2020 (10) TMI 491 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - time limitation - HELD THAT - It is stated that as per Section 18(1) of Limitation Act, 1963, an acknowledged of liability should be expiration of prescribed period for filing a suit or application. As per Art. 137 of the Limitation Act, where there is no prescribed period of limitation then the period of limitation to file proceedings in 3 years from the date when the right to apply accrues. It is submitted that the AMC has deducted/levied amount of Liquidated Damages from the Corporate Debtor on the basis of Clause 5 of the contract which provides for penalty for breach of contract and same is levied by Corporate Debtor to Operational Creditor on back to back basis as it is mentioned in email dated 11.07.2018 sent by Corporate Debtor to Operational Creditor. It is submitted that the same is acknowledged by the Operational Creditor through its mail dated 13.07.2018 which also shows that there is pre-existing dispute between the parties - it is evident that there are pre-existing disputes between the parties. Accordingly, as per the provisions contained in Section 9(5)(ii)(d), the petition is liable to be rejected. Application rejected.

Summary

Issues Involved:
1. Maintainability of the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Limitation period for filing the petition.
3. Existence of pre-existing disputes between the parties.
4. Entitlement to interest on the unpaid operational debt.
5. Appointment of an Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for unpaid operational debt. The Corporate Debtor argued that the petition is not maintainable and should be rejected as the claims are barred by limitation and there is a pre-existing dispute.

2. Limitation Period for Filing the Petition:
The Corporate Debtor contended that the petition is barred by limitation. The supply, installation, and erection of the system were completed in August 2010, and the last invoice was raised on 28.02.2014. According to the Corporate Debtor, the limitation period expired in 2017, and the Demand Notice was issued on 26.12.2018, making the petition time-barred. The Tribunal agreed with this contention, observing that the work was completed in 2010 and the application was filed on 26.06.2019, thus beyond the prescribed limitation period.

3. Existence of Pre-existing Disputes Between the Parties:
The Corporate Debtor argued that there were pre-existing disputes between the parties, which disentitled the petitioner from maintaining the petition. The Tribunal noted that the Ahmedabad Municipal Corporation had replaced the Operational Creditor and levied liquidated damages for breach of contract. The Tribunal observed that there was an existence of dispute between the parties before the Demand Notice was issued by the Operational Creditor.

4. Entitlement to Interest on the Unpaid Operational Debt:
The Operational Creditor claimed interest on the unpaid operational debt at the rate of 20.25% per annum. However, the Corporate Debtor argued that there was no provision for payment of interest in the contract or purchase orders, and thus, the Operational Creditor was not entitled to any interest. The Tribunal did not specifically address this issue in its final decision, as the petition was rejected on other grounds.

5. Appointment of an Interim Resolution Professional (IRP):
The Operational Creditor did not suggest any name for an IRP. The Tribunal noted that if the petition were to be admitted, an IRP would need to be appointed. However, since the petition was rejected, the appointment of an IRP was not required.

Conclusion:
The Tribunal rejected the petition on the grounds of limitation and the existence of pre-existing disputes. It was observed that the application was time-barred as the work was completed in 2010 and the petition was filed in 2019. Additionally, there were pre-existing disputes between the parties before the Demand Notice was issued, further justifying the rejection of the petition. The Tribunal clarified that its observations should not be construed as an expression of opinion on the merits of the dispute and that the rights of the applicant before any other forum would not be prejudiced by the rejection of the application. The Registry was directed to communicate the order to the petitioner and respondent by Registered Post/Speed Post at the earliest.