In a judgment delivered on January 4, the Supreme Court division bench led by Justice Ajay Rastogi and Justice C T Ravikumar provided a simple and brief definition for the term "sufficient cause" in Section 5 of the Limitation Act, 1963. ‘Sufficient Cause’ is the cause for which a party could not be blamed

The court observed that Section 22 (1) of the SICA imposed a legal bar on the initiation of proceedings against an industrial company.

" Obviously, when a party was thus legally disabled from resorting to legal proceeding for recovering the outstanding dues without the permission of BIFR and even on application permission, therefore, was not given the period of suspension of legal proceedings is excludable in computing the period of limitation for the enforcement of such right in terms of Section 22(5), SICA. In the absence of provisions for exclusion of such period in respect of an application under Section 9, IBC, despite the combined reading of Section 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 under Section 5 of the Limitation Act", the bench said. In this context, the court referred to Section 5 of the Limitation Act and observed:

"As relates to Section 5 of the Limitation Act showing ‘sufficient cause’ is the only criterion for condoning the delay. ‘Sufficient Cause’ is the cause for which a party could not be blamed."

The court stated that it is the Adjudicating Authority's responsibility to consider the claim for delay condonation when the proceeding in question is found to have been filed after the statute of limitations has expired. On the merits, the bench determined that the appeal should be dismissed because there was a "pre-existing dispute" between the parties.

In this case, Sabarmati Gas Limited filed an application before the NCLT, Ahmedabad, under Section 9 IBC, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) in its capacity as an operational creditor of Shah Alloys Limited. The NCLT denied the application due to limitation and the existence of a "pre-existing dispute" between the parties. After the NCLAT dismissed the appeal, Sabarmati Gas Ltd. petitioned the Supreme Court. One of the issues raised in the appeal was whether the period during which the operational creditor's right to proceed against or sue the corporate debtor that remains suspended by virtue of Section 22 (1) of the Sick Industrial Companies (Special Provisions Act, 1985) (SICA) can be excluded, as provided for in Section 22 (5) of SICA, can be excluded in computing the period of limitation in relation to an application filed under Section 9, IBC?

Case Title: Sabarmati Gas Limited vs. Shah Alloys Limited
Citation: CA 1669 of 2020 

Link: https://main.sci.gov.in/supremecourt/2020/4480/4480_2020_4_1501_40713_Judgement_04-Jan-2023.pdf