Applicability of Section 18 of the Limitation Act to proceedings under IBC: Need for reconsideration
By INSOL INDIA EDITORIAL TEAM Posted On : September 22, 2020
In a significant judgment, the Hon’ble Supreme Court recently held that Section 18 of the Limitation Act, 1963, is inapplicable to an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC).
The Court held that if a financial creditor does not file application for initiating the Corporate Insolvency Resolution Process (CIRP) within three years from the date of default, then the claim becomes time-barred under Article 137 of the Schedule to the Limitation Act.
In other words, no case can be brought under Section 7 IBC in respect of a financial debt after three years of the date of default, even if there is a written acknowledgment of that debt by the corporate debtor, which would otherwise give rise to a fresh period of limitation as per Section 18 of the Limitation Act.