2025 (1) TMI 1216 - AT - IBC

NCLAT upholds Section 9 IBC petition filed within limitation period, rejects dispute claims lacking credible evidence

Mr. Arvind Gulsia Suspended Director of M/s C & A Farm Fresh Pvt. Ltd. Versus Om Sai Boxes, C & A Farm Fresh Pvt. Ltd.

NCLAT dismissed appeal challenging Section 9 IBC application. Tribunal held petition filed within limitation period as last payment on 17.02.2017 extended ... Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code (IBC) - barred by the limitation period or not - pre-existing dispute or not - service of demand notice. Maintainability on the grounds of limitation - multiples dates of default have been mentioned - HELD THAT:- On the question whether the Petition was filed within the limitation period, it is pertinent to note that the last part payment made by the CD on 17.02.2017 is undisputed. Accordingly, the limitation period was extended for 3 years from 18.02.2017, expiring on 17.02.2020. The Petition was admitted and filed on 17.02.2020, making it well within the limitation period. Even assuming, without prejudice, that the limitation period is reckoned from 17.02.2017 (the date of the last payment), the 3-year period would expire on 16.02.2020, which was a Sunday and a non-working day for the Tribunal and its registry. As per Section 4 of the Limitation Act, read with Rule 3 of the NCLT Rules, the Petition could be validly filed on the next working day, i.e., 17.02.2020, which is when it was indeed filed. Hence, the Petition is still within the limitation period - Appellant’s grounds on limitation cannot be therefore accepted and the application is very much maintainable on this ground. Whether the Demand Notice in Form-3 dated 15.01.2020 was properly served or not? - HELD THAT:- CD claims that the OC falsely asserted in its affidavit that it did not receive a Reply to the Demand Notice. The CD claims that it duly responded to the Demand Notice, with supporting postal receipts provided as evidence. The tracking reports were unavailable due to the operational challenges during the COVID-19 pandemic. It is claimed that CD replied to the Demand Notice within the statutory period and raised a legitimate dispute regarding the claimed amount. Consequently, the Order violates Section 9(5) of the Insolvency and Bankruptcy Code (IBC), as the application is incomplete and OC has not received the reply to the demand notice and for that reason should be set aside by this Tribunal - there are no infirmity in the conclusion of the Adjudicating Authority on this hyper-technical ground raised by the Appellant. Pre-existing dispute or not - HELD THAT:- There is no material placed on record to show that the dispute existed between the parties much before the issuance of the Demand Notice. There is no correspondence between the parties to that effect. Further only after the service of Demand Notice and filing of Petition by OC, CD disputed it. Further, on the one hand, the Appellant contends pre-existing dispute, while on other hand, assumes an entirely contradictory position that the entire debt amount was paid by way of cash in instalments during the period of 03.05.2018 to 27.02.2019. Further, the CD claims to have passed entries of cash payments in its ledger annexed at Page No. 158 to 160 of APB while acknowledging debt payable by the CD for principal debt amount of Rs 11,69,948/- as on 01.04.2018. These are self-serving accounts of OC. Except for CD’s ledger account, with large number of small value cash entries, without producing any evidence, including any cash receipts – nothing else has been placed on record. The assertions of the Appellant cannot be, therefore, relied upon basis such material record. Hence, it can be safely concluded that there is no pre-existing dispute regarding the claim in hand. Conclusion - i) The application was filed within the limitation period, as the last payment extended the limitation period, and the application was filed timely. ii) The Demand Notice was properly served and that no pre-existing dispute was established. iii) The application was maintainable despite the OC being an unregistered partnership firm, as the bar under Section 69(2) of the Indian Partnership Act does not apply to insolvency applications. The Appeal is, therefore, dismissed and Section 9 proceedings against the CD must go on. ISSUES PRESENTED and CONSIDEREDThe Tribunal considered several key issues in this case:Whether the application under Section 9 of the Insolvency and Bankruptcy Code (IBC) was barred by the limitation period.Whether the Demand Notice was properly served and whether there was a pre-existing dispute.Whether the application was maintainable given that the Operational Creditor (OC) was an unregistered partnership firm.Whether the invoices and interest calculations were genuine, particularly with respect to the applicability of GST.Whether the alleged pre-existing dispute regarding the quality of goods supplied was valid.ISSUE-WISE DETAILED ANALYSISLimitation PeriodThe Tribunal examined whether the Section 9 application was filed within the limitation period. The Appellant argued that the application was time-barred, citing inconsistencies in the dates of default. The Tribunal noted that the last payment by the Corporate Debtor (CD) on 17.02.2017 extended the limitation period by three years, making the filing on 17.02.2020 timely. The Tribunal also considered that if the limitation period ended on a non-working day, the application could be filed on the next working day, further supporting the application's timeliness.Service of Demand Notice and Pre-existing DisputeThe Tribunal evaluated whether the Demand Notice was properly served and if there was a pre-existing dispute. The Appellant claimed that the OC falsely stated that no reply was received to the Demand Notice. The Tribunal found that the Demand Notice was duly served, as evidenced by postal receipts and tracking reports. The Tribunal also determined that the Appellant failed to provide evidence of a pre-existing dispute prior to the Demand Notice, concluding that the Appellant's claims were unsubstantiated.Maintainability of Application by Unregistered Partnership FirmThe Tribunal addressed the Appellant's argument that the OC, being an unregistered partnership firm, could not maintain the application under Section 69(2) of the Indian Partnership Act. The Tribunal referred to precedent, establishing that the bar under Section 69(2) applies to suits and not to applications for insolvency proceedings under the IBC. Therefore, the application was deemed maintainable.Genuineness of Invoices and Interest CalculationsThe Appellant challenged the genuineness of the invoices, alleging improper GST charges. The Tribunal found that VAT and CENVAT, not GST, were levied on the invoices during the relevant period. GST was applicable only on interest for delayed payments in the Form-5 Petition filed in 2020. The Tribunal concluded that the principal and interest amounts exceeded the statutory threshold, validating the OC's claims.Alleged Pre-existing Dispute Regarding Quality of GoodsThe Tribunal examined the Appellant's claim of a pre-existing dispute over the quality of goods supplied. The Tribunal found no evidence of such a dispute prior to the Demand Notice. The Appellant's contradictory claims of pre-existing disputes and cash payments without evidence further undermined their position. The Tribunal concluded that no pre-existing dispute existed.SIGNIFICANT HOLDINGSThe Tribunal held that the application was filed within the limitation period, as the last payment extended the limitation period, and the application was filed timely. The Tribunal confirmed that the Demand Notice was properly served and that no pre-existing dispute was established. The application was maintainable despite the OC being an unregistered partnership firm, as the bar under Section 69(2) of the Indian Partnership Act does not apply to insolvency applications. The Tribunal found the invoices and interest calculations genuine, with the principal and interest amounts exceeding the statutory threshold. The Tribunal dismissed the Appellant's claims of a pre-existing dispute due to a lack of evidence.The Tribunal concluded that the appeal lacked merit and dismissed it, allowing the Section 9 proceedings against the Corporate Debtor to continue.