NDLI: Sabarmati Gas Limited Vs. Shah Alloys Limited

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	ss. 6 238A 252 Insolvency and Bankruptcy Code 2016 8 9 Sick Industrial Companies 62
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Limitation Act, 1963 (36 of 1963) Insolvency and Bankruptcy Code, 2016 (31 of 2016) Sick Industrial Companies (special Provisions) Act, 1985 (1 of 1986)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Insolvency and Bankruptcy Code, 2016 – ss. 6, 8, 9, 62, 238A, 252 – Sick Industrial Companies (Special Provisions) Act, 1985 – ss. 16, 17, 22, 25 – Limitation Act, 1963 – s.5,14 and Art. 137 – Insolvency and Bankruptcy (Application to Adjudicating Authority), Rules 2016 – r. 5, Form no. 3 – Appellant and respondent entered into a Gas Sales Agreement (GSA) whereunder the appellant was having the obligation to supply natural gas – Thereafter, the respondent made default in the payment of the invoices – Respondent approached BIFR and it was declared a ‘sick unit’ – Appellant sought the permission of the BIFR for initiating proceedings against the respondent for recovery of outstanding dues – Shortly thereafter, the SICA was repealed w.e.f 01.12.2016 by coming into force of IBC – Upon BIFR becoming functus officio, appellant issued demand notice u/s.8 of IBC – Respondent declined the liability to pay the amount demanded – Appellant filed an application u/s. 9 of the IBC before NCLT seeking initiation of CIRP in its capacity as operational creditor of the respondent – The said application was dismissed by the NCLT on the grounds of being barred by limitation and existence of a ‘pre-existing dispute’ between the appellant and the respondent – The appeal against the decision of NCLT was also dismissed by NCLAT – Issues before the Supreme Court: Whether in computation of the period of limitation in regard to an application filed u/s. 9, IBC the period during which the operational creditor’s right to proceed against or sue the corporate debtor that remain suspended by virtue of s.22 (1) of the Sick Industrial Companies (Special Provisions Act, 1985) (SICA) can be excluded, as provided u/s.22 (5) of SICA and Whether the respondent has raised a dispute which is describable as ‘pre-existing dispute’ between itself and the appellant warranting dismissal of application u/s. 9 of the IBC at the threshold – Held: When the limitation period for initiating CIRP u/s. 9, IBC is to be reckoned from the date of default, as opposed to the date of commencement of IBC and the period prescribed therefor, is three years as provided by s.137 of the Limitation Act, 1963 and the same would commence from the date of default and is extendable only by application of s.5 of the Limitation Act, 1963 it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay – In the absence of provisions for exclusion of period in respect of an application u/s. 9, IBC, despite the combined reading of s. 238A, IBC and the provisions under the Limitation Act what is legally available to such a party is to assign the same as a sufficient cause for condoning the delay u/s. 5 of the Limitation Act – As far as ‘preexisting dispute is concerned’, considering the nature of the dispute of the respondent as referred hereinbefore in respect of the claim made by the appellant, there is no reason to disagree with the concurrent findings of the Tribunals that there existed a ‘pre-existing dispute’ between the parties before the receipt of demand notice u/s. 8, IBC – The dismissal of the application u/s. 9, IBC on the ground of ‘pre-existing dispute’ cannot be held to be patently illegal or perverse.
Judge	Hon'ble Mr. Justice C.T. Ravikumar
Neutral Citation	2023 INSC 10
Petitioner	Sabarmati Gas Limited
Respondent	Shah Alloys Limited
SCR	[2023] 4 S.C.R. 188
Judgement Date	2023-01-04
Case Number	1669

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