2019 (12) TMI 1358 - Tri - Insolvency and Bankruptcy

Dismissal of Insolvency Petition Due to Time Limitation and Lack of Pursuit

The Tribunal dismissed the petition filed by SK Systems Private Limited against M/s. Hamtek Infra Projects Private Limited under Section 9 of the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT:- In the instant case the invoices has been raised against corporate debtor on 13.03.2014 and there is no pursuance of the said liability by operational creditor against the corporate debtor till the issuance of demand notice dated 27.03.2019. Thus there is huge gap of more than five years in between the two dates which is unexplained - Since the Limitation Act is applicable to applications filed under Section 7 & 9 of I&B Code, Article 137 of the Limitation Act is invoked. The said Article provides the period of Limitation as in case of any other application for which no period of limitation is provided elsewhere, to be three years from the time when the right to apply accrues. In the present case the legal action accrues from the date of invoice and the time limitation also accrues from the same date. In the instant case invoice has been raised on 13.03.2014 and the present proceedings have been initiated by way of the statutory demand notice only on 27.03.2019. Petition dismissed. Issues Involved:1. Default in repayment by the Corporate Debtor.2. Limitation period for filing the petition under IBC.3. Dispute regarding completion of services by the Operational Creditor.4. Admission of debt by the Corporate Debtor.Detailed Analysis:1. Default in repayment by the Corporate Debtor:The Operational Creditor, SK Systems Private Limited, filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, against the Corporate Debtor, M/s. Hamtek Infra Projects Private Limited, for defaulting in repaying Rs. 4,22,697/-. The Operational Creditor claimed that the Corporate Debtor raised a purchase order on 19.08.2013 for the erection and commissioning of roof extractor units, and despite completing the work and submitting the completion report on 10.03.2014, the Corporate Debtor failed to make the payment. Various emails were sent from April 2014 to July 2016, but the payment remained unpaid.2. Limitation period for filing the petition under IBC:The Corporate Debtor contended that the petition is barred by limitation, citing the Supreme Court's decision in BK Educational Services Private Limited Vs. Parag Gupta and Associates, which held that an application filed after the IBC came into force in 2016 cannot revive a time-barred debt. The right to sue accrues when a default occurs, and if the default occurred over three years prior to the filing of the application, it would be barred under Article 137 of the Limitation Act. The Corporate Debtor argued that the default occurred on 28.03.2014, making the petition filed in 2019 time-barred.3. Dispute regarding completion of services by the Operational Creditor:The Corporate Debtor disputed the claim, stating that the Operational Creditor did not complete the commissioning of the roof extractor units as per the work order. The Corporate Debtor asserted that the Operational Creditor only completed the erection part and not the commissioning, which was a part of the work order. The Corporate Debtor also mentioned that no invoice was accounted for, no Service Tax credit was taken, and no TDS was done due to the non-completion of work by the Operational Creditor.4. Admission of debt by the Corporate Debtor:The Operational Creditor argued that the Corporate Debtor admitted the debt in its reply dated 05.04.2019 to the demand notice, stating that the amount was not paid due to the absence of complete documents. The Operational Creditor maintained that the documents were duly annexed with the notice and that the limitation period should accrue from the date of the reply, i.e., 05.04.2019. The Operational Creditor also cited continuous communication and meetings between the parties, which extended the limitation period.Judgment:The Tribunal noted that the invoice was raised on 13.03.2014, and there was no pursuance of the liability by the Operational Creditor until the demand notice on 27.03.2019, creating an unexplained gap of more than five years. Referring to the Supreme Court's decision in BK Educational Services Pvt Ltd vs. Parag Gupta and Associates, the Tribunal reiterated that the right to sue accrues when a default occurs, and applications filed under Section 7 and 9 of the IBC are subject to Article 137 of the Limitation Act, which provides a three-year limitation period. Since the legal action and time limitation accrue from the date of the invoice (13.03.2014), the petition filed in 2019 was beyond the limitation period. Consequently, the Tribunal dismissed the petition as being barred by limitation.