Application for Corporate Insolvency Dismissed: Claim Deemed Time-Barred

The Tribunal dismissed the application for corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code, 2016, as the claim by the operational creditor was deemed time-barred. The claim, arising from supplies made in 2011-12, was filed in 2017, exceeding the three-year limitation period. Despite the operational creditor's arguments on continuous transactions and follow-up actions, the Tribunal held that the lack of subsequent invoices after 2011 indicated discontinuity. Additionally, the Tribunal found insufficient evidence of acknowledgment of debt in the respondent company's financial statements, leading to the rejection of the claim as unenforceable in law.

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Issues:
Default in payment of operational debt; Application for corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code, 2016; Claim of operational creditor against corporate debtor; Limitation period for filing the claim.

Analysis:
The application was filed by an operational creditor, M/s Prowess International Private Limited, against the corporate debtor, M/s Action Ispat and Power Private Limited, under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing default in payment. The operational creditor claimed that the corporate debtor owed them a significant sum for supplies made, and despite repeated demands and notices, the outstanding dues were not cleared. The operational creditor highlighted that the debt was acknowledged in the respondent company's financial statements for multiple fiscal years, indicating that the amount was not written off.

The Tribunal examined the issue of the limitation period for filing the claim. The claim arose from supplies made in 2011-12, with the last payment received in 2012. The application, however, was filed in 2017, well beyond the three-year limitation period. The operational creditor argued that continuous transactions and follow-up actions prevented the claim from being time-barred. However, the Tribunal held that the transactions were not continuous as there were no subsequent invoices after 2011. The Tribunal emphasized that mere follow-up actions do not extend the limitation period, citing legal precedents.

Regarding the acknowledgment of debt in the financial statements, the Tribunal noted that while the operational creditor provided financial statements of the respondent company for multiple years, there was no specific mention or reflection of the outstanding dues owed to the petitioner. Without concrete evidence of acknowledgment, the Tribunal deemed the claim time-barred. The Tribunal emphasized that the burden of proof lies on the claimant to establish the acknowledgment of debt, which was not satisfactorily done in this case.

Ultimately, the Tribunal concluded that the claim was time-barred due to the expiration of the limitation period, making it unenforceable in law. As the debt had become more than three years old and was not recoverable due to the law of limitation, the Tribunal rejected the application for corporate insolvency resolution process against the respondent company, M/s Action Ispat and Power Private Limited, without any costs imposed.

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