IBC - Moratorium Period Can Be Excluded In Computing Limitation Period In A Suit/Application By Corporate Debtor: Supreme Court

The Supreme Court has held that the entire period during which the moratorium was in force in respect of corporate debtor can be excluded while computing the period of limitation for a suit or proceeding by the corporate debtor.

In this case, the appellant, had approached the Apex Court challenging the Delhi High Court's order allowing the application filed by respondent corporate debtor under Section 11(6) of the Arbitration and Conciliation Act. 

The issue raised in the appeal was whether Section 60(6) of the IBC gives rise to a new lease of life to a proceeding at the instance of the corporate debtor on the basis of a moratorium which is put in place by virtue of the order passed under section 14 of the IBC and whether corporate debtor can take advantage of the same to bring the application in this case filed under Section 11(6) of the Arbitration Act? According to appellant, there is no warrant for exclusion of the period for a suit or proceeding by the corporate debtor.

Section 60(6) provides thus: Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

The court noted that Section 14 (moratorium) does not include an application under Section 11(6) of the 1996 Act by the corporate debtor or for that matter, any other proceeding by the corporate debtor against another party.  Referring to the scheme of insolvency proceedings, the bench comprising Justices KM Joseph and Hrishikesh Roy observed:

Therefore, on the one hand, an application under Section 7, 9 or 10, does bring in a period which is intended to bring a corporate debtor back to life if possible, 'a period of calm', in the words of the respondent. But this is a period during which the management of the corporate debtor is displaced, ironically, a period of turbulent churning. While it may be true that proceedings by the corporate debtor through the resolution professional is contemplated, it is not impossible to contemplate  that the resolution professional for whatever reason it may be, does not discharge his duties and conduct proceedings in all matters as he should. We are noting this as this can be the rationale for the Law Giver excluding the period of limitation in regard to suits or applications at the instance of the corporate debtor under Section 60(6).

The appellant had also highlighted the ambiguity regarding the need to exclude the period of limitation for a suit or an application, at the instance of the corporate debtor when a Moratorium ushered in by an order under Section 14 does not pose any bar against a suit or an application at the instance of the corporate debtor. Rejecting the said contention, the bench, while dismissing the appeal, observed:

"The words for which an order of Moratorium has been made under this part is intended to be the point of reference or the premise for the exclusion of the time for the purpose of computing the period of limitation. Besides being the point of reference and being the sine qua non for applying Section 60(6), it also specifies the period of time which will be excluded in computing of the period of limitation. In other words, present an order of Moratorium under Section 14, the entire period of the Moratorium is liable to be excluded in computing the period of limitation even in a suit or an application by a corporate debtor"..

In other words, notwithstanding the period of limitation under the Limitation Act, the Law Giver has thought it fit to provide that in respect of a corporate debtor if there has been an order of moratorium made in Part II, the period during which such moratorium was in place shall be excluded. 'For which an order of moratorium' cannot bear the interpretation which is sought to be placed by the appellant. The interpretation placed by the appellant is clearly against the plain meaning of the words which have been used. We have already undertaken the task of understanding the purport of the Code and the context in which section 60(6) has been put in place. This Court cannot possibly sit in judgment over the wisdom of the Law Giver. The period of limitation is provided under the Limitation Act. The law giver has contemplated that when a moratorium has been put in place, the said period must be excluded. We cannot overlook also the employment of words 'any suit or application'. This is apart, no doubt, from the words 'by a corporate debtor'. Interpreting the statute in the manner which the appellant seeks would result in our denying the benefit of extending the period of limitation to the corporate debtor, a result, which we think, would not be warranted by the clear words used in the statute.

Case details

New Delhi Municipal Council vs Minosha India Limited | 2022 LiveLaw (SC) 469 | CA 3470 OF 2022 | 27 April 2022

Coram: Justices KM Joseph and Hrishikesh Roy

Counsel: Sr. Adv Gourab Banerji for appellant, Sr. Adv Neeraj Kishan Kaul for respondent

Headnotes

Insolvency and Bankruptcy Code, 2016 ; Section 14, 60(6) - Section 60(6) does contemplate exclusion of the entire period during which the moratorium was in force in respect of corporate debtor in regard to a proceeding as contemplated therein at the hands of the corporate debtor - Present an order of Moratorium under Section 14, the entire period of the Moratorium is liable to be excluded in computing the period of limitation even in a suit or an application by a corporate debtor. (Para 25-28)

Interpretation of Statutes - Courts would not indulge in interpretation of a report of a body and when there is better material in the form of the Act itself available for interpretation. (Para 18)

Interpretation of Statutes - Golden rule of interpretation discussed - If the words of a statute are not ambiguous, the scope of interpretation dwindles. (Para 19-23)

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