2024 (9) TMI 1178 - AT - IBC

Corporate debtor's appeal dismissed under Section 9 IBC for failing to prove debt acknowledgement after 2013

NCLAT Principal Bench dismissed an appeal under Section 9 of IB Code, 2016 concerning default in fabrication and erection of steel structure work. The ... Limitation - acknowledgement of debt - production of documents / compliance with order to produce documents - pre-existing dispute - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation counted from date of defaultApplication under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation - limitation counted from date of default - acknowledgement of debt - Whether the Section 9 application is barred by limitation in the absence of any acknowledgement of debt extending the limitation period. - HELD THAT: - The Adjudicating Authority had rejected the Section 9 petition as barred by limitation applying the principle that an application seeking initiation of CIRP filed after three years from the date of default is time barred. The appellant sought to rely on financial records and accounts to demonstrate an acknowledgement of debt or other material to bring the claim within limitation. The Tribunal on remand examined the documents filed by the respondent pursuant to the earlier production order and found that the appellant failed to identify any entry or documentary material in the trial balance, ledgers, balance sheets or other financial statements for the years 2011 12 to 2017 18 that could constitute an acknowledgement of debt or otherwise operate to extend the period of limitation. In the absence of such acknowledgement, the Section 9 petition remains barred by limitation and dismissal on that ground is justified. [Paras 11, 12]Dismissal of the Section 9 petition as barred by limitation is affirmed because no acknowledgement of debt was shown in the financial documents produced.Production of documents / compliance with order to produce documents - pre-existing dispute - Whether the order directing production of financial documents was complied with and whether any non compliance affected adjudication. - HELD THAT: - The Supreme Court had set aside the earlier NCLAT order and remanded the matter for fresh disposal, observing that NCLAT had not recorded any finding on whether the production order was complied with. On remand, the Tribunal noted that the respondent filed the documents on 03.12.2020 as required by the order dated 25.10.2019. The appellant was given opportunities to inspect and identify material but did not point to any specific entry amounting to acknowledgement of debt. Although NCLAT previously affirmed on alternative ground of pre existing dispute, the present adjudication on remand focuses on compliance with the production order and the absence of any documentary acknowledgement; consequently no further opportunity was granted. [Paras 11]The production order was complied with by the respondent; the appellant did not demonstrate non compliance or identify documents evidencing acknowledgement, and no additional opportunity to adduce such material was warranted.Final Conclusion: On remand from the Supreme Court, the Tribunal found that the respondent complied with the earlier order to produce financial documents and that the appellant failed to identify any acknowledgement of debt in those records; therefore the Section 9 petition is time barred and the appeal is dismissed, with pending applications disposed of. Issues:1. Application under Section 9 of the IB Code, 2016 filed by Operational Creditor against Corporate Debtor for defaulting payment.2. Dispute regarding the application being barred by limitation.3. Appeal against the order of the Adjudicating Authority dismissing the main petition.4. Compliance with the order for production of documents.5. Appeal filed before the Hon'ble Supreme Court against the dismissal of the appeal by the Tribunal.Issue 1: Application under Section 9 of the IB Code, 2016:The Operational Creditor filed an application under Section 9 of the IB Code, 2016 against the Corporate Debtor for defaulting a sum of Rs.1,95,28,552 due in relation to work done for fabrication and erection of steel structure at the Corporate Debtor's plant in Meghalaya. The Operational Creditor raised 81 invoices for the work done and the amount due, alleging that demands were made from 2013 to March 2018, leading to the application under Section 9 of the IB Code, 2016.Issue 2: Dispute on Limitation:The main defense raised by the Corporate Debtor was that the application was barred by limitation. Initially, the appellant argued that the company petition was filed within three years from the coming into force of the IB Code, 2016. However, following a Supreme Court judgment, it was established that the law of limitation applies from the date of default. The appellant sought to bring on record financial statements to show that the claim was within limitation, but the application was dismissed by the Adjudicating Authority. The Tribunal affirmed the dismissal, stating that the application was barred by limitation based on the judgments of the Hon'ble Supreme Court.Issue 3: Appeal against the Order of the Adjudicating Authority:The appellant filed an appeal against the order of the Adjudicating Authority, seeking the production of financial documents by the Corporate Debtor. The Tribunal allowed the appellant to file necessary documents to establish the claim was within limitation. However, the Adjudicating Authority later dismissed the main petition under Section 9 of the IBC, 2016 without discussing the impact of the financial statements, leading to the dismissal of the appeal by the Tribunal.Issue 4: Compliance with the Order for Production of Documents:The Hon'ble Supreme Court noted a dispute regarding compliance with the order for the production of documents to establish an acknowledgment of debt. The NCLAT did not provide any finding on whether the order for production of documents was complied with, leading to the setting aside of the NCLAT's order for further consideration. The appellant failed to identify any document showing acknowledgment of debt in the financial documents filed by the Corporate Debtor, resulting in the dismissal of the appeal.Issue 5: Appeal before the Hon'ble Supreme Court:The appellant filed an appeal before the Hon'ble Supreme Court, which found that the appellant failed to identify any document showing acknowledgment of debt in the financial documents filed by the Corporate Debtor. The Court set aside the NCLAT's order and restored the appeal for fresh disposal, keeping all rights and contentions of the parties open for adjudication.---