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TMI Blog2024 (1) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the Section 9 application was filed well within time. Hence the objection on the ground of limitation raised by the Corporate Debtor basis the date of default mentioned in the demand notice while choosing to ignore the date of default shown in the Section 9 application lacks merit. Keeping in mind the settled position of law as laid down in the Mobilox judgment [ 2017 (9) TMI 1270 - SUPREME COURT] , it is amply clear that there exists a pre-existing dispute with respect to the computation of claims by the Operational Creditor qua the Corporate Debtor in the backdrop of an arrangement which had come into existence following a meeting held on 28.08.2012. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. Where Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out given the facts of the present case. It is well settled that in Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which however closed on 02.02.2016, which date was before the tenure specified in the Agency Agreements. It is submitted that following the closure of the showroom, the stock in trade was sent back to the Corporate Debtor by the Operational Creditor. Thereafter on the request made by the Corporate Debtor, the Operational Creditor raised invoices for salvageable and non-salvageable assets on the Corporate Debtor on 18.11.2016. However, the Corporate Debtor made only part payment of Rs.51,283.28 on 28.04.2017. Aggrieved with the meagre, part-payment amount paid by the Corporate Debtor, the Operational Creditor sent a detailed computation sheet showing a total outstanding commission amount of Rs.86.34 lakh and invoices amounting Rs.15.26 lakhs and Rs.4.28 lakhs towards salvageable and non-salvageable assets respectively. Since payment was not forthcoming, in spite of sending three reminders, a demand notice was sent under Section 8 of the IBC to the Corporate Debtor on 07.08.2019 for operational debt totalling an amount of Rs. 1.05 crore. Admitting that the Section 8 notice was replied to by the Corporate Debtor on 21.08.2019, it was added that as no further payments were received, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate with respect to commission payment arrangement. Alleging further that the purported proceedings of the meeting were fabricated, it was added that the Adjudicating Authority wrongly relied on this meeting and mistook the forged meeting proceedings to be evidence of pre-existing dispute while dismissing the Section 9 application. 6. Countering the submissions made by the Appellant, the Learned Counsel for the Respondent contended that whereas the date of default mentioned in the demand notice of the Operational Creditor was 27.08.2016, the Section 9 application was filed on 01.10.2019 which was beyond the prescribed three years period of limitation and hence time-barred. It was therefore submitted that the Adjudicating Authority had rightly held that the Section 9 application had been filed beyond three years limitation period and hence not maintainable. It was also pointed out that the Allen Solly Agency Agreement had already been validly terminated by the Corporate Debtor on 02.02.2016. This agreement provided for reconciliation of accounts within 15 days from the date of termination of the agreements. However, the Operational Creditor failed to demonstrate attempts made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 10. Before we examine as to whether there had arisen a debt and default above the threshold limit, we would like to examine how the Adjudicating Authority has treated the Section 9 application from the point of view of limitation. 11. On the issue of limitation, the findings of the Adjudicating Authority are as extracted hereunder: - 5.3 As regards applicability of law of limitation under section 238A of the IBC read with Article 137 of the Limitation Act, 1963, the OC's demand notice dated 07.08.2019 under section 8 of the IBC, clearly states the date of default as 27.08.2016. This date has been mentioned against both serial number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rva Auto Logistics Pvt. Ltd. v. Intec Capital Ltd Anr. in CA (AT) (Ins.) No. 303/2022 on the ground that the present is a case relating to an application under Section 9 and not Section 7. This finding of the Adjudicating Authority is misplaced since the provisions of the Limitation Act in this regard is equally applicable to both Section 7 and 9 applications as has been held by the Hon ble Supreme Court in B.K. Educational Services Pvt. Ltd. v. Parag Gupta (2019) 11 SCC 633 which is to the effect : 42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 14. Coming now to the question as to whether debt was due and payable, it is the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable items. 16. We notice that the Adjudicating Authority has taken notice of Clauses 1.11, 5.1 and 6.10 and held that in terms of these clauses, the claim raised by the Operational Creditor fall flat . We have perused the above clauses of the Agency Agreements as has been placed at Annex 2 of the APB. As we are clear in our mind that neither the Adjudicatory nor the Appellate Tribunal is vested with the competent jurisdiction either to enter into the realm of investigating contractual disputes or to determine the tenability of the claim amount arising out of contractual terms, we cannot subscribe to the finding of the Adjudicating Authority that the claims of the Operational Creditor has fallen flat. Be that as it may, we however do not hesitate from making the observation that in their reply to the Section 8 demand notice, the Corporate Debtor having raised dispute on the amount claimed by the Operational Creditor in the light of the clauses of the Agency Agreements, there was clearly a pre-existing dispute between the parties on the computation of claims. 17. We further find that the Adjudicating Authority has also taken due cognizance of the email dated 18.11.2016 from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority. 20. The claim made by the Operational Creditor that it had sent letters to the Corporate Debtor on 20.08.2018, 08.12.2018 and 24.06.2019 regarding their dues has also been stoutly controverted by the Corporate Debtor. It was submitted that these letters were never annexed to the demand notice and that they were never shared with the Corporate Debtor. Moreover, it has been contended that the Operational Creditor failed to demonstrate that the letters were served on the Corporate Debtor. While Clause 12 of the Agency Agreements spelt out the address of the Corporate Debtor as Bangalore, the alleged courier receipts to prove service of the said letters show the address as Gurgaon as placed at pages 138, 140 and 142 of the APB which show that no reminders were actually ever sent to the Corporate Debtor. 21. The Operational Creditor has however refuted the assertion made by the Corporate Debtor with regard to the meeting held on 28.08.2012 and submitted that no such meeting was held with the Corporate Debtor on 28.08.2012. It was denied that any arrangement on the payment of the reduced/revised commission was arrived at on 28.08.2012. It is claimed that the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Nitesh Agrawal as raised by the Appellant is a subject which requires detailed investigation which is not possible to be carried out by the Adjudicatory/Appellate Tribunal given their summary jurisdiction. 24. It is relevant at this juncture to refer to the guiding principles laid down by the Hon ble Supreme Court in Mobilox supra. Para 56 of the Mobilox judgment is extracted hereunder which reads as follows: 56. Going by the aforesaid test of existence of a dispute , it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. 25. On going through the submissions made by the parties and keeping in mind the settled position of law as laid down in the Mobilox judgment cited supra, it is amply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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