2019 (3) TMI 1442 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - pre-existing dispute in regard to the quality of goods supplied by the Operational Creditor to the Corporate Debtor as alleged - Application as barred by the Laws of Limitation as alleged - HELD THAT - There are proofs of delivery of invoices in the case in hand. Corporate Debtor has failed in proving a pre-existing dispute in regard to the quality of goods and rate of goods evidently delivered to the Corporate Debtor in the light of the proposition laid down in the above cited decisions. The dispute raised by way of issuing reply notice is not at all a pre-existing dispute. It cannot be ruled out that the dispute raised in the case in hand is a dispute to stage-manage false evidence so as to defeat the claim of the Operational Creditor. This point is answered accordingly. Period of limitation - The Application seen filed after 31/2years of the starting of period of limitation. There is no acknowledgment in writing as laid down under Section 18 of the Limitation Act, 1963 in the case in hand. Applying Section 19 of the Limitation Act, 1963, the period of limitation in the case in hand would run from the payment of part consideration of the amount due i.e. 01-07-2014. It is significant to note here that the Code has been amended by adding Section 238A to Section 238 of the Code by applying the provisions of the Limitation Act, 1963 to the proceedings or appeals before the Adjudicating Authority. That being so, no doubt the application in the case in hand has been filed beyond the period of limitation and therefore, even if the Corporate Debtor has failed in establishing a pre-existing dispute, the application is not maintainable as per the law of limitation. This point is answered accordingly. The application filed under section 9 of I&B Code, is complete, however, the Applicant failed to prove that the application is maintainable as per the provisions of Limitation Act,1963. The claim of the Operational Creditor/Applicant is found barred by Law of Limitation. Therefore, the application is liable to be dismissed.

Summary

Issues Involved:
1. Pre-existing dispute regarding the quality of goods supplied.
2. Application barred by the laws of limitation.
3. Reliefs and costs.

Detailed Analysis:

Issue 1: Pre-existing dispute regarding the quality of goods supplied
The Operational Creditor claimed that the Corporate Debtor defaulted in paying ?37,50,212/- for Soya De-Oil-Cake (Soya DOC) supplied, with an additional interest of ?31,77,360.05/- at 18% per annum. The Corporate Debtor contended that the goods supplied were not Soya DOC but De Oiled Rice Bran, an inferior product, and thus disputed the quality and the amount due. The Corporate Debtor also argued that two of the four invoices were fabricated and not delivered. However, the Tribunal found no evidence of prior communication disputing the invoices or quality before the demand notice. The Tribunal noted that the Corporate Debtor's contention was raised only in the reply affidavit and found the dispute to be staged to defeat the claim of the Operational Creditor. Therefore, the Tribunal concluded there was no pre-existing dispute regarding the quality of goods.

Issue 2: Application barred by the laws of limitation
The Corporate Debtor argued that the application was barred by the laws of limitation since the last payment was made on 01-07-2014, and the application was filed on 14-03-2018. The Tribunal agreed, noting that the period of limitation would start from the date of the last payment. Since the application was filed beyond the three-year limitation period, it was deemed time-barred. The Tribunal referred to the Supreme Court's ruling in BK Educational Services (P.) Ltd. v. Parag Gupta & Associates, which confirmed that the Limitation Act, 1963 applies to proceedings under the Insolvency and Bankruptcy Code (IBC).

Issue 3: Reliefs and costs
The Tribunal concluded that although the application under Section 9 of the IBC was complete, it was not maintainable due to being barred by the law of limitation. Consequently, the application was dismissed without any cost.

Conclusion:
The application filed by the Operational Creditor was dismissed on the grounds that it was barred by the law of limitation, despite the Corporate Debtor's failure to establish a pre-existing dispute regarding the quality of goods supplied. The parties were directed to bear their respective costs.