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TMI Blog2021 (12) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short 'I&B Code'). 2. Parties in the Company Petition represents them in this Appeal for the sake of convenience. 3. FACTUAL BACKGROUND: The Appellant/State of West Bengal, through the Principal Secretary, West Bengal Biotech Development Corporation Limited, which owns 100% share in the 'West Bengal Biotech Development Ltd' (for brevity 'WBBDL') has filed this Appeal against the Order admitting the petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016. Accordingly, the Corporate Insolvency Resolution Process (in short, 'CIRP') was initiated against the Corporate Debtor 'West Bengal Biotech Development Corporation Limited' West Bengal Biotech Development Corporation Limited ('WBBDCL'), and a moratorium was declared vide Order dated 28.01.2020 as amended by the Order dated 10.02.2020. 3.1 The Operational Creditor/Respondent No.1 had initially approached the Corporate Debtor 'WBBDCL' and represented that the Company engaged in interior decoration and renovation work. Under a bonafide belief on the said representations of the Operational Creditor, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Section 9 petition filed in October 2018 under the Insolvency and Bankruptcy Code 2016. 3.6 Respondent No.1, in his Reply, stated that it had raised three bills on 30th March 2012, 3rd April and lastly on 3rd May 2012, leaving aside a sum of Rs. 29,09,899/-. Irrespective of various reminders, the Appellant neither paid the said dues nor rejected the said claim of Respondent No.1. 3.7 Further, Respondent No.1, in his Reply, submitted that the Appellant on 7th November 2017 issued a letter to Respondent No.1 admitting the dues with a further promise to pay the said dues. Consequently, respondent No.1/Operational Creditor received no payments irrespective of the fact that there was a promise to pay. 3.8 Further in Reply the Respondent No.1 stated that before filling the Application under Section 9 of the Code IBC, the Appellant had also issued various letters enclosing the bills. Still, despite receipt of the same, the Appellant/Corporate Debtor never raised any objection about the deficiency in services rendered by the Operational Creditor. 3.9 The impugned Order is being assailed only on the ground that the Respondent No.1/Operational Creditors application is barred by limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e completion certificate. 4.4 The Appellant states that the Operational Creditor has not been able to produce the job Completion Certificate, which could have demonstrated that the work was allegedly done to the satisfaction of the Corporate Debtor. Therefore, save, and except the amount of Rs. 4,05,794/- paid by the Corporate Debtor to the Operational Creditor, no further sum was due and payable by the Corporate Debtor to the Operational Creditor. During this period, the Operational Creditor had raised three purported bills dated 11th February 2012. However, the Corporate Debtor found no sum due and payable to the Operational Creditor. Moreover, the Operational Creditor had not made over the original invoices, vouchers and/or challans to the Corporate Debtor for demonstrating that the third-party vendors were allegedly inducted by the Operational Creditor to carry out the subject work. Further, except for the work of fixing air-conditioners in the said building for which the Corporate Debtor had already made the payment on 30th April 2012, the Operational Creditor was not entitled to claim any further sum from the Corporate Debtor. 4.5 However, all of a sudden, after issuing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your convenience for the said purpose may please be communicated at the earliest" [emphasis supplied] 4.10 The Ld. Adjudicating Authority has erred in law and fact by failing to appreciate that document and correspondence which is issued for the purpose of initiating settlement or discussion are always without prejudice to the rights and contentions of the parties, and such letter/communication/ document cannot be construed as an admission. For this proposition, the Appellant relies upon the judgment reported in AIR 1963 Allahabad 157; AIR 1992 Orissa 136 and AIR 1949 Allahabad 440. 4.11 The Ld. Adjudicating Authority has failed to appreciate that there are pre-existing disputes between the parties long before the issuance of the statutory Notice dated 7th November, 2017. 4.12 The Reply dated 14th December, 2017, was issued as a goodwill gesture for the purpose of entering into discussions/meeting for settling the grievance of the Operational Creditor. The amount of alleged debt has not been quantified in the said letter of 14th December 2017. 4.13 The Ld. Adjudicating Authority has failed to appreciate that there is no promise to pay within the meaning of Section 25 (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pposed to reimburse the cost to Respondent No. 1. After that, Respondent No. 1 had paid a part of the total sum due to the job as executed by Respondent No. 1. However, irrespective of repeated reminders, the Appellant neither rejected the claim of Respondent No.1 nor did the Appellant pay the remaining sum to be reimbursed. 5.2 Respondent No.1, on 07.11.2017, issued a Demand Notice in 'Form 3' of the Code IBC, which the Respondent received. On receipt of such Notice, the Appellant had issued its letter dated 14th December 2017 wherein and wherefrom three essential elements would be evident from such letter, namely: a) intention to pay off the dues b) promise to pay c) acknowledgement of the debt. 6. Responding to the letter dated 14th December 2017, Respondent No.1 had held a meeting. Accordingly, based on the further request, by way of its covering letter dated 11th January 2018, all necessary documents as requested were forwarded to the Appellant herein. 7. The Appellant had failed and/or neglected to pay off the dues. Hence, Respondent No.1 approached the Ld. NCLT under Section 9 of the Code. The Appellant had also admitted in paragraph 3 of its Reply that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated action under Section 9 of the Code Insolvency and Bankruptcy Code, 2016. 9.5 The Adjudicating Authority had mentioned in its Order that when the case was taken up for hearing, the learned Counsel appearing for the Respondent/Corporate Debtor mainly objected to this Application contending that the claim of the Operational Creditor is barred by limitation. However, according to the learned Counsel for the Corporate Debtor, the bills on the basis of which claims have been raised are dated 11th February 2012; the Application filed on 26th October 2018 is barred by limitation. Therefore, for the said reasons itself, this Application is liable to be dismissed. 9.6 The Adjudicating Authority has noted in its Order that; "Admittedly, the invoice was raised on 11th February 2012 and the work was issued by the corporate debtor on 22nd February 2011. The averments produced on the side of the operational Creditor prove that the operational Creditor demanded the amount repeatedly from 28th May 2012 onwards till 7th June 2016. Failing payment of the amount in demand on the side of the corporate debtor, the operational Creditor was compelled demand notice as per section 8 (1) of the Cod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly has considered maintainable. There is no other objection sufficient enough to uphold anyone contention in the objections being raised on the side of the corporate debtor." (verbatim copy) 9.7 On perusal of the impugned order, it is clear that the Adjudicating Authority relying on the judgement of the Hon'ble Bombay High Court in the case of South Eastern Roadways (supra), has considered the letter issued by Corporate Debtor dated 14th December 2017 as an acknowledgement of debt in the form of a promise to pay the debt amount and given a finding that the Application filed by the Operational Creditor is beyond the given period of limitation. 9.8 In the circumstances, it is necessary to go through the findings of the Hon'ble Bombay High Court in the above-mentioned case. 9.9 In case of South Eastern Roadways v. UP State Agro Industrial Corporation Ltd., 1992 SCC OnLine Bom 420 : (1993) 1 Mah LJ 236 : (1993) 1 Bom CR 709 : AIR 1993 Bom 300 at page 237 Hon'ble Bombay High Court has held that: "4. Section 18 of the Limitation Act, 1963 prescribes the effect of an acknowledgment in writing vis-a-vis liabilities for which the limitation has expired. Excluding the unne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exact amount payable and to what the said liability relates. We do not see how such an ambiguity can be read into Ex. 35. To understand Ex. 35, one has to go to Ex. 37 to which Ex. 35 purports to be a reply. In Ex. 37, plaintiff was calling upon the Corporation to reimburse it for the storage and unloading charges quantified at Rs. 37,800/- and Rs. 714 respectively. While replying to Ex. 37, the Corporation specifically said that the matter would be settled. The expression "matter" used in Ex. 35 could not but refer to claims appearing in Ex. 37. In spite of the clear words used in Ex. 35 the author of that document entered the witness box, admitted that Ex. 35 bore his signature, but yet saw no difficulty in denying that it constituted an acknowledgment of liability. This is a surprising stand to have been taken by an Officer of a State Government's Corporation. The mere fact that the amount which was to be settled was not quantified or clarified, will not render Ex. 35 any the less an acknowledgment. To quote the words of the Explanation to section 18 of the Limitation Act "an acknowledgment may be sufficient though it omits to specify the exact nature of the property or ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the Creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. Explanation 1.-Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made. Explanation 2.-An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent to the promisor was freely given. Illustrations (a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement. (b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract. (c) A finds B's purse and gives it to him. B promises to give A Rs. 50. This is a contract. (d) A supports B's infant son. B promises to pay A's expenses in so doing. This is a contract. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration (e) of Section 25 of the Contract Act provides that "if A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract." 9.14 There is no written promise to pay the time-barred debt or part of that debt in the instant case. So the question does not arise of applying Section 25 (3) of the Contract Act. However, the learned Adjudicating Authority has erroneously considered the applicability of Section 25 (3) of the Contract Act simply on the premise that the Corporate Debtor did not dispute's claim but showed his readiness to settle that the claim after discussion. The phrase 'does not dispute the claim' cannot be equated with acknowledging the liability to pay the time-barred debt. 9.15 It is pertinent to mention that Hon'ble Bombay High Court in the case of South-Eastern Roadways (supra), while considering a specific document containing the signatures but denying acknowledgement of liability, held that the mere fact that the amount which was to be settled was not quantified clarified would not render Ex 35, any less an acknowledgement of liability in terms of the Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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