2020 (1) TMI 592 - Tri - Insolvency and Bankruptcy

Dismissal of Insolvency Application Due to Time-Barred Claim & Lack of Evidence

The application under Section 9 of the Insolvency and Bankruptcy Code for Corporate Insolvency Resolution Process against M/s. Mekko Steel & Power ... Limitation under Limitation Act, 1963 - acknowledgement under Section 18 of Limitation Act, 1963 - operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - requirement of authorised signatory and supporting Board Resolution - ex parte hearing - IBC not to be used as a substitute for recovery (Mobilox principle) - jurisdiction of the Adjudicating AuthorityJurisdiction of the Adjudicating Authority - Adjudicating Authority has territorial jurisdiction over the petition as the Registered Office of the Corporate Debtor is in Chhattisgarh. - HELD THAT: - The registered office of the Corporate Debtor is situated in Chhattisgarh; accordingly this Adjudicating Authority has territorial jurisdiction to entertain the Section 9 petition against the Corporate Debtor. [Paras 5]Petition entertained by this Adjudicating Authority as having jurisdiction.Ex parte hearing - Respondent was called absent and the matter proceeded ex parte for want of representation despite notice. - HELD THAT: - Notice was served on the respondent but there was no representation; the Tribunal therefore proceeded to hear the application ex parte. [Paras 4]Hearing conducted ex parte and matter decided on the material before the Tribunal.Limitation under Limitation Act, 1963 - operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Majority of the invoices relied upon by the Operational Creditor are barred by the period of limitation and the Section 9 petition is time-barred in respect of those invoices. - HELD THAT: - Eighteen invoices are dated in 2011 and therefore the three-year limitation period under the Limitation Act, 1963 has expired by the time this petition was filed on 16.07.2019. Invoices from 2013 and 2014 likewise fell outside the limitation period when measured against the filing date. Consequently the claimed amounts corresponding to those invoices are time-barred and cannot sustain the Section 9 petition unless a valid acknowledgement under Section 18 is shown. [Paras 6, 7, 10]The claim based on the time-barred invoices is rejected as barred by limitation.Acknowledgement under Section 18 of Limitation Act, 1963 - requirement of authorised signatory and supporting Board Resolution - Alleged confirmations of balance are not proved to be valid acknowledgements under Section 18 and the Operational Creditor has not discharged the onus of proving authority of the signatory. - HELD THAT: - Petitioner produced purported Confirmations of Balance dated 01.04.2016, 01.04.2017, 01.04.2018 and 01.04.2019, but originals were not placed on record and no Board Resolution or other evidence was filed to establish that the signatory was authorised to bind the Corporate Debtor. The Tribunal observed that conditions for an acknowledgement under Section 18 (written, made before expiry of limitation, unqualified, signed by the debtor or authorised agent) are not shown to be satisfied. Documentary evidence before the Tribunal (emails sent by the petitioner and attached invoices) did not suffice to prove a valid acknowledgement or payment which could revive the barred claims. [Paras 8, 9, 10, 11]Confirmations of balance cannot be treated as valid acknowledgements; onus to prove validity and authority rests on the Operational Creditor and remains unfulfilled.IBC not to be used as a substitute for recovery (Mobilox principle) - operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Insolvency proceedings under the Code cannot be invoked as a substitute for recovery of disputed or time-barred dues; applying that principle the Section 9 petition is dismissed. - HELD THAT: - Relying on the settled principle that the Insolvency and Bankruptcy Code is not a substitute for ordinary recovery remedies, the Tribunal found that, given the time-barred nature of the bulk of the claimed invoices and the lack of proof of valid acknowledgement or authorised signing, the petition cannot be sustained under Section 9. Consequently the petition was dismissed, with liberty to the petitioner to pursue other remedies available under law for recovery of dues if any. [Paras 12, 13]Section 9 petition dismissed; petitioner may pursue alternate remedies.Final Conclusion: The Tribunal, having territorial jurisdiction, heard the matter ex parte and concluded that most invoices are time-barred; alleged acknowledgements were not proved or authorised and therefore did not revive limitation; applying the principle that IBC is not a substitute for recovery, the Section 9 petition is dismissed with liberty to the petitioner to seek other remedies. Issues:Initiation of Corporate Insolvency Resolution Process under Section 9 of Insolvency and Bankruptcy Code, 2016; Jurisdiction of the Adjudicating Authority; Time-barred claims; Conditions for acknowledgment under Section 18 of the Limitation Act, 1963; Validity of balance of confirmation as evidence; Lack of evidence for outstanding dues; Invocation of Insolvency and Bankruptcy Code for recovery.Analysis:The judgment pertains to an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 for the initiation of Corporate Insolvency Resolution Process. The applicant, an Operational Creditor, sought resolution against the Corporate Debtor, M/s. Mekko Steel & Power Pvt. Ltd., due to outstanding dues amounting to Rs. 72,57,236 since 2011. The respondent, a Company registered under the Companies Act, 1956, did not represent itself, leading to the application being heard ex parte.The jurisdiction of the Adjudicating Authority was established as the Registered Office of the Corporate Debtor was in Chhattisgarh. The Operational Creditor submitted 21 invoices as evidence, but it was noted that 18 invoices from 2011 were time-barred under the Limitation Act, 1963, as the application was filed in 2019.The judgment delved into the conditions for acknowledgment under Section 18 of the Limitation Act, emphasizing that acknowledgment must be in clear terms, unqualified, and signed by the liable party. Various forms of acknowledgment were discussed, including email acknowledgments, balance sheets, and payments made in earlier suits.Regarding the later invoices from 2013 and 2014, the application was also deemed time-barred. The Operational Creditor produced a balance of confirmation allegedly executed by the Corporate Debtor, but the validity of the signature was questioned. The lack of a Board Resolution authorizing the signatory raised doubts about the claim's authenticity.The judgment highlighted the absence of evidence for outstanding dues, apart from emails sent by the Operational Creditor. It was noted that the Insolvency and Bankruptcy Code is not intended as a substitute for a recovery forum, as clarified by the Supreme Court in previous cases. Consequently, the application was dismissed, with no costs imposed, allowing the petitioner to seek other remedies for recovery under different laws.In conclusion, the judgment emphasized the need for proper evidence, adherence to legal requirements for acknowledgment, and the limitations of invoking the Insolvency and Bankruptcy Code for mere recovery purposes. The dismissal of the application underscored the importance of substantiating claims with valid documentation and following due legal processes for debt recovery.