2020 (1) TMI 1247 - 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 - The invoice in question is dated 10.05.2011 and the debt is not legally enforceable as the claim is time barred. Even the applicant claims that the default occurred on 10.08.2011 and the applicant sent form 3 4 demand notice under section 8 of the I B Code on 09.03.2018. On perusal of the record it is observed that the application under Section 9 of I B Code has been filed on 28th May, 2018 i.e. after more than six years from the date of accrual of cause of action - Hon'ble Supreme Court in the case of B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates 2018 (10) TMI 777 - SUPREME COURT held that the Limitation Act is applicable to applications filed under section 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases, where, in the facts of the case. Section 5 of the Limitation Act may be applied to condone the delay in filing such applications. In the instant case the applicant has filed the application under Section 9 of the I B Code on 28th May, 2018 after six years from the date of accrual of cause of action. Thus, the application filed under Section 9 of I B Code is apparently time barred - 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. Instant petition dismissed as being time barred.

Summary

Issues:
- Time-barred debt under Section 9 of The Insolvency and Bankruptcy Code, 2016.

Analysis:
The case involved a petition filed by an operational creditor against a private limited company, claiming unpaid operational debt. The operational creditor, a sole proprietorship firm, had raised two bills on the corporate debtor, out of which one remained unpaid. The debt was claimed to be due and payable by the corporate debtor, leading to the filing of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. The operational creditor provided evidence of the unpaid debt, including invoices and a demand notice.

The main objection raised by the respondent was that the application was time-barred. The records showed that the invoice in question was dated 10.05.2011, and the debt was not legally enforceable due to being time-barred. The applicant had sent a demand notice under Section 8 of the Code on 09.03.2018, more than six years after the default occurred. The Tribunal noted that as per the Limitation Act, a debt is deemed time-barred if legal action is not taken within three years from the due date. In this case, more than six years had elapsed from the due date, rendering the debt time-barred and not legally payable.

The Tribunal referred to previous judgments, including one by the Hon'ble Supreme Court, emphasizing that the Limitation Act applies to applications under the Code, and debts already time-barred cannot be revived. In this instance, the application under Section 9 of the Code was filed after six years from the accrual of the cause of action, making it time-barred. The Tribunal also highlighted Section 18 of the Limitation Act, which allows for a fresh period of limitation upon acknowledgement of liability, but since no such acknowledgement was made in this case, the application fell under the residuary article of the Limitation Act.

Based on the discussions and legal principles, the Tribunal concluded that the application was not maintainable as it was time-barred under the Limitation Act. Consequently, the petition was dismissed, along with the filed application. The Tribunal directed the communication of the order to the parties involved.

This detailed analysis highlights the key legal aspects of the judgment, focusing on the time-barred nature of the debt under Section 9 of the Insolvency and Bankruptcy Code, 2016, and the application of the Limitation Act in determining the maintainability of the petition.