2019 (1) TMI 1748 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate DEbtor failed to make repayment of its debt - existence of debt and dispute or not - Time Limitation - HELD THAT - Both the parties have waited for more than 6 years to raise the issue again to settle the old disputes. Admittedly, the respondent ceased to manufacture IMFL for the petitioner since November, 2012. Therefore, laches and limitation applies for both the parties. And now it is settled position of law that law of limitation applies for invoking provisions of Code. The hon'ble Supreme Court of India, in the case of B. K. Educational Services P. Ltd. v. Parag Gupta and Associates 2018 (10) TMI 777 - SUPREME COURT , has examined the issue of applicability of provisions of the Limitation Act, 1963 to the provisions of the Code. Therefore, the case is also barred by laches and limitation. Existence of debt and dispute or not - HELD THAT - The impugned demand is not only disputed, but it is also not established with supporting documents, and it is also barred by laches and limitation. The law on issue as discussed above is also against the petitioner. Therefore, the petitioner failed to make out any prima facie case to admit the instant case and it is liable to be rejected. Application rejected.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Dispute over unpaid advances and interest.
3. Dispute over the return of equipment and stock.
4. Existence of pre-existing disputes and arbitration proceedings.
5. Applicability of the Limitation Act, 1963.
6. Admissibility of the petition under the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The applicant, M/s. Unistil Alcoblends P. Ltd., sought to initiate CIRP against M/s. India Brewery and Distillery P. Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing non-payment of ?2,38,16,374 for advances towards supply of ENA, machinery lent, and stock withheld.

2. Dispute Over Unpaid Advances and Interest:
The applicant claimed advances of ?44,00,000 and ?47,57,800 paid to the corporate debtor for ENA supply, which were not fulfilled due to the non-renewal of the excise license by the corporate debtor. The corporate debtor acknowledged the debt but disputed the payment of interest, arguing that the agreement did not contain an interest clause.

3. Dispute Over Return of Equipment and Stock:
The applicant also claimed ?30,00,000 for equipment lent to the corporate debtor and ?16,77,827 for stock withheld at the corporate debtor's unit. The corporate debtor admitted the presence of equipment and stock but stated they were in the custody of the excise department due to non-renewal of licenses.

4. Existence of Pre-Existing Disputes and Arbitration Proceedings:
The corporate debtor filed an arbitration application under Section 9 of the Arbitration and Conciliation Act, 1996, claiming breaches by the applicant and seeking damages. The tribunal noted that the arbitration proceedings were initiated before the CIRP application, indicating a pre-existing dispute.

5. Applicability of the Limitation Act, 1963:
The tribunal emphasized that the law of limitation applies to the Insolvency and Bankruptcy Code, 2016, as established by the Supreme Court in B. K. Educational Services P. Ltd. v. Parag Gupta and Associates. The tribunal found that both parties had waited for over six years to address the disputes, rendering the claims barred by laches and limitation.

6. Admissibility of the Petition:
The tribunal referred to judgments such as Innoventive Industries Ltd. v. ICICI Bank and Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd., which state that the existence of a dispute or arbitration proceedings prior to the demand notice precludes the initiation of CIRP. The tribunal concluded that the claims were not substantiated with appropriate documents and were barred by limitation.

Conclusion:
The tribunal rejected the petition, stating that the applicant failed to establish a prima facie case for initiating CIRP. The tribunal noted that the disputes should be resolved through arbitration or other legal avenues, not through the summary proceedings of the Insolvency and Bankruptcy Code, 2016. The order emphasized that the petitioner's claims were disputed, lacked supporting documentation, and were barred by limitation.