2022 (9) TMI 859 - 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 is not in dispute that a Legal Notice dated 13.11.2015 was issued and a Demand Notice under Section 8 of the Code was issued on 04.04.2018 and subsequently the Section 9 Application was filed on 26.11.2018. Even if we do not take into consideration the disputed Debit Note dated 28.05.2015, the fact still remains that the last payment was made on 16.03.2015 whereas, the Demand Notice was sent on 04.04.2018. Having regard to the fact that the Legal Notice and the Demand Notice are within three years of the last payment made i.e., 16.03.2015, the Application is well within the limitation period. However, perusal of the material on record read together with the grounds of Appeal and the Rejoinder Affidavit, it is crystal clear that there is an admitted dispute between the parties. The Appellant themselves are admitting the existence of a dispute which is neither spurious or mere bluster. Further there is a Civil Suit O.S. NO. 271/2015 filed before the Additional District Judge, Kakenada for the amount claimed to be in default and is pending adjudication. This Appeal was filed with a delay of 392 days which was condoned - it is not a fit case to remand the matter to the Adjudicating Authority having regard to the fact that the Impugned Order is dated 15.10.2019 and almost three years has lapsed and additionally the Appellant themselves have admitted to the existence of a dispute. Appeal disposed off.

Summary

Issues:
1. Limitation period for filing Section 9 Application under the Insolvency and Bankruptcy Code, 2016.
2. Maintainability of the Section 9 Application due to advance payment for goods not supplied.
3. Dispute between the parties and pending Civil Suit.

Analysis:
1. The judgment addresses the issue of the limitation period for filing a Section 9 Application under the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority dismissed the Application citing a judgment by the Supreme Court regarding the application of the Limitation Act to such cases. The judgment emphasized that the right to sue accrues when a default occurs, and applications filed beyond three years from the default date are barred by limitation, unless condoned under Section 5 of the Limitation Act. The Application in question was found to be time-barred due to the dates of default mentioned and the absence of evidence to prove otherwise.

2. The judgment also delves into the issue of the maintainability of the Section 9 Application based on advance payments for goods not supplied. It references a previous decision by the National Company Law Appellate Tribunal, stating that advance payments for goods not delivered do not constitute 'Operational Debt' under Section 9. In this case, the Appellant had paid advances for Palmolien Oil, but the goods were not supplied, leading to the Application being deemed not maintainable.

3. Furthermore, the judgment discusses the existence of a dispute between the parties and a pending Civil Suit. The Respondent argued that the Application was not only time-barred but also deserved rejection on merits due to the pre-existing dispute and the Civil Suit filed. The Appellant, however, highlighted invoices, legal notices, and the timing of the Application to support their case. The judgment acknowledged the admitted dispute and the pending Civil Suit, following the precedent set by the Supreme Court regarding the need to reject applications in the presence of a genuine dispute.

In conclusion, the judgment considered the limitation period, the nature of the debt, and the ongoing dispute between the parties to determine the fate of the Section 9 Application, ultimately deciding not to initiate Corporate Insolvency Resolution Process against the Respondent due to the existing dispute and the peculiar circumstances of the case.