2018 (12) TMI 1817 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and debt and dispute or not - HELD THAT - The Corporate Debtor has taken time for reconciliation and signing the reconciliation statement but not having completed it the demand notice was issued by the Operational Creditor under section 8(1), which was not denied by the Corporate debtor. In VALLIAMMA CHAMPAKA PILLAI VERSUS. SIVATHANU PILLAI AND ORS. 1979 (8) TMI 210 - SUPREME COURT , the Hon ble Supreme Court held that under section 18 of Limitation Act, one of the essential requirements for a valid acknowledgement under Section 18, is that the writing concerned must contain an admission of a subsisting liability. A mere admission of past liability is not sufficient to constitute such an acknowledgement . In the present case, the Fernas Construction India Pvt. Ltd. (Corporate Debtor) in its job completion certificate has shown the actual value of work executed by the Operational Creditor. In reply to the demand the Corporate debtor intimated the Operational creditor that all the bills along with supporting documents are in process. It has not disputed the claim - Corporate Debtor also requested the Operational creditor to depute personnel for reconcile purpose and to sign jointly reconcile statement. Till date the Fernas Construction India Pvt. Ltd. (Corporate debtor) has not completed reconciliation of all the bills and not signed reconcile statement and kept matter pending. The matter having kept open by the Corporate Debtor, there is a continuous cause of action in absence of completion of reconcile statement jointly signed by the parties. Substantial liability having been already accepted by the Corporate Debtor in writing and intention of continuing with relationship in the record, it is held that the Corporate Debtor has treated and acknowledged the liability consciously and admitted liability to pay on reconciliation. The claim of the Operational Creditor is not barred by limitation, there being continuous cause of action and the Corporate Debtor cannot take plea that there is no debt payable to Operational Creditor in law - Appeal dismissed.

Summary

Issues:
Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on a claim being barred by limitation.

Analysis:
The appeal was filed by a shareholder and Director of a company against the order passed by the Adjudicating Authority, admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appellant argued that the claim by the operational creditor was barred by limitation, contending that there was no debt payable in law, hence no default. The Corporate Debtor had undertaken significant projects in the Oil & Gas Sector for companies like ONGC Petro Additions Ltd. and Indian Oil Corporation Ltd., involving substantial amounts. The dispute arose from work orders issued to a subcontractor, which led to a claim by the Operational Creditor for unpaid amounts.

The Operational Creditor issued demand notices and eventually filed an application under Section 9, which was admitted. The appellant claimed that the cause of action had arisen in August 2013, and since no subsequent cause of action occurred, the claim was time-barred. However, the Operational Creditor argued that there was a continuous cause of action based on communications and acknowledgments of liability by the Corporate Debtor.

The Tribunal referred to legal precedents regarding acknowledgments of liability and continuous cause of action. It noted that the Corporate Debtor had acknowledged the liability in various communications and had not completed the reconciliation process, indicating a continuous relationship with the Operational Creditor. As the Corporate Debtor had accepted a substantial liability in writing and showed an intention to continue the relationship, the Tribunal held that the claim was not barred by limitation.

Based on the facts and legal principles, the Tribunal dismissed the appeal, stating that there was a continuous cause of action, and the Corporate Debtor had acknowledged the liability, thereby affirming the debt payable to the Operational Creditor. The Tribunal found no merit in the appeal and ordered its dismissal without costs.