2022 (7) TMI 357 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT - The Operational Creditor supplied the goods to the Corporate Debtor and raised 18 invoices of Rs. 4,25,39,644/-. It is not a disputed fact that out of the total aforesaid amount, the Corporate Debtor paid an amount of Rs. 3,86,89,784/-. The Demand notice under Section 8 of the IB Code in form-3 was issued by the Operational Creditor to the Corporate Debtor on 04.04.2019 for the payment of Rs. 2,40,20,575/-, and the same was delivered to the Corporate Debtor on 09.04.2019. The Corporate Debtor replied to the said demand notice on 20.05.2019 and raised a pre-existing dispute with respect to the service and goods supplied. This application is filed on the basis of the award passed by the Hon'ble MSME Council on 20.02.2016. In the present matter, the moot question is whether the award passed on 20.02.2016 by the MSME Council is within the period of limitation or not? It is settled law that Article 137 Schedule- I of the Limitation Act, 1963 would be applicable in the application filed under section 7 or 9 of the IB Code. The aforesaid Article provides 3 years limitation period for filing an application from the date when the right accrues. The arbitration award was passed on 20.02.2016 and the present application was filed before this Adjudicating Authority on 13.08.2019 after three years. No appeal or application for setting aside the said order is preferred by the Corporate Debtor till date. The present application is barred by limitations - Application rejected.

Summary

Issues:
Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process due to default amount. Clarification on the award's finality and limitation period. Dispute regarding the validity of the award. Application's compliance with the limitation period.

Analysis:
1. The Operational Creditor filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for defaulting on a significant amount. The Operational Creditor provided detailed averments regarding the issuance of purchase orders, supply of goods, and outstanding payments, amounting to Rs. 2,50,66,590. The date of default was mentioned as 20.02.2016, leading to the initiation of the Corporate Insolvency Resolution Process.

2. The Operational Creditor's contentions included supplying goods, raising invoices, partial payments made by the Corporate Debtor, and subsequent non-payment despite reminders and legal notices. The Operational Creditor pursued arbitration proceedings, resulting in an award by the MSME Council on 20.02.2016 in favor of the Operational Creditor. The Corporate Debtor failed to comply with the award, leading to the application under the Insolvency and Bankruptcy Code.

3. The Adjudicating Authority sought clarification on the award's finality, limitation period, and potential pre-existing disputes. The Operational Creditor provided explanations citing relevant legal provisions, emphasizing the finality of the award and absence of any pending appeals or disputes.

4. The Corporate Debtor raised defenses based on the limitation period, invoking Article 137 of the Limitation Act, 1963. They contested the validity of the award, highlighting procedural irregularities and lack of service. Additionally, the Corporate Debtor argued against the application's compliance with the limitation period, emphasizing the applicability of Article 137 over Article 136 of the Limitation Act.

5. After hearing both parties, the Tribunal concluded that the application was barred by limitations. The Tribunal analyzed the limitation period under Article 137 of the Limitation Act, 1963, and found that the application filed after three years from the arbitration award date was not within the prescribed timeframe. The absence of appeals or actions to set aside the award further supported the decision to reject the application.

6. The Tribunal emphasized the importance of adhering to the limitation period prescribed under the law, ultimately leading to the rejection and disposal of the application. No costs were awarded in the judgment, concluding the legal proceedings in the matter.