Ceasefire Industries Pvt. Ltd vs Cambay Sez Hotels Limited

IN THE MATTER OF: Ceasefire Industries Pvt. Ltd. ...Appellant

Versus Cambay SEZ Hotels Ltd. ...Respondent

Present: For Appellant: Mr. Mohit Gupta, Advocate For Respondent: None

ORDER

(Virtual Mode)

04.07.2022: This Appeal is directed against the order dated

25.09.2020 passed by the Adjudicating Authority (National Company Law

Tribunal, Ahmedabad Bench, Ahmedabad, Court - 2) in I.A. No. 626 of

2020, dismissing an application filed by the Applicant/Operational Creditor

under Section 5 of the Limitation Act, 1963 (in short 'Act') for seeking

condonation of delay of 358 days in filing of the application and also to set

aside the consequential order passed separately on 04.12.2020 dismissing

the application filed under Section 9 of the Insolvency and Bankruptcy

Code, 2016 (in short 'Code') bearing CP (IB) No. 228/NCLT/AHM/2018.

2. In brief, the Appellant is the Operational Creditor (in short 'OC'), who

alleged to have supplied fire-fighting system to the Corporate Debtor (in

short 'CD') from March 16, 2013 till March 31, 2014. It is alleged by the

Appellant that default had occurred on 28.03.2014 of payment of the total

sum of Rs. 36,13,744/- alongwith interest @ 18 % per annum and as a

Company Appeal (AT) (Insolvency) No. 923 of 2020 2

result thereof, the OC had to file an application under Section 9 of the Code,

which was listed before the Adjudicating Authority bearing CP (IB) No.

228/9/NCLT/AHM/2018. After filing of the application, the OC found the

delay of 358 days in filing of the application under Section 9 of the Code,

therefore, it filed an application under Section 5 of the Act for condonation

of delay. The application bearing I.A. No. 626 of 2020 for seeking

condonation of delay was dismissed by the Adjudicating Authority, vide its

impugned order dated 25.09.2020, only on the ground that since the

application, filed under Section 9 of the Code, is an original application,

therefore, provisions of Section 5 of the Act would not apply and as such the

application was dismissed as not maintainable. At that stage, though it was

required by the Adjudicating Authority to have dismissed the main

application also, which was filed under Section 9 of the Code but it found

later on its mistake and passed a separate order on 04.12.2020, in which it

was categorically mentioned that:

"On perusal of the records, it is found that one I.A, i.e. IA 626 of 2020, has been filed separately for condoning the delay of 358 days in filing petition under Section 9 of the I&B Code. The said IA was dismissed on 25.09.2020, as not maintainable. However, due to inadvertence, the instant petition is remained unheard."

3. In order to put the records straight, the Applicant filed a

Miscellaneous Application bearing I.A No. 365 of 2022 for seeking

amendment of Memo of Appeal in order to challenge the later order dated

04.12.2020 as well, because the Appellant had already filed the present

Appeal to challenge the order dated 25.09.2020.

Company Appeal (AT) (Insolvency) No. 923 of 2020 3

4. Before we proceed further, in the given facts and circumstances, it

would be just and expedient if the impugned order dated 04.12.2020 is also

made part of the Memo of Appeal and is considered and decided alongwith

the order dated 25.09.2020 which was passed by the Adjudicating Authority

while dismissing the application filed under Section 5 of the Act.

Accordingly, the application bearing I.A. No. 363 of 2022 is hereby allowed

and the Memo of Appeal is accordingly amended in order to allow the

Appellant to challenge the order dated 04.12.2020.

5. Counsel for the Appellant has vehemently argued that the impugned

order dated 25.09.2020 is patently illegal and deserves to be set aside. It is

submitted that since the application filed under Section 9 of the Code is an

application, provided in the 3rd Division of the Schedule of the Act,

therefore, application under Section 5 shall apply to it as it applies to the

applications and appeals and the approach of the Adjudicating Authority is

incorrect to hold that since the application filed under Section 9 is an

original proceeding, therefore, the limitation once provided cannot be

extended under Section 5 of the Act. In support of his submission, he has

relied upon the decisions of the Hon'ble Supreme Court in the cases of Sesh

Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-Operative Bank Ltd. &

Anr. [(2021) 7 SCC 313], Babulal Vardharji GurjarVs. Veer Gurjar

Aluminium Industries Pvt. Ltd. [(2020) 15 SCC 1] and Dena Bank Vs. C.

Shivakumar Reddy (2021 Online SC 543).

6. No one has put in appearance on behalf of the Respondent.

7. We have heard Counsel for the Appellant and perused the record with

his able assistance.

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8. From the resume of the aforesaid facts, the issue involved in this

Appeal is "as to whether the delay caused in filing of an application under

Section 9 of the Code can be condoned by filing an application under

Section 5 of the Act?

9. Although the issue is no more res-integra as it has been held in the

cases of Sesh Nath Singh (Supra), Babulal Vardharji Gurjar (Supra) and

Dena Bank (Supra) that an application filed under Section 5 of the Act is

maintainable. However, we may hasten to add that the period of limitation is

defined under Section 2(j) of the Act which is as under:

"period of limitation" means the period of limitation prescribed for any suit, appeal or application by the Schedule, and "prescribed period" means the period of limitation computed in accordance with the provisions of this Act."

10. Section 3 of the Act deals with the Bar of limitation which says that:

"every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence."

11. The limitation to file the suits, appeals and applications is provided in

the schedule appended to the Act which has three divisions. 1st division

deals with the suits having 10 parts, 2nd division deals with the appeals and

the 3rd Division deals with the applications having two parts. It has also

been held by catena of judgments by the Hon'ble Supreme Court that for the

purpose of limitation the trigger point has to be date of default and as no

period of limitation is provided in the Code for the purpose of filing an

application under Section 7 or 9 of the Code, therefore, while applying

Section 238A of the Code, which says that:

Company Appeal (AT) (Insolvency) No. 923 of 2020 5

"the provisions of the limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, NCLAT, DRT or DRAT, as the case may be."

The Residuary Article 137 has been applied, which provides that:

Description of Period of Limitation Time from which Application period begins to run

137. Any other Three years When the right to application for apply accrues.

which no period of limitation is provided elsewhere in this division.

12. Since, there is no dispute that the period of limitation shall be three

years from the date when the right to file accrues i.e. date when the default

occurs, the Adjudicating Authority shall be well within its right not to

entertain the application filed under Section 7 or 9 of the Code as the case

may be but the delay, if any, can be condoned in terms of the Section 5 of

the Act, which read as under:-

"5. Extension of prescribed period in certain cases: Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

Explanation: The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section."

Company Appeal (AT) (Insolvency) No. 923 of 2020 6

13. Since Section 5 is an enabling provision for the purpose of extending

the period of limitation for the suiter to pursue his claim made in the Code,

it applies only in the case of application or appeal but it does not apply to a

suit. In the present case, since the proceeding is initiated by the OC by filing

an application under Section 9 of the Code, which provides that:

"9. (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub- section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process."

Therefore, the provisions of Section 5 of the Act shall apply to the

application filed under Section 9 of the Code and hence, the order passed by

the Adjudicating Authority is patently illegal and erroneous.

16. It is not the case before us that the application has been dismissed by

the Adjudicating Authority on the ground that the Appellant could not have

shown sufficient cause for the purpose of seeking condonation of delay

rather the case before us is that the Adjudicating Authority has dismissed

the application only on the ground of maintainability. Therefore, in view of

the observations made, the present appeal is hereby allowed, both the

orders dated 25.09.2020 and 04.12.2020 are set aside and the matter is

remanded back to the Adjudicating Authority to consider the application as

maintainable and decide the same in accordance with law.

14. We may also make it clear that we have not made any observation on

the merits of the case.

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15. The Parties are directed to appear before the Adjudicating Authority

on 08th August, 2022.

16. The Registry is directed to send the copy of this order to the

concerned Adjudicating Authority.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

[Mr. Naresh Salecha] Member (Technical)

Sheetal/rr

Company Appeal (AT) (Insolvency) No. 923 of 2020