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Application under IBC is not a suit, limitation is of 3 years as per Article 137 of the Limitation Act

In CIVIL APPEAL NO. 4952 OF 2019, GAURAV HARGOVINDBHAI DAVE vs ASSET RECONSTRUCTION COMPANY (INDIA)LTD., the Respondent No.2 was declared NPA on 21.07.2011 and an application Section 7 application filed under the Insolvency and Bankruptcy Code on 03.10.2017 and the date of the NPA was declared as 21.07.2011. NCLT allowed the application while applying Article 62 of the Limitation Act under which the limitation period was 12 years from the date on which the money suit has become due. NCLAT following its earlier judgments dismissed the appeal holding that the time of limitation would begin running for the purposes of limitation only on and from 01.12.2016 which is the date on which the Insolvency and Bankruptcy Code was brought into force. Appeal was filed before Supreme Court against this order.

The appellants quoting Supreme Court judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates, 2018 SCC OnLine SC 1921 argued that Article 137 being a residuary article would apply on the facts of this case, and as right to sue accrued only on and from 21.07.2011,
three years having elapsed since then in 2014, the Section 7 application filed in 2017 is clearly out of time.

The Supreme Court held that Article 62 is not applicable here as it would only apply to suits. The present case being “an application” which is filed under Section 7, would fall only within the residuary article 137. Agreeing with the appellant, the Supreme Court decided that time, therefore, begins to run on 21.07.2011, as a result of which the application filed under Section 7 would clearly be time-barred.

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