Filing an application u/s 7 of the IBC after expiry of three years from the date of accrual would be considered time barred

Last updated: 19 April 2021

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The Supreme Court has ruled that an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) will be considered time-barred if it is filed more than three years after the debt became due. This decision overturns the NCLAT's earlier judgment which had admitted such an application, highlighting the importance of adhering to limitation periods in insolvency proceedings.

Court :
Supreme Court of India

Brief :
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 22nd November 2019, passed by the National Company Law Appellate Tribunal (NCLAT), dismissing Company Appeal (AT) (Insolvency) No.672 of 2019, filed by the Appellants, challenging an order dated 25th April 2019, of the National Company Law Tribunal (NCLT), Kolkata Bench, admitting the application filed by the Respondent No.1 as Financial Creditor, under Section 7 of the IBC being CP(IB) No.1202/KB/2018, thereby initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Debi Fabtech Private Ltd.

Citation :
CIVILAPPEAL NO. 9198 OF 2019

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVILAPPEAL NO. 9198 OF 2019
SESH NATH SINGH & ANR. …..Appellant(s)

versus

BAIDYABATI SHEORAPHULI CO-OPERATIVE
BANK LTD AND ANR. …..Respondent(s)

J U D G M E N T

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 22nd November 2019, passed by the National Company Law Appellate Tribunal (NCLAT), dismissing Company Appeal (AT) (Insolvency) No.672 of 2019, filed by the Appellants, challenging an order dated 25th April 2019, of the National Company Law Tribunal (NCLT), Kolkata Bench, admitting the application filed by the Respondent No.1 as Financial Creditor, under Section 7 of the IBC being CP(IB) No.1202/KB/2018, thereby initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Debi Fabtech Private Ltd.

2. The Corporate Debtor was inter alia engaged in the business of export of textile and garments. On or about 8th February 2012, the Corporate Debtor requested the Financial Creditor for cash credit facility of Rs.1,00,00,000/- (Rupees One Crore).

3. By a letter of sanction dated 15th February, 2012, the Financial Creditor granted Cash Credit Facility of Rs.1,00,00,000/- to the Corporate Debtor, after which a Cash Credit Account No.482 was opened in the name of the Corporate Debtor. The Corporate Debtor duly executed a hypothecation agreement with the Financial Creditor on 17th February, 2012.

To know more in details find the attachment file

FAQ :

The Supreme Court ruled that an application filed under Section 7 of the IBC is time-barred if it is submitted more than three years from the date the debt accrued.

Section 7 of the Insolvency and Bankruptcy Code (IBC) allows financial creditors to initiate the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor.

The National Company Law Appellate Tribunal (NCLAT) had previously dismissed an appeal against an NCLT order that admitted a Section 7 application filed after the limitation period.

A time-barred application cannot be admitted by the tribunal, meaning the Corporate Insolvency Resolution Process (CIRP) cannot be initiated based on it.

Attached File : 40_3498_43226_2019_40_1501_27085_judgement_22_mar_2021.pdf

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