2024 (8) TMI 670 - AT - Insolvency and Bankruptcy

Seeking Section 9 application - whether payment in respect of the ten invoices raised by the Operational Creditor were time barred? - whether there was any substance in the contention of the Corporate Debtor that there was a preexisting dispute surrounding the debt claimed by the Operational Creditor? Time limitation - HELD THAT - It is the case of the Corporate Debtor that even taking into account the date of the 10th invoice which was 02.02.2017, the claim against it stood barred on 01.02.2020 which pre-dated the filing of Section 9 application which happened to be 04.03.2020. Hence all the 10 invoices, except the 11th invoice no. 77, stood time barred. It is well acknowledged that the period of limitation for an application under Section 9 of IBC is undisputedly three years as prescribed by the Limitation Act. Since the date of default is the starting point for counting of limitation and such date of default having been specifically shown as 25.07.2016 in Part IV by the Appellant in respect of these 10 invoices, the limitation period of filing of Section 9 application clearly expired on 24.07.2019 while the Section 9 application was filed on 04.03.2020 - the Adjudicating Authority did not commit any error in holding that the first ten invoices relied upon by the Appellant as the basis for their Section 9 application were all time-barred claims on which the incidence of debt and default could not be predicated. Pre-existing dispute - HELD THAT - Despite having received the payment, it is clear that the Appellant has tried to misrepresent the total outstanding amount as Rs. 75.38 lakhs as due and payable under the 11th invoice no. 77 dated 31.01.2019 in Part-IV of the Section 9 application. Even on seeing the reply of the Corporate Debtor to the Section 8 Demand Notice, it is noticed that the amounts claimed by the Appellant have been disputed by the Respondent - the Adjudicating Authority rightly applied the ratio of Innoventive judgement supra in deciding whether the amount under 11th invoice had become due and payable or not and basis that appreciated the existence of a pre-existing dispute in respect of the said invoice and factorising the same rejected the Section 9 application. Given the conspectus of facts in the present case, it is clear that the first ten invoices were clearly time-barred and the 11th invoice no. 77 stood disputed even before the issue of demand notice - the Adjudicating Authority did not commit any error in rejecting the Section 9 application. There are no good grounds to interfere with the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Limitation of claims under Section 9 application.
2. Pre-existing dispute regarding the 11th invoice.
3. Alleged payment of Rs. 5.96 crores to a third party.

Detailed Analysis:

1. Limitation of Claims Under Section 9 Application:
The primary issue was whether the claims made by the Operational Creditor were barred by limitation. The Operational Creditor had raised 11 invoices between 25.07.2016 and 02.02.2017, and the date of default was mentioned as 25.07.2016. The Section 9 application was filed on 04.03.2020, which clearly exceeded the three-year limitation period prescribed by the Limitation Act. The Adjudicating Authority noted that the account between the parties was not a running account but based on invoice-to-invoice payments. Consequently, the claims related to the first ten invoices were held to be time-barred. The Tribunal agreed with this assessment, stating, "the limitation period of filing of Section 9 application clearly expired on 24.07.2019 while the Section 9 application was filed on 04.03.2020."

2. Pre-existing Dispute Regarding the 11th Invoice:
The second issue was whether there was a pre-existing dispute concerning the 11th invoice dated 30.01.2019. The Corporate Debtor argued that the invoice was for 25 MT of copper cathodes, but only 14 MT was delivered, and 95% of the payment for the delivered quantity had already been made. The Adjudicating Authority found that there was indeed a pre-existing dispute, as the Corporate Debtor had raised issues about the incomplete delivery before the issuance of the demand notice. The Tribunal upheld this finding, stating, "the Adjudicating Authority rightly appreciated the existence of a pre-existing dispute in respect of invoice no. 77 and in rejecting the Section 9 application."

3. Alleged Payment of Rs. 5.96 Crores to a Third Party:
The Operational Creditor claimed that Rs. 5.96 crores remained unpaid. However, the Corporate Debtor contended that this amount had been transferred to TDT Copper Ltd. at the request of the Operational Creditor. The Adjudicating Authority accepted this argument, noting that the letter dated 13.06.2019 indicated mutual consent for the transfer. The Tribunal further noted that the Appellant had suppressed material records, including a ledger statement showing the payment of Rs. 5.96 crores. The Tribunal stated, "This ledger statement persuasively removes all ambiguity from our minds that the amount of Rs. 5.96 cr claimed by the Operational Creditor as outstanding is bereft of any foundational basis."

Conclusion:
The Tribunal dismissed the appeal, affirming the Adjudicating Authority's decision to reject the Section 9 application. It concluded that the claims related to the first ten invoices were time-barred, and there was a pre-existing dispute concerning the 11th invoice. Additionally, the Tribunal found that the Rs. 5.96 crores had been validly transferred to TDT Copper Ltd., and thus no debt was due and payable. The judgment stated, "The Appeal lacks merit and stands dismissed. No costs."