Recent Judgments Related to Applicability of Limitation, SEBI and Income Tax Act on IBC.
The Supreme Court has recently given some very important rulings with regards to Section 18 of the Limitation Act and Section 238 of the IBC i.e The Insolvency and Bankruptcy Code.
The court stated that so far as possible within the contours of the Limitation Act, a debt will continue to be alive and an action basis such debt will be maintainable under the Insolvency and Bankruptcy Code, 2016 (“Insolvency Code”) against a defaulting borrower.
- Laxmi Pat Surana vs.Union Bank of India & Anr Civil Appeal No. 2734 of 2020.
Here the court stated that sec 18 of the limitation act is applicable to IBC such that if a written acknowledgement of liability is given prior to the expiry of the prescribed period of limitation, i.e., a period of three-years from the date of default (Section 137 of the Limitation Act), a fresh period of limitation will be computed from the time of signing of such acknowledgement, provided the acknowledgment is before expiration of the prescribed period of limitation. In other words, applicability of Section 18 would extend the existing period of limitation for a debt, provided it is not already time barred.
- Asset Reconstruction Company (India) Limited vs.Bishal Jaiswal Civil Appeal No. 323 of 2021
The court stated that entries in books of accounts, including in the balance sheets of the debtor, will amount to acknowledgment of debt under Section 18 of the Limitation Act.Along with the two cases another very important ruling by the apex court was
- Sesh Nath Singh & Anr vs.Baidyabati Sheoraphuli Co-Operative Bank & Anr 2021 In this case the court held that
- Limitation Act must be read harmoniously “as far as may be” possible with the Insolvency Code.
- Application for condonation of delay is not mandatory to seek condonation under the provisions of the Limitation Act.
- Section 14 of the Limitation Act and be allowed to be excluded while computing limitation under Insolvency Code.
- Mr. Bhanu Ram & Ors. v. M/s HBN Daries and Allied Ltd., Company Petition (IB)-547(PB)/2018
Issue: The issue before the Tribunal was whether provisions of the Insolvency and Bankruptcy Code would override the provisions of the SEBI Act and the Income Tax Act in view of Section 238.
The Adjudicating Authority referred to the decision of the Hon’ble Supreme Court in Pr. Commissioner of Income Tax v. Monnet Ispat and Energy Ltd., SLP(C) No. 6487/2018 and observed that Section 238 is a non-obstante clause with the widest amplitude due to which the IBC would override anything inconsistent contained in any other enactment including the Income Tax Act and the SEBI Act.
The Tribunal declared that in view of the non-obstante clause of Section 238, no right under any other law can come in the way of the IBC as in absence of records of possession over the Corporate Debtor’s property, the Resolution Professional would be unable to perform his statutory duties under the Code in a time bound manner and no possibility of resolution would then exist, which was the primary object of the Code.