Machhar Polymer Pvt. Ltd vs Sabre Helmets Pvt. Ltd

Machhar Polymer Private Limited ...Appellant

Vs.

Sabre Helmets Private Limited ...Respondent

Present: For Appellant: - Mr. Rohit Rathi, Advocate.

ORDER

27.03.2018 ─ This appeal has been preferred by the Appellant-

'Operational Creditor' against the order dated 28th September, 2017

passed by the Adjudicating Authority (National Company Law Tribunal),

Mumbai Bench, whereby and whereunder the application preferred by

the Appellant under Section 9 of the Insolvency and Bankruptcy Code,

2016 (hereinafter referred to as "I&B Code") has been rejected on the

ground that the application is barred by limitation with following

observations:

"25. Another interesting feature in section 3 of

Limitation Act is the proceeding instituted basing on

time barred claim shall be dismissed although

limitation has not been set up as defense. Here,

the corporate debtor is not present; going by section

3, this Bench hereby can decide limitation issue

without any averment from the corporate debtor.

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26. There is a situation where Limitation Act could

not reach, that is Constitution, there whenever any

writ wither under Article 226 or on fundamental

rights is filed, since constitution governs every other

statute, the Limitation Act will remain application to

other statutes, for this reason only, delay and laches

doctrine has been carved out to meet the situation in

constitutional matters.

27. In view of the reasons mentioned above, in

whatever line so far limitation is applied to winding

up cases, in the same line, prescription of limitation is

applicable to the Code as well. As long as limitation

is not prescribed under any specific enactment, it

goes without saying Limitation Act, 1963 is

automatically applicable to the Code as well.

28. Therefore, for the reasons above mentioned,

this Company Petition is dismissed with liberty to the

petitioner to proceed in respect to the claim within

limitation by invoking section 14 of Limitation Act

1963."

2. In spite of service of notice and notice published in English

newspaper "Times of India", Mumbai Edition and Gujarati newspaper

"Sandesh", Mumbai Edition, the Respondent has not appeared.

Company Appeal (AT) (Insolvency) No. 276 of 2017 3

3. Learned counsel for the Appellant rightly pointed out that the

impugned order is against the decision of this Appellate Tribunal in "M/s.

Speculum Plast Pvt. Ltd. Vs. PTC Techno Pvt. Ltd.─ Company Appeal

(AT) (Insolvency) No. 47 of 2017". In the said case, this Appellate

Tribunal by judgment dated 7th November, 2017 observed and held as

follows:

"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

Company Appeal (AT) (Insolvency) No. 276 of 2017 4

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 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

Company Appeal (AT) (Insolvency) No. 276 of 2017 5

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."

4. For the reasons aforesaid, the impugned order dated 28th

September, 2017 passed in Company Petition No. 1333/I&BP/2017 is

set aside. The case is remitted to the Adjudicating Authority, Mumbai

Bench to consider the application under Section 9 of the 'I&B Code'

preferred by the Appellant after notice to the 'Corporate Debtor'. If the

application is complete, the Adjudicating Authority will admit it. On the

other hand, if there is any defect, the Appellant may be allowed time to

remove the defects.

5. The appeal is allowed with aforesaid observations and directions.

No cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial) Ar/uk

Company Appeal (AT) (Insolvency) No. 276 of 2017