Limitation Act does not apply to Proceedings under the IBC

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Oct 01, 2017

Limitation Act does not apply to Proceedings under the IBC

By its order dated August 11, 2017,[1] NCLAT held that the provisions of the Limitation Act, 1963 (‘Limitation Act’) do not apply to the insolvency and bankruptcy process under the IBC. It stressed on the fact that the IBC was not enacted for the purpose of recovery of money claims, but rather for the initiation of CIRP. Accordingly, NCLAT allowed a debt that was time barred under the Limitation Act to form the basis of an application for the initiation of CIRP.

On August 23, 2017, the Supreme Court (‘SC’) dismissed an appeal from the order of NCLAT and declined to interfere with it. However, it noted that the question of law, viz whether the Limitation Act applies to IBC proceedings, has been kept open.

[1] Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Limited, Company Appeal (AT) (Insolvency) No. 44 of 2017.

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