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2025 (3) TMI 689 - AT - IBCAdmission of Corporate Debtor into Corporate Insolvency Resolution Professional (CIRP) on an application under Section 9 of the Insolvency and Bankruptcy Code 2016 - application filed within time limitation or not - existence of pre-existing dispute or not. Time Limitation - HELD THAT - Since the last payment was made on 19.10.2016 and the application was filed within three years we hold that application under Section 9 of the IBC 2016 is within limitation. On the issue of pre-existing dispute it is found that in email dated 25.05.2018 the Corporate Debtor had clearly stated that as per their books of account and bank statement nothing is payable to M/s Satkar Logistics Pvt. Ltd. the Operational Creditor. Existence of pre-existing dispute or not - HELD THAT - There is continuous exchange of e-mails between the Operational Creditor and the Corporate Debtor regarding the differences in the accounting entries and the final email exchanged is dated 25.05.2018 wherein the Corporate Debtor had clearly stated no amount is payable to M/s Satkar Logistics Pvt. Ltd. - On perusal of the reply to Section 8 notice we find that Corporate Debtor had clearly stated no amount is due to the Operational Creditor. This Tribunal in LAINA POWER ENGINEERING VERSUS SOKEO POWER PRIVATE LIMITED 2018 (9) TMI 1044 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI had relied upon the emails exchanged between the parties prior to issue of demand notice under Section 8 of the IBC 2016 as evidence of pre-existing dispute. The Hon ble Supreme Court in M/s S.S. Engineers Ors. v. Hindustan Petroleum Corporation Ltd. 2022 (9) TMI 377 - SUPREME COURT has held that the application under Section 9 was rightly rejected on the grounds of preexisting dispute. The Hon ble Supreme Court in the case of Sabarmati Gas Limited v. Shah Alloys Limited 2023 (1) TMI 195 - SUPREME COURT has held that failure of reconciliation of accounts qualifies as a pre-existing dispute. The rejection of Section 9 application on the grounds of such pre-existing dispute was upheld. Conclusion - i) The application was deemed to be within the limitation period. ii) There existed a dispute between the Operational Creditor and the Corporate Debtor prior to the issuance of notice under Section 8 of the IBC 2016 which is evidenced by the emails exchanged between the parties. The Ld. NCLT has erred in ignoring the pre-existing dispute and admitting the Corporate Debtor into CIRP. The impugned order of the Ld. NCLT is set aside and the appeal is allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment were: 1. Whether the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) was within the limitation period as per the Limitation Act. 2. Whether there was a pre-existing dispute between the Operational Creditor and the Corporate Debtor that would bar the initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC. ISSUE-WISE DETAILED ANALYSIS 1. Limitation Period for Filing the Application Relevant Legal Framework and Precedents: Under Section 137 of the Limitation Act, the limitation period for filing an application under Section 9 of the IBC is three years from the date of default. Court's Interpretation and Reasoning: The Tribunal observed that the last payment was made by the Corporate Debtor on 19.10.2016, and the application was filed on 14.08.2019, which was within the three-year limitation period. Application of Law to Facts: The Tribunal concluded that the application was filed within the permissible time frame, thus satisfying the requirement under the Limitation Act. Conclusions: The application was deemed to be within the limitation period. 2. Pre-Existing Dispute Relevant Legal Framework and Precedents: Sections 8 and 9 of the IBC require that there be no pre-existing dispute for an operational creditor to initiate CIRP. The Supreme Court in M/s S.S. Engineers & Ors. v. Hindustan Petroleum Corporation Ltd. and Sabarmati Gas Limited v. Shah Alloys Limited established that a pre-existing dispute, evidenced by correspondence or other means, can bar the initiation of CIRP. Court's Interpretation and Reasoning: The Tribunal examined email exchanges between the parties, particularly the email dated 25.05.2018 from the Corporate Debtor stating that no amount was payable to the Operational Creditor. This email was not replied to by the Operational Creditor, indicating a pre-existing dispute. Key Evidence and Findings: The Tribunal found that the email correspondence and the lack of response from the Operational Creditor constituted evidence of a pre-existing dispute. The Tribunal noted that the Operational Creditor did not address the dispute before issuing the demand notice under Section 8 of the IBC. Application of Law to Facts: The Tribunal applied the principles from the cited cases to determine that the existence of a pre-existing dispute was evident and should have been considered by the NCLT. Treatment of Competing Arguments: The Tribunal considered the arguments from both parties, including the Operational Creditor's assertion of an admitted debt and the Corporate Debtor's evidence of a pre-existing dispute. Conclusions: The presence of a pre-existing dispute barred the initiation of CIRP, and the NCLT erred in admitting the application. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reaffirmed the principle that a pre-existing dispute, if evidenced prior to the issuance of a demand notice under Section 8 of the IBC, bars the initiation of CIRP under Section 9. Final Determinations on Each Issue: The Tribunal set aside the order of the NCLT admitting the Corporate Debtor into CIRP, finding that the application was within the limitation period but was barred due to a pre-existing dispute. Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Supreme Court's reasoning in M/s S.S. Engineers & Ors. v. Hindustan Petroleum Corporation Ltd. and Sabarmati Gas Limited v. Shah Alloys Limited to support its conclusion that the existence of a pre-existing dispute precludes the admission of an application under Section 9 of the IBC.
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