2017 (12) TMI 399 - AT - Insolvency and Bankruptcy

Winding up petition - debtor Company defaulted in making payment - Held that - Appellant had not submitted all the information other than information forming part of the records of the transferred case, as required in terms of first proviso to Rule -5 aforesaid, we hold that the Application under Sections 433, 434 and 439 of the Companies Act which was transferred to the Tribunal stood abated in view of Rule 5 aforesaid. However, in view of the Second provision to Rule-5, as quoted above, the Appellant is given liberty to file a fresh Application under Section 9 of the I & B Code in accordance with the provision of law i.e., after giving Notice of Demand under sub-Section (1) of Section 8 in requisite form 3 or 4. After such notice, if there is no dispute and the Appellant prefers application under Section 9 of the I & B Code, in such case, the Adjudicating Authority will not dismiss the case on the ground of delay there being continuing cause of action since 27th April, 2010, and it cannot be held to be barred by limitation. If there remains a defect, the Adjudicating Authority may allow the Appellant to remove the defect in terms of the proviso to Section 9 of the I&B Code.

Summary

Issues:
1. Application for winding up under Companies Act, 1956 transferred to the National Company Law Tribunal.
2. Claim of the Appellant barred by limitation.
3. Applicability of the Limitation Act, 1963 in Corporate Insolvency Resolution Process.
4. Decision on the application under Sections 433, 434, and 439 of the Companies Act.

The Appellant, an Operational Creditor, filed an application for winding up the Respondent Company before the Bombay High Court due to non-payment of dues. The Central Government transferred the pending proceedings to the National Company Law Tribunal under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016. The Respondent argued that the claim was time-barred. The Adjudicating Authority, considering the Central Government notification, rejected the application under the I&B Code, citing failure to show acknowledgment of debt within the limitation period.

The issue of the applicability of the Limitation Act, 1963 in the Corporate Insolvency Resolution Process was deliberated in a previous case. The Appellate Tribunal held that while the Limitation Act does not apply to initiating the process, delay exceeding three years may require an explanation. The Tribunal emphasized that stale claims without justifying the delay should not trigger the Corporate Insolvency Resolution Process under the I&B Code. The right to apply accrues from the enforcement of the Code in December 2016, preventing rejections based on limitation for applications filed after this date.

Considering the precedent set in a previous case, the Appellate Tribunal overturned the impugned order due to non-submission of necessary information by the Appellant. The transferred application under the Companies Act was deemed abated under Rule 5. However, the Appellant was granted the liberty to file a fresh application under Section 9 of the I&B Code after issuing a Notice of Demand. The Tribunal emphasized the need to address any defects in the application and allowed the removal of such defects as per the Code's provisions.

The Appellate Tribunal's decision allowed the Appellant to file a fresh application under the I&B Code, provided the necessary steps are taken to rectify any deficiencies. The order did not prevent the Respondent from settling the dispute before the application under Section 9 was admitted. The appeal was allowed without costs, with the Tribunal providing detailed guidance on the process to be followed for filing a new application under the I&B Code.