M/S TECH SHARP ENGINEERS PVT. LTD.versusSANGHVI MOVERS LIMITED

922                      [2022]REPORTS
               SUPREME COURT   13 S.C.R. 922              [2022] 13 S.C.R.


A                M/S TECH SHARP ENGINEERS PVT. LTD.
                                       v.
                        SANGHVI MOVERS LIMITED
                         (Civil Appeal No. 296 of 2020)
B                           SEPTEMBER 19, 2022
          [INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]
             Insolvency and Bankruptcy Code, 2016: s.9 – Initiation of
      Corporate Insolvency Resolution Process (CIRP) – Applicability of
      Limitation Act – Pursuant to agreement, respondent let out a crane
C
      on hire to the appellant – Respondent raised invoices on the
      appellant between 03.01.2013 and 04.03.2013 for a sum of
      Rs.38,84,709/- – On 14.10.2013, Respondent issued statutory notice
      to Appellant-Company for its winding up for payment of invoices–
      Appellant replied to notice on 07.11.2013, acknowledging its
D     liability to the Respondent – Respondent filed a winding up petition
      before High Court which was returned for curing of defects, first
      time on 05.01.2016 and second time on 24.05.2016 – IBC came
      into force on 01.12.2016 – Respondent again issued a demand notice
      on 14.11.2017 u/s. 8(1) of IBC calling upon appellant to repay its
      dues – On 30.03.2018, the Respondent filed petition u/s. 9 of the
E
      IBC for initiation of CIRP in the NCLT, which was dismissed for
      being barred by limitation – Respondent approached NCLAT which
      set aside the order passed by NCLT and remitted the case back to
      NCLT for admission – NCLAT directed that before admission of the
      case, it would be open to the Respondent to settle the matter with
F     the Appellant and that right to apply under s.9 accrued to appellant
      on 01.12.2016, when IBC came into force and, therefore, application
      u/s.9 filed by the Appellant is within the period of three years from
      the date of right to apply accrued – Hence instant appeal – Held:
      The pendency of the proceedings in a parallel forum is not sufficient
      cause for the delay in filing an application u/s.9 of the IBC –
G
      Material date is on which the right to sue accrued and if the cause
      of action continued – By the time the application was filed, the
      claim had become barred by limitation as is clear from the averments
      in the winding up petition, that there was no acknowledgment of
      liability after 07.11.2013 and last payment was made in June 2013
H     – No help will be provided by ss. 14 and 18 of the Limitation Act as
                                      922
    M/S TECH SHARP ENGINEERS PVT. LTD. v. SANGHVI                          923
                  MOVERS LIMITED

the last acknowledgment was in 2013 and the High Court neither             A
suffered from any defect of jurisdiction to entertain the winding up
application nor was unable to entertain the winding up application
for any other cause of a like nature – Initiation of proceedings in
High Court would not save limitation for initiation of proceedings
for initiation of CIRP in the NCLT – Order of NCLAT is unsustainable
                                                                           B
in law.
      Allowing the appeal, the Court
      HELD: 1. The condition precedent for condonation of the
delay in filing an application or appeal, is the existence of sufficient
cause. Whether the explanation furnished for the delay would               C
constitute “sufficient cause” or not would be dependent upon
facts of each case. There cannot be any straitjacket formula for
accepting or rejecting the explanation furnished by the Appellant/
applicant for the delay in taking steps. When an appeal is filed
against an order rejecting an application on the ground of
limitation, the onus is on the Appellant to make out sufficient            D
cause for the delay in filing the application. The date of
enforcement of the IBC and/or the date on which an application
could have first been filed under the IBC are not relevant in
computation of limitation. It would be absurd to hold that the
CIRP could be initiated by filing an application under Section 7           E
or Section 9 of the IBC, within three years from the date on which
an application under those provisions of the IBC could have first
been made before the NCLT even though the right to sue may
have accrued decades ago. [Paras 16 and 17][928-E-G]
      2. The fact that an application for initiation of CIRP, may          F
have been filed within three years from the date of enforcement
of the relevant provisions of the IBC is inconsequential. What is
material is the date on which the right to sue accrues, and whether
the cause of action continuous. The pendency of the proceedings
in a parallel forum, invoked by the Respondent, is not sufficient
cause for the delay in filing an application under Section 9 of the        G
IBC. By the time the application was filed, the claim had become
barred by limitation. In a notice dated 24.05.2014 issued by the
Respondent demanding payment, it was contended that the
Appellant had agreed to pay its outstanding dues in five equated
                                                                           H
924            SUPREME COURT REPORTS                     [2022] 13 S.C.R.


A     monthly installments of Rs.8,48,053/-. The Appellant had,
      however, defaulted after payment of one installment for the month
      of June, 2013. [Paras 18-20][929-A-C]
            3. From the averments in the Winding Up petition, it is
      patently clear that there was no acknowledgment of liability after
B     07.11.2013. The last payment was made in June 2013. It is now
      well settled that the provisions of the Limitation Act are applicable
      to proceedings under the IBC as far as may be. Section 14(2) of
      the Limitation Act which provides for exclusion of time in
      computing the period of limitation in certain circumstances.
      Similarly, under Section 18 of the Limitation Act, an
C     acknowledgment of present subsisting liability, made in writing
      in respect of any right claimed by the opposite party and signed
      by the party against whom the right is claimed, has the effect of
      commencing of a fresh period of limitation, from the date on which
      the acknowledgment is signed. However, the acknowledgment
D     must be made before the period of limitation expires. Proceedings
      in good faith in a forum which lacks jurisdiction or is unable to
      entertain for like nature may save limitation. Similarly,
      acknowledgment of liability may have the effect of commencing a
      fresh period of limitation. In this case, the last acknowledgment
      was in 2013 and the Madras High Court neither suffered from
E     any defect of jurisdiction to entertain the winding up application
      nor was unable to entertain the winding up application for any
      other cause of a like nature. [Paras 21 and 23-26][930-F-G; 931-
      C, F-H; 932-A-B]
             4. The limitation for initiation of winding up proceedings in
F     the Madras High Court stopped running on the date on which
      the Winding Up petition was filed. The initiation of proceedings
      in Madras High Court would not save limitation for initiation of
      proceedings for initiation of CIRP in the NCLT under Section 7
      of the IBC. A claim may not be barred by limitation. It is the
G     remedy for realisation of the claim, which gets barred by
      limitation. The impugned order of the NCLAT is unsustainable
      in law. This judgment, however, will not prevent the Respondent
      from pursuing any other remedy which the Respondent may be
      entitled to avail in accordance with law and/or pursue any pending
      proceedings in accordance with law. [Paras 28, 29 and 31][932-
H     E-G]
    M/S TECH SHARP ENGINEERS PVT. LTD. v. SANGHVI                         925
                  MOVERS LIMITED

        B.K. Educational Services Pvt. Ltd. v. Parag Gupta and            A
        Associates (2019) 11 SCC 633 : [2018] 12 SCR 794;
        Radha Export (India) Private Ltd. v. K.P. Jayaram and
        Anr (2020) 10 SCC 538 : [2020] 8 SCR 272; Babulal
        Vardharji Gurjar v. Veer Gurjar Aluminium Industries
        Private Ltd. and Anr. (2020) 15 SCC 1 : [2020] 10
                                                                          B
        SCALE 48; Ramlal, Motilal & Chhotelal v. Rewa
        Coalfields Ltd. AIR 1962 SC 361 : [1962] SCR 762;
        Krishna v. Chathappan 1889 SCC Online Mad 1 –
        relied on.
                        Case Law Reference
                                                                          C
[2018] 12 SCR 794                 relied on                 Para 9
[2020] 8 SCR 272                  relied on                 Para 12
[2020] 10 SCALE 48                relied on                 Para 13
[1962] SCR 762                    relied on                 Para 15
                                                                          D
        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 296 of
2020.
      From the Judgment and Order dated 23.07.2019 of the National
Company Law Appellate Tribunal, Delhi in Company Appeal (AT)
(Insolvency) No.118 of 2019.
                                                                          E
     Nakul Dewan, Sr. Adv., Jayesh Dolia, R. Chandrachud, R. V.
Prabhat, Nikhil S. Nair, Advs. for the Appellant.
      Shikhil Shiv Suri, Mrs. Madhu Suri, T. R. B. Sivakumar, Advs. for
the Respondent.
        The Judgment of the Court was delivered by                        F
        INDIRA BANERJEE, J.
       This appeal under Section 62 of the Insolvency and Bankruptcy
Code, 2016, hereinafter referred to as the “IBC” is against a judgment
and order dated 23rd July 2019 passed by the National Company Law
Appellate Tribunal (NCLAT), New Delhi allowing Company Appeal             G
(AT)(Insolvency) No. 118 of 2019 filed by the Respondent and setting
aside an order dated 2nd January 2019 passed by the Adjudicating
Authority, i.e., the National Company Law Tribunal (NCLT), Chennai
whereby the Adjudicating Authority had dismissed an application filed
by the Respondent as barred by limitation.                                H
926            SUPREME COURT REPORTS                         [2022] 13 S.C.R.


A           2. Pursuant to an agreement executed by and between the
      Appellant and the Respondent, the Respondent let out on hire to the
      Appellant, 150 MT crane for erection of equipment at the site of Indian
      Oil Corporation Ltd. (IOCL) at Paradip in Odisha. The Respondent/
      Operational Creditor raised invoices on the Appellant between 3rd January
      2012 and 4th March 2013 for a sum of Rs.38,84,709/-.
B
            3. On or about 6th May 2013, the Respondent issued notice to the
      Appellant for payment of outstanding hire charges. By letter dated 17th
      May 2013, the Appellant replied to the said notice. Further correspondence
      ensued.
C            4. Ultimately, on 14th October 2013, the Respondent issued a
      statutory notice to the Appellant under Sections 433(e), 434 and 439 of
      the Companies Act, 1956 for Winding Up of the Appellant-Company.
      The Appellant duly replied to the notice on 7 th November 2013,
      acknowledging its liability to the Respondent.
D            5. On 9 th November 2013, the Respondent called upon the
      Appellant to clear its dues. On 24th May 2014, the Respondent issued a
      statutory notice under Sections 433(e), 434 and 439 of the Companies
      Act, 1956 calling upon the Appellant to pay Rs.38,84,709/- towards crane
      hire charges.
E            6. On or about 22nd December 2015, the Respondent filed a
      Winding Up petition dated 4th July 2015 in the Madras High Court. On
      5th January 2016, the High Court returned the Winding Up petition to the
      Respondent for curing of defects. The Winding Up petition was
      represented on 3rd February 2016, but again returned on 24th May 2016
      with an endorsement to comply with the defects as intimated earlier.
F
            7. The IBC came into force on 1st December 2016. Thereafter
      the Respondent issued a demand notice on 14th November 2017 under
      Section 8(1) calling upon the Appellant to repay its dues.
             8. On 30th March 2018, the Respondent filed petition being CP/
G     724/(IB)/2018 under Section 9 of the IBC for initiation of the Corporate
      Insolvency Resolution Process (CIRP) in the NCLT. On 20th June 2018,
      the Adjudicating Authority (NCLT) directed the Registry to issue notice
      to the Appellant.
           9. By an order dated 2nd January 2019, the Adjudicating Authority
H     (NCLT) rejected the application as barred by limitation, placing reliance
       M/S TECH SHARP ENGINEERS PVT. LTD. v. SANGHVI                           927
            MOVERS LIMITED [INDIRA BANERJEE, J.]

on the judgment of this Court in B.K. Educational Services Pvt. Ltd.           A
v. Parag Gupta and Associates1. The application under Section 9 of
the IBC was accordingly dismissed.
        10. The Respondent appealed to the NCLAT under Section 61 of
the IBC. By the impugned judgment and order, the NCLAT has set
aside the order dated 2nd January 2019 passed by the Adjudicating              B
Authority (NCLT) rejecting the application of the Respondent under
Section 9 of the IBC and has remitted the case to the Adjudicating
Authority for admission after notice to the parties. The NCLAT directed
that before admission of the case, it would be open to the Respondent to
settle the matter with the Appellant. The NCLAT held :-
                                                                               C
           “8. In the present case, it is not in dispute that right to apply
           under Section 9 accrued to the Appellant on 1st December,
           2016, when ‘I&B Code’ came into force. Therefore, we find
           that the application under Section 9 filed by the Appellant is
           within the period of three years from the date of right to apply
           accrued.”                                                           D
      11. For the purpose of limitation, the relevant date is the date on
which the right to sue accrues which is the date when a default occurs.
In B.K. Educational Services Pvt. Ltd. (supra), cited before the NCLT
and referred to in the judgment and order impugned, this Court held :-
                                                                               E
           “42. 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 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     F
           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.”
        12. In Radha Export (India) Private Ltd.v.K.P. Jayaram and             G
       2
Anr. , this Court referred to B.K. Educational Services Pvt. Ltd. (supra)
and held the application under Section 7 of the IBC to be barred by
limitation.
1
    (2019) 11 SCC 633
2
    (2020) 10 SCC 538                                                          H
928             SUPREME COURT REPORTS                          [2022] 13 S.C.R.


A            13. In Babulal Vardharji Gurjar v. Veer Gurjar Aluminium
      Industries Private Ltd. and Anr.3, this Court held that limitation of
      three years as provided by Article 137 of the Limitation Act, which
      commenced from the date of the default, was extendable under Section
      5 of the Limitation Act, 1963.
B            14. It is well settled by a plethora of judgments of this Court as
      also different High Courts and, in particular, the judgment of this Court
      in B.K. Educational Services Pvt. Ltd. (supra) that the NCLT/NCLAT
      has the discretion to entertain an application/appeal after the prescribed
      period of limitation. The condition precedent for exercise of such discretion
      is the existence of sufficient cause for not preferring the appeal and/or
C     the application within the period prescribed by limitation.
             15. In Ramlal, Motilal & Chhotelal v. Rewa Coalfields Ltd.4,
      this Court affirmed the view taken by the Madras High Court in Krishnav.
      Chathappan5 and held that Section 5 of the Limitation Act gives the
      Court a discretion, which is to be exercised in the way in which judicial
D     power and discretion ought to be exercised, upon principles which are
      well understood.
             16. The condition precedent for condonation of the delay in filing
      an application or appeal, is the existence of sufficient cause. Whether
      the explanation furnished for the delay would constitute “sufficient cause”
E     or not would be dependent upon facts of each case. There cannot be
      any straitjacket formula for accepting or rejecting the explanation
      furnished by the Appellant/applicant for the delay in taking steps.
              17. When an appeal is filed against an order rejecting an application
      on the ground of limitation, the onus is on the Appellant to make out
F     sufficient cause for the delay in filing the application. The date of
      enforcement of the IBC and/or the date on which an application could
      have first been filed under the IBC are not relevant in computation of
      limitation. It would be absurd to hold that the CIRP could be initiated by
      filing an application under Section 7 or Section 9 of the IBC, within three
G     years from the date on which an application under those provisions of
      the IBC could have first been made before the NCLT even though the
      right to sue may have accrued decades ago.

      3
        (2020) 15 SCC 1
      4
        AIR 1962 SC 361
      5
H       1889 SCC Online Mad 1
    M/S TECH SHARP ENGINEERS PVT. LTD. v. SANGHVI                             929
         MOVERS LIMITED [INDIRA BANERJEE, J.]

       18. The fact that an application for initiation of CIRP, may have      A
been filed within three years from the date of enforcement of the relevant
provisions of the IBC is inconsequential. What is material is the date on
which the right to sue accrues, and whether the cause of action continuous.
        19. The pendency of the proceedings in a parallel forum, invoked
by the Respondent, is not sufficient cause for the delay in filing an         B
application under Section 9 of the IBC. By the time the application was
filed, the claim had become barred by limitation.
       20. In a notice dated 24th May 2014 issued by the Respondent
demanding payment, it was contended that the Appellant had agreed to
pay its outstanding dues in five equated monthly installments of              C
Rs.8,48,053/-. The Appellant had, however, defaulted after payment of
one installment for the month of June, 2013. A copy of the petition filed
by the Respondent in the High Court of Judicature at Madras is enclosed
to the paper book. The Respondent asserted -
      “The Petitioner states that without any valid reason the                D
      Respondent delayed the payment for the Services done by
      the petitioner. Even after repeated and constant follow-up
      the Responder did not settle the dues payable to the Petitioner
      and therefore, the Petitioner issued a notice dated 06.05.2013
      and demanded the Respondent to make the payment. The
                                                                              E
      Respondent sent a reply dated 17.05.2013 and in the said
      reply the Respondent admitted the outstanding dues and
      agreed to settle the outstanding dues in six months and
      requested the Petitioner to give discount. The Petitioner issued
      a rejoinder dated 21.05.2013 providing 10% discount and
      to settle the remaining amount in 5 equaled monthly instalment,         F
      commencing from 1st June, 2013. However, it is made clear
      that the offer given by rejoinder dated 21.05.2013 is subject
      to the condition that the Respondent issue and honour the
      post-dated cheques for the five monthly instalments.
      The Petitioner states that the Respondent sent a reply dated            G
      07.06.2013 stating that they are unable to pay 1st instalment
      on 01.06.2013 and informed that the same will be paid on
      20.06.2013. The Petitioner sent a sur-rejoinder dated
      14.06.2013 and asked the Respondent to proceed with the
      payment schedule proposed by them and it is made very clear             H
930            SUPREME COURT REPORTS                        [2022] 13 S.C.R.


A           that the discount and the waiver of interest offered by the
            Petitioner is strictly on the condition that the Respondent
            adhere to the payment schedule. The Respondent paid the 1st
            instalment and failed to make any further payment and
            therefore the Petitioner sent a reminder dated 02.08.2013.
            The Respondent did not honour their promise and miserably
B
            failed to make payment for the 2nd instalment and therefore
            the Petitioner was constrained to revoke their offer and issued
            notice dated 14.10.2013 demanding the Respondent to pay
            Rs.38,84,709/- (Rupees Thirty Eight Lakhs Eighty Four
            Thousand Seven Hundred and Nine only) with interest.
C
               The Petitioner states that the Respondent issued reply dated
               07.11.2013 and confirmed the non-payment of instalments
               as per their promise and further stated that the Respondent
               has requested IOCL to make direct payment to the Petitioner
               and also enclose a draft letter to be sent by the Respondent
D              to IOCL. The Petitioner sent sur re-rejoinder dated
               09.11.2013 and informed the Respondent that the discount
               offered has been withdrawn due to the failure on the part
               of the Respondent. However, considering the request of
               the Respondent gave final opportunity to settle the dues in
E              two instalments and it was made very clear that any failure
               on the part of the Respondent to clear dues will result in
               withdrawal of discounts/waivers and the Respondent has
               to pay the entire amount of Rs.38,84,709/- (Rupees Thirty
               Eight Lakhs Eighty Four Thousand Seven Hundred and
               Nine only).”
F
             21. From the averments in the Winding Up petition, it is patently
      clear that there was no acknowledgment of liability after 7th November
      2013. The last payment was made in June 2013.
            22. The Adjudicating Authority (NCLT) held :-
G           “On perusal of the Application filed under Section 9 of the
            I&B Code, 2016, it appears that the claim amounting to
            Rs.38,84,709/- has become due and payable on 28.02.2013.
            There is a single confirmation of the claim by the Corporate
            Debtor on 07.11.2013 as reflects from the document placed
H
    M/S TECH SHARP ENGINEERS PVT. LTD. v. SANGHVI                            931
         MOVERS LIMITED [INDIRA BANERJEE, J.]

      at page 60 of the typed set filed with the Application.                A
      Thereafter, there is nothing on record to suggest that at any
      point of time the Corporate Debtor confirmed/acknowledged
      the debt.
      In the circumstances, the claim has become time barred and
      in view the judgment of the Hon’ble Supreme Court passed in            B
      B.K. Educational Services Pvt. Ltd. -vs- Parag Gupta and
      Associates (2018 SCC Online SC 1921), the Petition stands
      dismissed.”
      23. It is now well settled that the provisions of the Limitation Act
are applicable to proceedings under the IBC as far as may be. Section        C
14(2) of the Limitation Act which provides for exclusion of time in
computing the period of limitation in certain circumstances, provides as
follows:
      “14. Exclusion of time of proceeding bona fide in court without
      jurisdiction.—                                                         D
      (1) ...
      (2) In computing the period of limitation for any application,
      the time during which the applicant has been prosecuting with
      due diligence another civil proceeding, whether in a court of          E
      first instance or of appeal or revision, against the same party
      for the same relief shall be excluded, where such proceeding
      is prosecuted in good faith in a court which, from defect of
      jurisdiction or other cause of a like nature, is unable to
      entertain it.”
                                                                             F
       24. Similarly, under Section 18 of the Limitation Act, an
acknowledgment of present subsisting liability, made in writing in respect
of any right claimed by the opposite party and signed by the party against
whom the right is claimed, has the effect of commencing of a fresh
period of limitation, from the date on which the acknowledgment is signed.
However, the acknowledgment must be made before the period of                G
limitation expires.
       25. Proceedings in good faith in a forum which lacks jurisdiction
or is unable to entertain for like nature may save limitation. Similarly,
acknowledgment of liability may have the effect of commencing a fresh
period of limitation.                                                        H
932             SUPREME COURT REPORTS                         [2022] 13 S.C.R.


A            26. In this case, the last acknowledgment was in 2013 and the
      Madras High Court neither suffered from any defect of jurisdiction to
      entertain the winding up application nor was unable to entertain the winding
      up application for any other cause of a like nature.
             27. The NCLAT held :-
B            “From the facts as narrated above, it will be evident that the
             winding up petition was filed before the Hon’ble High Court
             of Judicature at Madras which had not reached finality and
             in the meantime, as the ‘I&B Code’ came into force, the demand
             notice under Section 8(1) was issued on 14th November, 2017
C            for payment of outstanding amount along with the interest.
             Thus, as we find that there is continuous cause of action the
             claim is within the period of limitation. The Appellant had
             moved before an appropriate forum for appropriate relief in
             time, in accordance with law and so we hold that the claim of
             the Appellant is not barred by limitation as the petition under
D            Section 433 & 434 of the Companies Act, 1956 become
             infructuous; by operation of law.”
            28. The limitation for initiation of winding up proceedings in the
      Madras High Court stopped running on the date on which the Winding
      Up petition was filed. The initiation of proceedings in Madras High Court
E     would not save limitation for initiation of proceedings for initiation of
      CIRP in the NCLT under Section 7 of the IBC.
             29. A claim may not be barred by limitation. It is the remedy for
      realisation of the claim, which gets barred by limitation. The impugned
      order of the NCLAT is unsustainable in law.
F
             30. The appeal is allowed. The impugned order of the NCLAT is
      set aside.
             31. This judgment, however, will not prevent the Respondent from
      pursuing any other remedy which the Respondent may be entitled to
      avail in accordance with law and/or pursue any pending proceedings in
G
      accordance with law.

      Devika Gujral                                                 Appeal allowed.
      (Assisted by : Deepak Panwar, LCRA)


H