2018 (9) TMI 204 - AT - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Period of limitation - Held that - The right to apply under Section 9 accrued to Respondent only after the Insolvency and Bankruptcy Code, 2016 came into force, i.e. 1st December, 2016, the application under Section 9 was preferred within three years, therefore it was not barred by limitation. There was another issue raised by the Corporate Debtor that the goods supplied was of inferior quality, but no such dispute was raised by the Appellant prior to issuance of notice under Section 8(1). The question of quality was raised by the Appellant only when reply under Section 8(2) was filed by the Corporate Debtor. Therefore, that cannot be taken into consideration to annul the initiation of Corporate Insolvency Resolution Process. Hon ble Supreme Court has set aside earlier order passed by this Appellate Tribunal on 13th October, 2017, the Corporate Insolvency Resolution Process initiated against M/s Jord Engineers India Ltd. revived. The Resolution Professional has taken charge of the same as ordered by the Adjudicating Authority and the Moratorium order etc. passed by the Adjudicating Authority is continuing. However, we make it clear that the period of pendency of the appeal before this Appellate Tribunal and then before the Hon ble Supreme Court, till its disposal i.e. from 30th August, 2017 till today (date of order) cannot be counted and therefore should be excluded from counting of the period of 180 days or 270 days. The Adjudicating Authority will now ensure that the Corporate Insolvency Resolution Process concludes as per the I&B Code. The appeal stands disposed of. No costs.

Summary

Issues Involved:
1. Validity of notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016.
2. Admissibility of application under Section 9 against the Corporate Debtor.
3. Existence of a dispute regarding the claim amount.
4. Bar of limitation in relation to the claim amount.
5. Quality of goods supplied as a ground for disputing the application.
6. Effect of the Hon’ble Supreme Court’s decision on the earlier order of the Appellate Tribunal.

Issue 1: Validity of notice under Section 8(1):
The Respondent filed an application under Section 9 against the Corporate Debtor, which was initially admitted but later set aside due to the notice under Section 8(1) being sent through an Advocate. However, the Hon’ble Supreme Court held that a notice sent on behalf of an operational creditor by a lawyer is valid, citing the Advocates Act and the I&B Code. Therefore, the notice was deemed valid.

Issue 2: Admissibility of application under Section 9:
The Respondent’s application under Section 9 was found to be complete, and no dispute regarding its initiation was raised by the Appellant. The claim amount was not barred by limitation as it fell within the prescribed three-year period from when the right to apply accrued. Additionally, the quality of goods supplied was raised as a dispute only after the notice under Section 8(1) was issued, which was deemed insufficient to annul the initiation of the Corporate Insolvency Resolution Process.

Issue 3: Existence of a dispute regarding the claim amount:
The Appellant did not provide any evidence to show the existence of a dispute regarding the claim amount. The ground of the claim amount being related to a period barred by limitation was rejected based on the provisions of the Limitation Act, 1963, and the timing of the application falling within the permissible period.

Issue 4: Effect of the Hon’ble Supreme Court’s decision:
The Hon’ble Supreme Court set aside the earlier order of the Appellate Tribunal and remitted the appeal for fresh disposal in accordance with the law. Consequently, the Corporate Insolvency Resolution Process initiated against the Corporate Debtor was revived, and the Resolution Professional was directed to continue the process as per the I&B Code. The period during the appeal’s pendency was excluded from the counting of the statutory timelines.

In conclusion, the judgment clarified the validity of the notice under Section 8(1), upheld the admissibility of the application under Section 9, dismissed the dispute regarding the claim amount and quality of goods supplied, and reinstated the Corporate Insolvency Resolution Process in light of the Hon’ble Supreme Court’s decision.