Tribunal rules the claim filed by BSEL Algo Limited in the CIRP of Gigeo Construction Company Pvt. Ltd. is time-barred, citing Article 19 of the Limitation Act, 1963.
In a significant decision, the National Company Law Tribunal (NCLT) Mumbai Bench has dismissed the claim of BSEL Algo Limited against Gigeo Construction Company Pvt. Ltd. in the ongoing Corporate Insolvency Resolution Process (CIRP). The tribunal, presided by Sh. Prabhat Kumar and Sh. Sushil Mahadeorao Kochey, ruled that the claim was filed beyond the permissible limitation period as stipulated under Article 19 of the Limitation Act, 1963.
BSEL Algo Limited, a secured creditor, had filed a claim amounting to over Rs. 22 crore, including principal and interest, based on a mortgage deed. However, the tribunal held that the limitation period for filing such claims in the CIRP is three years under Article 19, not twelve years under Article 62, which is applicable for enforcing payment of money secured by a mortgage.
The case highlights the complexities involved in the interpretation of limitation periods within insolvency proceedings. The tribunal emphasized that filing claims in a CIRP is distinct from enforcing a mortgage, which is subject to a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016.
The tribunal also considered the impact of the COVID-19 pandemic on the limitation period, as directed by the Supreme Court in its suo motu order. The limitation was extended due to the pandemic, but the extended period still expired on October 22, 2023. BSEL Algo Limited's claim, filed on January 24, 2025, was thus deemed time-barred.
Further, the tribunal addressed the issue of interest claims, ruling that in the absence of any stipulation in the agreement or mortgage deed regarding interest, such claims are without merit. Additionally, the tribunal clarified that the substantive rights under a registered mortgage deed cannot be negated by its disclosure as unsecured debt in financial statements, unless set aside by a competent court.
This decision underscores the critical importance for creditors to be mindful of limitation periods when filing claims in insolvency proceedings and reaffirms the necessity of adhering to statutory provisions to safeguard their financial interests.
Bottom Line:
Limitation period for filing claims in CIRP by mortgagee creditors is governed by Article 19 of the Limitation Act, 1963, and not by Article 62. Claims must be filed within three years of the debt becoming due, even if the debt is secured by a mortgage.
Statutory provision(s): Limitation Act, 1963 - Articles 19 and 62, Insolvency and Bankruptcy Code, 2016 - Section 14
BSEL Algo Limited v. Mr. Pankaj Bhattad, (NCLT)(Mumbai Bench) : Law Finder Doc Id # 2834420
