2017 (6) TMI 692 - Tri - Companies Law

Operational creditor eligibility for filling Arbitration Application - period of limitation - Held that - It is not right on the part of the operational creditor to raise debit notes charging minimum guaranteed conducting fee even after the dispossession of the corporate debtor from the premises. For there being material showing the corporate debtor was dispossessed on 26.03.2012, there is no occasion to the operational creditor to raise debit notes against the corporate debtor. Hence, the debit notes raised after March, 2012 will not constitute as debt. In respect of the dues from November, 2011 till the filing of the Arbitration Application, since the Arbitration Application was dismissed on 4.3.2014 without any liberty, based on partial settlement orally agreed between the parties, this Bench cannot go into the issue already decided against the operational creditor. The contention of the operational creditor that since the last debit note was raised on 5.4.2014, this petition filed on 4.4.2017 is within the period of limitation does not hold water. Arbitration Application was dismissed on 4.3.2014 and that claim covered the debit notes raised from November, 2011 to the date of filing of Arbitration Application on 30.3.2012. In order to save limitation on this portion of the claim, the operational creditor should have obtained liberty to proceed against the corporate debtor but that is not the case herein, the Arbitration Application was dismissed without any liberty. It is to be noted that after the last payment in September, 2011, neither there was an acknowledgement of liability nor any payment by the corporate debtor. In this situation, the whole debt as claimed by the financial creditor is time barred.

Summary

Issues:
1. Interpretation of Business Conducting Agreement and Addendum.
2. Default in payment of conducting fee by the corporate debtor.
3. Validity of demand notice and response.
4. Submission of relevant documents by the operational creditor.
5. Previous Arbitration Application filed by the operational creditor.
6. Time limitation for recovery of debt under the Insolvency and Bankruptcy Code.

Interpretation of Business Conducting Agreement and Addendum:
The case involved an operational creditor and a corporate debtor who had a Business Conducting Agreement for managing a music concept store. An Addendum was later made to reduce the monthly fee. The operational creditor claimed that the corporate debtor defaulted in payment as per the original agreement terms.

Default in payment of conducting fee by the corporate debtor:
The operational creditor alleged that the corporate debtor failed to pay the conducting fee as per the agreements, leading to a substantial outstanding amount. The corporate debtor disputed the amount due, leading to a legal dispute.

Validity of demand notice and response:
The operational creditor issued a demand notice for the outstanding amount, but the response from the corporate debtor challenged the legality of the notice and the amount claimed. The absence of necessary documents with the notice was also highlighted.

Submission of relevant documents by the operational creditor:
During the proceedings, it was noted that the operational creditor did not submit essential documents like the Business Conducting Agreement and Addendum promptly. This raised concerns about the completeness of the evidence presented.

Previous Arbitration Application filed by the operational creditor:
An Arbitration Application was filed earlier by the operational creditor seeking recovery, but it was later withdrawn. The details of this previous legal action were considered in the context of the current debt recovery petition.

Time limitation for recovery of debt under the Insolvency and Bankruptcy Code:
The Tribunal analyzed the timeline of events and legal actions taken by both parties to determine the enforceability of the debt under the Insolvency and Bankruptcy Code. It was concluded that the debt had become time-barred and unenforceable, leading to the dismissal of the petition.

In conclusion, the Tribunal dismissed the petition, ruling that the debt claimed by the operational creditor was time-barred and hence unenforceable under the Insolvency and Bankruptcy Code. The judgment highlighted issues related to payment defaults, validity of notices, submission of relevant documents, and previous legal actions, providing a comprehensive analysis of the case based on the interpretation of agreements and legal provisions.