Even Though Limitation Is Not Set Up As Defence, Tribunal Should Examine: NCLT Chennai

Background Facts

SBQ Steels Ltd. ("Corporate Debtor") had availed loan from Bank of Baroda ("Applicant") and Mr. Rajiv Rai had stood as a Personal Guarantor vide a Deed of Personal Guarantee dated 27.03.2012. The Applicant had issued a loan recall notice dated 06.11.2014 but the Corporate Debtor and Personal Guarantor failed to repay the loan. Subsequently, the Corporate Debtor was dissolved in 2021 vide an order passed by the NCLT Chennai.

On 10.04.2021, the Applicant filed an application under Section 95 of the IBC seeking initiation of insolvency resolution process against the Respondent (Personal Guarantor). The Respondent submitted before the NCLT that the application was barred by limitation.

Relevant Law

Section 238A IBC

"238A. Limitation

The provision of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeal before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be."

Decision Of The NCLT

The NCLT Bench observed that the loan recall notice was issued on 06.11.2014 and the application has been filed on 10.04.2021, i.e. after 6 years. It was held that Section 238A of IBC applies to entire provisions of IBC and Article 136 of the Limitation Act, 1963 was also applicable to an application filed under Section 95 of IBC.

"In the said circumstances, as per Section 3 of the Limitation Act, 2013, even Court/Tribunal is required to examine the debt on the point of limitation, even though such a defence has not been setup."

The Bench held that the debt claimed by the Respondent was hopelessly time barred and accordingly dismissed the application.

Case Title: Bank of Baroda v Rajiv Rai, CP/89/IB/2021.

Counsel for Applicant: Nivedita Baskara, Advocate.

Counsel for Respondent: V. Anil Kumar, Advocate.

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