companies Act, 2013, it

would  become  clear  that  proceedings  before  the  National

5

Company Law Tribunal (“NCLT”) arising under the Code would

be  covered  by  the  Limitation  Act  via  Section  433  of  the

Companies Act  from the very inception or commencement of

the Code. According to them, it is important to remember that

the Eleventh Schedule to the Code, which made amendments

in various Acts, did not introduce the limitation provision of the

Companies  Act  so  as  to  govern  the  Code  as  it  was

unnecessary, as Section 433 applied  vide Section 5(1) of the

Code  read  with  Section  408  of  the  Companies  Act.  In  any

event,  they  argued  that  even  on  the  assumption  that  the

Limitation  Act  does  not  apply  to  the  applications  referred  to

above, the principle in  State of Madhya Pradesh and Anr. v.

Bhailal Bhai and Ors., (1964) 6 SCR 261 has to be followed,

and the doctrine of laches applies. In applying this doctrine, the

period prescribed by the Limitation Act  will  be taken to be a

guide,  and  any  application  filed  relating  to  debts  that  are

beyond what is prescribed under the Limitation Act would be hit

by this doctrine in any case.  

6

5. On the other hand, Shri Ashish Dholakia, learned advocate

appearing on behalf of some of the respondents, argued, based

upon  our  judgment  in  Innoventive  Industries  Ltd.  v.  ICICI

Bank & Anr., (2018) 1 SCC 407, that the Code is a complete

Code dealing with insolvency and not debt recovery and that,

therefore, the periods of limitation that are stated therein would

show that the Limitation Act would not apply. In any case, as

has been held by various judgments of this Court, the Limitation

Act cannot apply to the NCLT as it is a tribunal and not a court.

He  cited  a  number  of  judgments  to  point  out  the  difference

between amounts that  are “due and payable”  as opposed to

amounts  that  are  “due  and  recoverable”.  According  to  him,

since  the  language  used  in  Section  3(11)  is  “due”  and  in

Section 3(12), “due and payable”, it would be clear that a time-

barred debt would be subsumed within the said expression as it

is  not  a  debt  that  is  “due  and  recoverable”  under  the  said

provision.  For  this  purpose,  he  relied  upon  a  number  of

judgments and Sections 25(3), 60 and 61 of the Indian Contract

Act,  1872. He also handed up a chart in which, according to

him, the following Tribunals, depending upon the particular Act

7

in question, would either be governed or not governed by the

Limitation Act as follows:

Tribunal Name

Discharges functions of Whether there is a provision for application of

Limitation Act? Telecom  Disputes  Settlement and  Appellate  Tribunal

Appellate  Tribunal  under Airports  Economic  Regulatory Authority of India Act, 2008

No

Appellate  Tribunal  under Information  Technology  Act, 2000

Yes – Section 60

Appellate  Tribunal  under Telecom  Regulatory  Authority of India Act, 1997

No

National Company Law Appellate Tribunal

Appellate  Tribunal  under Competition Act, 2002

No

Appellate  Authority  under Insolvency & Bankruptcy Code, 2016

No**

Appellate  Tribunal  under Companies Act, 2013

Yes  –  Section 433

National Company Law Tribunal

Tribunal under Companies Act, 2013

Yes  –  Section 433

Adjudicating  Authority  under Insolvency & Bankruptcy Code, 2016

No**

8

Securities Appellate Tribunal

Appellate  Tribunal  under Securities  &  Exchange  Board of India Act, 1992

Yes  –  Section 15W

Appellate  Tribunal  under Depositories Act, 1996

Yes  –  Section 23D

Appellate  Tribunal  under Securities  Contracts (Regulation) Act, 1956

Yes  –  Section 22D

Appellate  Tribunal  under Pension  Fund Regulatory  and Development  Authority  Act, 2013

No

**Prior  to  the Insolvency  & Bankruptcy (Second Amendment) Act, 2018

Also,  according to the learned advocate,  incongruous results

would  obtain  if  we  were  to  hold  that  Section  433  of  the

Companies Act, would apply to provide a period of limitation to

the NCLT deciding cases under the Code.  He argued that the

National  Company  Law  Appellate  Tribunal  (“NCLAT”)  is  an

appellate tribunal which is common to three statutes, namely,

the Competition Act, 2002, the Companies Act, 2013, and the

9

Insolvency and Bankruptcy Code, 2016. Under the Competition

Act,  no  period  of  limitation  is  prescribed  within  which  a

complaint  may  be  made  to  the  Competition  Commission.

Therefore, when the Appellate Tribunal decides a case under

the Competition Act, it will decide the case on merits despite the

period of limitation having elapsed, whereas, if the argument of

the  appellants  is  correct,  the  same  Appellate  Tribunal  will

decide a case under the Code applying a period of limitation

and barring applications that fall outside such period. This is an

incongruous  situation  which  could  not  possibly  have  been

intended  by  the  legislature.  He  also  went  on  to  argue  that

Section 238A of the Code could not be retrospective as it would

take away a vested right of the application filed under Section 7

or Section 9 to be decided without applying the Limitation Act

pre  06.06.2018.  He went  on to  argue  that  if  the doctrine  of

laches were to be applied, it  would have to be applied along

with other doctrines such as acquiescence and estoppel on the

facts of each case, there being no hard and fast rule that once

a  period  of  limitation  was  over,  the  application  must  be

10

dismissed. He also relied upon several decisions to buttress his

contentions.

6. Having  heard  the  learned  counsel  for  both  sides,  it  is

important  to  first  set  out  the  reason  for  the  introduction  of

Section 238A into the Code. This is to be found in the Report of

the Insolvency Law Committee of March, 2018, as follows:

“28. APPLICATION OF LIMITATION ACT, 1963

28.1 The question of  applicability of  the Limitation Act,  1963 (“Limitation Act”)  to  the Code has been deliberated upon in several judgments of the NCLT and the NCLAT. The existing jurisprudence on this subject indicates that if  a law is a complete code, then  an  express  or  necessary  exclusion  of  the Limitation Act should be respected.1 In light of the confusion in this regard, the Committee deliberated on the issue and unanimously agreed that the intent of  the  Code  could  not  have  been  to  give  a  new lease  of  life  to  debts  which  are  time-barred.  It  is settled law that when a debt is barred by time, the right to a remedy is time-barred.2 This requires being read with the definition of  ‘debt’ and ‘claim’ in the Code.  Further,  debts  in  winding  up  proceedings cannot be time-barred,3 and there appears to be no rationale to exclude the extension of this principle of law to the Code.

1 Ravula Subba Rao and Anr. v. The Commissioner of Income Tax, Madras, (1956) SCR 577. 2 Punjab National Bank and Ors. v. Surendra Prasad Sinha AIR 1992 SC 1815. 3 Interactive Media and Communication Solution Private Limited v. Go Airlines, 199 (2013) DLT 267.

11

28.2 Further, non-application of the law on limitation creates the following problems: first, it re-opens the right  of  financial  and  operational  creditors  holding time-barred debts under the Limitation Act to file for CIRP,  the  trigger  for  which  is  default  on  a  debt above  INR  one  lakh.  The  purpose  of  the  law  of limitation is “to prevent disturbance or deprivation of what may have been acquired in equity and justice by long enjoyment or what may have been lost by a party’s  own  inaction,  negligence  or  latches”4. Though the Code is  not  a  debt  recovery  law,  the trigger being ‘default in payment of debt’ renders the exclusion  of  the  law  of  limitation  counter-intuitive. Second, it re-opens the right of claimants (pursuant to  issuance  of  a  public  notice)  to  file  time-barred claims with the IRP/RP, which may potentially be a part  of  the resolution plan. Such a resolution plan restructuring time-barred debts and claims may not be in compliance with the existing laws for the time being in force as per section 30(4) of the Code.

28.3  Given that the intent was not to package the Code  as  a  fresh  opportunity  for  creditors  and claimants who did not exercise their remedy under existing laws within the prescribed limitation period, the  Committee  thought  it  fit  to  insert  a  specific section applying the Limitation Act to the Code. The relevant entry under the Limitation Act may be on a case  to  case  basis.  It  was  further  noted  that  the Limitation  Act  may  not  apply  to  applications  of corporate applicants,  as these are initiated by the applicant for its own debts for the purpose of CIRP and are not in the form of a creditor’s remedy.”

4 Rajinder Singh v. Santa Singh, AIR 1973 SC 2537.

12

The Report of the Committee would indicate that it has applied

its mind to judgments of the NCLT and the NCLAT. It has also

applied its mind to the aspect that the law is a complete Code

and the fact that the intention of such a Code could not have

been to give a new lease of life to debts which are time-barred.  

7.   We will first take up the position in law of the applicability of

the Limitation Act,  on a reading of  the Code together with a

cognate legislation,  the Companies Act,  2013.  Sections 3(6),

3(11), 3(12), and 5(6) of the Code read as follows:

“3.  Definitions.—In  this  Part,  unless  the  context otherwise requires,—

(6) “claim” means—

(a) a right to payment, whether or not such right  is  reduced  to  judgment,  fixed, disputed,  undisputed,  legal,  equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such  breach  gives  rise  to  a  right  to payment,  whether  or  not  such  right  is reduced  to  judgment,  fixed,  matured, unmatured, disputed, undisputed, secured or unsecured;”

xxx xxx xxx

13

“(11) “debt” means a liability or obligation in respect of  a  claim  which  is  due  from  any  person  and includes a financial debt and operational debt;

(12)  “default”  means  non-payment  of  debt  when whole or  any part  or  installment  of  the amount  of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be;”

“5.  Definitions.—In  this  Part,  unless  the  context otherwise requires,—

xxx xxx xxx

(6)  “dispute”  includes  a  suit  or  arbitration proceedings relating to—

(a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty;”

Vide  Section  3(37),  words  and  expressions  used,  but  not

defined in the Code, but defined inter alia in the Companies Act,

2013 shall have the meanings respectively assigned to them in

that Act. Section 5(1) of the Code defines Adjudicating Authority

as follows:

“5.  Definitions.—In  this  Part,  unless  the  context otherwise requires,—

(1) “Adjudicating Authority”, for the purposes of this Part,  means  National  Company  Law  Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013);”

14

This Section, therefore, requires that we look at Section 408 of

the Companies Act. Section 408 of the Companies Act states:

“408.  Constitution  of  National  Company  Law Tribunal.—The  Central  Government  shall,  by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President  and  such  number  of  Judicial  and Technical  members,  as  the  Central  Government may  deem  necessary,  to  be  appointed  by  it  by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.”

It is important to notice that the NCLT is set up to discharge

such powers and functions that are conferred on it not merely

under the Companies Act but also under “any other law for the

time being in force”. Section 433 of the Companies Act states

as follows:

“433. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case may be.”

15

What  is  conspicuous  by  its  absence  in  this  Section  are  the

expressions “under this Act” or “subject to the provisions of this

Act”. By way of contrast, Section 424(2) uses the expression

“under this Act” as follows:

“424.  Procedure  before  Tribunal  and  Appellate Tribunal.—

xxx xxx xxx

(2)  The  Tribunal  and  the  Appellate  Tribunal  shall have, for the purposes of discharging their functions under  this  Act or  under  the  Insolvency  and Bankruptcy  Code,  2016,  the same powers as are vested  in  a  civil  court  under  the  Code  of  Civil Procedure, 1908 (5 of 1908) while trying a suit  in respect of the following matters, namely:-

(a) summoning and enforcing the attendance of any person and examining him on oath; (b)  requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d)  subject  to  the provisions of  sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872),  requisitioning  any  public  record  or document  or  a  copy  of  such  record  or document from any office; (e) issuing commissions for the examination of witnesses or documents; (f)  dismissing  a  representation  for  default  or deciding it ex parte; (g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and (h) any other matter which may be prescribed.”

16

(emphasis supplied)

Pertinently,  the  Eleventh  Schedule  (Amendments  to  the

Companies Act, 2013) to the Code reads as follows:

“1. In Section 2,—

xxx xxx xxx

(b) after clause (94), the following clause shall be inserted, namely—

‘(94-A)  “winding  up”  means  winding  up under  this  Act  or  liquidation  under  the Insolvency and Bankruptcy Code, 2016, as applicable.’”

8.  It may also be noticed that under Section 434(1)(c) of the

Companies  Act,  all  proceedings  under  the  Companies  Act,

including the proceedings relating to winding up of companies,

pending immediately before such date, before any District Court

or High Court, shall stand transferred to the Tribunal and the

Tribunal may proceed to deal with such proceedings from the

stage before they are transferred. This Section is also important

in that it indicates that proceedings under the Companies Act

relating  to  arbitration,  compromise,  arrangements  and

reconstruction and winding up of companies, that were pending

17

before  the  District  Court  or  the  High  Court,  may  now  be

transferred to the Tribunal.  Each of  these proceedings would

directly  be  governed  by  the  Limitation  Act  as  they  are

proceedings before  Courts.  Obviously,  upon transfer  of  such

proceedings to the Tribunal, it  cannot be stated that because

these proceedings are now before the Tribunal, the Limitation

Act will cease to apply. Also, in fresh applications that are made

after the Code comes into force, it cannot be said that to such

applications, the Limitation Act will not apply, but to applications

that are transferred from the District Court or the High Court,

the  provisions  of  the  Limitation  Act  will  apply.  In  particular,

winding up proceedings pending before a High Court are liable

to be transferred to the NCLT for further decision by applying

the Code and not the Companies Act. This becomes clear on a

reading  of  Rule  5  of  the  Companies  (Transfer  of  Pending

Proceedings) Rules, 2016, which reads as follows:

“5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.—(1) All  petitions  relating  to  winding  up  of  a  company under clause (e) of section 433 of the Act5 on the

5 Rule  2(2)  of  the  Companies  (Transfer  of  Pending  Proceedings)  Rules,  2016  defines  the  “Act”  as meaning the Companies Act, 1956.

18

ground of inability to pay its debts pending before a High Court,  and,  where the petition  has not  been served  on  the  respondent  under  rule  26  of  the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub- section (4)  of  Section  419 of  the Companies Act, 2013 exercising territorial jurisdiction to be dealt with in accordance with Part ll of the Code:

Provided  that  the  petitioner  shall  submit  all information,  other  than information forming part  of the records transferred in  accordance with  rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details  of  the  proposed insolvency professional  to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated:

Provided further that any party or parties to the petitions shall,  after the 15th day of July,  2017, be eligible to file fresh applications under sections 7 or 8  or  9  of  the  Code,  as  the  case  may  be,  in accordance with the provisions of the Code:

Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal  under  this  rule  and  remains  in  the  High Court  and  where  there  is  another  petition  under clause (e) of section 433 of the Act for winding up against  the  same  company  pending  as  on  15th

December,  2016,  such  other  petition  shall  not  be transferred to the Tribunal, even if the petition has not been served on the respondent.”

9.  It is thus clear that Section 433 of the Companies Act, 2013

would apply to the Tribunal even when it decides applications

under Sections 7 and 9 of the Code.   

19

10. The matter can be viewed from a slightly different angle. In

National Sewing Thread Co. Ltd. v.  James Chadwick and

Bros. Ltd., 1953 SCR 1028, this Court dealt with an appeal to

the High Court from any decision of the Registrar under Section

76 of the Trade Marks Act.  It was argued that the provisions of

clause 15 of the Letters Patent would not be attracted to such

an appeal preferred under Section 76. This was negatived by

this Court stating:

“……The Trade Marks Act does not provide or lay down any procedure for the future conduct or career of that appeal in the High Court, indeed Section 77 of the Act provides that the High Court can if it likes make rules in the matter. Obviously after the appeal had reached the High Court it has to be determined according to the rules of practice and procedure of that Court and in accordance with the provisions of the charter under which that Court is constituted and which confers on it power in respect to the method and manner of exercising that jurisdiction. The rule is  well  settled that  when a statute  directs  that  an appeal shall lie to a Court already established, then that appeal must be regulated by the practice and procedure of that Court.  ……  

Though the facts of the cases laying down the above rule were not exactly similar to the facts of the present case, the principle enunciated therein is one of  general  application  and  has  an  apposite application  to  the  facts  and  circumstances  of  the present  case.  Section  76  of  the  Trade Marks  Act confers a right of appeal to the High Court and says

20

nothing more about it. That being so, the High Court being  seized  as  such  of  the  appellate  jurisdiction conferred  by  Section  76  it  has  to  exercise  that jurisdiction in the same manner as it  exercises its other  appellate  jurisdiction  and  when  such jurisdiction  is  exercised  by  a  Single  Judge,  his judgment becomes subject to appeal under clause 15 of the Letters Patent there being nothing to the contrary in the Trade Marks Act.”

(at 1033-1034)

11. Given the fact that the “procedure” that would apply to the

NCLT  would  be  the  procedure  contained  inter  alia in  the

Limitation Act, it is clear that the NCLT would have to decide

applications made to it under the Code in the same manner as

it exercises its other jurisdiction under the Companies Act. This

being the position in law, it is clear that when various provisions

of the Companies Act were amended by the Eleventh Schedule

to the Code, it  was unnecessary to apply and adapt Section

433 of the Companies Act to the Code, as was done to various

other Sections of the Companies Act.  

12. Coming to the next  argument  that,  in  any case,  Section

238A,  being  clarificatory  of  the  law and  being  procedural  in

nature, must be held to be retrospective, it is necessary to refer

21

to a few judgments of this Court. In M.P. Steel Corporation v.

CCE, (2015) 7 SCC 58, this Court held:

“54. It  is  settled  law  that  periods  of  limitation  are procedural in nature and would ordinarily be applied retrospectively. This, however, is subject to a rider. In  New  India  Insurance  Co.  Ltd. v.  Shanti  Misra [(1975) 2 SCC 840 : (1976) 2 SCR 266], this Court held: (SCC p. 844, para 5)

5. “On the plain language of Sections 110- A and 110-F there should be no difficulty in taking the view that the change in law was merely a change of forum i.e. a change of adjectival  or  procedural  law  and  not  of substantive  law.  It  is  a  well-established proposition  that  such  a  change  of  law operates  retrospectively  and  the  person has  to  go  to  the  new  forum  even  if  his cause of action or right of action accrued prior to the change of forum. He will have a vested right of action but not a vested right of  forum.  If  by  express  words  the  new forum is made available only to causes of action  arising  after  the  creation  of  the forum, then the retrospective operation of the  law  is  taken  away.  Otherwise  the general rule is to make it retrospective.”

55. In  answering  a  question  which  arose  under Section 110-A of the Motor Vehicles Act, this Court held: (Shanti Misra case [(1975) 2 SCC 840 : (1976) 2 SCR 266] , SCC p. 846, para 7)

7. “… ‘(1) Time for the purpose of filing the application  under  Section  110-A  did  not start running before the constitution of the tribunal.  Time had started running for  the filing of the suit  but before it  had expired

22

the  forum  was  changed.  And  for  the purpose of the changed forum, time could not  be  deemed  to  have  started  running before a remedy of going to the new forum is made available. (2)  Even though by and large the law of limitation has been held to be a procedural law, there are exceptions to this principle. Generally the law of limitation which is in vogue on the date of the commencement of  the  action  governs  it.  But  there  are certain  exceptions  to  this  principle.  The new  law  of  limitation  providing  a  longer period cannot  revive a dead remedy. Nor can it suddenly extinguish a vested right of action by providing for a shorter period of limitation.’”

(emphasis in original)

56. This statement of the law was referred to with approval  in  Vinod  Gurudas  Raikar v.  National Insurance Co. Ltd. [(1991) 4 SCC 333] as follows: (SCC p. 337, para 7)

7. “It is true that the appellant earlier could file  an  application  even  more  than  six months  after  the  expiry  of  the  period  of limitation, but can this be treated to be a right which the appellant had acquired. The answer  is  in  the  negative.  The  claim  to compensation  which  the  appellant  was entitled to, by reason of the accident was certainly enforceable as a right. So far the period of limitation for commencing a legal proceeding is concerned, it is adjectival in nature, and has to be governed by the new Act—subject to two conditions. If under the repealing Act the remedy suddenly stands barred  as  a  result  of  a  shorter  period  of limitation,  the  same  cannot  be  held  to

23

govern the case, otherwise the result  will be to deprive the suitor of an accrued right. The  second  exception  is  where  the  new enactment leaves the claimant with such a short  period  for  commencing  the  legal proceeding so as to make it unpractical for him to avail  of  the remedy. This principle has been followed by this  Court  in  many cases and by way of illustration we would like  to  mention  New India  Insurance  Co. Ltd. v.  Shanti  Misra [(1975) 2 SCC 840 : (1976)  2  SCR 266].  The  husband  of  the respondent in that case died in an accident in  1966.  A  period  of  two  years  was available to the respondent for instituting a suit  for  recovery  of  damages.  In  March 1967  the  Claims  Tribunal  under  Section 110 of  the Motor  Vehicles Act,  1939 was constituted,  barring  the  jurisdiction  of  the civil  court  and prescribed 60 days as the period  of  limitation.  The  respondent  filed the  application  in  July  1967.  It  was  held that  not  having  filed  a  suit  before  March 1967  the  only  remedy  of  the  respondent was by  way of  an  application  before  the Tribunal. So far the period of limitation was concerned, it was observed that a new law of limitation providing for a shorter period cannot certainly extinguish a vested right of action. In view of the change of the law it was held that the application could be filed within  a  reasonable  time  after  the constitution of  the  Tribunal;  and,  that  the time  of  about  four  months  taken  by  the respondent  in  approaching  the  Tribunal after  its  constitution,  could  be held  to  be either  reasonable  time  or  the  delay  of about  two  months  could  be  condoned under the proviso to Section 110-A(3).”

24

Both these judgments were referred to and followed in  Union of  India v. Harnam Singh [(1993)  2 SCC 162  :  1993  SCC  (L&S)  375  :  (1993)  24  ATC 92], see para 12.

57. The  aforesaid  principle  is  also  contained  in Section 30(a) of the Limitation Act, 1963:

30. “Provision for suits,  etc.,  for which the  prescribed  period  is  shorter  than the  period  prescribed  by  the  Indian Limitation  Act,  1908.—Notwithstanding anything contained in this Act—

(a) any suit for which the period of limitation  is  shorter  than  the period of  limitation prescribed by the  Indian  Limitation  Act,  1908, may be instituted within a period of  seven  years  next  after  the commencement  of  this  Act  or within  the  period  prescribed  for such suit by the Indian Limitation Act,  1908,  whichever  period expires earlier.”

58. The reason for  the said  principle  is  not  far  to seek. Though periods of limitation, being procedural law, are to be applied retrospectively, yet if a shorter period of limitation is provided by a later amendment to a statute,  such period would render  the vested right of action contained in the statute nugatory as such right of action would now become time-barred under the amended provision.

59. This aspect of the matter is brought out rather well in  Thirumalai Chemicals Ltd. v.  Union of India [(2011) 6 SCC 739 :  (2011) 3 SCC (Civ)  458] as follows: (SCC pp. 748-49, paras 22-26)

22. “Law is well settled that the manner in which the appeal has to be filed, its form and the period within which the same has

25

to be filed are matters of procedure, while the  right  conferred  on  a  party  to  file  an appeal is a substantive right. The question is,  while  dealing  with  a  belated  appeal under  Section  19(2)  of  FEMA,  the application for condonation of delay has to be dealt with under the first proviso to sub- section (2) of Section 52 of FERA or under the proviso to sub-section (2) of Section 19 of FEMA. For answering that question it is necessary to examine the law on the point. Substantive and procedural law 23. Substantive  law  refers  to  a  body  of rules  that  creates,  defines  and  regulates rights and liabilities.  Right  conferred on a party to prefer an appeal against an order is a substantive right conferred by a statute which  remains  unaffected  by  subsequent changes in law, unless modified expressly or by necessary implication. Procedural law establishes  a  mechanism for  determining those rights and liabilities and a machinery for enforcing them. Right of appeal being a substantive right always acts prospectively. It  is  trite  law  that  every  statute  is prospective  unless  it  is  expressly  or  by necessary  implication  made  to  have retrospective operation. 24. Right of appeal may be a substantive right but the procedure for filing the appeal including the period of limitation cannot be called  a  substantive  right,  and  an aggrieved person cannot claim any vested right claiming that he should be governed by the old provision pertaining to period of limitation.  Procedural  law  is  retrospective meaning thereby that it  will apply even to

26

acts  or  transactions  under  the  repealed Act. 25. Law  on  the  subject  has  also  been elaborately  dealt  with  by  this  Court  in various  decisions  and  reference  may  be made  to  a  few  of  those  decisions.  This Court in  Garikapati Veeraya v.  N. Subbiah Choudhry [AIR 1957 SC 540],  New India Insurance Co. Ltd. v.  Shanti Misra [(1975) 2 SCC 840 : (1976) 2 SCR 266], Hitendra Vishnu  Thakur v.  State  of  Maharashtra [(1994) 4 SCC 602 : 1994 SCC (Cri) 1087], Chintamani Saran Nath Shahdeo v.  State of  Bihar [(1999)  8  SCC  16]  and  Shyam Sunder v.  Ram Kumar [(2001) 8 SCC 24], has elaborately  discussed the scope and ambit  of  an  amending  legislation  and  its retrospectivity  and held  that  every litigant has a vested right in substantive law but no such  right  exists  in  procedural  law.  This Court  has  held  that  the  law  relating  to forum and limitation is procedural in nature whereas  law  relating  to  right  of  appeal even  though  remedial  is  substantive  in nature. 26. Therefore,  unless  the  language  used plainly  manifests  in  express  terms  or  by necessary implication a contrary intention a statute  divesting  vested  rights  is  to  be construed as prospective, a statute merely procedural  is  to  be  construed  as retrospective  and  a  statute  which  while procedural  in  its  character,  affects vested rights  adversely  is  to  be  construed  as prospective.”

60. This judgment was strongly relied upon by Shri A.K. Sanghi for the proposition that the law in force on  the  date  of  the  institution  of  an  appeal,

27

irrespective of the date of accrual of the cause of action for filing an appeal, will govern the period of limitation. Ordinarily, this may well be the case. As has been noticed above, periods of limitation being procedural in nature would apply retrospectively. On the facts in the judgment in Thirumalai case [(2011) 6 SCC 739 : (2011) 3 SCC (Civ) 458], it was held that the repealed provision contained in the Foreign Exchange Regulation Act, namely, Section 52 would not  apply  to  an  appeal  filed  long  after  1-6-2000 when the Foreign Exchange Management Act came into  force,  repealing  the  Foreign  Exchange Regulation Act. It is significant to note that Section 52(2)  of  the  repealed  Act  provided  a  period  of limitation of 45 plus 45 days and no more whereas Section 19(2) of FEMA provided for 45 days with no cap thereafter provided sufficient cause to condone delay is shown. On facts, in that case, the appeal was held to be properly instituted under Section 19, which  as  has  been  stated  earlier,  had  no  cap  to condonation of delay. It was, therefore, held that the Appellate Tribunal in that  case could entertain the appeal even after the period of 90 days had expired provided  sufficient  cause  for  the  delay  was made out.”

A perusal  of  this  judgment  would  show that  limitation,  being

procedural in nature, would ordinarily be applied retrospectively,

save and except that the new law of limitation cannot revive a

dead remedy.  This  was said  in  the context  of  a  new law of

limitation providing for a longer period of limitation than what

was provided earlier. In the present case, these observations

28

are apposite in view of what has been held by the Appellate

Tribunal. An application that is filed in 2016 or 2017, after the

Code has come into force, cannot suddenly revive a debt which

is no longer due as it is time-barred.  

13. In  State of Kerala v. V.R. Kalliyanikutty, (1999) 3 SCC

657,  (“V.R.  Kalliyanikutty”),  this  Court  dealt  with  whether  a

time-barred  debt  can  be  recovered  by  resorting  to  recovery

proceedings under the Kerala Revenue Recovery Act of 1968.

In stating that the said Act cannot extend to recovery of a time-

barred debt, this Court stated in paragraph 8,

“8. …… In  every  case  the  exact  meaning  of  the word “due”  will  depend upon the context  in  which that word appears.”

It  was  held  in  that  case  that  Section  17(3)  of  the  Kerala

Revenue  Recovery  Act,  1968  made  it  clear  that  a  person

making payment under protest will have a right to institute a suit

for refund of the whole or part of the sum paid by him under

protest. It was thus held that when the right to file such a suit is

expressly preserved, there is a necessary implication that the

shield  of  limitation  available  to  a  debtor  in  a  suit  is  also

29

preserved,  as  a  result  of  which,  a  wide  interpretation of  the

expression  “amount  due”  to  include time-barred debts  would

destroy an important  defence available  to  a  debtor  in  a  suit

against him by the creditor, and may fall foul of Article 14 of the

Constitution of India.   

14. Another  judgment  referred to by learned counsel  for  the

appellants is contained in Union of India v. Uttam Steels Ltd.,

(2015) 13 SCC 209. Here the question was whether Section

11-B  of  the  Central  Excise  Act  as  amended  on  12.05.2000

would  apply  to  the  fact  situation  in  that  case.  Section  11-B

provided  a  longer  period  of  limitation  by  substituting  “six

months” with “one year”. Since the rebate application was filed

within a period of one year, the respondent contended that they

were  within  time.  This  Court  held,  in  paragraph  10,  that

limitation,  being  procedural  law,  would  ordinarily  be

retrospective  in  nature.  This  is  however  with  one  proviso

superadded, which is that the claim made under the amended

provision should not itself have been a dead claim in the sense

that  it  was  time-barred  before  the  amending  Act  came  into

30

force, bringing a larger period of limitation with it. On the facts

of  that case, it  was held that since the claim for rebate was

made beyond the period of six months but within the extended

period of one year, such extended period would not avail the

respondent in that case.  

15. In  Allied Motors (P) Ltd. v. CIT, (1997) 3 SCC 472, this

Court took the view that the amendment made to Section 43-B

in the Income Tax Act was retrospective, holding:

“14. ……  As  observed  by  G.P.  Singh  in  his Principles of Statutory Interpretation,  4th Edn. at p. 291: “It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation  is  generally  intended.”  In  fact  the amendment  would  not  serve  its  object  in  such  a situation unless it is construed as retrospective……”

In  the  present  case  also,  it  is  clear  that  the  amendment  of

Section 238A would not serve its object unless it is construed

as  being  retrospective,  as  otherwise,  applications  seeking to

resurrect  time-barred  claims  would  have  to  be  allowed,  not

being governed by the law of limitation.  

31

16. We may also refer to a recent decision of this Court in SBI

v. V. Ramakrishnan,  (2018) SCC Online SC 963, where this

Court, after referring to the selfsame Insolvency Law Committee

Report,  held that  the amendment made to Section 14 of  the

Code, in which the moratorium prescribed by Section 14 was

held not to apply to guarantors, was held to be clarificatory, and

therefore,  retrospective  in  nature,  the  object  being  that  an

overbroad interpretation of Section 14 ought to be set at rest by

clarifying that this was never the intention of Section 14 from

the very inception.  

17. We  now come  to  some  of  the  judgments  cited  by  Shri

Dholakia. In State of Jharkhand v. Shivam Coke Industries,

(2011) 8 SCC 656, this Court, in construing Section 46(4) of the

Bihar Finance Act, 1981, held that the Limitation Act could not

be read into the exercise of a suo motu power of revision. This

was for the reason that the Limitation Act applies to courts and

not to quasi-judicial bodies. In so holding, the Court went on to

hold:

“46. We would, however, agree with the position that such a power cannot be exercised by the revisional

32

authority indefinitely. In our considered opinion, such extraordinary power i.e. suo motu power of initiation of revisional proceeding has to be exercised within a reasonable period of time and what is a reasonable period  of  time  would  depend  on  the  facts  and circumstances of each case. For this proposition, a number of decisions of this Court can be referred to on which reliance was placed even by the counsel appearing for the respondent.”

This judgment has no direct bearing on the controversy before

us except that even where the Limitation Act was held not to

apply, the power of the revisional authority cannot be exercised

at any point of time but had to be exercised within a reasonable

period,  otherwise,  it  would  be  barred  by  a  doctrine  akin  to

limitation, namely, delay.  

18. Learned counsel for the respondents then referred to and

relied  upon  Bombay  Dyeing  &  Mfg.  Co.  Ltd.  v.  State  of

Bombay, 1958 SCR 1122 (“Bombay Dyeing”).  In this case,

the  Court  was  concerned  with  the  Bombay  Labour  Welfare

Fund Act in which the well-known distinction between the loss

of a right and the loss of a remedy was reiterated thus:

“It  will  be  observed  that  the  definition  of  “unpaid accumulations” takes in only payments due to the employees remaining unpaid within a period of three

33

years after they become due. The intention of the Legislature  obviously  was  that  claims  of  the employees which are within time should be left to be enforced by them in the ordinary course of law, and that  it  is  only when they become time-barred and useless to them that the State should step in and take  them  over.  On  this,  the  question  arises  for consideration whether a debt which is time-barred can be the subject of transfer, and if it can be, how it can benefit the Board to take it over if it cannot be realised by process of law. Now, it is the settled law of this country that the statute of Limitation only bars the  remedy  but  does  not  extinguish  the  debt. Section 28 of the Limitation Act provides that when the period limited to a person for instituting a suit for possession of any property has expired, his right to such  property  is  extinguished.  And  the  authorities have held — and rightly, that when the property is incapable of possession, as for example, a debt, the section has no application, and lapse of time does not extinguish the right of a person thereto. Under Section 25(3) of the Contract Act, a barred debt is good consideration for  a fresh promise to pay the amount. When a debtor makes a payment without any direction as to how it is to be appropriated, the creditor  has  the  right  to  appropriate  it  towards  a barred debt. (Vide Section 60 of the Contract Act). It has  also  been  held  that  a  creditor  is  entitled  to recover the debt from the surety, even though a suit on  it  is  barred  against  the  principal  debtor.  Vide Mahant  Singh v.  U  Ba  Yi [(1939)  LR  66  IA 198], Subramania Aiyar v.  Gopala Aiyar [(1910) ILR 33 Mad 308] and  Dil Muhammad v. Sain Das [AIR 1927 Lah 396]. And when a creditor has a lien over goods by way of security for a loan, he can enforce the lien for obtaining satisfaction of the debt, even though an action thereon would be time-barred. Vide

34

Narendra Lal Khan v.  Tarubala Dasi [(1921) ILR 48 Cal 817, 823]. ……”6

(at 1134-1135)

Section  25(3)  of  the  Contract  Act  was  referred  to  by  this

judgment.  This  Section  is  based  on  the  fact  that  under  the

Indian Contract Act, 1872, “consideration” is defined in Section

2(d) as including past consideration, a notion that was unknown

to English law. This doctrine came from Field’s Draft Civil Code,

1862,7 which was one of the sources for the enactment of the

Indian  Contract  Act,  1872.  Section  572  of  Field’s  Draft  Civil

Code reads as follows:

“§ 572. An existing legal or moral obligation resting upon the promiser, is also a good consideration for a promise, to an extent corresponding with the extent of the obligation, but no further or otherwise.”8

6 Similarly, in Punjab National Bank v. S. Sinha, 1993 Supp (1) SCC 499, this Court reiterated the well- known difference between the right to recover a debt remaining even though the remedy to do so may be barred by the law of limitation (see paragraph 5).

7 DRAFT OF A CIVIL CODE FOR THE STATE OF NEW YORK, PREPARED BY THE COMMISSIONERS OF THE CODE, AND SUBMITTED TO THE JUDGES AND OTHERS FOR EXAMINATION, PRIOR TO REVISION BY THE COMMISSIONERS (Weed, Parsons and Company Printers 1862) [“Field’s Draft Civil Code”]. 8 David Dudley Field Jr., the draftsman of the Draft Civil Code for the State of New York, was one of three celebrated brothers. Stephen Field, one of the brothers, was the second-longest serving Justice of the U.S. Supreme Court, having served for over 34 years. He was the only Justice to have been appointed as the tenth sitting Justice of the U.S. Supreme Court by President Lincoln. Another brother, Cyrus Field, was famous for connecting two continents by laying the Atlantic Cable, after several failed attempts, in 1866, and was immortalized in Stefan Zweig’s ‘The Tide of Fortune’.

35

19. Shri Dholakia also referred to and relied upon Section 60

and 61 of the Contract Act which are set out hereunder:

“60.  Application  of  payment  where  debt  to  be discharged  is  not  indicated.—Where  the  debtor has  omitted  to  intimate,  and  there  are  no  other circumstances indicating to which debt the payment is  to  be  applied,  the  creditor  may  apply  it  at  his discretion  to  any  lawful  debt  actually  due  and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

61. Application of payment where neither party appropriates.—Where  neither  party  makes  any appropriation  the  payment  shall  be  applied  in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal  standing,  the  payment  shall  be  applied  in discharge of each proportionably.”

These Sections also recognize the fact that limitation bars the

remedy but  not  the right.  In  the context  in which Section 60

appears, it is interesting to note that Section 60 uses the phrase

“actually due and payable to him….” whether its recovery is or

is  not  barred by the limitation law.  The expression “actually”

makes it  clear  that  in  fact  a  debt  must  be due and payable

notwithstanding the law of limitation. From this, it is very difficult

to infer that in the context of the Contract Act, the expression

36

“due and payable” by itself would connote an amount that may

be due even though it is time-barred, for otherwise, it would be

unnecessary  for  Section  60  to  contain  the  word  “actually”

together with the later words, “whether its recovery is or is not

barred by the law in force for the time being as to the limitation

of suits”.  

20.  Shri  Dholakia  went  on  to  cite  Bhimsen  Gupta  v.

Bishwanath Prasad Gupta,  (2004) 4 SCC 95, and  In re Sir

Harilal  Nemchand  Gosalia,  AIR  1950  Bom  74  for  the

proposition that debts “due and payable” must be differentiated

from debts “due and recoverable”.  

In  the  former  case,  Section  11(1)(d)  of  the  Bihar  Buildings

(Lease,  Rent  and  Eviction)  Control  Act,  1982  provided  for

eviction  of  a  tenant  where  the  amount  of  two  months’  rent

“lawfully  payable  by  the  tenant  and  due  from  him”  was  in

arrears. This Court followed  Bombay Dyeing (supra), stating

as follows:

“6. Section  11  of  the  said  Act,  1982  deals  with eviction  of  tenants.  It  begins  with  non  obstante clause.  It  states  that  notwithstanding  anything

37

contained in any contract or law to the contrary, no tenant  shall  be  liable  to  be  evicted  except  in execution of a decree passed by the court on one or more of the grounds mentioned in Sections 11(1)(a) to (f). In this case we are concerned with the ground of  default  which  falls  under  Section  11(1)(d)  and which states that where the amount of two months’ rent,  lawfully  payable by the tenant  and due from him is in arrears by reason of non-payment within the time fixed by the contract or in the absence of such  contract  by  the  last  day  of  the  month  next following that  for  which rent  is  payable then such default  would  constitute  ground  for  eviction.  It  is interesting  to  note  that  the  expression  used  in Section  11(1)(d)  is  “lawfully  payable”  and  not “lawfully  recoverable”  and therefore,  Section 11(1) (d) has nothing to do with recovery of arrears of rent. On the contrary, Section 11(1)(d) provides a ground for eviction of the tenant in the eviction suit. It is well settled that law of limitation bars the remedy of the claimant to recover the rent for the period beyond three years prior to the institution of the suit, but that cannot be a ground for defeating the claim of  the landlord for decree of eviction on satisfaction of the ingredients of Section 11(1)(d) of the said Act, 1982. In the case of  Bombay Dyeing & Mfg.  Co. Ltd. v. State  of  Bombay  [AIR 1958 SC 328]  it  has been held that  when the debt  becomes time-barred the amount  is  not  recoverable  lawfully  through  the process of  the court,  but  it  will  not  mean that  the amount has become not lawfully payable. Law does not bar a debtor to pay nor a creditor to accept a barred debt.”

It  is  clear  that  this  judgment  will  have  no  application  to  the

present  case  as  Section  11(1)(d)  had  nothing  to  do  with

38

recovery of arrears of rent, but furnished a ground for evicting

the tenant, this being the context in which the words “lawfully

payable by the tenant and due from him” had been used. This

Court correctly held that the right to evict the tenant cannot be

affected  as  the  law  of  limitation  has  reference  only  to  the

remedy of recovery of arrears of rent, and such law cannot be

held to stand in the way of the right to evict the tenant.

Similarly,  in  Sir  Harilal  Nemchand  Gosalia (supra),  the

expression used is “amount of debts due and owing from the

deceased, payable by law out of the estate” which appeared in

the third schedule of the Court Fee Act, 1870. It was held that

an executor of a will  is entitled to pay time-barred debts and

cannot be confused with a creditor who may sue the executor in

relation  to  those  debts.  The  creditor  would  fail  in  his  action

because  although  the  debt  subsists,  the  remedy  has  been

extinguished due to the law of limitation. Since the executor is

duty bound to pay the amounts due and owing under the will

without going to Court, he is entitled to pay a time-barred debt.

This,  the  Court  held,  is  made  clear  by  Section  323  of  the

39

Succession  Act,  1925,  which  made  no  exception  in  case  of

time-barred debts. It is in this context that the Court noted the

difference between “payable” and “recoverable”.

21. It is important to remember that interpretation is the art of

matching the text with the context. In a slightly different context,

under Section 86 of the Electricity Act, this Court, in  Andhra

Pradesh Power Coordination Committee and Ors. v. Lanco

Kondapalli Power Ltd. and Ors., (2016) 3 SCC 468, refused

to apply the principle of these cases stating:

“30. …… In  the  absence  of  any  provision  in  the Electricity Act creating a new right upon a claimant to claim even monies barred by law of limitation, or taking away a right of the other side to take a lawful defence of limitation, we are persuaded to hold that in the light of nature of judicial power conferred on the  Commission,  claims  coming  for  adjudication before  it  cannot  be  entertained  or  allowed  if  it  is found legally not recoverable in a regular suit or any other  regular  proceeding  such  as  arbitration,  on account of law of limitation. We have taken this view not only because it appears to be more just but also because  unlike  labour  laws  and  the  Industrial Disputes  Act,  the  Electricity  Act  has  no  peculiar philosophy or inherent underlying reasons requiring adherence to a contrary view.

31. We  have  taken  the  aforesaid  view  to  avoid injustice as well as the possibility of discrimination. We have already extracted a part of para 11 of the

40

judgment  in  State  of  Kerala v.  V.R.  Kalliyanikutty [State of Kerala v. V.R. Kalliyanikutty, (1999) 3 SCC 657] wherein the Court considered the matter also in the light of Article 14 of the Constitution. In that case the possibility  of  Article 14 being attracted against the  statute  was  highlighted  to  justify  a  particular interpretation as already noted. It was also observed that  it  would  be  ironic  if  in  the  name  of  speedy recovery contemplated by the statute, a creditor is enabled  to  recover  claims  beyond  the  period  of limitation. In this context, it would be fair to infer that the  special  adjudicatory  role  envisaged  under Section  86(1)(f)  also  appears  to  be  for  speedy resolution  so  that  a  vital  developmental  factor  — electricity and its supply is not adversely affected by delay in adjudication of even ordinary civil disputes by the civil court.  Evidently, in the absence of any reason  or  justification  the  legislature  did  not contemplate to enable a creditor who has allowed the  period  of  limitation  to  set  in,  to  recover  such delayed claims through the Commission. Hence we hold  that  a  claim  coming  before  the  Commission cannot be entertained or allowed if  it  is  barred by limitation prescribed for an ordinary suit before the civil court. ……”

(emphasis supplied)

This case is most apposite.  As in the present case, and as is

reflected in  the Insolvency Law Committee Report  of  March,

2018,  the legislature  did not  contemplate  enabling a  creditor

who has allowed the period of limitation to set in to allow such

delayed claims through the mechanism of the Code. The Code

cannot be triggered in the year 2017 for a debt which was time-

41

barred,  say,  in  1990,  as  that  would  lead  to  the  absurd  and

extreme consequence of the Code being triggered by a stale or

dead  claim,  leading  to  the  drastic  consequence  of  instant

removal  of  the  present  Board  of  Directors  of  the  corporate

debtor permanently, and which may ultimately lead to liquidation

and,  therefore,  corporate  death.  This  being  the  case,  the

expression  “debt  due”  in  the  definition  sections  of  the  Code

would obviously only refer to debts that are “due and payable”

in law, i.e., the debts that are not time-barred. That this is the

case  has  already  been  held  by  us  in  the  Innoventive

Industries Ltd. (supra) as follows:

“28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor — it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the  application  is  made  by  a  financial  creditor  in Form  1  accompanied  by  documents  and  records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars  of  the  corporate  debtor  in  Part  II, particulars  of  the  proposed  interim  resolution

42

professional  in  Part  III,  particulars  of  the  financial debt  in  Part  IV  and  documents,  records  and evidence of default in Part V. Under Rule 4(3), the applicant  is  to  dispatch  a  copy  of  the  application filed  with  the  adjudicating  authority  by  registered post  or  speed post  to  the  registered  office  of  the corporate  debtor.  The  speed,  within  which  the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be  satisfied  that  a  default  has  occurred,  that  the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment  the adjudicating authority  is  satisfied that a default has occurred, the application must be admitted  unless  it  is  incomplete,  in  which  case  it may give notice to the applicant to rectify the defect within  7  days  of  receipt  of  a  notice  from  the adjudicating  authority.  Under  sub-section  (7),  the adjudicating  authority  shall  then  communicate  the order passed to the financial creditor and corporate debtor  within  7  days  of  admission  or  rejection  of such application, as the case may be.”

(emphasis supplied)

xxx xxx xxx

“30. On the  other  hand,  as  we have seen,  in  the case of a corporate debtor who commits a default of a  financial  debt,  the  adjudicating  authority  has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt

43

is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it  is payable at some future date. It is only when this is proved  to  the  satisfaction  of  the  adjudicating authority that  the adjudicating authority may reject an application and not otherwise.”

(emphasis supplied)

22.  We  have  already  seen  from  the  judgment  in V.R.

Kalliyanikutty  (supra),  that  the expression “due” will  depend

upon the context in which that word appears. It  will  be seen

from a reading of the definition of “debt” in Section 3(11) of the

Code,  that  “debt”  is  said  to  mean  a  liability  or  obligation  in

respect of a claim which is “due” from any person, and includes

a  financial  debt  and  an  operational  debt.  “Financial  debt”  is

defined in Section 5(8) as follows:

“5.  Definitions.—In  this  Part,  unless  the  context otherwise requires,—

xxx xxx xxx

(8) “financial debt” means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes—

(a)  money borrowed against  the payment of interest; (b)  any  amount  raised  by  acceptance under any acceptance credit  facility  or its de-materialised equivalent;

44

(c) any amount raised pursuant to any note purchase  facility  or  the  issue  of  bonds, notes,  debentures,  loan  stock  or  any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is  deemed  as  a  finance  or  capital  lease under the Indian Accounting Standards or such  other  accounting  standards  as  may be prescribed; (e)  receivables  sold  or  discounted  other than any receivables sold on non-recourse basis; (f)  any  amount  raised  under  any  other transaction,  including any forward sale or purchase  agreement,  having  the commercial effect of a borrowing; Explanation.—For the purposes of this sub- clause,—

(i) any amount raised from an allottee under  a  real  estate  project  shall  be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, “allottee” and “real estate  project”  shall  have  the meanings  respectively  assigned  to them in clauses (d) and (zn) of Section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);

(g) any derivative transaction entered into in  connection  with  protection  against  or benefit from fluctuation in any rate or price and  for  calculating  the  value  of  any derivative  transaction,  only  the  market value  of  such  transaction  shall  be  taken into account; (h)  any  counter-indemnity  obligation  in respect  of  a  guarantee,  indemnity,  bond, documentary  letter  of  credit  or  any  other

45

instrument  issued  by  a  bank  or  financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;”

Operational debt is defined in Section 5(21) as follows:

“5.  Definitions.—In  this  Part,  unless  the  context otherwise requires,—

xxx xxx xxx

(21) “operational debt” means a claim in respect of the  provision  of  goods  or  services  including employment or a debt in respect of the payment of dues  arising  under  any  law for  the  time  being  in force and payable to the Central Government, any State Government or any local authority;”

The definition of “default” in Section 3(12) uses the expression

“due and payable” followed by the expression “and is not paid

by the debtor or the corporate debtor……”. “Due and payable”

in Section 3(12), therefore, only refers to the whole or part of a

debt,  which when referring to the date  on which it  becomes

“due and payable”, is not in fact paid by the corporate debtor.

The context of this provision is therefore actual non-payment by

the  corporate  debtor  when  a  debt  has  become  due  and

payable.  

46

23. Section 7 applies to a financial  creditor  who may file  an

application  for  initiating  a  corporate  insolvency  resolution

process  against  a  corporate  debtor  when  a  “default”  has

occurred. The same expression is used when it comes to an

operational creditor, who may on the occurrence of a “default”

under  Section  8,  deliver  a  demand  notice  as  may  be

prescribed. What throws considerable light on the expression

“default” is Section 8(2)(a) which reads as follows:

“8. Insolvency resolution by operational creditor. —  

xxx xxx xxx

(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor—

(a)  existence of a dispute, if  any,  or record of the  pendency  of  the  suit  or  arbitration proceedings  filed  before  the  receipt  of  such notice or invoice in relation to such dispute;”

It  will  be  seen  from  a  reading  of  Section  8(2)(a)  that  the

corporate debtor shall, within a period of 10 days of the receipt

of  the  demand notice,  bring  to  the  notice  of  the  operational

creditor  the  existence  of  a  “dispute”.  We  have  seen  that

47

“dispute” as defined in Section 5(6) includes a suit or arbitration

proceeding  relating  to  certain  matters.  Again,  under  Section

8(2)(a),  the corporate debtor may, in the alternative, disclose

the pendency of a suit or arbitration proceedings filed before

the receipt of the demand notice. It is clear therefore, that at

least in the case of an operational creditor, “default” must be

non-payment of amounts that have become due and payable in

law.  The  “dispute”  or  pendency  of  a  suit  or  arbitration

proceedings would necessarily bring in the Limitation Act, for if

a suit or arbitration proceeding is time-barred, it would be liable

to be dismissed. This again is an important pointer to the fact

that when the expression “due” and “due and payable” occur in

Sections 3(11) and 3(12) of the Code, they refer to a “default”

which is non-payment of a debt that is due in law, i.e., that such

debt is not barred by the law of limitation. It is well settled that

where the same word occurs in a similar context, the draftsman

of the statute intends that the word bears the same meaning

throughout the statute (see Bhogilal Chunilal Pandya v. State

of Bombay,  1959 Supp. (1) SCR 310 at 313-314). It  is thus

clear that the expression “default” bears the same meaning in

48

Sections 7 and 8 of the Code, making it clear that the corporate

insolvency resolution process against  a corporate debtor can

only be initiated either by a financial or operational creditor in

relation to debts which have not become time-barred.  

24.  Strong reliance was placed by Shri Dholakia on France

B. Martins v. Mafalda Maria Teresa Rodrigues, (1999) 6 SCC

627,  by  which  Section  24A was  inserted  in  the  Consumer

Protection  Act,  1986  by  a  1993  amendment,  making  the

provisions  of  the  Limitation  Act  applicable  to  the  Consumer

Protection Act. In turning down the plea that Section 24A would

cover the period from 1986 to 1993, this Court  held that  the

legislature in its wisdom thought it appropriate not to prescribe a

period of limitation for proceedings under the Act as the object

of  that  Act  was  for  the  better  protection  of  the  interest  of

consumers.  The  Court,  therefore,  held  that  the  addition  of

Section 24A in the Act shows that initially, the legislature did not

intend to prescribe any period of limitation for filing complaints

under the Act as it would stultify the beneficent social legislation

contained therein. This case is again wholly distinguishable in

49

that  the  Court  found  that  the  Consumer  Protection  Act  is  a

beneficial social legislation, whose object was not to apply the

Limitation Act when it was first enacted. On the contrary, in the

present  case,  we  find  that  the  object  of  the  Code  was

subserved by applying Section 433 of the Companies Act from

the  very  inception  of  the  Code.  Also,  the  Insolvency  Law

Committee Report of March, 2018 makes it clear that the object

of the Code from the very beginning was not to allow dead or

stale claims to be resuscitated. In this view of the matter, we are

afraid that this judgment also would have no bearing.  

25. The chart handed up by Shri Dholakia, in which he wished

to demonstrate that various tribunals under different Acts either

apply  or  do  not  apply  the  Limitation  Act,  again  leads  us

nowhere.  Depending  upon  the  intention  of  the  legislature  in

each  of  the  enactments  mentioned  in  the  chart,  either  the

legislature thought it fit to apply the Limitation Act, or it did not,

depending upon the subject matter of the Act in question. We

have held that at least insofar as the Code is concerned, the

intention  of  the  legislature,  from  the  very  beginning,  was  to

50

apply  the  Limitation  Act  to  the  NCLT and  the  NCLAT while

deciding applications filed under Sections 7 and 9 of the Code

and  appeals  therefrom.  Section  433  of  the  Companies  Act,

which  applies  to  the  Tribunal  and  the  Appellate  Tribunal,

expressly applies the Limitation Act to the Appellate Tribunal,

the NCLAT, as well. Also, the argument that the NCLAT is an

appellate tribunal which is common to three statutes, under one

of which,  viz., the Competition Act, no period of limitation has

been prescribed,  would not  lead to any anomalous situation.

When the Appellate Tribunal, i.e., the NCLAT decides an appeal

under the Competition Act, since an appeal is a continuation of

the application filed before the Competition Commission (See

Lachmeshwar  Prasad  Shukul  and  Ors.  v.  Keshwar  Lal

Chaudhuri and Ors., AIR 1941 FC 5), the NCLAT will decide

the appeal on the footing that the Limitation Act did not apply to

an application made before the Competition Commission. On

the other hand, insofar as applications are filed under Section 7

or  9 of  the Code,  or  petitions or  applications filed under  the

Companies  Act,  the  NCLAT  will  decide  such

petitions/applications on the footing that the Limitation Act will

51

apply  to  such  petitions/applications.  Merely  because appeals

under different statutes are sent to one appellate tribunal would

make no difference to the position in law. Undoubtedly, if three

separate  appellate  tribunals  had  been  constituted  under  the

three enactments in question, this argument would have no legs

to  stand  on.  Merely  because,  from  the  point  of  view  of

convenience,  appeals  are  filed  before  one  appellate  forum

would not mean that any anomalous situation would arise as

each appeal would be decided keeping in mind the provisions of

the  particular  Act  in  question.  Therefore,  this  argument  also

must be rejected.    

26. Shri  Dholakia  argued  that  the  Code being  complete  in

itself, an intruder such as the Limitation Act must be shut out

also by application of Section 238 of the Code which provides

that, “notwithstanding anything inconsistent therewith contained

in any other law for the time being in force”, the provisions of

the Code would override such laws. In fact, Section 60(6) of the

Code specifically states as follows:

“60.  Adjudicating  Authority  for  corporate persons.—

52

xxx xxx xxx

(6)  Notwithstanding  anything  contained  in  the Limitation Act, 1963 (36 of 1963) or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against  a  corporate  debtor  for  which  an  order  of moratorium  has  been  made  under  this  Part,  the period  during  which  such  moratorium  is  in  place shall be excluded.”

This  provision  would  have  been  wholly  unnecessary  if  the

Limitation Act was otherwise excluded either by reason of the

Code being complete in itself or by virtue of Section 238 of the

Code.  Both,  Section  433  of  the  Companies  Act  as  well  as

Section 238A of the Code, apply the provisions of the Limitation

Act “as far as may be”. Obviously, therefore, where periods of

limitation have been laid down in the Code, these periods will

apply notwithstanding anything to the contrary contained in the

Limitation Act. From this, it does not follow that the baby must

be  thrown  out  with  the  bathwater.  This  argument,  therefore,

must also be rejected.  

27. It is thus clear that since the Limitation Act is applicable to

applications filed under Sections 7 and 9 of the Code from the

inception  of  the  Code,  Article  137  of  the  Limitation  Act  gets

53

attracted. “The right to sue”, therefore, accrues when a default

occurs. If the default has occurred over three years prior to the

date of filing of the application, the application would be barred

under Article 137 of the Limitation Act, save and except in those

cases where, in the facts of the case, Section 5 of the Limitation

Act  may  be  applied  to  condone  the  delay  in  filing  such

application.

28.  In view of our finding that the Limitation Act has in fact

been applied from the inception of the Code, it is unnecessary

for us to go into the arguments based on the doctrine of laches.

The appeals are therefore remanded to the NCLAT to decide

the appeals afresh in the light of this judgment.

…………………………..J. (R.F. Nariman)

…………………………..J. (Navin Sinha)

New Delhi; October 11, 2018.  

54