2024 (3) TMI 289 - AT - Insolvency and Bankruptcy

Dismissal of Section 9 petition filed by the Appellant - Period of limitation - seeking to bring the Corporate Debtor under the rigours of Corporate Insolvency Resolution Proceedings (CIRP) - Appeal was dismissed on the ground of time limitation - HELD THAT - There are no document/agreement between the two parties which evidences running account payment underlying their business operations. In the absence of any documentary evidence which provides foundational basis to the claim of the Appellant that there was a running account, the reliance placed on the judgment of this Tribunal in SHRI ABHINANDAN JAIN, DIRECTOR RISA INTERNATIONAL LTD. VERSUS TANAYA ENTERPRISES PVT. LTD. 2021 (3) TMI 939 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH , NEW DELHI does not come to the aid of the Appellant. Furthermore, on perusal of the reply to the Section 8 Demand Notice sent by the Corporate Debtor on 07.01.2020, as placed at pages 127-136 of APB it comes to notice that it has been categorically denied that any operational debt was due qua the Operational Creditor - there are no merit in the argument advanced by the Learned Counsel for the Appellant that since the last invoice did not attract limitation, the other 26 invoices which have been submitted alongwith it also escapes the bar of limitation on the unsubstantiated pretext of running account of payments. Reliance placed in the decision of the Hon ble Supreme Court in the matter of B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES 2018 (10) TMI 777 - SUPREME COURT wherein after considering the statutory provisions of the IBC and the Limitation Act, it has been settled that for filing application under Section 9 of the IBC, Article 137 is attracted. The Adjudicating Authority has therefore not erred in holding that the Appellant cannot rely on the 26 other invoices wherein the default occurred over three years prior to date of filing Section 9 application to cross the threshold mark in claiming an outstanding amount of Rs. 1,57,06,741 / - in their Section 8 Demand Notice and Section 9 application - the principal legislative intent behind the IBC is insolvency resolution so as to bring the Corporate Debtor to its feet and in view of this clear legislative fiat, the IBC forum cannot be allowed to be used as a substitute for money recovery proceedings. There are no convincing reasons to interfere with the order of the Adjudicating Authority. The appeal being devoid of merit, there are no reasons to entertain it. In the result, the appeal is dismissed.

Summary

Issues involved:
The judgment involves the issue of dismissal of a Section 9 petition seeking to bring the Corporate Debtor under Corporate Insolvency Resolution Proceedings, based on the grounds of limitation and the applicability of the Insolvency and Bankruptcy Code 2016.

Summary:

Issue 1: Grounds of Limitation
The Appellant filed an appeal under Section 61 of the Insolvency and Bankruptcy Code 2016, challenging the dismissal of a Section 9 petition by the Adjudicating Authority. The dispute arose from unpaid goods supplied by the Appellant to the Corporate Debtor, leading to a demand notice under Section 8 of the IBC. The Adjudicating Authority dismissed the petition citing that the debts were old and barred by limitations, as no subsequent acknowledgment of liability was provided by the Corporate Debtor.

Issue 2: Running Account Payment
The Appellant argued that the business relationship between the parties was based on a running account, and thus, the entire dues should not be considered time-barred. However, the Adjudicating Authority found that most invoices were over three years old from the date of the Section 9 application, lacking any evidence of a running account. The Corporate Debtor denied any operational debt due and questioned the continued supply of materials despite pending payments.

Issue 3: Legal Precedents and Legislative Intent
The Tribunal referred to legal precedents, including the Supreme Court decision in B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta, emphasizing the application of the Limitation Act to IBC applications. It was highlighted that the IBC is not meant to revive time-barred debts, and the legislative intent is insolvency resolution rather than debt recovery. Consequently, the Tribunal upheld the Adjudicating Authority's decision, dismissing the appeal and allowing the Appellant to seek legal remedies through appropriate forums.

Conclusion
The Tribunal, after considering the submissions and legal principles, found no merit in the appeal and upheld the Adjudicating Authority's order. The Appellant was granted the liberty to pursue legal actions for debt recovery but was not awarded costs. The judgment reinforced the legislative objective of the IBC for insolvency resolution and discouraged its misuse for mere money recovery purposes.