Section 9 insolvency threshold and limitation applied prospectively, with operational debt and default established on record.
A section 9 insolvency application was treated as timely because limitation under Article 137 ran from the date of accrual of the right to apply, and the debtor's last payment was treated as an acknowledgment of liability within three years. The enhanced minimum default threshold was held to apply prospectively, so the application was tested under the earlier pecuniary limit in force on the filing date and satisfied that threshold. The debtor's objections on defective goods and absent inspection or quality reports were unsupported, so the record established operational debt and default. The application was admitted under section 9(5), and CIRP, moratorium, and appointment of an interim resolution professional followed.
Issues: (i) whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was within limitation; (ii) whether the application satisfied the pecuniary threshold applicable on the date of filing; and (iii) whether there was an operational debt and default warranting admission of the insolvency application.
Issue (i): whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was within limitation.
Analysis: The limitation for a section 9 application is governed by Article 137 of the Limitation Act, and the period runs from the date when the right to apply accrues. The last payment made by the corporate debtor was treated as an acknowledgment of liability, and the application was filed within three years from that date.
Conclusion: The application was held to be within limitation.
Issue (ii): whether the application satisfied the pecuniary threshold applicable on the date of filing.
Analysis: The filing date preceded the notification enhancing the minimum default amount to one crore, and the enhancement was treated as prospective. The application was therefore tested under the earlier threshold applicable to section 9 proceedings.
Conclusion: The pecuniary threshold was held to be satisfied.
Issue (iii): whether there was an operational debt and default warranting admission of the insolvency application.
Analysis: The debtor's objections regarding defective goods and absence of inspection or quality reports were found unsupported by evidence. On the record, the debt was treated as an operational debt and the non-payment constituted default within the meaning of the Code.
Conclusion: The existence of operational debt and default was affirmed, and the application was admitted under section 9(5) of the Insolvency and Bankruptcy Code, 2016.
Final Conclusion: Corporate insolvency resolution process was directed to commence, moratorium followed, and an interim resolution professional was appointed.
Ratio Decidendi: A section 9 insolvency application filed within three years of an acknowledged last payment is within limitation, and where default and operational debt are supported on record, the application is liable to be admitted; a later enhancement of the default threshold operates prospectively.
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