Electronik Lab India Pvt Ltd vs Pinnacle Air Pvt Ltd

(Arising out of Impugned Order dated 25th February, 2020 passed by the Adjudicating Authority/National Company Law Tribunal, Bench-VI, New Delhi in Company Petition No. IB-303/(ND)/2020)

IN THE MATTER OF:

Elektronik Lab India Pvt. Ltd. ... Appellant.

Versus

Pinnacle (Air) Pvt. Ltd. ...Respondent.

Present:

For Appellant: Ms. Jaikriti S. Jadeja, Advocate

For Respondent: Mr. Manan Batra, Advocate, Karan Singh, Advocate

JUDGEMENT

(Date: 25.2.2021)

{Per: Dr. Alok Srivastava, Member(T)}

This appeal has been filed under Section 61 of the Insolvency and

Bankruptcy Code 2016 (hereinafter called IBC) against the order dated

25.2.2020 passed by the Adjudicating Authority NCLT, New Delhi Bench-VI

(hereinafter called Adjudicating Authority) in Company Petition No. IB-

303/(ND)/2020. The Adjudicating Authority has dismissed the application

Company Appeal (AT) (Ins) No. 510 of 2020 1 under Section 9 of IBC filed by the Operational Creditor (Appellant) as being

barred by limitation of time.

2. The case as stated in the appeal and argued by the Appellant is as

follows:-

(i) The Appellant Company and the Respondent Company are both

limited liability companies incorporated and registered under the Companies

Act, 1956. The Appellant Company is a marine electronics support, service

provider and systems integrator, which specializes in designing and

integrating communications and navigation systems. The Respondent

Company is a provider of services for operation, management and

communication system for aircrafts etc.

(ii) The Respondent approached the Appellant in April, 2010 to provide

Airtime/Communication service to the Respondent. These services began to

be provided by the Appellant to the Respondent from May, 2010 onwards

and invoices were raised periodically by the Appellant to the Respondent for

the service rendered, which were cleared from time to time. The Respondent

had leased a Falcon 2000 LX Aircraft from M/s, Bajaj Hindustan Sugar

Limited on which the Appellant had activated satcom facility.

(iii) Some payments remained to be made to the Appellant by the

Respondent. The Appellant sent e-mails in April/May, 2012 to the

Respondent to clear outstanding payment of Rs. 37,02,761/- (Rupees Thirty

Company Appeal (AT) (Ins) No. 510 of 2020 2 Seven Lakhs Two Thousand Seven Hundred and Sixty One only). No

payments were made in response.

(iv) The Respondent communicated to the Appellant vide email dated

29.5.2012 that they were no longer able to afford the charges of Appellant for

the services rendered and requested the Appellant to terminate their services

with effect from 01.06.2012. The Appellant thereafter discontinued the

services while an amount of payment as mentioned earlier remained pending

for payment. The last payment received from the appellant from the

Respondent was a sum of Rs.6,89,524/- (Rupees Six Lakhs Eighty Nine

Thousand Five Hundred Twenty Four only) through cheque No.713568 dated

10.6.2012 which was cleared and amount credited in the appellant's account

on 12.7.2012.

(v) The matter regarding pending payment was discussed by the Appellant

with the Respondent and M/s. Bajaj Hindustan Sugar Private Limited (for

whom the Respondent Company was arranging Airtime Falcon services).

Subsequently, the Appellant issued a legal notice to the Respondent on

30.09.2014 for making the outstanding payment. The Respondent vide reply

dated 5.11.2014 informed that the owner of the Falcon Aircraft viz. M/s.

Bajaj Hindustan Sugar Limited was liable to clear the pending dues as the

Respondent was only maintaining, operating and running the aircraft.

(vi) As the issue of payment of dues remained unresolved, the appellant

filed a Company Petition No.06/2015 against M/s. Bajaj Hindustan Sugar

Company Appeal (AT) (Ins) No. 510 of 2020 3 Limited and the Company Directors for winding up under the Companies

Act, 1956 before the Hon'ble High Court at Allahabad (Lucknow Bench).

This petition, according to the Appellant was filed on 10.7.2015 which is

within 3 years of limitation from the date of last payment, which was

12.7.2012. The Winding Up Petition was dismissed on merits on the ground

that the petitioner/Appellant was unable to prove the case against M/s Bajaj

Hindustan Sugar Limited.

(vii) Subsequently, the Appellant Company issued demand notice under

Section 8 of the IBC upon the Respondent on 3.12.2019. In reply dated

12.12.2019 to the notice, the Respondent raised a dispute regarding the

demand and refuted its liability to pay the operational debt.

(viii) As the Appellant Company was not satisfied with the reply, it filed an

application before the Adjudicating Authority under Section 9 of the IBC on

06.01.2020 which was not admitted by the impugned order passed on

20.5.2020.

3. The Respondent filed reply and both parties filed their written

submissions. Both parties were also accorded ample opportunity to present

oral arguments in support of their respective cases.

4. In the Appeal preferred by the Appellant, the main ground taken is

that the winding up petition before the Hon'ble High Court of Allahabad was

dismissed on the ground of misjoinder of party and, therefore, the period

Company Appeal (AT) (Ins) No. 510 of 2020 4 during which the winding-up petition was being prosecuted in good faith

before the Hon'ble High Court of Allahabad should be excluded in

accordance with Section 14 of the Limitation Act, 1963 in computation of

limitation for the Section 9 application under IBC.

5. In support of his case, the Learned Counsel for the appellant has

referred to the judgment of the Apex Court in the case of Jignesh Shah &

Anr v. Union of India & Anr; (2019) 10 SCC 750 wherein the Hon'ble

Supreme Court has held that

"...in matters pertaining to winding up petitions, Section 433 (e) read with

Section 434 of the Companies Act would show that the trigger point for the

purpose of limitation for filing of a winding-up petition under Section 433(e)

would be the date of default in payment of the debt in any of the three

situations mentioned in section 434. That as such, a company shall be

deemed to be "unable to pay its debts" under section 433(e), if a demand is

made by the creditor to whom the company is indebted, requiring the company

to pay the sum so due, and the company has for three weeks therefore

"neglected to pay the sum."

6. The Appellant has also argued that the authorized signatory of the

Appellant Company could not approach the Adjudicating Authority with

application under Section 9 of IBC within the limitation period as he was ill

and indisposed/on bed-rest due to surgery and could not contact the legal

counsel for appropriate advice for filing the said application. Therefore, these

Company Appeal (AT) (Ins) No. 510 of 2020 5 periods of illness and indisposition should be excluded from the computation

of limitation. In support, the Appellant's Learned Counsel has cited the law

laid down by the Hon'ble Apex Court in the case of B.K. Educational

Services Pvt. Ltd. V. Parag Gupta& Associates; (2019) 11 SC 633. The

Appellant has urged that Section 5 of the Limitation Act, 1963 is a general

provision whereby the Adjudicating Authority has discretion to condone the

delay in preferring an application, subject to the satisfaction of the

Adjudicating Authority regarding the cause for the delay in approaching the

Adjudicating Authority.

7. The appellant has claimed in the winding up petition that the

limitation for winding-up petition started from the date the Company (M/s.

Bajaj Hindustan Sugar Pvt. Ltd.) was "unable to pay its debts" and trigger for

limitation was the "neglect to pay its dues" after demand notice under the

provisions of Section 433(e) and Section 434 of the Companies Act, 1956 was

raised by the creditor. It is noted that in this winding up petition M/s.

Pinnacle (Air) Private Limited (respondent in this appeal) was not made a

Respondent. The case was heard by Hon'ble Court of Judicature at

Allahabad (Lucknow Bench) and was dismissed as the petitioner was unable

to produce convincing evidence in support of his contention and the petition

was heard in full and dismissed on merits. The relevant portion of this order

is reproduced below:-

Company Appeal (AT) (Ins) No. 510 of 2020 6

".........There is no agreement or document filed before this court, whereby it

can be concluded that the respondent-company has any agreement viz-à-viz

for taking service or has admitted to have taken service from the petitioner,

therefore, the respondent-company is not liable to pay the amount involved. In

view thereof, it is not proved that the respondent-company is liable to pay the

said amount. The question of fact is involved in this petition as to whether the

respondent-company is liable to pay the amount or not, which can only be

proved by a detailed evidence. I find it not a proper case to be entertained.

The present company petition filed under sections 433(e)(f), 434 & 439 of the

Companies Act, 1956, lacks merits and the same is dismissed."

8. The portions of Section 14 of the Limitation Act, 1963 which are

relevant to this appeal are reproduced below:-

14. Exclusion of time or proceeding bona fide in Court without

jurisdiction - (1) In computing the period of limitation for any suit the time

during which the plaintiff has been prosecuting with due diligence another civil

proceeding, whether in a Court of first instance or of appeal or revision,

against the defendant shall be excluded, where the proceeding, relates to the

same matter in issue and is prosecuted in good faith in a Court which, from

defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during

which the applicant has been prosecuting with due diligence another civil

proceeding, whether in a Court of first instance or of appeal or revision,

Company Appeal (AT) (Ins) No. 510 of 2020 7 against the same party for the same relief shall be excluded, where such

proceeding is prosecuted in good faith in a Court which, from defect of

jurisdiction or other cause of a like nature, is unable to entertain it.

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Explanation.- For the purposes of section, -

(a) In excluding the time during which a former civil proceeding as pending, the

day on which that proceeding was instituted and the day on which it ended

shall both be counted;

(b) A plaintiff or an applicant resisting an appeal shall be deemed to be

prosecuting a proceeding;

(c) Misjoinder of parties or of causes of action shall be deemed to be a cause of a

like nature with defect of jurisdiction."

9. The Ld. Counsel of Appellant has argued that by virtue of provisions of

Section 14(2) of the Limitation Act read with the Explanation 3 (supra),

misjoinder of party should be deemed to be a cause of a like nature as defect

of jurisdiction. On this basis, the Appellant has sought that the time spent

by him in prosecution of the winding up of proceedings before High Court of

Allahabad should be excluded for computing limitation in accordance with

Section 14 of the Limitation Act.

10. The order passed by Hon'ble High Court at Allahabad in winding up

Petition No.6 of 2015 does not mention the dismissal of the petition on the

Company Appeal (AT) (Ins) No. 510 of 2020 8 basis of misjoinder of parties. In fact, the order very clearly mentions that

"in view thereof, it is not proved that the Respondent Company is liable to pay

the said amount......... The present petition filed under Sections 433(e)(f), 434

and 439 of the Companies Act, 1956 lacks merits and the same is dismissed".

Under Sub-Section 2 of Section 14 of the Limitation Act, in computing the

period of limitation, exclusion of time can be claimed when in the court of

first instance or of Appeal or revision, against the same party and for the

same relief, such proceedings are prosecuted in good faith which the said

court is unable to entertain, from defect of jurisdiction or other cause of like

nature. Admittedly, the Appellant was not party in the winding up Petition.

Thus, this case may be of non-joinder of parties and not the mis-joinder of

parties. The Petition was dismissed by the Hon'ble High Court on the ground

that the question of fact involved in the petition as to whether the

Respondent Company is liable to pay the amount or not, which can only be

proved by detailed evidence. Thus, the Appellant has not fulfilled any of the

conditions enumerated in Sub-Section 2 of Section 14 of the Limitation Act.

11. In such a situation, we are unable to accept the contention of the

Appellant that the winding-up petition No.6 of 2015 was dismissed on the

ground of mis-joinder of parties, and we are not persuaded to allow the

Appellant the benefit of Section 14 of the Limitation Act, 1963.

12. Now we look at the date of filing application under Section 9 of the

IBC. As mentioned in the impugned order, the winding up petition was filed

Company Appeal (AT) (Ins) No. 510 of 2020 9 in the High Court of Allahabad on 10.7.2015. Since, it was taken up for

hearing, we accept that the winding up petition was filed within three years

from the date of default, which appears to be 12.7.2012 (which is the date of

clearing of the last payment cheque dated 10.6.2012). Since the benefit of

Section 14 of the Limitation Act, 1963 is not available to the Appellant and

no exclusion of time period spent in prosecuting the winding-up petition is

possible, the time period starting from the date of default i.e. 12.07.2012 to

the date of filing of application under Section 9 of IBC i.e. 06.01.2020 needs

to be explained for deriving the benefit of extension of limitation under

Section 5 of Limitation Act, 1963.

13. For this, we consider the averments made in the Application regarding

extension of prescribed period as per Section 5 of the Limitation Act, 1963.

14. The Appellant has in a somewhat cursory way tried to explain the

delay by the two illnesses and indisposition/bed rest that his authorized

representative underwent. Even if we take a very generous view of these

indispositions and consequent inability to file the Section 9 application we

can give an exclusion of ninety days for each of the two illnesses and

subsequent bed rest i.e. a maximum extension of one hundred eighty days

(180) days i.e. about six months. Despite giving such an extension in

prescribed period the appellant had to explain cogently and convincingly the

reason for delay of about two years and ten months days which has not been

done by the Appellant. We are, therefore, unable to give him relaxation

Company Appeal (AT) (Ins) No. 510 of 2020 10 under Section 5 of the Limitation Act, 1963 for this unexplained period of

about two years and ten months.

15. In view of the detailed discussion in the aforementioned paragraphs,

we are not convinced that the delay in filing the application was adequately

explained as required in law. Consequently, the application filed by the

Appellant under Section 9 of the IBC is very clearly out of limitation. We,

therefore, do not find any reason to interfere with the order dated 25.2.2020

of NCLT, Bench-VI, New Delhi. The appeal is, hence, dismissed with no

order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) New Delhi 25th February, 2021

/aks/

Company Appeal (AT) (Ins) No. 510 of 2020 11