Section 5 Limitation Act - 'Suffficient Cause' Is The Cause For Which A Party Could Not Be Blamed : Supreme Court

The Supreme Court, in a judgment delivered on Wednesday, gave a simple and short definition for the term 'sufficient cause' in Section 5 of Limitation Act, 1963.

‘Sufficient Cause’ is the cause for which a party could not be blamed , Justice C T Ravikumar, who authored the judgment, observed.

The Apex Court bench also comprising of Justice Ajay Rastogi was considering an appeal filed against NCLT order dismissing an application seeking initiation of Corporate Insolvency Resolution Process (CIRP) on the ground that it is barred by limitation.

In this case, Sabarmati Gas Limited had filed an application under Section 9 IBC before NCLT, Ahmedabad seeking initiation of Corporate Insolvency Resolution Process (CIRP) in its capacity as Operational Creditor of the Shah Alloys Limited. NCLT dismissed the application on the grounds of being barred by limitation and existence of a ‘pre-existing dispute’ between the parties. As the NCLAT dismissed the appeal, Sabarmati Gas Ltd., approached the Apex Court.

One of the issues raised in the appeal was whether in computation of the period of limitation in regard to an application filed under Section 9, IBC the period during which the operational creditor’s right to proceed against or sue the corporate debtor that remain suspended by virtue of Section 22 (1) of the Sick Industrial Companies (Special Provisions Act, 1985) (SICA) can be excluded, as provided under Section 22 (5) of SICA?

The court observed that there was a legal bar for initiation of proceedings against an industrial company by virtue of Section 22 (1), SICA.

" Obviously, when a party was thus legally disabled from resorting to legal proceeding for recovering the outstanding dues without the permission of BIFR and even on application permission therefor was not given the period of suspension of legal proceedings is excludable in computing the period of limitation for the enforcement of such right in terms of Section 22(5), SICA. In the absence of provisions for exclusion of such period in respect of an application under Section 9, IBC, despite the combined reading of Section 238A, IBC and the provisions under the Limitation Act what is legally available to such a party is to assign the same as a sufficient cause for condoning the delay under Section 5 of the Limitation Act", the bench said.

In this context, the court referred to Section 5 of the Limitation Act and observed:

"As relates Section 5 of the Limitation Act showing ‘sufficient cause’ is the only criterion for condoning delay. ‘Sufficient Cause’ is the cause for which a party could not be blamed."

[Note: Section 3 of the Limitation Act provides that "Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence." Section 5 reads as follows: "Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.]

The court said that it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the period of limitation. On merits, the bench, however, found that appeal is liable to be dismissed as there existed a ‘pre-existing dispute’ between the parties.