2020 (1) TMI 1241 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT - On perusal of the records it is found that all the invoices in question had fallen due in the year 2013. Even as per the documents produced by the applicant (page 22) the last payment was received on 30.06.2015 and the petition is filed on 10th August 2018 i.e. beyond three years - It is pertinent to mention here that prior to 10.11.2017 no action whatsoever has been taken by the applicant to recover the alleged debt. According to part II of first division of schedule given under the Limitation Act 1963 a debt is deemed time barred if the lender or the supplier of goods and services does not recover the money or does not take legal action within three years from the due date. In the instant case more than three years has been elapsed from the due date therefore the debt which is claimed by the applicant through this petition is a time barred debt hence this application is not maintainable. In the case on hand no acknowledgement was made by the corporate debtor and/or obtained by the applicant before expiration of three years as required in Section 18 of the Limitation Act therefore the application is barred by limitation as it fall under article 137 of the Limitation Act which is a residuary article - the Adjudicating Authority is of the considered view that the instant application is not maintainable as the same is barred by Limitation Act. Petition dismissed.

Summary

Issues:
- Application under Section 9 of The Insolvency and Bankruptcy Code, 2016
- Time-barred application
- Validity of demand notice
- Lack of purchase orders
- Application barred by limitation

Analysis:
1. Application under Section 9 of The Insolvency and Bankruptcy Code, 2016: The operational creditor filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, as an operational creditor/applicant. The applicant company supplied raw material and ceramic glaze mixture to the respondent company in 2013, raising five invoices totaling to ?23,97,072, which fell due on specific dates in August and September 2013.

2. Time-barred application: The respondent raised an objection that the application was time-barred. The records showed that the last payment was received on 30th June 2015, and the petition was filed on 10th August 2018, beyond the three-year limitation period. The Board Resolution authorizing the initiation of Corporate Insolvency Resolution Process (CIRP) was dated 3rd February 2018, after the demand notice issued on 10th November 2017, rendering it invalid.

3. Validity of demand notice: The respondent also argued that the demand notice was not as per Form 3 and Form 4, lacking annexures, making it legally deficient. The applicant failed to provide copies of purchase orders against which the goods were supplied and the related invoices, further weakening the case.

4. Lack of purchase orders: The absence of purchase orders against which the goods were supplied and invoices raised was noted as a deficiency in the applicant's submission, affecting the credibility of the claim.

5. Application barred by limitation: The application was deemed time-barred under the Limitation Act, 1963. The debt claimed was considered time-barred as no action was taken by the applicant to recover the debt before 10th November 2017. The application was filed on 20th August 2018, well beyond the three-year limitation period from the last payment received on 30th June 2015. Citing legal precedents, the judgment highlighted that the application fell under Article 137 of the Limitation Act, making it time-barred and not maintainable.

6. Conclusion: The Adjudicating Authority dismissed the petition, ruling it as not maintainable due to being barred by limitation. The judgment emphasized the importance of adhering to statutory timelines and legal requirements in insolvency proceedings, ultimately leading to the dismissal of the application without imposing any costs.

7. Communication: The order's copy was to be communicated to both the Applicant/Financial Creditor and the respondent/Corporate Debtor for necessary action and information.