NCLT Kolkata: Limitation Period To Enforce Scheme Under Companies Act Is 12 Years Given In Article 136 Of Limitation Act

Brief Background:

In 2021, MTPL had preferred a petition under Section 231 of the Companies Act, 2013 for execution of an order dated 10.08.2011 passed by Calcutta High Court approving a scheme of arrangement.

The core issue that arose before NCLT Kolkata was "whether limitation to enforce/implement the scheme is 12 years as per Article 136 of the Limitation Act or is 3 years as per Article 137 of the Limitation Act."

The Respondent contended the application by arguing that the application should be dismissed due to the expiration of the limitation period. It claimed that the Petitioner is attempting to enforce an Order dated 10.08.2011 beyond the three-year period stipulated under Article 137 of the Limitation Act, 1963.

Contentions of the Petitioner:

The Petitioner argued that it is seeking execution of a decree, for which the limitation period is 12 years under Article 136 of the Limitation Act and thus, within the allowable period. Further as per Section 424 of the Companies Act, 2013 it asserted that the Order constitutes a decree under this section, making the limitation period for enforcement 12 years. Additionally, Section 231 of the Companies Act specifies no time limit to implement the decree rather the Tribunal has the authority to oversee its implementation.

Further, it contended that even if the three-year limitation applies, the Petitioner only became aware of the Order in 2020 when the company's auditors informed the management. Therefore, the limitation period should start from the date of knowledge. It also relied upon the judgment of Techno Metal India (P.) Ltd. vs. Prem Nath Anand by the Division Bench of Calcutta High Court.

NCLT Verdict:

The NCLT Kolkata allowed the application and observed that the argument of the respondent may be correct concerning the period of execution being three years under the Arbitration Act, however under the Companies Act, the period of execution is 12 years as per Article 136 of the Limitation Act 1963, it is 12 years.

It placed reference upon the decision of the Calcutta High Court in Techno Metal India (P.) Ltd. vs. Prem Nath Anand wherein it was observed that the insertion of the word "other" suggests that the legislature intended to clarify that Article 137 should be interpreted with reference to preceding articles. The other articles in the third division of the Schedule pertain to applications under the Code of Civil Procedure, except for some applications under the Arbitration Act and in two cases, the Code of Criminal Procedure. The Court concluded that even the changes introducing references to applications under the Code of Criminal Procedure in the new Limitation Act did not significantly alter the scope of the residuary Article 137. Thus, it cannot be inferred that the legislature intended to broaden this article to encompass all applications, regardless of their relation to the Code of Civil Procedure.

It concluded the application to be within the prescribed period of limitation.

Case Title: Machino Transport Private Limited vs. Machino Finance Private Limited

Case No.: IA (CA) No. 213/KB/2023 and CP No. 42/KB/2021

Counsel for Applicant: Ms. Ranjana Roy Gawai, Mr. Pervindra, Mr. Shikhar Upadhyay, Advocates

Counsel for Respondent: Mr. Ratnanko Banerji, Senior Advocate Mr. Ajay Gaggar, Ms. Tahira Karanjawala, Advocates

Click here to Read/Download Order