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

NCLAT dismissed appeal challenging Section 9 IBC application. Tribunal held petition filed within limitation period as last payment on 17.02.2017 extended three-year limitation to 17.02.2020, when petition was filed. Demand notice was properly served despite appellant's claims of reply during COVID-19 period. No pre-existing dispute established as appellant's contradictory positions regarding debt payment lacked credible evidence beyond self-serving ledger entries with cash payments. Application maintainable despite operational creditor being unregistered partnership firm. Insolvency proceedings ordered to continue against corporate debtor.

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ISSUES PRESENTED and CONSIDERED

The 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 ANALYSIS

Limitation Period

The 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 Dispute

The 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 Firm

The 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 Calculations

The 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 Goods

The 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 HOLDINGS

The 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.

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