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2020 (8) TMI 337 - AT - IBCMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT - Admittedly, in this case, the alleged amount is due on account of non-payment of invoice amount, generated on 13th December 2011. The acknowledgement of debt, which is beyond the limitation period, i.e. 01st April 2017 cannot provide a fresh period of limitation under Section 18 of the Limitation Act - In the case of Jignesh Shah v. Union of India, 2019 (9) TMI 1121 - SUPREME COURT Hon ble the Supreme Court has clearly held that when the time for limitation begins to run, it can only be extended in the manner provided under the Limitation Act. For example, an acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period. Thus, when part payment is made before the expiration of the prescribed period of limitation by the person liable to pay the debt, a fresh period of limitation shall be computed from the time when the payment was made - In the instant case, the Operational Creditor claims that it has received last payment in lieu of debt from the Corporate Debtor on 30th May 2015. Alleged liability is on account of invoice dated 13th December 2011. Therefore, the limitation period cannot be extended, given the statutory provision under Section 19 of the Limitation Act as the Corporate Debtor has made part payment after expiration of the period of limitation. In this case, the Adjudicating Authority has passed the Order of admission under Section 9 of the Code, without even considering the statutory requirement of Section 9(3)(b) and 9(3)(c) of the Code. The Adjudicating Authority has even not considered the issue of limitation, though Section 3 of Limitation Act mandates to decide the issue of limitation - The Adjudicating Authority has admitted the time barred petition, though as per statutory provision of Section 3 of the Limitation Act, it was obligatory on the Adjudicating Authority to examine the issue of limitation. Appeal allowed.
Issues Involved:
1. Completeness of the Application under Section 9 of the Insolvency and Bankruptcy Code (I&B Code), 2016. 2. Existence of a pre-existing dispute. 3. Limitation period for the debt claim. 4. Acknowledgement of debt and its impact on the limitation period. 5. Compliance with statutory requirements under Section 9(3)(b) and 9(3)(c) of the I&B Code. Detailed Analysis: 1. Completeness of the Application under Section 9 of the I&B Code, 2016: The Appellant contended that the Application filed under Section 9 was incomplete, lacking requisite annexures and not in the proper format. The Application also allegedly failed to comply with the statutory provisions of Section 9(3)(b) and 9(3)(c) of the I&B Code. 2. Existence of a Pre-existing Dispute: The Appellant argued that there was a suppression of material facts regarding a pre-existing dispute. The debit notes, which were crucial documents showing deficiency in the quality of goods and services rendered, were not annexed to the Application. 3. Limitation Period for the Debt Claim: The primary issue was whether the debt claim was time-barred. The debt was claimed under an invoice dated 13th December 2011. The balance confirmation was signed on 01st April 2017, which the Appellant argued was not within the limitation period. The Adjudicating Authority failed to consider that the Application was time-barred, as the debt fell due on 12th January 2012, making it almost nine years old. 4. Acknowledgement of Debt and its Impact on the Limitation Period: The Petitioner’s case was based on a balance confirmation letter dated 01st April 2017, acknowledging a sum of ?2,06,84,088.47/- due. The Appellant contended that the last part payment was made on 30th May 2015, and the balance confirmation dated 01st April 2017 was beyond the limitation period. The Supreme Court's ruling in B.K. Educational Services (P) Limited Vs. Parag Gupta & Associates was cited, which stated that the right to sue accrues when a default occurs, and if the default occurred over three years prior to the Application, it would be barred by limitation under Article 137 of the Limitation Act. 5. Compliance with Statutory Requirements under Section 9(3)(b) and 9(3)(c) of the I&B Code: The Adjudicating Authority admitted the petition without considering the statutory requirements of Section 9(3)(b) and 9(3)(c) of the I&B Code. Section 3 of the Limitation Act mandates that every Application made after the prescribed period shall be dismissed, even if limitation has not been set up as a defense. Conclusion: The Appellate Tribunal concluded that the Adjudicating Authority erred in admitting the petition without considering the issue of limitation. The Operational Creditor’s claim was barred by limitation, and the balance confirmation dated 01st April 2017 did not provide a fresh period of limitation as it was made after the expiration of the prescribed period. The Tribunal set aside the impugned Order and directed the Adjudicating Authority to pass an appropriate Order regarding the payment of CIRP cost. The Corporate Debtor Company shall be governed by its Board of Directors.
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