2020 (10) TMI 1294 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT - The first invoice was raised by the petitioner on 19.12.2013 and the due date of payment was 18.04.2014 and the last invoice was raised by the petitioner on 23.01.2014 and the due date of payment was 23.05.2014 and on the basis of invoices the date of default is the date of payment it means since the amount was not paid on 23.05.2014 therefore on that day the default had occurred - In view of the Article 137 of the Limitation Act the petitioner was required to file an application within 3 years from the date when the right to apply accrues and since due date of payment was of 23.05.2014 therefore the petitioner was required to file the application within three years from the date of first default that is from 23.05.2014 but the present application has been filed on behalf of the petitioner on 30.06.2020 therefore it is much after the period of three years. The documents are of the dated 18.01.2016 07.07.2016 and 02.02.2017 and last one upon which the petitioner has placed reliance is of dated 15.12.2017 after going through these documents we noticed that the document dated 15.12.2017 is a credit notice memo issued by the petitioner and not by the respondent therefore this credit note cannot be treated as an acknowledgement of debt. So far the document dated 07.07.2016 is concerned of course in this document there is a signature of the director of the respondent company which is addressed to the Deutsche Bank AG regarding the payment of the pending invoices and the two invoices are referred which are of dated 26/12/2013 and if we accept that this letter will be treated as acknowledgement of debt under Section 18 of the Limitation Act then the limitation shall run from the date of acknowledgement i.e. from 07.07.2016. Even if letter is also treated as acknowledgement of debt then the limitation shall run from the date i.e. 02.02.2017 whereas the present application is filed on 30.06.2020 which is much after the period of 3 years as required under Article 137 of the Limitation Act so on this ground also the present application in our considered view is barred by limitation - Application dismissed.

Summary

Issues:
- Application filed under Section 9 of the Insolvency & Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
- Default in payments by the Corporate Debtor against raised invoices.
- Acknowledgment of debt by the Corporate Debtor.
- Consideration of limitation period for filing the application.

Analysis:
1. The application was filed under Section 9 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process due to the Corporate Debtor's inability to liquidate its operational debt. The Operational Creditor, engaged in pharmaceutical product manufacturing, entered into a Distribution Agreement with the Corporate Debtor for product distribution. Despite raising invoices, the Corporate Debtor failed to pay outstanding amounts, leading to the petition.

2. The Operational Creditor highlighted that the Corporate Debtor acknowledged the outstanding debt on multiple occasions, confirming the amount due. Additionally, a credit note was issued by the Operational Creditor towards potential losses incurred by the Corporate Debtor. The application was deemed timely based on these acknowledgments.

3. The Tribunal reviewed the documents provided by the Operational Creditor, noting the dates of acknowledgment of debt by the Corporate Debtor. However, the Tribunal found that the credit note issued by the Operational Creditor could not be considered an acknowledgment of debt. The Tribunal analyzed the limitation period for filing the application, considering the date of acknowledgment as the starting point.

4. Despite the acknowledgment of debt by the Corporate Debtor on specific dates, the Tribunal determined that the application was filed beyond the statutory limitation period. The Tribunal emphasized that even if certain documents were treated as acknowledgments, the application was still time-barred under Article 137 of the Limitation Act. Consequently, the application was dismissed on the grounds of being barred by limitation.

5. In conclusion, the Tribunal dismissed the application, ruling it as barred by limitation due to being filed after the prescribed period. The acknowledgment of debt by the Corporate Debtor did not extend the limitation period for initiating the Corporate Insolvency Resolution Process, leading to the rejection of the Operational Creditor's plea.