Limitation Act Applies to IBC: NCLT Condones Delay in Kerala Financial Corp's Bankruptcy Applications [Read Order]
Procedural timelines, though expressed in mandatory terms, may be construed as directory, especially where the statute does not prescribe specific penalties for non-compliance and where substantive rights would otherwise be defeated.
![Limitation Act Applies to IBC: NCLT Condones Delay in Kerala Financial Corps Bankruptcy Applications [Read Order]](https://images.taxscan.in/h-upload/2025/11/10/2103869-limitation-act-ibc-nclt-condones-delay-kerala-financial-corps-bankruptcy-applications-taxscan.webp "Limitation Act Applies to IBC: NCLT Condones Delay in Kerala Financial Corps Bankruptcy Applications [Read Order]")
While allowing the bankruptcy applications filed by Kerala Financial Corporation against personal guarantors, the Kochi bench of National Company Law Tribunal (NCLT) has held that the provisions of the Limitation Act, 1963, apply to proceedings under the Insolvency and Bankruptcy Code, 2016, and has condoned the delay in filing the applications.
The applications were filed by Kerala Financial Corporation, the creditor, against Dr. Bharath Chandran and Dr. Ashalatha Nair, who were personal guarantors for Trivandrum International Health Services Limited, the corporate debtor. The applications arose after the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor failed, and liquidation proceedings were initiated.
Kerala Financial Corporation argued that the delay in filing the applications on 04.03.2025 was necessitated by the ongoing liquidation of the corporate debtor's assets and the need to ascertain the outstanding debt. As a government of Kerala undertaking, it also required additional time for necessary administrative and statutory approvals.
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Per contra, the guarantors contended that the applications were time-barred and not maintainable. They relied on Section 121(2) of the IBC, which stipulates a three-month period for filing bankruptcy applications from the date of the Adjudicating Authority's order, and argued that the provisions of the Limitation Act, 1963, applied to make this period mandatory, thus barring the applications filed well beyond the prescribed limit.
The bench comprising Vinay Goel (Member-Judicial) and Madhu Sinha (Member-Technical), has held that the Limitation Act, 1963, applies to IBC proceedings. The Tribunal relied on Supreme Court precedents, including Sesh Nath Singh & Ors. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. and B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates, to hold that the word 'shall' in Section 121(2) of the IBC is directory and not mandatory.
The procedural timelines, though expressed in mandatory terms, may be construed as directory, especially where the statute does not prescribe specific penalties for non-compliance and where substantive rights would otherwise be defeated. The Tribunal found the creditor's explanation for the delay to be reasonable, noting that it was neither intentional nor mala fide.
Accordingly, the delay in filing the applications was hereby condoned. The applications were allowed and disposed of, subject to the Applicant depositing a sum of Rs. 25,000/- (Rupees Twenty-Five Thousand only) in each case with the National Defence Fund within one week from the date of the order.
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