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2021 (5) TMI 609 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Operational Creditors or not - existence of debt and dispute or not - contention of the Petitioner's counsel is that since no dispute has been raised within 10 days from the receipt of the demand notice, therefore, it is no dispute - HELD THAT - Earlier when the first demand notice was served upon the Corporate Debtor, he sent the reply within the prescribed period and raised the dispute. However, that company petition was dismissed as withdrawn at the request of the petitioner on technical ground - The contention of petitioner's counsel is that since in that matter, the demand notice was delivered through the counsel, the petitioner during the course of hearing had made a prayer to withdraw the petitioner with a liberty to file a fresh application and accordingly, that Application was dismissed as withdrawn. Again, the second demand notice was served upon the Corporate Debtor. Of course, the Corporate Debtor had not given reply to that demand notice but after appearance, the Corporate Debtor has filed the reply and annexed the emails exchanged between the parties. There are several emails exchanged between the parties regarding the termination of contract letter dated 20.11.2014 and dispute being raised regarding the quality of the work and the violation of the terms and conditions of the contract by the Corporate Debtor, which compelled the Corporate Debtor to cancel the contract - petitioner has failed to produce any document to show that in the light of the email exchanged between the parties, the termination of contract was recalled. The documents placed by the Corporate Debtor on record have established that there was a pre-existing dispute between the parties regarding the quality of the goods as well as the amount of debt and the matter had already been referred as per Clause 39.00 of the agreement for Arbitration - even no reply to the demand notice was sent in terms of Section 8(2) of the IBC, 2016, the Corporate Debtor can raise a dispute by filing the reply and that has been done by the Corporate Debtor - Also, the deduction of TDS amounts to acknowledgement of debt. Time Limitation - HELD THAT - In Part-IV column-II, the applicant has mentioned several dates of default and according to that, the first date of default is 30.01.2010 and the last date of default is 27.04.2017, whereas the contention of the respondent is that the contract was terminated on 20.11.2014 and therefore, the cause of action arose on that day - Mere plain reading of the provision shows that the application must be filed within three years from the date when the right to apply accrues - The petition is also barred by limitation. Petition dismissed.
Issues Involved:
1. Maintainability of the Petition under Section 9 of the IBC, 2016 2. Existence of Pre-Existing Dispute 3. Acknowledgement of Debt through TDS Deduction 4. Limitation Period for Filing the Petition Issue-Wise Detailed Analysis: 1. Maintainability of the Petition under Section 9 of the IBC, 2016 The petition was filed under Section 9 of the Insolvency & Bankruptcy Code, 2016, for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to non-payment of operational debt. The petitioner claimed that the application met all requirements under Section 9(5) of the Code, including completeness, non-payment of debt, receipt of invoice or notice of payment by the Corporate Debtor, and no notice of dispute received. 2. Existence of Pre-Existing Dispute The Corporate Debtor raised several disputes regarding the quality and timeliness of the work performed by the Operational Creditor. The disputes were communicated through various emails and letters before the issuance of the demand notice. The Corporate Debtor also invoked the dispute resolution clause of the contract, referring the matter to arbitration. The Tribunal noted that: - The Corporate Debtor had raised disputes through emails and letters before the issuance of the demand notice. - The contract was terminated on 20.11.2014 due to the Operational Creditor's failure to complete the work on time. - The disputes were referred to the Superintendent Engineer for arbitration as per the contract terms. The Tribunal referred to the Hon'ble Supreme Court's judgment in "Mobilox Innovations Private Limited vs. Kirusa Software Private Limited" and other precedents, establishing that the existence of a dispute before the receipt of the demand notice is sufficient to reject a Section 9 application. 3. Acknowledgement of Debt through TDS Deduction The petitioner argued that the deduction of TDS by the Corporate Debtor amounted to an acknowledgment of debt. However, the Tribunal rejected this contention, citing the Hon'ble Bombay High Court's decision in "SP Brothers Vs. Biren Ramesh Kadakia" and the Hon'ble Delhi High Court's decision in "Utility Power Tech Limited Vs. Amit Traders," which held that TDS deduction does not constitute an acknowledgment of debt. 4. Limitation Period for Filing the Petition The Corporate Debtor argued that the petition was barred by limitation, as the contract was terminated on 20.11.2014, and the petition was filed in December 2017. The Tribunal referred to Article 137 of the Limitation Act, which provides a three-year limitation period from the date when the right to apply accrues. The Tribunal held that the cause of action arose on the date of contract termination (20.11.2014), and subsequent dates of default could not extend the limitation period. Conclusion: The Tribunal concluded that: - There was a pre-existing dispute regarding the quality of work and the amount of debt before the issuance of the demand notice. - Deduction of TDS does not amount to an acknowledgment of debt. - The petition was barred by limitation as it was filed beyond the three-year period from the date of contract termination. Order: The Tribunal dismissed the Company Petition (IB) 586 (ND)/2017 on the grounds of pre-existing dispute and limitation.
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