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Limits of the Limitation Law and IBC

-Megha Mittal

(resolution@vinodkothari.com)

The law of limitation revolves around the basic concept of fixing or prescribing the time period for barring legal actions beyond that period. A concept widely acknowledged, in India, the law of limitation is governed by the Limitation Act, 1963[1]. As stated in its preamble, the Limitation Act, 1963 (“Act”) is an act to consolidate the laws for the limitation of suits and other proceedings and for purposes connected therewith.

As observed in the 89th Report of the Law Commission of India[2], the laws of limitation are ultimately based on justice and convenience. An individual should not live under the threat of possible action for an indefinite period, and at the same time, should be saved from the task of defending a stale cause of action, as it would be unjust. The Report states, “all that has been said on the subject can be summarised by stating that the laws of limitation rest upon three main foundations – justice, convenience and the need to encourage diligence.” 

The very crux of having a limitation law in force is that a person cannot sleep over his rights[3] for an indefinite period and seek such remedy at a later stage. That being the tenet on which the law is based, there are several basic principles which the law states. These principles substantively affect the rights of parties. Recently, there has been a lot of commotion around the manner and the circumstances, in which the limitation law can be invoked in the context of the Insolvency and Bankruptcy Code, 2016 (‘Code’), though it is established now that the limitation law is applicable to the proceedings under the Code by virtue of section 238A.

In this article, we have made a humble attempt to analyse the various principles of the Limitation Act and its impact on the Code.

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Accumulated welfare benefits of employees and treatment under Resolution Plans

Megha Mittal

(resolution@vinodkothari.com)

The preamble of the Insolvency and Bankruptcy Code, 2016 (“Code”) enshrines the principle of balance of interests of all stakeholders. A major part of the stakeholders is represented by employees and workmen. Employees and workmen are one of the most significant pillars on which the economy runs, and hence, it becomes important to understand their footing under the Code and ensure that they have necessary safeguards from being put in a helpless position in a situation where the employer gets into insolvency.

It must be noted that section 5(20) read with section 5(21) includes claims in respect of employment under the ambit of “operational debt”, and as such empowers employees to initiate an application for insolvency against its employer, under section 9 of the Code, that is, as an operational creditor. Further, section 53 of the Code accords priority to the workmen dues at par with secured creditors, and next priority is given to employee dues. Hence, while on one hand their position as an applicant is secured, the position of its claims, especially terminal claims remains a rather unexplored sphere.

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