2023 (5) TMI 343 - SCH - Insolvency and Bankruptcy

Initiation of CIRP - period of limitation - date of default - application dismissed solely on the ground that the claim was barred by limitation - HELD THAT - At the outset, it is required to be noted that, in fact, the appellant herein, who claimed to be Operational Creditor raised 187 different invoices for the Digital Classroom Solution Services provided for the period between 12.03.2011 and 30.06.2017. The amount under different invoices were unpaid, which gave rise to the appellant to initiate the proceedings under Section 9 of the IBC before the NCLT. The NCLT considering the starting point of limitation as 12.03.2011 held that the claim is barred by limitation. However, the NCLT did not take into consideration the subsequent invoices at least preceding three years from the date of filing of Section 9 application, which ought to have been considered. Under the circumstances, the NCLT ought to have considered the invoices at least for the period preceding three years from the date of the application under Section 9, rather than considering the starting point of limitation as 12.03.2011. Under the circumstances, the order(s) passed by the NCLT and affirmed by the NCLAT are unsustainable - the view taken by the NCLT that the claim is barred by limitation is unsustainable. The impugned judgment and order(s) passed by the NCLT and that of the NCLAT dismissing/rejecting application under Section 9 of the IBC on the ground that the claim is barred by limitation are hereby quashed and set aside and now the matter is remitted to the NCLT to consider Section 9 application afresh in accordance with law and on its own merits - Petition allowed.

Summary

Issues:
The issues involved in the judgment are the dismissal of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) on the ground of limitation, and the remittance of the matter to the National Company Law Tribunal (NCLT) for fresh consideration.

Dismissal on Ground of Limitation:
The appellant, claiming to be an 'Operational Creditor,' raised 187 invoices for Digital Classroom Solution Services provided between 12.03.2011 and 30.06.2017. The National Company Law Tribunal (NCLT) held the claim as barred by limitation, starting from 12.03.2011. However, the NCLT failed to consider invoices preceding three years from the application date under Section 9 of the IBC. The NCLT should have considered invoices at least for the three years preceding the application date. The orders of the NCLT and National Company Law Appellate Tribunal (NCLAT) are deemed unsustainable due to this oversight.

Commercial Viability of Respondent:
The respondent, a going concern, has paid Rs.4.5 crores to the appellant and is commercially viable. The respondent argues against insolvency declaration. The NCLT needs to consider these aspects. The NCLT's view that the claim is time-barred is unsustainable.

Judgment and Remittance:
The Supreme Court allows the appeal, quashing the NCLT and NCLAT orders dismissing the Section 9 application on limitation grounds. The matter is remitted to the NCLT for fresh consideration in accordance with the law. All contentions, including the respondent's commercial viability, are left open for NCLT's evaluation. The respondent is barred from raising a pre-existing dispute, as ruled by the NCLAT. No costs are awarded in this appeal.