Kailash Shah Rp Unique Sugar Limited vs Jaychandra Agro Industries Pvt Ltd

IN THE MATTER OF: Kailash Shah, RP of Unique Sugars Ltd. ...Appellant

Versus

Jaychandra Agro Industries Pvt. Ltd. ...Respondent

Present: For Appellant : Mr. Manoj Harit, Mr. Vikram Hegde, Mr. Abhinav Hansaraman, Advocates. For Respondent : Mr. Varun Garg and Ms. Komal Bihani, Advocates for R-1. Mr. Anirban Bhattarcharya, Mr. Rajeev Chowdhary, Ms. Priyanka Bhatt, Advocates.

ORDER

(Hybrid Mode)

12.07.2024: Heard learned counsel for the parties. This appeal has

been filed against order dated 06.12.2023 by which Section 9 application filed

by the Appellant has been dismissed.

2. Appellant, Resolution Professional of Unique Sugars Ltd. has filed an

Application under Section 9 against the Corporate Debtor - Jaychandra Agro

Industries Pvt. Ltd. claiming default of an amount of Rs.6,55,48,318/- along

with the interest. Reply was filed by the Corporate Debtor to which rejoinder

was also filed. Then application was filed by the Respondent that application

is time barred and does not meet the threshold limit and deserve to be

dismissed i.e. I.A. No.2963 of 2021.

3. The Adjudicating Authority proceeded to examine the application and

after hearing the parties dismissed the Section 9 application as barred by

Cont'd.../ 2

time. It was held by the Adjudicating Authority that Invoices No.1 to 248

dated 30.06.2014 to 21.06.2017 are prior to three years hence barred by

limitation and the amounts in the remaining invoices are below the threshold

limit. Before the Adjudicating Authority argument was raised that Applicant

was entitled for benefit of extension of limitation on the basis of Section 17 of

the Limitation Act.

4. Learned counsel for the Appellant challenging the order submits that

Appellant was entitled to be extended benefit of Section 17 in view of the

Forensic Audit Report which has referred to trade receivables of different

years' upto 2017-18. Learned counsel for the Appellant further submitted

that the Adjudicating Authority has passed an order on 11.10.2023 where the

Corporate Debtor was asked to file proof of payment and Balance Sheet

starting from 30.03.2017, however, the said order has not been complied and

Adjudicating Authority has not referred to said order when passing the order

rejecting the claim of the Appellant and dismissing Section 9 application.

5. Learned counsel for the Respondent submits that the Forensic Audit

Report even if is considered, the trade receivable for the year which is relied

by learned counsel for the Appellant for 2016-17 and 2017-18 are only

Rs.3.38 Lakhs and Rs.5.67 Lakhs, respectively and in no manner that will

help the Appellant to cross the threshold when the majority invoices are

barred by time.

6. We have considered the submission of learned counsel for the parties

and perused the record.

Company Appeal (AT) (Insolvency) No.852 of 2024 3

7. The Adjudicating Authority has returned finding that Invoices No.1 to

248 were prior to three years, hence, were barred by time, the said finding

cannot be assailed in the present appeal and has to be accepted. The

submission of learned counsel for the Appellant is based on the Forensic Audit

Report, which Forensic Audit Report cannot be foundation to extend

limitation under Section 18 or 19 of the Limitation Act since no

acknowledgment was there for extending the limitation. Application of

Section 17 of the limitation has been deliberated by the Adjudicating

Authority in Para 4.2 of the impugned order, which is as follows:

"4.2 As far as the question of limitation goes, the Respondent seeks to take the cover of Forensic Audit Report and has relied on section 17 of the Limitation Act. However, a plain reading of section 17 clearly indicates that Operational Creditor case is not covered under any of the clauses of Section 17 of the Limitation Act, 1963. In any case Forensic Audit is only an indicative report and not a conclusive evidence which has to be further examined. The Hon'ble Apex Court has held that to invoke Section 17 of the Limitation Act discovery of the fraud have to be pleaded and proved. In the present case apart from the Forensic report which mentions 'trade receivables' from the related party, no supporting documents have been filed to prove the existence of fraud committed by the Corporate Debtor. Hence this bench is not inclined to go with the respondent's plea on applicability of Section 17 of Limitation Act."

8. The Forensic Audit Report cannot be any basis for Appellant, who was

Resolution Profession of the Operational Creditor to say that any fraud has

Company Appeal (AT) (Insolvency) No.852 of 2024 4

been detected in the Forensic Audit Report. The Forensic Audit Report at best

reflect the financial status and details of different entities, trade receivables

and sales, etc. Therefore, we are of the view that Forensic Audit Report cannot

be furnished for any foundation to claim benefit of Section 17 of the Limitation

Act.

9. We, thus, are of the view that the Adjudicating Authority did not commit

any error in rejecting Section 9 application. We do not find any merit in the

Appeal. Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Archana/nn

Company Appeal (AT) (Insolvency) No.852 of 2024