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2022 (9) TMI 18 - AT - Insolvency and BankruptcyInitiation of CIRP - barred by time limitation or not - SIC company - pre-existing dispute or not - NCLT admitted the application - HELD THAT - The law is now well settled that the limitation for filing an application either under Section 7 or 9 of the Code is three years in view of Article 137 of the Limitation Act, 1961 which has to be seen from the date of default. There is no dispute that the Appellant was referred to as a Sick unit by BIFR on 09.11.2005 and the embargo of Section 22 of the SICA was lifted with the repeal of SICA w.e.f. 01.12.2016 - The right to apply under Section 9 of the Code accrued to the Respondent after SICA Act was repealed on 01.12.2016 and also when the Insolvency and Bankruptcy Code, 2016 came into force - the application filed under Section 9 of the Code by the Respondent is well within the period of three years and as such the application is not barred by limitation. Pre-existing dispute or not - HELD THAT - The Respondent has submitted that the issue regarding the pre-existing dispute is concocted by the Appellant because no evidence is brought on record to show that there has ever been any effort by the Appellant either by filing any suit or any proceedings in respect of quality of the goods. It is further submitted that the Appellant, in the written submissions filed before the Adjudicating Authority has made bald averments of making request several time to the Respondent to take back the material which has not been accepted by the IOCL, without giving any particular date of the said instance. Therefore, the objection raised by the Appellant about the pre-existing dispute is just for the sake of an objection otherwise it has no legs to stand. Appeal dismissed.
Issues involved:
1. Barred by limitation - Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016. 2. Pre-existing dispute raised by the Appellant. Analysis of the Judgment: Issue 1: Barred by limitation - Application under Section 9 of the Code: The appeal was filed by the Corporate Debtor against the order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Operational Creditor. The Operational Creditor claimed an operational debt of Rs. 4,82,98,924 accrued from supplying goods to the Corporate Debtor. The Corporate Debtor raised a limitation issue, stating that the debt occurred in 2011-12, and the application was filed in 2017, beyond the three-year limitation period. However, the Adjudicating Authority rejected this contention, citing the Sick Industrial Companies (Special Provisions) Act, 1985, which prevented legal action until its repeal on 01.12.2016. The Appellate Tribunal upheld this decision, emphasizing the three-year limitation period under Article 137 of the Limitation Act, 1961, counted from the date of default. The Tribunal ruled that the application was within the limitation period post the repeal of SICA and enactment of the Insolvency and Bankruptcy Code, 2016. Issue 2: Pre-existing dispute raised by the Appellant: The Appellant claimed a pre-existing dispute due to poor quality material supplied by the Respondent, resulting in order cancellations and losses. They alleged requesting the Respondent to lift scrap and pay freight charges, which the Respondent acknowledged during a visit. The Appellant argued that a dispute existed before the application under Section 9 was filed, citing various Supreme Court decisions. However, the Respondent contended that the Appellant's claims lacked evidence of any prior legal actions or proceedings regarding the material quality. The Appellant's objection on the pre-existing dispute was deemed unsubstantiated, as no concrete evidence was presented to support their claim. Consequently, the Tribunal dismissed the appeal, finding no merit in the Appellant's arguments. In conclusion, the Appellate Tribunal dismissed the appeal, ruling in favor of the Respondent on both issues, finding the application under Section 9 not barred by limitation and rejecting the Appellant's claim of a pre-existing dispute due to lack of supporting evidence.
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