2020 (5) TMI 422 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT - It is noticed that the dispute prior to filing of this application was with respect to 10 pieces of damaged glass and the same has been claimed by the applicant to have been settled between the parties by issuance of credit note dated April 1, 2017 which is signed by authorised signatory of both the parties. It is undisputed that the invoices claimed to be due pertain to the period on or before August 21, 2015 being the date of the last invoice of the bunch of invoices asserted to be unpaid, which should normally have been cleared within 7 days. It has been argued by the operational creditor that the amount claimed are not barred by limitation as a fresh period of time should be reckoned from April 1, 2017 the date of the credit note issued by the operational creditor in favour of the corporate debtor - rejecting an application merely on non-filing of memorandum of appearance in accordance with rule 45 of the NCLT Rules, 2016 would hamper justice, in view of the fact that the substantive content of the pre scribed form has been complied with. Hence, the objection of the corporate debtor, in this regard, warrants no further consideration. While the date of the credit note falls within prescribed period for the purposes of limitation, there is no admission of liability or statement or implication of intention to pay. Thus, a fresh period of limitation cannot start from the date of the credit note. Under the circumstances, the filing of the application on January 7, 2019 beyond the period of three years as per article 137 of the Limitation Act, 1963 against the date of default on August 28, 2015 is not maintainable and cannot be sustained. The application is barred by limitation and is dismissed.

Issues Involved:
1. Jurisdiction and Applicability of Insolvency and Bankruptcy Code, 2016.
2. Validity and Authorization of the Application.
3. Claims and Computation of Outstanding Amounts.
4. Existence of Dispute and Limitation Period.
5. Procedural Compliance and Technical Objections.

Detailed Analysis:

1. Jurisdiction and Applicability of Insolvency and Bankruptcy Code, 2016:
The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) along with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The applicant, Ridhi Sidhi Glasses (India) P. Ltd., claimed to be an operational creditor seeking initiation of the corporate insolvency resolution process against Integrity Windows and Doors P. Ltd. The Tribunal acknowledged the jurisdiction and the applicability of the IBC, 2016 in this case.

2. Validity and Authorization of the Application:
The application was filed by Mr. Suresh Kumar Shah, authorized by a board resolution dated March 10, 2018. The corporate debtor challenged the validity of the board resolution and the authorization process. The Tribunal found the board resolution proper and noted that the authorization through power of attorney contained all substantive content as required. The Tribunal cited the Supreme Court's view in Sambhaji v. Gangabai, emphasizing that procedural laws are aids to justice and should not obstruct it. Thus, the objection regarding the authorization was dismissed.

3. Claims and Computation of Outstanding Amounts:
The applicant claimed a total amount of ?11,50,449, including interest, as outstanding from the corporate debtor. The applicant provided a detailed computation of the amount due, including principal and interest, and asserted that the corporate debtor defaulted on five invoices from July 14, 2015, to August 21, 2015. The corporate debtor contested the claims, arguing that some invoices were already paid and disputed the interest calculations. The Tribunal noted discrepancies and the lack of clear documentation supporting the applicant's claims, particularly regarding the disputed invoices and the credit note dated April 1, 2017.

4. Existence of Dispute and Limitation Period:
The corporate debtor argued that the application was barred by limitation as the claims related to invoices from 2015, and there was an existence of a dispute prior to the demand notice. The Tribunal focused on the limitation period, noting that the last invoice was dated August 21, 2015, and the default date was August 28, 2015. The applicant argued that a fresh limitation period should start from the date of the credit note (April 1, 2017). However, the Tribunal found that the credit note did not constitute an acknowledgment of liability or an intention to pay, as required by law. Citing the Supreme Court's decision in J. C. Budhraja v. Chairman, Orissa Mining Corporation Ltd., the Tribunal concluded that the application, filed on January 7, 2019, was beyond the three-year limitation period and thus not maintainable.

5. Procedural Compliance and Technical Objections:
The corporate debtor raised several technical objections, including the validity of the board resolution, the authorization process, and the non-compliance with procedural rules. The Tribunal dismissed these objections, emphasizing that procedural requirements should facilitate justice rather than hinder it. The Tribunal found that the applicant had substantially complied with the necessary procedural requirements, and minor deviations did not warrant the rejection of the application.

Conclusion:
The Tribunal dismissed the application on the grounds that it was barred by the law of limitation, as it was filed beyond the prescribed three-year period from the date of default. The Tribunal did not impose costs on the applicant.

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