2021 (5) TMI 311 - Tri - Insolvency and Bankruptcy

Time-barred Insolvency Application dismissed under Section 9

The Tribunal dismissed the Insolvency and Bankruptcy Application under Section 9 of the Insolvency and Bankruptcy Code, 2016, finding it time-barred due ... Maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation under Article 137 of the Limitation Act - application of Section 5 of the Limitation Act for condonation of delayMaintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation under Article 137 of the Limitation Act - application of Section 5 of the Limitation Act for condonation of delay - Whether the Section 9 application filed by the operational creditor is maintainable in view of the period of limitation. - HELD THAT: - The Tribunal examined the dates of the debit notes, the last payment received and the filing date of the Section 9 application. The period of limitation for applications under Sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016 is governed by Article 137 of the Limitation Act, and the right to sue accrues on the date of default. Where the default occurred more than three years prior to filing, the application is time-barred unless delay is condoned under Section 5 of the Limitation Act. In the present case the debit notes and last payment predate the filing by more than three years and the operational creditor did not seek condonation of delay under Section 5; accordingly the application is barred by limitation. The Tribunal applied the principle laid down by the Hon'ble Supreme Court in B.K. Educational Services Private Limited v. Parag Gupta & Associates regarding applicability of Article 137 to applications under the Code and the necessity to invoke Section 5 where delay is to be condoned. [Paras 10, 11, 12, 13]The Section 9 application is barred by limitation and is therefore dismissed as not maintainable.Final Conclusion: The application under Section 9 is dismissed as time barred under Article 137 of the Limitation Act; no condonation under Section 5 was sought, and hence the application is not maintainable. Issues:Insolvency and Bankruptcy Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Maintainability based on the period of limitation.Analysis:The judgment pertains to an Insolvency and Bankruptcy Application (IBA) filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by an Operational Creditor against a Corporate Debtor for defaulting in payment for services rendered. The application included details of the Operational Creditor, Corporate Debtor, operational debt, and circumstances leading to the default. The Operational Creditor raised invoices under agreements for distribution of motion pictures, claiming an outstanding amount of Rs. 1,21,68,732, which the Corporate Debtor failed to pay despite reminders and a demand notice.The Tribunal examined the application and noted that the debit notes raised by the Corporate Debtor were more than three years old from the date of filing the application, with the last payment received in February 2016. Considering the limitation period prescribed under section 137 of the Limitation Act as three years, the Tribunal found the application to be time-barred. Referring to a Supreme Court judgment, the Tribunal emphasized that applications under the Insolvency and Bankruptcy Code should be treated as falling under Article 137 of the Limitation Act, where the right to sue accrues when a default occurs, and any application filed after three years from the default is barred unless delay is condoned under section 5 of the Limitation Act.Based on the above analysis and legal principles, the Tribunal concluded that the application was hit by the limitation and therefore dismissed it as not maintainable. The judgment highlighted the importance of adhering to the prescribed limitation period for such applications. The Registry was directed to communicate the order to the Operational Creditor, Corporate Debtor, and the Interim Resolution Professional promptly.This detailed analysis of the judgment showcases the Tribunal's thorough examination of the application, consideration of legal provisions, and application of relevant case law to arrive at a decision regarding the maintainability of the Insolvency and Bankruptcy Application based on the period of limitation.