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TMI Blog2021 (4) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... on-payment of debt when whole or any part or instalment of the amount of Debt has become due and payable and is not paid by the Corporate Debtor. When the Corporate Debtor acknowledges the liability before the expiration of three years, from that point fresh period of Limitation u/s 18 of the Limitation Act starts. But such acknowledgement must be before the expiration of the prescribed period of Limitation, including the fresh period of Limitation due to acknowledgement of the Debt, from time to time for the institution of proceeding under Section 7 of the Code. The limitation period started after the General Agency Agreement's termination, when demand was raised, and the default was committed by the Corporate Debtor. Therefore, the limitation period is regularly getting extended by implication of Section 18 of the Limitation Act. Thus it is clear that the Debt is not barred by Limitation. Pre-existing dispute or not - HELD THAT:- It is a settled position of law that once the Debt and default in question are proved, and the Corporate Debtor raised no prior dispute, it is mandatory for the Adjudicating Authority in an Application filed under Section 9 of the Code, adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent No.1, Company, to manage Respondent No.1 Companies work more effectively. Respondent No.2 Company/ Corporate Debtor, is registered under the Companies Act 1956 since 16 January 2002. Respondent No.2 Company's main object was to carry on the business of booking cargo on a commission basis. b. Mr Andrea Colombo, who was holding a position as Director from 18 March 2002 till 1 April 2019, removed from the directorship of Respondent No.2 Company with effect from 1 April 2019 for the non-compliances as he absented from all the meetings of the Board of Directors held during 12 months commencing from 1 April 2018 to 31 March 2019. Mr Andrea Colombo is at present the Director of the Respondent -1 Company since 16 February 2001. Mr Fernando Poletti was also a Director of Respondent No.2 Company from 18 March 2002 till 15 February 2019. However, he was also the authorised representative of Respondent No.1 Company. All the Respondent No.2 Company's decisions from 18 March 2002 till 15 May 2019 were being taken by Mr Andrea Colombo and Mr Fernando Poletti. Mr Andrea Colombo, who was managing the financials of Respondent No.2 Company. c. Under the General Agency Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absent from all the meetings of the Board Of Directors held during 12 months commencing from 1 April 2018 to 31st of 2019, the demand notice dated 12 June 2019 was issued. 3. Grounds: The Appellant has challenged the impugned Order on the following grounds; Respondent No.1 is not an Operational Creditor. No liability arises in the form of future payments in exchange for goods or services. Respondent No.1 has not provided any goods and services to Respondent No. 2. Hence, Respondent No. 1 is not an Operational Creditor as its liability does not come from a transaction on operations. The Debt is not an Operational Debt and is also barred by Limitation as alleged in part A of the demand notice dated 12 June 2019. Further, the Debt, as mentioned in part B and part C of the demand notice, are forged. No debt arises from any transactions of operations. The proceedings against Respondent No. 2 were initiated to defraud the Respondent No. 2 Company because Mr Andrea Colombo and Fernando Poletti, the then directors, were themselves managing Respondent -2 Company's operations during the year 2002 to 2019. As mentioned above, all the sales and purchase of the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e General Agency Agreement dated 31 August 2003, and both the Respondents are bound by it. d. Given the terms of the Agreement, the Corporate Debtor was to act as a cargo booking agent for the Operational Creditor (R-1) in India, on a commission basis, which carries on transporting freight by sea using ships/vessels owned/chartered by it. The Operational Creditor terminated this Agreement on 5 September 2018. e. After the Agreement's termination, the Operational Creditor issued a demand notice Dt. 12 June 2019 under section 8 of the I B code 2016 to the Corporate Debtor. The Operational Creditor demanded repayment of debts, classified into three categories, namely, unsecured loans (part A), payment towards Yacht (part B) and payment towards freight collections (part C). f. The Corporate Debtor, in response to the demand notice, admitted the Debt of USD 1766.09 claimed by the Operational Creditor under part 'C' of the demand notice and amount of the Debt, under part B, i.e. USD 61,119.45 out of the USD 1,41,072.57 as the actual payable dues, as per the books and the financials of the Company for the financial year ending 31 March 2018. But the reply was si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration of the service that the Corporate Debtor had provided, or was expected to provide in the future, to the Operational Creditor. The Appellant has pleaded that the Operational Creditor's advance was not meant to fund the Corporate Debtor service. Hence, there was no time value of money involved. 1.3 The Learned Counsel for the Respondent No.1 placed reliance on the judgement of the Hon'ble Supreme Court in case of Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1 : 2019 SCC OnLine SC 1005 at page 490. In this case it is held: 42. It is impossible to say that classifying real estate developers is not founded upon an intelligible differentia which distinguishes them from other operational creditors, nor is it possible to say that such classification is palpably arbitrary having no rational relation to the objects of the Code. It was vehemently argued by the learned counsel on behalf of the petitioners that if at all real estate developers were to be brought within the clutches of the Code, being like operational debtors, at best they could have been brought in under this rubric and not as financial debtors. Her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lving exchange i.e. advances paid only in order to obtain a flat/apartment. What is predominant, insofar as the real estate developer is concerned, is the fact that such instalment payments are used as a means of finance qua the real estate project. One other vital difference with operational debts is the fact that the documentary evidence for amounts being due and payable by the real estate developer is there in the form of the information provided by the real estate developer compulsorily under RERA. This information, like the information from information utilities under the Code, makes it easy for homebuyers/allottees to approach NCLT under Section 7 of the Code to trigger the Code on the real estate developer's own information given on its webpage as to delay in construction, etc. It is these fundamental differences between the real estate developer and the supplier of goods and services that the legislature has focused upon and included real estate developers as financial debtors. This being the case, it is clear that there cannot be said to be any infraction of equal protection of the laws. 1.4 In the instant case, the monies advanced by the R-1 to the Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of the claim amount. Since the Corporate Debtor was an agent and service provider of the Operational Creditor, the amounts due under the transactions would fall within the ambit of Operational Debt as defined under Section 5 (21) of the Insolvency and Bankruptcy Code 2016. B. Whether alleged Debt is barred by Limitation? 1.1 The Appellant contends that Respondent No. 1's claims are barred by time, and by no stretch of the imagination, Respondent No. 1 can make good its dead claim. It is contended that by the issuance of notice dated 12 June 2019, at this late stage, Respondent No. 1 cannot claim the Debt on time. 1.2 Respondent No. 1 claims a sum of USD 12,23,937 towards the freight from 2004 to 2016, which is the time-barred claim of Respondent No.1. It is stated that it is not possible to raise freight invoices both by Respondent No. 1 2 Company for the same freight transaction. 1.3 The Appellant, in response to the above, contended that the repayment of the Debt as demanded could be classified into three categories, namely, unsecured loans (part A), payment towards Yacht (part B) and payment towards freight collections (part C). 1.4 The Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdhraji Gurjar (II) (supra). Suffice it to observe that this court had not ruled out the application of section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case warrants. Considering that the purport of section 238 A of the Code, as enacted, it is clearificatory in nature and being a procedural law had been given retrospective effect; which included application of provisions of the Limitation Act on case to case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time-barred debts under the Limitation Act. At the same time, accrual of fresh period of Limitation in terms of section 18 of the Limitation Act is on its own under that Act. It will not be a case of giving new lease to time-barred Debt under the existing law (Limitation Act) as such. 36. Notably, the provisions of the Limitation Act have been made applicable to the proceedings under the Code, as for as may be applicable. For, section 238 A predicates that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or Appeals before the Adjudicating Authority, the NCLAT, the DRT or the Debt Recovery Appellate Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of Limitation due to acknowledgement of the Debt, from time to time, for institution of the proceedings under section 7 of the Code. Further, the acknowledgement must be of a liability in respect of which the financial Creditor can initiate action under section 7 of the Code. (emphasis supplied) 1.9 Based on the above observation of the Hon'ble Supreme Court, it is clear that Section 7 of the I B Code comes into play on non-payment of debt when whole or any part or instalment of the amount of Debt has become due and payable and is not paid by the Corporate Debtor. When the Corporate Debtor acknowledges the liability before the expiration of three years, from that point fresh period of Limitation u/s 18 of the Limitation Act starts. But such acknowledgement must be before the expiration of the prescribed period of Limitation, including the fresh period of Limitation due to acknowledgement of the Debt, from time to time for the institution of proceeding under Section 7 of the Code. In the instant case the Appellant has contended that during the years 2002 to 2019, Mr Andrea Columbo and Fernando Poletti were handling the Respondent No. 2 Company's operations. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly feeble argument, as held in the case of Mobilox Innovations (supra). It is also important to mention that any investigation into the issues of fabrication/falsification of documents, invalid debit notes, directors having a conflict of interest after leaving the Corporate Debtor Company etc., as now raised by the Respondent/Corporate Debtor, are the issues clearly outside the scope of the summary proceedings. The Petition filed under Section 9 of the Code is filed by Mr Andrea Colombo, being duly authorised by Board Resolution dated 15 July 2019 by the Operational Creditor Company, which is a separate legal entity, and not in his personal capacity. 1.2 It is pertinent to mention that there is an admission of liability to repay the due amount by the Corporate Debtor, in its reply dated 1 July 2019 to the demand notice. It is stated that; under these circumstances, on being mindful of the long standing relationship with you, in order to resolve the issue amicably in good faith, we are ready and willing to reimburse the amount of rupees INR 5,97, 45,758 as the freight payable, and USD 61,119.452 towards the settlement of Yacht Import Bills, within the period of 2 years, by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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