TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 767
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....rder dated 20.12.2018, rejected the Application on the ground of 'Pre-Existing Dispute' and 'Claims being time barred'. Brief Background: 2. The Adjudicating Authority while dismissing the Application noted as follows; "13. The Hon'ble Supreme Court in the case of B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates1, has inter alia held that provisions of Limitation Act will apply to proceedings or appeals before NCLT/NCLAT. Section 238A of the Code make provisions of Limitation Act would apply to proceedings under the Code. As stated supra, debt in question fell on various dates on and after October, 2011 and there is no explanation for the laches and delay on the part of the petitioner. Moreover, as per the terms and conditions as stipulated in the Master License Agreement in question, the debt in question itself is subject to various compliances as stated supra. The Hon'ble Supreme Court of India, in a recent case, in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited2, has categorically laid down that IBC is not intended to be substitute to a recovery forum. It is also laid down whenever there is existence of real dispute, the IBC provi....
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....lant. It is a settled law that if any dispute is raised prior to the issuance of the invoices or Demand Notice u/s 8(1) of the I&B Code with regard to quality of service or goods or pendency of the suit or arbitration, in such case one may take the plea that there is an 'existence of dispute' but if any dispute is raised after issuance of Demand Notice u/s 8(1) that cannot be termed to be a 'pre-existing dispute'. We find that the Adjudicating Authority has failed to notice the aforesaid issue and observed that 'debt' in question is not only serious dispute but also barred by limitation and laches and not discussed under which provision the 'Master Service Agreement' with 'Sri Gowtham Academy of General and Technical Education' was consequentially issued on 8th February, 2016 and the reply to the Demand Notice was issued on 8th August, 2017. For the reasons aforesaid, we set aside the impugned order dated 20th December, 2018 and remit the case to the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench for admitting the application u/s 9 of the 'I&B Code' after notice to the 'Corporate Debtor'. We allow the 'Corporate Debtor' to settle the claim before its ....
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....itor' contended that 187 invoices were raised for the Digital Classroom Solution Services provided for the period between 12.03.2011 and 30.06.2017; that the 'Corporate Debtor' has sent a letter dated 11.09.2015 pertaining to an audit confirmation wherein there was an express admission for an amount of Rs. 2,46,61,404, 'due and payable' to the 'Corporate Debtor'; that an email dated 27.04.2016 was also addressed to the Corporate Debtor wherein the liability to pay the dues was admitted; that an Addendum Agreement dated 01.07.2016 was entered into between the parties wherein an amount of Rs. 2.69/- Crores was once again confirmed as payable by the 'Corporate Debtor'; that the amount payable was intentionally delayed and never paid despite repeated requests and hence a Demand Notice dated 08.08.2017 under Section 8(1) of the 'IBC' was issued which was received by the 'Corporate Debtor' on 12.08.2017, but was not replied to within the statutory period of 10 days; that the Corporate Debtor sent a belated Reply dated 08.09.2017 denying all the claims of the Appellant and raised fictitious and non-existent disputes. 7. Learned Counsel for the Operational Creditor further submitted that ....
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....re of systems for 18 days from 08.10.2013 to 25.10.2013; that there was a breach of clauses 6.1 and 6.8 of the Master Agreement which show the rights and obligations of the 'Operational Creditor'; that the matter at hand is only a suit for recovery camouflaged as an Application under Section 9 of 'IBC'; that the 'Operational Creditor' was obligated to spend Rs. 25/- Lakhs in Joint Media Advertising which was never done; that the 'Telugu content' and the 'Training Sessions' promised by the 'Operational Creditor' was never provided and these breaches amount to 'Pre-Existing Disputes' and hence the Learned Adjudicating Authority had rightly relied on the ratio in 'Mobilox Innovations Private Limited' V/s. 'Kirusa Software Private Limited', (2018) 1 SCC 353 and rejected the Application. 10. Learned Counsel for the 'Corporate Debtor' drew our attention to the invoices (on pages 399 to 406, Volume II) in which the unpaid debt is reflected from 12.03.2011 onwards. It is submitted that the last invoice is dated 30.06.2017 which is beyond three years of the date of default and therefore the Application is barred by limitation. He further contended that the breach of clauses 6.4, 6.5 and 6.....
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.... Educational Services (P) Ltd.' (2019) 11 SCC 633 observed; "3. Having heard the learned counsel for both parties, we are of the view that this is a case covered by our recent judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, para 42 of which reads as follows: "42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application." Dealing with Section 23 of the Limitation Act, 1963, the Hon'ble Supreme Court observed: "xxx xxx xxx Following this judgment, it is clear that when the recovery certificate dated 24-12- 2001 was issued, this certificate injured effectively and completely the appellant's rights as a result of which lim....
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.... the Limitation Act when it is clear that a particular article gets attracted. It is well settled that there is no equity about limitation - judgments have stated that often time periods provided by the Limitation Act can be arbitrary in nature. 8. This being the case, the appeal is allowed and the judgments of the NCLT and NCLAT are set aside." (Emphasis in bold supplied) "29. Close on the heels of Gaurav Hargovindbhai Dave (supra), this Court dealt with similar issue yet again in the case of Sagar Sharma (supra), decided on 30.09.2019. Therein, apart from disapproving the proposition that the date of commencement of the Code could be the starting point of limitation (as noticed hereinabove), this Court again pointed out the fallacy in applying the period of limitation related to mortgage liability to the application under Section 7 of the Code and said, - "2.....However, we find in the impugned judgment that Article 62 (erroneously stated to be Article 61) was stated to be attracted to the facts of the present case, considering that there was a deed of mortgage which was executed between the parties in this case. We may point out that an application under Section 7 of the C....
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....y' accrues. In the instant case, the material on record and the admitted invoices, (pages 399 to 406 of Volume II) evidence that the first unpaid debt is dated 12.03.2011. Page 402 is relevant as the Learned Counsel for the Appellant sought to rely on the debt for the period from 02.04.2015 upto 30.06.2017 (page 406). For better understanding of the case, the same is reproduced as hereunder; Bill No. Date Milestone Total Amount Billed (Inclusive of Tax) Status Balance O/s. 2012-2013/HYD/TN/67667 5/7/2012 5/7/2012 123,550.00 UnPaid 18,051,540.00 2012-2013/HYD/TN/68306 5/14/2012 5/14/2012 123,550.00 UnPaid 18,175,090.00 2012-2013/HYD/TN/38669 2/6/2012 2/6/2012 68,300.00 UnPaid 18,243,390.00 2012-2013/HYD/TN/39221 2/14/2012 2/14/2012 85,000.00 UnPaid 18,428,390.00 2012-2013/HYD/TN/39725 2/18/2012 2/18/2012 124,880.00 UnPaid 18,553,270.00 2012-2013/HYD/TN/39711 2/18/2012 2/18/2012 124,880.00 UnPaid 18,678,150.00 2012-2013/HYD/TN/39710 2/18/2012 2/18/2012 124,880.00 UnPaid 18,803,030.00 2012-2013/HYD/TN/40258 2/22/2012 2/22/2012 4,400.00 UnPaid 18,807,430.00 2012-2013/HYD/TN/42644 2/29/2012 2/29/2012 124,850.00 UnPaid 18,932,28....
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....Applicable 4. Details of retention of file arrangements in respect of goods to which the operational debt refers Not Applicable 5. Record of default with the information utility Not Applicable 6. Provision of law contract or other document under which debt has become due Under Section 8(10 of the Insolvency and Bankruptcy Code, 2016 7. List of documents attached to this application in order to prove the existence of operational debt and the amount in default As described in Table 2 At this juncture, we find it relevant to reproduce the statutory provisions of Section 8 and Section 9 of the Code as hereunder; "Section 8: Insolvency resolution by operational creditor.- (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute,....
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....rofessional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- (i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,- (a) the application made under sub-section (2) is complete; (b) there is no repayment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and (e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the opera....
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....ot a suit for recovery. 22. To reiterate, once the default takes place, the Right to file Application accrues as provided under Article 137 of the Limitation Act, 1963. In the instant case, we are of the considered view that the 'Right to Application' first accrued within three years of 12.03.2011, which limitation ends on 12.03.2014. If the argument of the Counsel for the Operational Creditor is accepted, then there would be several dates of default 2011, 2012, 2015 etc. It is not the discretion of the Tribunal to accept one date or the other. The date of default is fixed and hence a crucial date and cannot be shifted and hence we are of the considered opinion that the first date of default in the instant case is 12.03.2011. 23. Now we address ourselves to the letter dated 12.09.2015, the email communication 29.02.2016 and 27.04.2016 whereby and whereunder the 'Operational Creditor' seeks to establish 'Acknowledgement of debt' under Section 18 of the Limitation Act, 1963. 24. The Counsels placed reliance on the email dated 27.04.2016 (Annexure A-4) and we find it relevant to reproduce the same as hereunder; "On the balance amount due we are awaiting the signing of the Escrow ....
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....n to the 'Rejoinder Affidavit' filed before the Adjudicating Authority wherein there is a specific denial that the 'Operational Creditor' had never come forward to spend Rs. 25/- Lakhs towards advertising. It is significant to mention that a perusal of the material on record does not evidence any such issue raised by the 'Operational Creditor' prior to the issuance of the Demand Notice. It is stated in that Affidavit that training was given to the teachers as and when required by the 'Corporate Debtor'. We observe that there is no such 'dispute' with respect to 'training' raised in any of the emails exchanged between the parties prior to 08.08.2017. The aspect regarding the 'training sessions' to be provided as per clause 6.3 of the Agreement was raised for the very first time in the belated Reply filed before the Adjudicating Authority. 28. The Hon'ble Supreme Court in 'Transmission Corporation of Andhra Pradesh Limited' V/s. 'Equipment Conductors and Cables Limited', (2019) 12 SCC 697, while deciding the issue of Pre-Existing Dispute and in 'Mobilox Innovations Pvt. Ltd.' Vs. 'Kirusa Software (P) Limited'- 2017 1 SCC OnLine SC 353 has clearly laid down the law that the 'existenc....
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....tion 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act." "18. From the aforesaid decision, it is clear that the existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the 'operational debt' is exceeding Rs. 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under Section 9 cannot be rejected and is required to be admitted." (Emphasis Supplied) 29. In the instant case, Learned Counsel appearing for the 'Corporate Debtor' drew our attention to pages 626 to 630 of Volume III, which is a part of the Reply filed before the Adjudicating Authority wherein the email correspondence between the parties dated 21.07.2012, 18.12.2013, 31.07.2015, 18.08.2015 is reproduced. It is seen from this correspondence....