2019 (11) TMI 1680 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existence of dispute or not - HELD THAT - M/s. Mahendra Trading Company was not cleared by M/s. Hindustan Controls and Equipment Pvt. Ltd. , the 1st Appellant ( Operational Creditor ) moved before the Calcutta Electric Traders Association of which 1st Appellant is a member alleging non-clearance of the amount by the Corporate Debtor . On the request of the 1st Appellant (Operational Creditor), the Calcutta Electric Traders Association by letter dated 31st August, 2017 intimated the Managing Director of M/s. Hindustan Controls and Equipment Pvt. Ltd. - (Corporate Debtor) that the 1st Appellant has informed that the Corporate Debtor is not clearing the amount and, therefore, requested the Corporate Debtor to assign reasons for non-payment of the amount and to file reply so as to take further course of action. There is no arbitration proceeding pending or initiated under the Arbitration and Conciliation Act, 1996. However, the fact discloses that there was a dispute relating to payment of the dues and the letter issued by the Calcutta Electric Traders Association suggests that there is pre-existence dispute - the Adjudicating Authority has rightly held that there being pre-existence of dispute, the application was not maintainable. Appeal dismissed.

Summary

Issues:
1. Barred by limitation - Appeal under Section 61 of the I&B Code
2. Maintainability of Section 9 application under the I&B Code

Issue 1: Barred by limitation - Appeal under Section 61 of the I&B Code

The Appellants filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process against the Corporate Debtor. The Adjudicating Authority rejected the application citing pre-existence of dispute and other grounds. The Appellants argued against the pre-existence of dispute, stating that the arbitration proceeding was not under the Arbitration & Conciliation Act, 1996. The Respondent raised the issue of the appeal's maintainability, claiming it was barred by limitation. Reference was made to a Supreme Court decision regarding the time limit for filing appeals under specific statutes, emphasizing the importance of adhering to the prescribed timelines.

The Tribunal examined the provisions of Section 61 of the I&B Code, which mandates filing an appeal within 30 days, with a provision for condonation of a further 15 days if sufficient cause is shown. The Tribunal considered the date of communication of the order to the Appellant and the subsequent filing of the appeal. It was noted that the appeal was filed after the completion of 30 days, but within a reasonable time frame considering the circumstances. The Tribunal distinguished the case from the cited Supreme Court decision, as the relevant statute did not require the provision of a free certified copy, thereby allowing for a more flexible interpretation of the timeline.

Issue 2: Maintainability of Section 9 application under the I&B Code

The dispute arose from a Memorandum of Understanding between the Operational Creditor (1st Appellant) and the Corporate Debtor, involving unpaid dues amounting to a substantial sum. The Operational Creditor approached a trade association to address the non-payment issue, which led to a communication requesting the Corporate Debtor to clarify the reasons for non-payment. While no formal arbitration proceeding was pending under the Arbitration and Conciliation Act, 1996, the communication indicated a pre-existing dispute regarding the outstanding dues. The Tribunal concurred with the Adjudicating Authority's decision that the application under Section 9 was not maintainable due to the existence of a pre-existing dispute, thereby dismissing the appeal with relevant observations and no costs awarded.

This detailed analysis of the judgment addresses the issues of limitation and maintainability under the I&B Code, providing a comprehensive overview of the legal reasoning and decisions made by the National Company Law Appellate Tribunal.