Status as on 13/12/2019
Recently, the NCLAT has delivered a judgment declaring that time spent over proceedings under SARFAESI will excluded for the purposes of computing limitation under IBC, 2016 lets analysis it.
Creditors no more lie in wait. NCLAT cleared much awaited issue of limitation over the proceedings of Insolvency while addressing to SARFAESI Act. The Limitation Act, prescribing the timeline in which a person is required to file a suit/petition was under a serious doubt over maintainability of an application of Limitation Act on insolvency proceedings instituted under Insolvency and Bankruptcy Code, 2016. Nevertheless, due to deliberations of Insolvency Law Committee, Section 238-A was inserted by way of amendment in 2018. This mandated application of Limitation Act over IBC. Further, this was acknowledged by the Supreme Court in B.K. Educational Services Private Limited case. But in this respect, one important question that arises-
Whether Creditors who preferred relief under SARFAESI Act, 2002 would have the option to take recourse under IBC?
NCLAT was faced with a similar question and it passed an order in favor of the Creditors. There has been a very sharp turn of view which had favor the cases filed by the Creditors.
NCLAT In the matter of SeshNath Singh and Anr. vs. BaidyabatiSheoraphuli Cooperative Bank Ltd, while computing the limitation period in respect of the section 7 application (for initiating insolvency proceedings) under the Insolvency and Bankruptcy Code, 2016 (IBC), the NCLAT excluded the time during which the financial creditor had proceeded against the Corporate Debtor under SARFAESI Act, 2002 for the same relief. It primarily relied on interpreting proceedings instituted under SARFAESI in the light of Section 14(2) of the Limitation Act and inferred that in computing the period of limitation the time during which the Secured Creditor has been prosecuting with due diligence in another civil proceedings under SARFAESI against the Corporate Debtor for the same relief shall be excluded.
Effect of the NCLAT’s Order over Creditors
The effect of the observation made by the NCLAT is that it would entitle all the Creditors who prior to the enactment of IBC have instituted proceedings under SARFAESI but the debt stood unrecoverable. Now these creditors have been given a green light to institute proceedings under IBC, if excluding the period of proceedings under SARFAESI the Creditors are within the limitation period as provided under the Limitation Act,1963. Therefore, this order provides a new way to all creditors which fall under the above category to institute proceedings under IBC.
This order gives a fresh call to all the Creditors to invoke the jurisdiction of IBC and seek appropriate redressal for their long-awaited grievances against the debtor. Banks, who are among the majority in Creditors, to get the good benefit by the recent development through this order.
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