2023 (10) TMI 1171 - AT - Insolvency and Bankruptcy

Maintainability of section 9 application - initiation of CIRP - Application dismissed on the ground that it is barred by limitation - arbitration clause present in the agreement - eligibility for benefit of Section 14 of the Limitation Act. It is submitted that there is arbitration clause in the agreement and the suit could not have been decided on merits, hence, the benefit of Section 14 needs to be extended to the Appellant. Time Limitation - HELD THAT - Benefit of Section 14 of the Limitation Act was sought by the Appellant on the basis of filing of suit and pendency of the suit during the period 03.10.2017 till 18.07.2022. The suit was withdrawn without any liberty from the Court to institute a fresh proceeding and termination of suit cannot be held on ground of defect of jurisdiction on cause of like nature. Thus, an essential condition for extending the benefit of Section 14 is absent. Thus, the delay in filing Section 9 application with delay cannot be said to be a sufficient cause within the meaning of Section 5. The benefit for exclusion of the time during which proceedings under SARFAESI Act was pending was based on the observation that the said proceedings are without jurisdiction, on which prima facie finding High Court has granted stay. Hon ble Supreme Court in Sesh Nath Singh 2021 (3) TMI 1183 - SUPREME COURT also observed that Section 5 of the Limitation Act is also applicable in proceedings under Section 9 and on sufficient cause, the said delay can be condoned - The Judgment of Sesh Nath Singh was in facts and grounds as noted above and does not help the Appellant in the present case. It is further observed that that the proceedings under IBC are not proceedings for recovery of contractual dues, as is apparent from the facts of the present case the Operational Creditor has initiated proceeding for recovery of its contractual dues arising out of contract between the parties. Suit for recovery of dues was already filed by the Appellant which was withdrawn by the Appellant. It is, however, relevant to notice that withdrawal of the suit was not on the ground contended by the Appellant nor any liberty was granted by the Civil Court to institute a fresh suit nor Appellant at any point of time resorted to the proceeding of arbitration which according to the Appellant was reason for withdrawal of suit. The present was a case filed by the Operational Creditor only for recovery of its contractual dues with regard to default committed as per the case of the Appellant on 30.04.2015 for stage 1 and 23.10.2018 for stage 2. The Adjudicating Authority did not commit any error in rejecting Section 9 application as barred by time - there are no merit in this Appeal - appeal dismissed.

Summary

Issues Involved:

1. Whether the Section 9 Application filed by the Appellant was barred by limitation.
2. Whether the Appellant was entitled to the exclusion of time under Section 14 of the Limitation Act.
3. Whether the Appellant was entitled to condonation of delay under Section 5 of the Limitation Act.

Summary of Judgment:

1. Whether the Section 9 Application filed by the Appellant was barred by limitation:

The Appellate Tribunal examined the facts of the case, noting that the Operational Creditor had issued invoices in response to three Purchase Orders and had filed a suit for recovery of monies which was withdrawn on 18.07.2022. The Section 9 Application was filed on 05.12.2022. The Adjudicating Authority dismissed the application on the grounds that it was barred by limitation and did not meet the threshold of Rs.1 Crore due to the absence of an agreement for interest.

2. Whether the Appellant was entitled to the exclusion of time under Section 14 of the Limitation Act:

The Tribunal referred to Section 14 of the Limitation Act, which pertains to the exclusion of time when proceedings are prosecuted in good faith in a court without jurisdiction. The Appellant argued that the period during which the civil suit was pending should be excluded. However, the Tribunal found that the withdrawal of the suit was voluntary and not due to a defect of jurisdiction. Therefore, the conditions for applying Section 14 were not met.

3. Whether the Appellant was entitled to condonation of delay under Section 5 of the Limitation Act:

The Tribunal noted that the Appellant did not institute any arbitration proceedings despite claiming that the suit was withdrawn due to an arbitration clause. The Tribunal concluded that the delay in filing the Section 9 Application could not be condoned under Section 5 of the Limitation Act as the Appellant failed to show sufficient cause.

Conclusion:

The Tribunal upheld the Adjudicating Authority's decision to dismiss the Section 9 Application as barred by limitation. The Appellant was not entitled to the exclusion of time under Section 14 of the Limitation Act, nor was there sufficient cause to condone the delay under Section 5. The appeal was dismissed.