2019 (11) TMI 1490 - 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 - Whether the MoU is a validly executed contract binding the Corporate Debtor? - HELD THAT - The MoU even if raised to the level of a contract does not carry the seal of the Corporate Debtor but only the signature of one Mr. Shantilal Ratanchand Lunkad who is claimed to be the authorised signatory. However the nature of authorisation such as by way of a Board Resolution has not been stated in the MoU. The signature portion of the MoU also does not express it to be For and on behalf of the Company but instead uses the words Signed Sealed and Delivered by the with in named the Company by the hands of Mr. Shantilal Ratanchand Lunkad the Authorised Signatory - In the absence of the seal of the company or details of authorisation the MoU cannot be said to be executed with proper authority not a legally valid document and not binding on the Company (Corporate Debtor). Issue No. 1 is therefore decided accordingly. Whether the amount claimed under the MoU can be held to satisfy the definition of Operational Debt given in section 2(21) of the IBC? - HELD THAT - In view of the decision that the MoU is not validly executed and does not bind the Corporate Debtor this issue has become infructuous. In the event that the definition of Operational Debt is satisfied whether the claim itself is hit by limitation? - HELD THAT - The Corporate Debtor has raised the issue that the MoU is dated 21.08.2013 and the petition came to be filed on 30.04.2019 and the same is beyond three years and hence barred by limitation. There is merit in this argument when seen in the light of the fact that the MoU itself says that the payment is due from 01.08.2013. Therefore the question of limitation has to be considered - also it is not the case of the Operational Creditor that there was any acknowledgement of liability on the part of the Corporate Debtor within the limitation period of three years that may have the effect of extending the period of limitation within the meaning of section 18 of the Limitation Act 1963. The petition fails the twin tests of merit and limitation and therefore the same is rejected.

Summary

Issues:
1. Validity of MoU as a contract binding the Corporate Debtor
2. Whether the claimed amount under the MoU satisfies the definition of "Operational Debt" under IBC
3. Whether the claim is barred by limitation

Issue No. 1 - Validity of MoU as a contract binding the Corporate Debtor:
The MoU lacks the seal of the Corporate Debtor and does not specify the authorization details, raising doubts on its validity. The absence of proper authority and legal execution renders the MoU non-binding on the Company, thus failing to establish a valid contract.

Issue No. 2 - Satisfaction of "Operational Debt" definition under IBC:
Since the MoU is deemed invalid and does not bind the Corporate Debtor, the question of whether the claimed amount fulfills the definition of "Operational Debt" under section 2(21) of the IBC becomes irrelevant.

Issue No. 3 - Claim barred by limitation:
The Corporate Debtor argues that the petition, filed in 2019, is beyond the three-year limitation period from the date of the MoU in 2013. Citing legal precedents, it is established that the right to sue accrues when a default occurs, and the application would be time-barred if the default happened over three years before filing. As per Supreme Court rulings, the limitation for filing this petition expired in 2016. Since there was no acknowledgment of liability within the limitation period, the petition fails both on merit and limitation grounds.

In conclusion, the Tribunal rejects the petition due to the invalidity of the MoU, rendering the claimed debt non-binding on the Corporate Debtor. Additionally, the petition is time-barred as it was filed beyond the prescribed limitation period. The judgment clarifies that the dismissal of the petition does not affect any other rights the petitioner may have under different laws, ensuring no prejudice to their rights before other judicial forums. The order is to be communicated to the parties as per the provisions of the IBC.