NCLAT upholds rejection of time-barred Section 9 application despite arbitration clause defense

NCLAT dismissed appeal challenging rejection of Section 9 application for CIRP initiation on limitation grounds. Appellant sought benefit of Section 14 of Limitation Act claiming arbitration clause in agreement prevented suit from being decided on merits. Tribunal held essential condition for Section 14 benefit absent as suit was withdrawn without court liberty for fresh proceedings and not terminated due to jurisdictional defect. Section 5 sufficient cause also not established. Proceedings under SARFAESI Act pendency could not exclude time as those were without jurisdiction. Court noted IBC proceedings are not for contractual dues recovery, and appellant had already filed suit for dues recovery which was withdrawn. Adjudicating Authority correctly rejected time-barred application.

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Issues Involved:

1. Whether the Section 9 Application filed by the Appellant was barred by limitation.
2. Whether the Appellant was entitled to the exclusion of time under Section 14 of the Limitation Act.
3. Whether the Appellant was entitled to condonation of delay under Section 5 of the Limitation Act.

Summary of Judgment:

1. Whether the Section 9 Application filed by the Appellant was barred by limitation:

The Appellate Tribunal examined the facts of the case, noting that the Operational Creditor had issued invoices in response to three Purchase Orders and had filed a suit for recovery of monies which was withdrawn on 18.07.2022. The Section 9 Application was filed on 05.12.2022. The Adjudicating Authority dismissed the application on the grounds that it was barred by limitation and did not meet the threshold of Rs.1 Crore due to the absence of an agreement for interest.

2. Whether the Appellant was entitled to the exclusion of time under Section 14 of the Limitation Act:

The Tribunal referred to Section 14 of the Limitation Act, which pertains to the exclusion of time when proceedings are prosecuted in good faith in a court without jurisdiction. The Appellant argued that the period during which the civil suit was pending should be excluded. However, the Tribunal found that the withdrawal of the suit was voluntary and not due to a defect of jurisdiction. Therefore, the conditions for applying Section 14 were not met.

3. Whether the Appellant was entitled to condonation of delay under Section 5 of the Limitation Act:

The Tribunal noted that the Appellant did not institute any arbitration proceedings despite claiming that the suit was withdrawn due to an arbitration clause. The Tribunal concluded that the delay in filing the Section 9 Application could not be condoned under Section 5 of the Limitation Act as the Appellant failed to show sufficient cause.

Conclusion:

The Tribunal upheld the Adjudicating Authority's decision to dismiss the Section 9 Application as barred by limitation. The Appellant was not entitled to the exclusion of time under Section 14 of the Limitation Act, nor was there sufficient cause to condone the delay under Section 5. The appeal was dismissed.

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