NCLT Proceedings Time Excludable Under Section 14 Limitation Act: Calcutta High Court

The Calcutta High Court on 6 May held that the time spent prosecuting insolvency proceedings before the National Company Law Tribunal (NCLT) is liable to be excluded under Section 14 of the Limitation Act, 1963, even where a Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC) is rejected on the ground of pre-existing dispute.

Justice Aniruddha Roy allowed a commercial suit filed by Jones Lang LaSalle Property Consultants (India) Pvt Ltd against M. A. Leasing and Construction Pvt Ltd and its directors seeking recovery of unpaid professional fees, and directed exclusion of the period spent before the NCLT while computing limitation. He held:

“Therefore, in the order of dismissal of NCLT dismissing the Section 9 proceeding filed under IBC dated September 10, 2023, when shows that the dismissal was at the threshold on the ground of pre-existing dispute, which is a jurisdictional bar under the relevant statute, IBC, to entertain the proceeding, such dismissal was not on merit and should be construed within the meaning and expression 'other cause of like nature' used under sub Section (1) to Section 14 of the Limitation Act.”

Jones Lang LaSalle had issued a demand notice under Section 8 of the IBC on 29 November 2019 and subsequently initiated insolvency proceedings before the NCLT Kolkata Bench on 29 July 2020, alleging default in payment of professional fees by M. A. Leasing.

The NCLT, by its order dated 10 September 2023, dismissed the Section 9 application after holding that a pre-existing dispute existed between the parties, while granting liberty to the plaintiff to pursue remedies under other applicable laws.

The plaintiff thereafter approached the High Court seeking exclusion of the time spent before the NCLT for the purpose of limitation in the subsequent commercial suit, contending that both proceedings arose from the same underlying claim for unpaid dues.

The Bench noted that the plaintiff had acted with due diligence from the inception of the cause of action and had bona fide pursued statutory remedies before the appropriate forum.

It further held that the earlier proceedings were dismissed on a jurisdictional ground without adjudication on merits and that there was neither negligence nor lack of diligence on the plaintiff's part. In this context, the Court observed:

“This Court finds that there was neither any lack of diligence nor was any negligence on the part of the plaintiff in pursuing its remedy, at any point of time. Immediately after the order of dismissal passed by the NCLT, the plaintiff had instituted the instant suit within a span of less than three months.”

Accordingly, the High Court excluded the relevant period spent before the NCLT under Section 14 of the Limitation Act and admitted the commercial suit.