Limitation Barred: Section 9 Application Dismissed - Pre-Existing Dispute Grounds

The Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, was held to be barred by Limitation as the Tribunal found that the actual date of default was 19.12.2014, and the Application was filed beyond the three-year Limitation period. Additionally, the Tribunal rejected the Application on the grounds of a 'Pre-Existing Dispute' between the parties, as supported by documentary evidence presented by the Respondent regarding the inferior quality of goods supplied. The Appeal was dismissed, and the Application under Section 9 was rejected, with no order as to costs.

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Issues Involved:
1. Whether the Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, is barred by Limitation.
2. Whether there was a 'Pre-Existing Dispute' between the parties prior to the issuance of the Notice under Section 8 of the Code.

Detailed Analysis:

1. Limitation:
The first issue pertains to whether the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016, is barred by Limitation. The Tribunal examined the ledger entries and statements of accounts, which evidenced that the last supply of steam coal by the Appellant was on 18.11.2014, and the last payment of Rs. 15 Lakhs was made by the Respondent on 24.11.2014. Debit Notes were raised in 2017, and the Application under Section 9 was filed on 09.05.2018. The Tribunal noted the relevant invoices dated 15.12.2013 and 19.12.2014.

The Appellant argued that the Adjudicating Authority failed to consider an email dated 05.08.2015, which allegedly acknowledged outstanding payments. However, the Tribunal found that the Director of the Respondent Company had filed an Affidavit stating that the email was sent without authority, as the sender was under probation and not acting under the Director's instructions. The Tribunal observed that there was no communication regarding payments due between 2015 and 2018.

The Tribunal referenced the Hon'ble Supreme Court's judgment in 'Babulal Vardharji Gurjar' Vs. 'Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr.', which emphasized the need for a proper foundation for debt acknowledgment. The Tribunal concluded that no case was made for extending the Limitation period, as the actual date of default was 19.12.2014, and the Application was filed beyond the three-year Limitation period. Thus, the Application was held to be barred by Limitation.

2. Pre-Existing Dispute:
The second issue was whether there was a 'Pre-Existing Dispute' between the parties before issuing the Notice under Section 8 of the Code. The Tribunal referred to the Hon'ble Supreme Court's decision in 'Mobilox Innovations Pvt. Ltd.' Vs. 'Kirusa Software Pvt. Ltd.', which outlined that the Adjudicating Authority must reject an Application if there is a plausible contention of a dispute that requires further investigation and is not a patently feeble legal argument or unsupported assertion of fact.

The Tribunal noted that the Respondent had raised issues regarding the inferior quality of steam coal supplied, supported by Debit Notes and Laboratory Test Reports. The Respondent argued that production was suspended due to the substandard quality of goods, resulting in production losses. The Tribunal found that there was a running account between the parties, and amounts were adjusted in the ledgers for the supply of steam coal.

The Tribunal highlighted that the definition of 'dispute' under Section 5(6) of the Code includes issues related to the quality of goods or services. The Tribunal observed that the Respondent's defence was not a sham or unsupported assertion but was backed by documentary evidence, including Debit Notes and Test Reports.

The Tribunal concluded that the ratio laid down by the Hon'ble Supreme Court in 'Mobilox Innovations Pvt. Ltd.' was applicable to the case, indicating a genuine dispute existed. Therefore, the Appeal was dismissed, and the Application under Section 9 was rejected on the grounds of 'Pre-Existing Dispute' and being barred by Limitation. No order as to costs was made.

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