2020 (3) TMI 1384 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - arbitration award passed in favour of the Operational Creditor - pre-existence of dispute or not - applicability of time limitation - Two parallel proceedings can be filed on the same cause or not? - HELD THAT - It is seen that there are internal notings made by the Corporate Debtor in its office files which is being referred to and relied upon as an acknowledgment of debt by the Operational Creditor. Even if the said document is taken as an acknowledgment for the purpose of section 18 of the Limitation Act, 1963, the last noting is dated 02.12.2010. If the limitation is calculated on the basis of the said date, the limitation stopped running on 01.12.2013. Apart from the said office notings no other document has been filed that acknowledges the debt within the period of limitation - the challenge against the Arbitral Award cannot be considered to having saved the limitation period for the Financial Creditor. The Operational Creditor has filed office notings of the Corproate Debtor as well as a cheque that was issued in 2016, The Operational Creditor has failed to show that there is a continuous chain of events without violating the provisions of the Limitation Act, 1963. The Hon ble Supreme Court of India by an order in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT has held that An application filed after the IBC came into force in 2016 cannot revive a debt which is no longer due as it is time- barred. The amendment of s. 238A would not serve its object unless it is construed as being retrospective. Otherwise, applications seeking to resurrect time-barred claims would have to be allowed, not being governed by the law of limitation. It is clear from a reference to the Insolvency Law Committee Report of March, 2018, that the legislature did not contemplate enabling a creditor who has allowed the period of limitation to set in to allow such delayed claims through the mechanism of IBC. This application is time barred - Petition dismissed.

Summary

Issues:
1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process.
2. Objections raised by the Corporate Debtor: time-barred application, pre-existence of dispute, and parallel proceedings.
3. Interpretation of limitation period and acknowledgment of debt.
4. Analysis of office notings, challenge against Arbitral Award, and continuous chain of events.
5. Consideration of legal precedents and legislative intent in determining the application's timeliness.

Detailed Analysis:
1. The application filed under Section 9 of the Insolvency and Bankruptcy Code aimed to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor based on an arbitration award in favor of the Operational Creditor, seeking payment of a specific amount. The dispute arose due to delayed payments by the Corporate Debtor, leading to the arbitration award in favor of the Operational Creditor.

2. The objections raised by the Corporate Debtor included contentions on the application being time-barred, the existence of a pre-existing dispute, and the prohibition against parallel proceedings on the same cause. The Corporate Debtor cited a civil suit filed as evidence of a pre-existing dispute and relied on previous legal orders to support its stance against parallel proceedings.

3. The Tribunal analyzed the limitation period concerning the debt acknowledgment and internal notings made by the Corporate Debtor. The Operational Creditor argued for a continuous cause of action, while the Corporate Debtor's challenge against the Arbitral Award and subsequent dismissal were crucial in determining the application's timeliness.

4. Detailed scrutiny of office notings, including a cheque issued in 2016, and the continuous chain of events presented by the Operational Creditor were essential in assessing the application's adherence to the Limitation Act, 1963. Legal precedents, such as the Supreme Court's rulings and legislative intent, were considered to ascertain the timeliness of the application in light of revived or time-barred claims.

5. Ultimately, the Tribunal concluded that the application was time-barred based on the evidence presented, including the limitation period calculations, acknowledgment of debt, and legal precedents cited. The decision to dismiss the application was grounded in a comprehensive analysis of the issues raised by both parties and the relevant legal framework, emphasizing the importance of adherence to statutory limitations and established legal principles.