Tribunal dismisses late-filed application for insolvency, emphasizes time limits and debt criteria

The Tribunal rejected the Operational Creditor's application to initiate Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016. The application was deemed time-barred as it was filed over three years after the alleged default date, and the claimed amount did not qualify as Operational Debt. The Tribunal held that applications filed beyond the limitation period are not maintainable, emphasizing that the right to apply under the Code accrues when the default occurs. Consequently, the application was dismissed.

---

---

Issues:
Application for Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016; Default in clearing debt; Barred by Limitation; Categorization of claimed amount as Operational Debt; Requirement of Invoice under Section 9; Application filing timeline.

Analysis:
1. The Applicant filed an application seeking to initiate Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016, against the Respondent for defaulting on a debt of Rs. 2,56,134. The Applicant detailed the transactions leading to the application, stating that timely payments were made initially, but a principal amount of Rs. 1,54,000 remained unpaid by the Respondent. The Applicant sent a Demand Notice under section 8 of IBC, 2016, which the Respondent replied to, disputing the amount claimed and the quality of services provided.

2. The Respondent argued that the application was time-barred as it was filed beyond the three-year limitation period from the alleged default date. Additionally, the Respondent contended that the claimed amount did not qualify as Operational Debt under Section 5(20) of the Code, as it did not relate to goods, services, employment, or statutory dues. The Respondent emphasized the applicability of the Limitation Act, 1963, to petitions under Section 9 of the Code.

3. The Counsel for the Operational Creditor argued that the issuance of an Invoice was not mandatory under Section 9, citing a previous NCLAT case. The Counsel highlighted that the last demand was made within the limitation period, and any discrepancies in the initial application were rectified in a subsequent filing. However, the Counsel for the Corporate Debtor relied on a Supreme Court judgment emphasizing the application of the Limitation Act to petitions under Section 9, asserting that the present application was filed beyond the limitation period.

4. The Tribunal considered the arguments and documents presented by both parties. It noted that the application was filed over three years after the alleged default date, rendering it time-barred. Referring to a Supreme Court decision, the Tribunal concluded that the right to apply under the Code accrues when the default occurs, and applications filed beyond the limitation period are not maintainable. Consequently, the Tribunal rejected the Operational Creditor's prayer to initiate proceedings under Section 9 of the IBC, 2016, and dismissed the application.

---