Application u/s 95 of IBC Filed after Expiry of 3 years Barred by Limitation: NCLAT Dismisses Appeal of IDBI Bank [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) held that application under section 95 of the Insolvency and Bankruptcy Code (IBC), 2016, filed after the expiry of 3 years is barred by limitation and dismissed the appeal of IDBI Bank.

IDBI Bank Ltd, the appellant cahellneged the two identical orders passed by the National Company Law Tribunal (NCLT), Indore Special Bench, Court – I in C.P. (IB) No.55/MP/2024 and C.P. (IB) No.54/MP/2024, rejecting Section 95 application filed by the IDBI Bank against the respondent, the personal guarantor herein.

The IDBI Bank extended credit facilities to corporate debtor – Great Logistic and Parking Services Pvt. Ltd., the respondent, stood personal guarantor and executed a personal guarantee in favour of the creditor on 28.10.2010. The corporate debtor had defaulted in repayment of the cash credit facilities on 31.03.2016 leading the classification of the account as NPA.

The creditor issued a guarantee invocation notice to the personal guarantor on 24.10.2016 and an OA was also filed before the Debt Recovery Tribunal (DRT) on 31.03.2017 and recovery certificate was issued in favour of the creditor on 25.01.2019, after issuing demand notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, (‘2019 Rules’) on 19.03.2024. The application under Section 95 was filed by the IDBI Bank on 02.09.2024.

The adjudicating authority by the impugned order rejected the application as barred by time. It was held that from recovery certificate dated 25.01.2019, 3 years will expire on 25.01.2022 and even giving benefit of order of the Supreme Court in ‘Re: Cognizance for Extension of Limitation’, the limitation period would extend only till 11.01.2024 and the application having been filed on 02.09.2024 is beyond limitation period. Adjudicating authority by the impugned order rejected C.P. (IB) No.55/MP/2024 ad C.P. (IB) No.54/MP/2024, aggrieved by which orders, IDBI Bank has filed this appeal.

Counsel for the appellant submitted that Supreme Court in ‘Tottempudi Salalith’ case has held that decree passed by Court shall remain valid for a period of 12 years and during which claim can be filed in the IBC. It is submitted that in view of the judgment , limitation for filing Section 95 application has to be treated as 12 years hence the application filed was not barred by time.

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It is clear that Supreme Court in the above case which is relied by the appellant relying on the earlier judgment in the matter of ‘Kotak Mahindra Bank Ltd.’held that limitation for filing Section 7 application is only 3 years as per Article 137. The Tribunal viewed that submission of the appellant relying on the above judgment that Supreme Court held that limitation will be 12 years with respect to a decree is wholly incorrect and is not borne out from the judgment.

The appellant submission that for filing an application under IBC 12 years limitation will apply’ was rejected by the bench . The two member bench of Justice Ashok Bhushan, Chairperson and Barun Mitra, Member (Technical) while dismissing the appeal upheld the ruling of the adjudicating authority in the impugned order that Section 95 application filed by the IDBI Bank was filed after expiry of three years period of limitation

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