2021 (11) TMI 732 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT - It was only on 06.08.2016 after the receipt of the information under RTI that the Appellant got the knowledge of recovery for the very first time and filed the Section 9 Application on 04.06.2019 well within three years - The Hon ble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT has observed that the right to sue accrued on the date of default . This decision has to be understood and interpreted keeping in view the factual matrix of each case. In the instant case the Respondent/ Corporate Debtor does not deny the main contention of the Appellant that the decision with respect to recovery and deduction of the Arbitral amount was never communicated to the Appellant. Even in their reply before the Adjudicating Authority and before this Tribunal and in the submissions filed the Corporate Debtor is completely silent with respect to this communication having been made to the Appellant herein - the date of knowledge of happening of the default is a relevant date. The part payment made on 31.03.2016 further extends the date of default keeping in view the facts and circumstances of the attendant case on hand. The challenge to the Arbitral Award was dismissed on 06.10.2018. The recovery made in 2016 was provisional subject to the challenge against the Arbitral Award which got dismissed on 06.10.2018 and the same was not challenged further. The Application was filed on 04.06.2019 which is within three years of this date. The Hon ble Supreme Court in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. 2021 (8) TMI 315 - SUPREME COURT has noted that once a recovery certificate is issued authorising the Creditor to realise its decretal dues a fresh right accrues to the Creditor to recover amount of the final Judgement/Order/decree - In the instant case the challenge to the Arbitral Award was dismissed on 06.10.2018 and hence has attained finality the part payment was made on 31.03.2016 and therefore the Application filed on 04.06.2019 is not barred by Limitation. The Learned Adjudicating Authority shall proceed in accordance with law keeping in view the timelines under the Code - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Limitation period applicability under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Determination of 'date of default' for the purpose of limitation.
3. Impact of internal notings and part payments on the limitation period.
4. Relevance of the challenge to the Arbitral Award and its dismissal on limitation.

Detailed Analysis:

1. Limitation Period Applicability under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The primary issue in this case revolves around the applicability of the Limitation Act, 1963 to proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Appellant’s application was dismissed by the Adjudicating Authority on the grounds of being time-barred. The Tribunal reiterated the Supreme Court’s stance from 'B.K. Educational Services Pvt. Ltd. v. Parag Gupta and Associates' that applications under IBC are subject to the Limitation Act, specifically Article 137, which prescribes a three-year limitation period from the date of default.

2. Determination of 'Date of Default' for the Purpose of Limitation:
The Tribunal had to ascertain the correct 'date of default' to determine if the application was within the limitation period. The Appellant argued that the date of default should be considered from the date they gained knowledge of the default, which was on 06.08.2016, through an RTI response. The Respondent, however, contended that the default date was 14.02.2008, the date of the Arbitral Award, which was also mentioned in the Section 8 Notice and the application under Section 9 of the Code.

3. Impact of Internal Notings and Part Payments on the Limitation Period:
The Tribunal examined whether internal notings and part payments could impact the limitation period. The Appellant presented evidence of internal notings and a cheque issued in 2016 as acknowledgments of debt. The Tribunal noted that the part payment made on 31.03.2016 extended the limitation period as per Section 19 of the Limitation Act, 1963. The Tribunal also referenced the Supreme Court’s decision in 'Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy & Anr.' which held that a fresh right to recover arises upon the issuance of a recovery certificate or part payment.

4. Relevance of the Challenge to the Arbitral Award and its Dismissal on Limitation:
The Tribunal considered the impact of the challenge to the Arbitral Award and its subsequent dismissal on the limitation period. The Appellant argued that the limitation period should start from 06.10.2018, the date when the challenge to the Arbitral Award was dismissed, making the recovery final. The Tribunal agreed, noting that the dismissal of the challenge to the Arbitral Award on 06.10.2018 gave rise to a fresh cause of action, and the application filed on 04.06.2019 was within the three-year limitation period.

Conclusion:
The Tribunal concluded that the application was not barred by limitation. It held that the relevant date for the accrual of the right to sue was 06.08.2016, when the Appellant gained knowledge of the default through the RTI response. Additionally, the part payment made on 31.03.2016 further extended the limitation period. The Tribunal allowed the appeal, set aside the Impugned Order, and directed the Adjudicating Authority to proceed in accordance with the law.