Appeal Dismissed: Adjudicating Authority's Decision on Section 9 IBC Application Upheld Due to Limitation Bar.

The Appellate Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision that the Section 9 Application under the IBC was barred by limitation. The Tribunal found no 'Pre-Existing Dispute' prior to the issuance of the Demand Notice. The appeal was dismissed without costs, emphasizing the importance of adhering to the limitation period.

---

---

Issues Involved:
1. Whether the Section 9 Application was barred by limitation.
2. Whether there was a ‘Pre-Existing Dispute’ prior to the issuance of the Demand Notice under Section 8(1) of the IBC.

Issue-wise Detailed Analysis:

1. Limitation of Section 9 Application:

The Appellant, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the Corporate Debtor. The Adjudicating Authority rejected the application on grounds of 'Pre-Existing Dispute' and 'Claims being time-barred'. The Appellant raised 187 invoices during the period from March 12, 2011, to June 30, 2017, for a total amount of Rs. 2,39,85,521.35, which remained unpaid. The Adjudicating Authority noted that the debt fell on various dates starting from October 2011 and there was no explanation for the delay on the part of the Appellant.

The Hon’ble Supreme Court in B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates held that the provisions of the Limitation Act apply to proceedings or appeals before NCLT/NCLAT. 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. In this case, the first unpaid debt was dated 12.03.2011, and the application was filed on 26.10.2017, beyond the three-year limitation period. The correspondence relied upon by the Appellant to establish 'Acknowledgement of debt' under Section 18 of the Limitation Act was dated 12.09.2015, beyond three years from the date of default. Therefore, the application was held to be barred by limitation.

2. Pre-Existing Dispute:

The Corporate Debtor argued that there was a 'Pre-Existing Dispute' regarding the services provided by the Operational Creditor. The dispute included issues such as the failure to provide requisite support, faulty supplies, and non-adherence to advertising commitments. The Appellant contended that these disputes were fictitious and non-existent, raised only after the issuance of the Demand Notice under Section 8(1) of the IBC.

The Hon’ble Supreme Court in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited held that the existence of a real dispute must be pre-existing, i.e., it must exist before the receipt of the Demand Notice or invoice. The Tribunal observed that the correspondence between the parties from 2012 to 2015 pertained to regular day-to-day issues and did not establish any significant dispute regarding the services provided. The last complaint about the equipment or services was dated 19.08.2015, and no issues were raised about training or advertising commitments before the issuance of the Demand Notice on 08.08.2017.

The Tribunal concluded that there was no 'Pre-Existing Dispute' between the parties prior to the issuance of the Demand Notice. However, since the application was barred by limitation, the appeal was dismissed.

Conclusion:

The Appellate Tribunal dismissed the appeal, agreeing with the Adjudicating Authority that the Section 9 Application was barred by limitation and there was no 'Pre-Existing Dispute' between the parties. The Tribunal emphasized that the date of default and the period of limitation are crucial and cannot be shifted or altered. The appeal was dismissed with no order as to costs.

---