2024 (2) TMI 1259 - AT - Insolvency and Bankruptcy

Operational creditor's Section 9 appeal dismissed as 224 invoices time-barred under Article 137, remaining invoices below threshold

NCLAT dismissed operational creditor's appeal for CIRP initiation under Section 9 of IBC. Out of 234 invoices claimed, 224 were time-barred under Article ... Initiation of CIRP u/s 9 - time limitation - threshold limit of amount claimed - whether the claims made by operational creditor are time barred? - whether the claims are meeting the threshold limit for them to be eligible for section 9 proceedings? - acknowledgement of debt - HELD THAT:- This Tribunal in S.M. GHOGBHAI VERSUS SCHEDULERS LOGISTICS INDIA PVT. LTD. [2022 (5) TMI 1210 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] had held that proceedings under Section 9 of the IBC 2016 cannot be set to be a suit relating to accounts and as such Article 1 of the Limitation Act is not applicable and the period of limitation for application under Section 9 of the IBC, would be governed by Article 137 of the Limitation Act. Accordingly, the time from which period of limitation begins is when the right to apply accrues and right to apply accrues when the invoices were to be paid. Time barred claims or not - HELD THAT:- The Limitation period begins to run from the time when the right to apply accrues i.e. limitation will be three years from when the right to apply accrues, which is over for 224 out of 234 invoices, as the due dates of these invoices, admittedly are from 2013 to 2014. In the instant case there are six projects, located in different locations, though under the same construction company viz HCCL. Most of the invoices pertain to the period of 2012 to 2014 and default dates varies from the year 2012 to 2014 in majority of the cases. Therefore, the three-year limitation period, even for the last invoice out of the 224 invoices had lapsed in September 2018, while this Company Petition was filed on 25th February, 2021. Therefore, the argument of the petitioner that for Company Appeal the limitation stood extended is not tenable. The legal tenability of running accounts has already been noted in the instant case for all the invoices together and there cannot be any better justification to settle them project wise as per Article 1 and therefore they also have to be settled as per Article 137 of the Limitation Act. The Operational Creditor has not been able to cross the hurdle of limitation and the threshold of Rupees one crore in a consolidated manner for 234 invoices claimed in his demand notice - with respect to 234 invoices, which are payable within 30 days of the invoices, 224 invoices are ex-facie time barred and the remaining 10 invoices do not meet the threshold of Rs.1,00,00,000/-. Therefore, this line of argument of the operational creditor is also not tenable. Emails-are they acknowledgement of debt? - whether the emails of 14.07.2017, 07.01.2019 and 26.03.2019, annexed to the petition constitute an acknowledgement of debt or not? - HELD THAT:- The claims either suffer from hurdle of limitation or threshold or most of the time by both. In the present case as the so-called acknowledgement of liability by these emails is not before the expiration of the period of limitation. Taking these projects individually, in the case of Kashang Hydro Electric Project the due date for the last invoices had fallen on 28.06.2014. The claims were rendered time barred on 28.06.2017. And the purported emails sent by the Appellant is dated 10.11.2017, which is much after the period of expiry of limitation. Similarly , the due date for the last invoice for the Uri Project had fallen on 23.01.2014. The claims were rendered time barred on 23.01.2017. Appellant had relied upon email dated 14.07.2017, which is much after the period of expiry of limitation. Same is the case for other projects also. Therefore, section 18 of the Limitation Act doesn’t apply and these emails do not provide any acknowledgement of the debt and doesn’t help the Appellant. It is well settled that the period of limitation for application under Section 9 of the IBC, would be governed by Article 137 of The Limitation Act, 1963. The claim of the Operational Creditor that they were having running account and are covered under Article 1 of the Limitation Act cannot be accepted - In the instant case in most of the claims, as noted by the Adjudicating Authority they are time barred. Specifically, out of 234 invoices 224 are ex-facie time barred and for the remaining 10 invoices the total does not make it more than the threshold of Rupees one crore and therefore the claims of the Operational Creditor cannot be accepted. Accordingly, the Appeal is dismissed. Issues Involved:1. Whether the claims made by the Operational Creditor are time-barred.2. Whether the claims meet the threshold limit of INR 1,00,00,000 for eligibility under Section 9 proceedings.3. Examination of running account and acknowledgment of debt.Summary:Running Account vs Project Wise Accounts:The Operational Creditor (OC) claimed a running account with the Corporate Debtor (CD), arguing that the limitation period extended from time to time under Article 1 of the Limitation Act. However, the ledger accounts produced indicated that accounts were maintained project-wise, not on a running account basis. The Tribunal held that Article 1 of the Limitation Act is not applicable to IBC proceedings; instead, Article 137 governs the limitation period. The right to apply accrues when the invoices were to be paid, and the limitation period is three years from that date.Time-Barred Claims:Out of 234 invoices, 224 invoices aggregating INR 1,44,03,646 were issued between 2012 to 2014 and were deemed time-barred as the limitation period expired between 2017 to 2018. Only 10 invoices amounting to INR 9,98,244 were within the limitation period, but this amount fell below the threshold of INR 1,00,00,000 as prescribed under Section 4 of the IBC. The Tribunal concluded that the OC's argument for extending the limitation period was not tenable.Emails as Acknowledgment of Debt:The OC relied on emails dated 14.07.2017, 07.01.2019, and 26.03.2019 as acknowledgments of debt to extend the limitation period. However, the Tribunal found that these emails were sent after the expiration of the limitation period. For instance, the last invoice for the Kashang Hydro Electric Project was due on 28.06.2014, rendering claims time-barred by 28.06.2017, while the email was sent on 10.11.2017. Similarly, for the Uri Project, the last invoice was due on 23.01.2014, with claims time-barred by 23.01.2017, and the email sent on 14.07.2017. Thus, Section 18 of the Limitation Act did not apply, and these emails did not constitute an acknowledgment of debt.Conclusion:The Tribunal concluded that the limitation period for applications under Section 9 of the IBC is governed by Article 137 of the Limitation Act, 1963. The claim of a running account by the OC was rejected, and the limitation period did not get extended. Most of the claims were time-barred, and the remaining claims did not meet the threshold limit. Accordingly, the appeal was dismissed.