Section 12(1)(c) Presidency Towns Insolvency Act | Covid-19 Limitation Extension Applies to Time-Bound Insolvency Petitions : Bombay HC

The Bombay High Court has clarified that the three-month period under Section 12(1)(c) of the Presidency Towns Insolvency Act, 1909, though framed as a condition precedent, is functionally a limitation period extended by the Supreme Court’s Covid-19 relief orders, thereby validating an insolvency petition filed during the pandemic lockdown.

Background & Facts

The Dispute

The petitioning creditor, Anil Kainya, sought to declare M/s M. A. Castle Infrastructure Company, a partnership firm, and its two partners, Manan Jabbar Shaikh and Aftab Manan Shaikh, as insolvents under the Presidency Towns Insolvency Act, 1909. The dispute arose from a failure to comply with a consent decree dated 20 August 2019, which required the judgment debtors to deliver four flats or pay Rs. 7.45 crores by 31 March 2020. The debtors defaulted, triggering the creditor’s recourse to insolvency proceedings.

Key Facts

• The consent decree was passed by the Bombay City Civil Court, Dindoshi on 20 August 2019.
• The judgment debtors failed to pay Rs. 7.45 crores or deliver flats by 31 March 2020.
• An insolvency notice in Form 1B was served on the firm (judgment debtor no.1) and partner Aftab Manan Shaikh (judgment debtor no.3) on 8 April 2021.
• The 35-day compliance period expired on 13 May 2021. Neither the firm nor this partner challenged the notice.
• The second partner, Manan Jabbar Shaikh (judgment debtor no.2), could not be served on 8 April 2021. He was served on 8 November 2021.
• The 35-day period for judgment debtor no.2 expired on 13 December 2021. On that same day, he filed a motion to set aside the notice.
• The Insolvency Court dismissed the motion on 20 December 2023, holding it was filed only by judgment debtor no.2.
• The petitioning creditor filed Insolvency Petition No.12 of 2023 on 29 January 2022.
• A second petition, No.4 of 2024, was filed on 20 March 2024.
• The appeal against the 20 December 2023 order was dismissed on 6 February 2026 for non-appearance.

Procedural History

• 20 August 2019: Consent decree passed by Bombay City Civil Court.
• 8 April 2021: Insolvency notice served on judgment debtor nos.1 and 3.
• 13 May 2021: 35-day compliance period expired for judgment debtor nos.1 and 3.
• 8 November 2021: Insolvency notice served on judgment debtor no.2.
• 13 December 2021: 35-day period expired for judgment debtor no.2; motion to set aside notice filed.
• 29 January 2022: Insolvency Petition No.12 of 2023 filed.
• 20 December 2023: Insolvency Court dismissed motion filed by judgment debtor no.2.
• 6 February 2026: Appeal against dismissal of motion dismissed for non-appearance.
• 20 March 2024: Second insolvency petition (No.4 of 2024) filed.
• 2 April 2026: Judgment delivered by Bombay High Court.

The Parties' Positions

For the Judgment Debtors (Nos.1, 2, and 3)

• Argued that Section 12(1)(c) is a condition precedent, not a limitation provision.
• Contended that the act of insolvency occurred on 13 May 2021 (expiry of 35-day period for judgment debtors 1 and 3), making the petition filed on 29 January 2022 time-barred.
• Relied on Chintaman Laxman v. Ramgopal Raghunathdas, Paramjeet Singh Patheja v. ICDS Ltd., and Kaku Chenchuramana Reddi v. Palapu Arunachalam to assert that the Insolvency Act must be strictly construed and that the Supreme Court’s Covid-19 extension does not apply to condition precedents.
• Argued that the petition against judgment debtor no.2 was premature because the act of insolvency only occurred on 20 December 2023, when the motion was dismissed.

For the Petitioning Creditor

• Argued that the act of insolvency is complete only upon the last service of notice, which was on 8 November 2021 to judgment debtor no.2.
• Contended that the 3-month period therefore began on 13 December 2021, making the petition filed on 29 January 2022 timely.
• Alternatively, relied on the Supreme Court’s Cognizance for Extension of Limitation orders to assert that the period from 15 March 2020 to 28 February 2022 should be excluded, extending the deadline.
• Invoked Prakash Corporates v. Dee Vee Projects Limited and Global Technologies v. Principal Commissioner of Customs to argue that the Supreme Court’s extension applies to time-bound pre-conditions, not just limitation periods.
• Asserted that the Court was effectively closed during the pandemic, and the proviso to Section 12(1)(c) allows filing on the next working day.

Relief Sought

The petitioning creditor sought declaration of all three judgment debtors as insolvents. The judgment debtors sought dismissal of Insolvency Petition No.12 of 2023 on grounds of non-compliance with Section 12(1)(c) and prematurity.

The Legal Issue

The central question was whether the three-month period under Section 12(1)(c) of the Presidency Towns Insolvency Act, 1909 constitutes a mere condition precedent, excluding the benefit of the Supreme Court’s Covid-19 limitation extension, or whether it functions as a limitation period that is extended by the Cognizance for Extension of Limitation orders.

Arguments Presented

For the Appellant/Petitioner

The petitioning creditor argued that the act of insolvency is complete only upon the last service of notice, which occurred on 8 November 2021 to judgment debtor no.2. Thus, the 3-month window began on 13 December 2021, and the petition filed on 29 January 2022 was within time. Alternatively, she contended that the Supreme Court’s orders excluding the period from 15 March 2020 to 28 February 2022 apply to all time-bound pre-conditions, including Section 12(1)(c), as confirmed in Prakash Corporates and Global Technologies. She further argued that the Court was functionally closed during the pandemic, and the proviso to Section 12(1)(c) permits filing on the next working day, which would be 1 March 2022 - well after the petition’s filing date.

For the Respondent/State

The judgment debtors contended that Section 12(1)(c) is a condition precedent, not a limitation provision, and therefore not subject to extension under the Supreme Court’s Covid-19 orders. They relied on Paramjeet Singh Patheja and Kaku Chenchuramana Reddi to assert that the Insolvency Act must be strictly construed due to its severe consequences. They argued that the act of insolvency occurred on 13 May 2021, making the petition time-barred. Regarding judgment debtor no.2, they claimed the petition was premature until the motion to set aside the notice was dismissed on 20 December 2023. They further argued that the Limitation Act is expressly excluded by Sections 101 and 101A of the Insolvency Act, and the Supreme Court’s orders do not override statutory conditions.

The Court's Analysis

The Court undertook a comprehensive analysis of Section 12(1)(c), the nature of partnership liability under the Indian Partnership Act, 1932, and the scope of the Supreme Court’s Covid-19 orders. It rejected the argument that service on one partner does not constitute service on the firm, holding that Rule 152 of the Bombay (Presidency Towns) Insolvency Rules, 1910, deems service on any partner as service on the firm. Thus, the act of insolvency occurred on 13 May 2021, not on 13 December 2021.

However, the Court then turned to the pivotal issue: whether the three-month period under Section 12(1)(c) is a limitation period subject to extension. The judgment debtors relied on decisions from Madras and Allahabad High Courts holding that Section 12(1)(c) is a condition precedent, not a limitation provision. The Court acknowledged this view but found it insufficient in light of the Supreme Court’s decision in Cognizance for Extension of Limitation.

"Paragraph 5.4 of the Cognizance for Extension of Limitation decision expressly includes within its scope 'any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.'"

The Court noted that the Supreme Court had applied this extension to Section 138 of the NI Act, Section 12A of the Commercial Courts Act, and Sections 23(4) and 29A of the Arbitration Act - all of which are condition precedents. The Court concluded that Section 12(1)(c) falls squarely within this category. It further held that the proviso to Section 12(1)(c), which allows filing on the next working day if the deadline falls on a closed court day, reinforces the provision’s character as a limitation period.

The Court also rejected the argument that the petitioning creditor was not a vigilant litigant, distinguishing Sagufa Ahmed on facts: in that case, the limitation had expired before the lockdown, whereas here, the deadline fell squarely within the excluded period. The Court emphasized that the pandemic rendered physical filing impossible, and the Insolvency Act requires physical submission even today.

Finally, the Court held that the petition was filed within the extended period, regardless of whether Section 12(1)(c) is viewed as a condition precedent or a limitation provision. In the former view, the Global Technologies principle applies - where no time is specified, a reasonable time is implied and extended by the Supreme Court’s orders. In the latter view, the Cognizance extension directly applies. Both paths lead to the same conclusion.

The Verdict

The Insolvency Petition No.12 of 2023 is held to be maintainable. The Court dismissed the preliminary objections raised by the judgment debtors. The petitioning creditor is entitled to proceed with the insolvency proceedings against all three judgment debtors. The Court directed that the matter be listed for further proceedings on merits, with all parties to appear before the Insolvency Court within 30 days of this order.

What This Means For Similar Cases

Time-Bound Conditions Are Now Extended Under Covid-19 Relief

• Practitioners may now invoke the Supreme Court’s Cognizance for Extension of Limitation orders to extend deadlines for any statutory pre-condition that functions as a time-bound trigger for initiating proceedings.
• This includes conditions under the NI Act, Arbitration Act, and now the Insolvency Act - even if labeled as "condition precedent."
• The burden shifts to respondents to prove the deadline fell outside the excluded period (15 March 2020 to 28 February 2022).

Service on One Partner Satisfies Service on the Firm

• In insolvency petitions against partnership firms, service on any partner or at the principal place of business constitutes service on all partners under Rule 152 of the Bombay Insolvency Rules.
• The last service date is irrelevant; the earliest valid service triggers the 3-month window.
• This prevents strategic delays by avoiding service on one partner.

Physical Filing During Lockdown Is a Valid Ground for Extension

• Courts will recognize the practical impossibility of physical filing during lockdowns as equivalent to court closure under the proviso to Section 12(1)(c).
• Petitioners must document court restrictions (e.g., SOPs, circulars) to substantiate claims of non-accessibility.
• Online filing availability is irrelevant if the statute mandates physical submission.