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Limitation Act Applicable To Sections 7 and 9 Of Insolvency Code From Inception

In B.K. EDUCATIONAL SERVICES PRIVATE LIMITED vs PARAG GUPTA AND ASSOCIATES,  appeal was filed against the order of the NCLAT where in reply to the question as to whether the Limitation Act will apply to applications that are made under Section 7 and/or Section 9 of the Insolvency and Bankruptcy Code and from its commencement on 01.12.2016 till 06.06.2018, till   the Appellate Authority has held that the Limitation Act does not so apply.

The issue accrued from Section 238A of the Insolvency and Bankruptcy Code, which was inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 with effect from 06.06.2018.

The Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.

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