Under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), limitation for initiating Corporate Insolvency Resolution Process (CIRP) by an operational creditor

 

Under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), limitation for initiating Corporate Insolvency Resolution Process (CIRP) by an operational creditor is governed by the Limitation Act, 1963, as clarified by the Supreme Court in B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates (2018).

Key Points:

1. Limitation Period:

• The period of limitation is 3 years from the date when the default occurs (i.e., when the debt became due and was not paid).
• Governed by Article 137 of the Limitation Act (residuary article).
• This applies even if no demand notice was sent — limitation starts from the date of default, not the date of sending the demand notice under Section 8.

2. Section 8 Notice and Limitation:

• The demand notice under Section 8 is a procedural step, not the trigger for limitation.
• It does not reset or extend the limitation period.
• If the claim is already time-barred when the Section 8 notice is issued, the application under Section 9 will be dismissed.

3. Acknowledgment of Debt – Section 18 of Limitation Act:

• If the corporate debtor acknowledges the debt in writing before the 3-year period expires, the limitation period gets extended and runs afresh from the date of acknowledgment.

4. Effect of No Notice or Communication:

• The absence of a prior demand notice or follow-up communications does not delay the starting point of limitation.
• The clock starts ticking from the date of default — i.e., when payment became due and was not made — whether or not you followed up.