Supreme Court: Section 9 IBC- No Limitation, till duty gets due

Supreme Court: Section 9 IBC- No Limitation, till duty gets due

According to Supreme Court's decision, the statute of limitations is not triggered at the time of due diligence but by the default. Insolvency and Bankruptcy Code defines debt as non-payment of the debt by the corporate debtor when it becomes due, as determined by the bench of Justices DY Chandrachud, Surya Kant, and Vikram Nath.

Thorn Lighting India Private Limited supplied the appellant with three purchase orders dated 24 June 2013 from the Proprietary Concern, which was the supplier of Thorn Lighting. As a result, the limitation period under Article 137 of the Limitation Act would expire on 7 November 2017 as the date of default. This case was on 7 November 2013, when the check was issued by CMRL to the Proprietary Concern.

According to the bench, the debt became due on 7 November 2013 as mentioned in the application. With reference to B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates (2019) 11 SCC 633, the bench gave the following observations:

In most cases, the limitation period does not begin when the debt becomes due, but rather when the debt defaults. In its judgment, the court noted that default is defined as a failure by the corporate debtor to pay its debt when it becomes due under Section 3(12) of the IBC.

Both the parties were negotiating the re-payment and the court noted that the Proprietary Concern was prepared to make the re-payment. If CMRL issued a letter stating that they would no longer claim in the future, or if a bank guarantee could be provided by the applicant.

In a final letter dated 27 February 2017, the appellant requested that payment be made on or before the 4th of March 2017. This letter was responded by the Proprietary Concern on 2 March 2017, stating that re-payment to the appellant would not be made. As a result, the application filed under Section 9 will not be barred by limitation," the court concluded.

The Bench consists of Justices DY Chandrachud, Surya Kant and Vikram Nath. Counsel for the parties are Adv M P Parthiban for appellant and Adv K Parameshwar for respondent.