JORD ENGINEERS INDIA LIMITED vs. VALIA AND CO.
Company Appeal (AT) (Insolvency) No. 158 of 2017
Facts:
1.Respondent filed the application under Section 9 of the Code in respect of an operational debt of Rs. 4,82,98,924/- accrued on account of supply of Iron, Steel Goods and Raw material to the Corporate Debtor on account of 41 invoices 22.04.2011 to 08.05.2012 which was admitted by the NCLT.
2.Respondent pleaded that the Corporate Debtor, was referred to as a sick unit on 09.11.2005 by BIFR and the amount of Operational Debt became recoverable only when the Sick Industrial Companies (Special Provisions) Repeal Act, 1985 was brought into force w.e.f. 01.12.2016.
3.On 26.04.2017 demand notice under Section 8 of the Code was served upon the Corporate Debtor providing a period of 10 days to clear the outstanding dues. The said notice was replied by the Corporate Debtor on 22.05.2017. Thereafter, the Operational Creditor filed the application before the Adjudicating Authority on 29.05.2017
4.Appellant raised the issue of limitation before the Adjudicating Authority on the ground that the default is of the year 2011-12 whereas the application under Section 9 of the Code was filed in the year 2017. But contention was rejected on the ground that the Corporate Debtor was referred to as a Sick unit on 09.11.2005 by BIFR and till the Sick Industrial Companies (Special Provisions) Act, 1985(for short ‘SICA’) was repealed on 01.12.2016, the Operational Creditor was deprived of taking legal recourse in view of Section 22 of the SICA.
5.Appeal was allowed by appellate Tribunal vide order dated 13.10.2017 on the ground that notice under Section 8(1) of the Code was given through the advocate. However, the order dated 13.10.2017 was set aside by the Hon’ble Supreme Court.
Issue: When does the right of operational creditor accrue under section 9 of the code if the corporate debtor was declared as the Sick Unit under the SICA?
Arugments:
For Appellants:
1.Counsel for the Appellant has raised two issues, namely, the application filed under Section 9 of the Code is barred by limitation because the operational debt is pertaining to the year 2011-12 whereas the application under Section 9 of the Code was filed in the year 2017 and that there is a pre-existing dispute.
2.It further submitted that it is now well settled by a catena of Judgments, both by the Hon’ble Supreme Court and this Appellate Tribunal, that the period of three years is to be counted from the date of default till the date of filing of the application, in view of Article 137 of the Limitation Act, 1961 and in this regard reliance has been placed upon the case of B.K Educational Services Pvt.
3.It is further submitted that Respondent cannot take advantage of the fact that the Applicant Company was before BIFR and Section 22 of the SICA applies to the cases where claim is pending as on the date when the company was sick and the pendency of the reference of the Company by BIFR does not extend the period of limitation
For Respondents:
1. Counsel for the Respondent has submitted that the Appellant Company was referred to as a sick unit on 09.11.2005 by BIFR and it continued as such till SICA was repealed on 01.12.2016 and as a result thereof, in view of Section 22 of the SICA, the Respondent was deprived of taking legal action against the Appellant for realisation of their money. It is submitted that the right to apply for recovery of operational debt was made available on 01.12.2016 pursuant to which a notice was issued on 26.04.2017 under Section 8 of the Code
2.Counsel submitted that the period of limitation counts from 01.12.2016 and the fact that the application under Section 9 was filed on 29.05.2017, it was well within the period of three years as provided under Article 137 of
the Limitation Act, 1961
Decision: Hon’ble NCLAT held that right to apply under Section 9 of the Code accrued to the Respondent after SICA Act was repealed on 01.12.2016 and also when the Insolvency and Bankruptcy Code, 2016 came into force.
Rationale:
1.It noted that law is now well settled that the limitation for filing an application either under Section 7 or 9 of the Code is three years in view of Article 137 of the Limitation Act, 1961 which has to be seen from the date of default
Order:
