SUPREME COURT ALLOWS FILING OF CLAIMS BEFORE RESOLUTION PROFESSIONAL BEYOND LIMITATION, IN VIEW OF COVID-19 PANDEMIC

A Two Judge Bench of the Supreme Court comprising of Justice Indira Banerjee and Justice J.K. Maheshwari passed a Judgment dated 29-11-2021 in the matter of GPR Power Solutions Private Limited vs Mr. Supriyo Chaudhuri (Resolution Professional of Rohit Ferro Tech Limited) and Others 2021 SCC OnLine SC 1328 and decided upon the issue of applicability of Limitation Act 1973 in case of delay in filing claims before the Resolution Professional of Rohit Ferro Tech Limited (Corporate Debtor) due to the COVID-19 Pandemic.

In this case, GPR Power Solutions Private Limited, the Appellant herein, carries on business of supply and erection of piping systems. The Corporate Debtor placed a Purchase Order with the Appellant around 25-04-2012. Later, the Corporate Debtor failed to pay approximately Rs. 76,85,472/- to the Appellant in connection with the aforesaid Purchase Order. Hence, the Appellant initiated Arbitration Proceedings against the Corporate Debtor. The Appellant then filed an Application under Section 11 of the Arbitration and Conciliation Act 1996 (Arbitration Act) before the Calcutta High Court seeking appointment of Arbitral Tribunal in respect of the aforesaid Claim. The Calcutta High Court passed an Order dated 29-09-2016 and appointed an Arbitrator to adjudicate the disputes between the Appellant and the Corporate Debtor. Thereafter, the Arbitrator passed a Final Award dated 30-11-2018 and awarded a sum of Rs. 55,01,661/- along with interest and costs to the Appellant-Claimant.

Aggrieved, the Corporate Debtor filed an Application under Section 34 of the Arbitration Act before the District Court at Alipore District, 24 South Parganas seeking setting aside of the Final Award dated 30-11-2018, which is still pending.

During the pendency of the Section 34 Petition before the District Court, the State Bank of India being a Financial Creditor of the Corporate Debtor, initiated Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code 2016 (IBC) before the National Company Law Tribunal (NCLT), Kolkata Bench around 07-02-2020. The NCLT admitted the Section 7 IBC Petition and appointed a Resolution Professional (RP).

The RP advertised the CIRP of the Corporate Debtor around 11-02-2020 and thereby invited claims from creditors and other stakeholders of the Corporate Debtor. Soon thereafter, the entire country saw the onset of COVID-19 Pandemic and imposition of countrywide Lockdown on 25-03-2020, which was extended from time to time.

Later, the Appellant engaged a Counsel to appear in the Section 34 Petition before the District Court around 27-11-2020, when the Appellant claims to have received the information about admission of CIRP in respect of the Corporate Debtor and invitation of claims by RP. The Appellant immediately took steps to file Form B before the RP. However, by Email dated 14-01-2021, the RP refused to entertain the Claim of the Appellant on the ground that it has been filed beyond time.

Aggrieved, the Appellant filed an Application under Section 60 (5) of IBC on 11-03-2021 along with Application for Condonation of Delay in Filing its Claim before NCLT Kolkata. The NCLT vide Order dated 09-07-2021, dismissed the Section 60 (5) Application. Section 60 (5) of IBC is reproduced below for easy reference:

60. Adjudicating Authority for corporate persons. –

(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of –

(a) any application or proceeding by or against the corporate debtor or corporate person;

(b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and

(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

Aggrieved, the Appellant filed an Appeal before the National Company Law Appellate Tribunal (NCLAT) under Section 61 of IBC. But the NCLAT also dismissed the Appeal vide Order dated 15-09-2021 on the ground that the Committee of Creditors (COC) has already approved a Resolution Plan on 21-06-2020.

Aggrieved, the Appellant filed an Appeal before the Supreme Court. The Apex Court passed a Judgment dated 29-11-2021 and made the following observations in this case:

1) That the Supreme Court has earlier passed a Suo Moto Order dated 22-03-2020 in the matter of In Re Cognizance for Extension of Limitation Suo Moto Writ Petition (C) No. 3 of 2020 and held that the period of limitation in all proceedings before Courts/Tribunals would stand extended w.e.f. 15-03-2020 till further orders to be passed by the Apex Court in the said matter.

2) Thereafter, the Supreme Court vide Order dated 08-03-2021, held that the extension of limitation allowed by the aforesaid Suo Moto Order dated 22-03-2020 has been ended.

3) Further, in the Order dated 08-03-2021, the Supreme Court clearly specified that the period from 15-03-2020 till 14-03-2021 would stand excluded in calculating the period of limitation for filing any suit, appeal, etc and directed as follows:

i) In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15-03-2020 till 14-03-2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15-03-2020, if any, shall become available with effect from 15-03-2021.

ii) In cases where the limitation would have expired during the period between 15-03-2020 till 14-03-2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15-03-2021. In the event the actual balance period of limitation remaining, with effect from 15-03-2021, is greater than 90 days, that longer period shall apply.

Hence, based on the aforesaid directions of the Apex Court Orders dated 22-03-2020 and 08-03-2021, the Appellant was entitled to file Claim and the RP ought not to have rejected its Claim. As a result, the Supreme Court dismissed the NCLT and NCLAT Orders dated 09-07-2021 and 15-09-2021 respectively.

Editor’s Comments

The Supreme Court of India has been given special powers under Articles 141 and 142 of the Constitution of India 1950 to act in a manner that would be in the interest of justice. The Indian Constitution at Article 141 mandates that the Law declared by the Supreme Court shall be binding on all Courts. The Apex Court has also been given special powers under Article 142 that it can pass any decree or make any order for doing complete justice in any cause. In keeping with these powers, the Supreme Court suo moto decided by Order dated 22-03-2020 to extend the period of limitation by suspending the Pandemic Period during the First Wave from 15-03-2020 to 14-03-2021. This Order was made to ensure that all litigants who could possibly get barred by the Law of Limitation, be given extra time of one year, while computing the period of limitation in filing their cases. This step was obviously taken in the interest of justice and has been of tremendous help to one and all for filing of fresh litigations, appeals, etc.

 

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

 

Edited by

Sushila Ram Varma

Chief Consultant

The Indian Lawyer