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TMI Blog2020 (2) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... l 30.12.2013. As per terms and conditions, Corporate Debtor had to provide Form "C". The last Form C was provided in March 2018. However, there occurred some differences during the execution which resulted in the non payment of the sum due to the Operational Creditor though part payments were made during the course of execution of contracts. 3. The Ld. Sr. Counsel appearing on behalf of the Operational Creditor narrated the facts and emphasised on the fact that as per purchase order, the activities were segregated into three portions as mentioned herein before. It was further contented that Form "C", were issued in respect of all the invoices raised by the Operational Creditor in respect of supplies portion. Our attention was drawn to Annexure - B of written notes which contained details of Form "C" and the reference to invoice and date relating to such Form "C". The Ld. Sr. Counsel emphasised on the fact that merely on the basis of outstanding amount on account of supplies, claim of the Operational Creditor was more than Rs. 1,00,000/- and there were no disputes, hence, application was liable to be admitted. He also placed reliance on the decision of Hon'ble Andhra Pradesh Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default as such Form "C" did not amount to acknowledgement of debt or liability. For this proposition, she placed reliance on the following judicial decisions : 1. National Company Law Appellate Tribunal (NCLAT) in Company Appeal (AT) (Insolvency) No, 261 of 2017 decided on 1st February, 2018 in the matter of Shrivarad Polyfab (P) Limited Vs. OLAM Agro India Private Limited 2. Judgement dated 22nd January, 2014 passed by the Hon'ble High Court at Calcutta in C.P. No. 326 of 2013 [Zion Steel Limited Vs. Subtleweigh Electric (India) Private Ltd. 6. Next line of argument was that there were disputes prior to the issue of demand notice under section 8 of IBC 2016. In this regard, it was contended that the supplies made by Operational Creditor were defective and the petitioner did not complete the work due to which the Corporate Debtor suffered loss and damages and had to get the work with the help of other vendors / contractors. To substantiate her claim, she drew our attention to the letters exchanged between the parties. It was also claimed that the Operational Creditor had also invoked Arbitration Clause. In this regard, she drew our attention to letter to letter 9.7.2016, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of Sole Proprietor Firm and not Sole Proprietor. In this regard, it is noted that in column 1 of Part 1 the name of the Proprietorship firm is mentioned. Under Part 2 of Form 5 name of the proprietor is mentioned. Further, the application has been signed by the Advocate who has been authorised by the Proprietor of the firm. In the background of these facts, we are of the view that this technical point does not deserve undue attention. The first reason for this is that the definition of person under section 3(23) is inclusive. Further, as per section 2(f) partnership firms and proprietorship firms are included in the category of entities to which provisions of IBC, 2016 will apply. Although this section is applied in relation to their insolvency and not to initiation of insolvency by them, however, in our considered view, once an entity is a legal entity for one purpose under the same Code, it will also be so for other purposes particularly when definition of the person is inclusive as stated earlier and there is no specific exclusion of proprietorship firm to file petition under section 7 or 9 of IBC, 2016. In this regard, the point which requires serious consideration is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g transactions in business, we take into account only those transactions that affect that particular business and ignore which are not relevant. This concept is very important because if the transactions of business are mixed up with that of its owner or other business, accounting information may lose its credibility and usability. This business entity concept is applicable to all types of business organisations, i.e., sole proprietorship, partnership, Corporation and even if law does not recognise the business and its owner, as separate entity. Proceedings under IBC are concerned with the insolvency resolution and economic growth, hence, in our considered view more importance has to be attached to economic and accounting concept of business entity than its legal meaning or understanding. Further, for taxation purpose also this is required as in the case of sole proprietorship firm, money withdrawn by its proprietor for his personal purposes is treated as drawings and is not allowed as expenses of the business entity. Similarly, any personal income that may be of different nature cannot be considered as business income of the sole proprietorship firm. Thus, the dichotomy between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor on the sole proprietorship firm. Once copy of invoice which is in the name of the sole proprietorship firm and also considered a necessary document for notice of demand by way of invoice, then, how the application filed in the name of sole proprietorship firm which is signed either by the proprietor or any person on his behalf can become unenforceable. Now, we take a brief look at Rule 5 and 6 of IBBI (Application to Adjudicating Authority) Rules 2016. As per rule 5 (1) (clause a) and (clause b) the payment notice can be in the form 3 or a copy of invoice can be attached with a notice in form 4. Thus, invoice has been again recognised in the Rules also. As per rule 6, application in form 5 may be filed along with documents / records required to be attached there with. Even Form 3 mentions as under - " Form of Demand Notice / invoice demanding payment under Insolvency and Bankruptcy Code - 2016" and in such form reference to invoice has been given at various places. Form 4 reads as - "Form of notice with which invoice demanding payment is to be attached". Thus, both the forms are based on the outstanding invoice. In the present case un-disputedly invoices have been raised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of reduced rate of taxes and on the other side do not want to make payment of money which is due to the supplier of goods. Further, in the absence of the books of accounts/ financial statements it cannot be said that liability to pay has not been disclosed either in financial statements or as contingent. liability which should be there because Form "C"s have been issued. It has been further brought to our notice that the Operational Creditor has been awarded work subsequently as well. Hence, considering this fact that in real life situation, small entrepreneurs wait for an amicable settlement of issues so that they can continue to work with the entity of the size of Corporate Debtor as it gives them continuity of business with the said entity and on this basis they also get empanelled for work with other business entities that are as large as the Corporate Debtor and to the extent possible do not take any legal action unless compelled to do so. Considering these facts and contents of Form "C" we are of the view that the issue of Form "C" amounts to acknowledgement of debt / liability in respect of goods supplied by Operational Creditor and received by the Corporate Debtor. As reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) The word 'signed' means signed either personally or by an agent duly authorised in this behalf; and (c) An application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. 9. From the perusal of Section 18(1), it is apparent that acknowledgement of liability must be made before expiry of limitation period for filing the suit. If limitation has already expired, it would not revive under section 18. In the present case, tast payment has been made in July, 2015 and e-mail has been sent in April, 2016, which is wett before the expiry period of three years. Hence, first hurdle is crossed. Now, we have to Zook whether such e-mail can be construed as acknowledgement of debt as it has been claimed that such mait has not been addressed to the Operational Creditor. From the perusal of the explanation (a) above, it is clear that the claim of the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edgement in writing. (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or Fight has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed. (2) Where the writing containing the acknowledgement is undated, oral evidence may be given of the time when it was signed, but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. Explanation: For the purposes of this section,- (a) An acknowledgement may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perforrn or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right; (b) The word "signed" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns on the principles of summary procedure. As discussed earlier that explanation (a) of Sec. 18 of Limitation Act. 1963 provides much fexibility and takes into consideration various factors/situations for explaining. as to what would constitute acknowledgement and in view of Sec.238 and 238A of the Insolvency & Bankrupt Code 2016 such provision has to be read further in conjunction with the wider meaning given to the term "claim" in Sec.3(6) of the Insolvency & Bankruptcy Code. 2016 which includes right to payment even on equitable ground. (Emphasis supplied). 10. In view of above discussion, we hold that there is no merit in the claim of the corporate debtor that the said emails cannot be said to be an acknowledgement within the meaning of provision of Sec. 18 of Limitation Act, 1963. Accordingly, we reject the same. " In the case of Asset Reconstruction Company (India) Ltd. vs. Dagcon (India) Private Limited, Order dated 20/ 11/2019 in CP(IB) No.1198/KB/2018, the Tribunal held as under:- "11. Coming to the aspect of limitation, we are of the view if averment made before a court of taw or any statutory authority cannot be constituted as an acknowledgment of debt then that wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing said so, we would further refer to the provisional statement attached with the letter of the Corporate Debtor dated June 25, 2014 copy of which has been placed at Page 1779 of Vol. 10 of the paper book to find as to what is the factual position as per the stand of Corporate Debtor on various issues. As per this provisional statement, the total purchase order value has been shown as Rs. 3818.72 lakhs. There have been several deductions including for services provided by Corporate Debtor to the Operational Creditor in the execution of the contract, entry tax, TDS, WCD, payment to parties/ payment to Operational Creditor by the Corporate Debtor / sub-vendors and sub contractors/vendors of the Operational Creditor. These are normal deductions as per business practice and terms of contract. However, it is noteworthy that Liquidated Damage @ 5% amounting to Rs. 190.94 lakhs, Performance Bank Guarantee to the tune of 673.6 lakhs, work claim of Rs. 352.00 lakhs for boiler house extension P.O. finalisation and additional work 71 lakh have also been considered. The net effect has been worked out by Corporate Debtor as Rs. 500 lakhs receivable from the Operational Creditor. If the boiler ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 18. Name of IRP has not been proposed which is not mandatory. Hence, we will appoint the IRP from the approved list maintained by IBBI. In case such person does not accept the assignment, then another person would be appointed. 19. Thus, considering the overall facts and above discussions, we are of the view that this application is liable to be admitted. 20. The application is otherwise complete in all respects and stands admitted. We order as under : ORDER i. The application filed by the Financial Creditor under section 8 and 9 of the Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, namely HPCL Biofuels Ltd. is hereby admitted. ii. We declare a moratorium and public announcement in accordance with Sections 13 and 15 of the IBC, 2016. iii. Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of Insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X
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