M/S. Shri Maruti Electrical ... vs M/S. Sas Real Pvt. Ltd

M/s. Shri Maruti Electrical Enterprises Ltd. ...Appellant

Versus

M/s. SAS Real Pvt. Ltd. ...Respondent

Present:

For Appellant : Mr. Prakash Ranjan Nayak, Advocate

For Respondent: Mr. Ashwin Kumar DS and Ms. Surbhi Mehta, Advocates

ORDER

22.03.2018 The appellant preferred an application under Section 433 of

the Companies Act, 1956 before the Hon'ble High Court of Madras which stood

transferred under Rule 5 of the "Companies (Transfer of pending Proceedings)

Rules, 2016" before the Adjudicating Authority (National Company Law

Tribunal), Chennai. Before the Adjudicating Authority the appellant requested

to treat the application under Section 9 of the Insolvency and Bankruptcy Code,

2016 (hereinafter referred to as the 'I&B Code'). However, the Adjudicating

Authority rejected the prayer on the ground that the application was barred by

limitation.

2. Respondent has appeared and the learned counsel for the respondent

prayed for some time to file the reply. However, as the matter requires

re-consideration by the Adjudicating Authority in view of the discussion, as made

below, we have not allowed the respondent to file any reply at this stage. 2

3. The question whether the Limitation Act, 1963 will be applicable for

initiation of 'corporate resolution process' under Section 7 or 9 or 10 of I & B

Code, fell for consideration before this Appellate Tribunal in "M/s. Speculam

Plast Pvt. Ltd. vs. PTC India Pvt. Ltd. etc. in Company Appeal (AT) (Insolvency) No.

47 of 2017". This Appellate Tribunal by judgment dated 7th November, 2017

observed and held as follows :

"68. In view of the settled principle, while we hold that the

Limitation Act, 1963 is not applicable for initiation of

'Corporate Insolvency Resolution Process', we further hold

that the Doctrine of Limitation and Prescription is

necessary to be looked into for determining the question

whether the application under Section 7 or Section 9 can

be entertained after long delay, amounting to laches and

thereby the person forfeited his claim.

69. If there is a delay of more than three years from the date

of cause of action and no laches on the part of the

Applicant, the Applicant can explain the delay. Where

there is a continuing cause of action, the question of

rejecting any application on the ground of delay does not

arise.

70. Therefore, if it comes to the notice of the Adjudicating

Authority that the application for initiation of 'Corporate

Insolvency Resolution Process' under section 7 or Section

9 has been filed after long delay, the Adjudicating

Authority may give opportunity to the Applicant to explain

Company Appeal (AT) (Insolvency) No. 72 of 2018 3

the delay within a reasonable period to find out whether

there are any laches on the part of the Applicant.

71. The stale claim of dues without explaining delay,

normally should not be entertained for triggering

'Corporate Insolvency Resolution Process' under Section 7

and 9 of the 'I&B Code'.

72. However, the aforesaid principle for triggering an

application under Section 10 of the 'I&B Code' cannot be

made applicable as the 'Corporate Applicant' does not

claim money but prays for initiation of 'Corporate

Insolvency Resolution Process' against itself, having

defaulted to pay the dues of creditors.

In so far it relates to filing of claim before the 'Insolvency

Resolution Professional', in case of stale claim, long delay

and in absence of any continuous cause of action, it is

open to resolution applicant to decide whether such claim

is to be accepted or not, and on submission of resolution

plan, the Committee of Creditors may decide such

question. If any adverse decision is taken in regard to any

creditor disputing the claim on ground of delay and

laches, it will be open to the aggrieved creditor to file

objection before the Adjudicating Authority against

resolution plan and for its necessary correction who may

decide the same in accordance with the. observations as

made above."

Company Appeal (AT) (Insolvency) No. 72 of 2018 4

4. In view of the decision in "M/s. Speculum Plast Pvt. Ltd. (Supra), we hold

that the Adjudicating Authority was wrong in holding that the application was

barred by limitation.

5. There are other factors to be noticed before treating an application under

Section 433 of the Companies Act, 1956 as an application under section 9 of

I&B Code in terms of Rule 5 of "The Companies (Transfer of Pending Proceedings)

Rules, 2016", which reads as follows:

"5. Transfer of Pending proceedings of Winding up on the ground of inability to pay debts.─ (1) All petitions relating to winding up of a company under clause

(e) of Section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of Section 419 of the Companies Act, 2013 exercising territorial jurisdiction to be dealt with in accordance with Part II of the Code:

Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated:

Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible

Company Appeal (AT) (Insolvency) No. 72 of 2018 5

to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code:

Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent."

6. In terms of Rule 5, if an application under Section 433 is transferred, it

is to be seen whether within the time prescribed the applicant provided all

information other than relevant information(s) as per the I & B Code and as

required to be furnished in requisite form prescribe under Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016. For treating

the application as an application under Section 9, it is to be seen as to whether

the applicant had issued notice under Section 8(1) and received a reply under

Section 8(2) of the I &B Code. If notice has been issued and reply has been

received, then only it can be seen whether there is an 'existence of dispute'.

All these issues are required to be noticed from the records and, therefore, we

are not going to deliberate on such issues at this stage.

7. For the reasons aforesaid, we set aside the order dated 10th November,

2017 and remit the case to the Adjudicating Authority (National Company law

Tribunal), Chennai passed in TCP/170/(IB)/CB/2017 and will reconsider the

issue after notice to the parties.

Company Appeal (AT) (Insolvency) No. 72 of 2018 6

8. It will be open to the respondent to point out whether notice under

Section 8(1) of the I&B Code was issued on him and in reply he raised any

objection and in such case if the notice was issued, whether there is an

'existence of dispute' or not. In case no such notice was issued then the

application under Section 433 be treated as abated. Similarly in other

information which are required to be given in Form 5 and has not been

provided in the petition filed under Section 433, in such case the application

cannot be dismissed.

9. The appeal is allowed and the case is remitted back to the Adjudicating

Authority (National Company Law Tribunal), Chennai with the aforesaid

observations. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/uk

Company Appeal (AT) (Insolvency) No. 72 of 2018