Sanghvi Movers Ltd vs Tech Sharp Engineers Pvt. Ltd

(Arising out of Order dated 2nd January, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Single Bench Chennai in CP/724/IB/2018)

IN THE MATTER OF:

Sanghvi Movers Ltd. ...Appellant

Vs.

M/s. Tech Sharp Engineers Pvt. Ltd. ...Respondent

Present: For Appellant: - Mr. Shikhil Suri, Mr. Shiv Kumar Suri, Ms. Vinishma Kaul and Ms. Shilpa Saini, Advocates.

For Respondent:- Mr. R. Chandrachud, Mr. J.B. Dahia, Mr. Karan Sharma, Mr. Nitin Thukral and Ms. Geetanjali, Advocates.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant- 'Sanghvi Movers Ltd.' filed application under

Section 9 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for

short) against 'Tech Sharp Engineers Pvt. Ltd.'- ('Corporate Debtor')

claiming that a sum of Rs.38,84,709/- has become due and payable on

28th February, 2013. The Adjudicating Authority (National Company Law

Tribunal), Single Bench, Chennai, by impugned order dated 2nd January,

2019 rejected the same on the ground that the claim is time barred with

following observations:

2

"Counsels for both the parties are present. As

seen from the Order dated 18.12.2018, last the

final opportunity was granted to the Operational

Creditor for seeking instruction from his client.

However, the counsel for the Operational Creditor

again prayed for time for seeking instruction from

his client. It appears that the Operational Creditor

is derailing the proceeded of adjudicating,

therefore, I proceeded to decide the matter on

merits.

On perusal of the Application filed under

Section 9 of the I&B Code, 2016, it appears that

the claim amounting to Rs.38,84,709/- has

become due and payable on 28.02.2013. There is

a single confirmation of the claim by the Corporate

Debtor on 07.11.2013 as reflects from the

document placed at page 60 of the typed set filed

with the Application. Thereafter, there is nothing

on record to suggest that at any point of time the

Corporate Debtor confirmed/ acknowledged the

debt.

In the circumstances, the claim has become

time barred and in view of the judgment of the

Hon'ble Supreme Court passed in

Company Appeal (AT) (Insolvency) No. 118 of 2019 3

B.K.Educational Services Pvt. Ltd. -vs- Parag

Gupta and Associates (2018 SCC Online SC

1921), the Petition stands dismissed."

2. Learned counsel appearing on behalf of the Appellant submitted

that the claim is not barred by limitation, the Adjudicating Authority

without citing the relevant facts and reasons referred to the decision of

the Hon'ble Supreme Court in "B.K. Educational Services Pvt. Ltd. v.

Parag Gupta and Associates─ (2018) SCC OnLine SC 1921" and

rejected the application.

3. It was submitted that the Adjudicating Authority neither noticed

nor discussed the relevant fact, as reflected in Form-6 which the

application under Section 9 of the 'I&B Code' filed by the Appellant.

4. Learned counsel appearing on behalf of the Respondent placed

reliance on decision of the Hon'ble Supreme Court in "B.K. Educational

Services Pvt. Ltd. v. Parag Gupta and Associates─ (2018) SCC

OnLine SC 1921", wherein the Hon'ble Supreme Court observed and

held:

"48. 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

Company Appeal (AT) (Insolvency) No. 118 of 2019 4

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."

5. The question arises for consideration in this appeal is whether the

claim is barred by limitation as observed by the Adjudicating Authority.

6. The aforesaid issue is mixed question of facts and law for which it

is necessary to notice the relevant facts and the law.

7. For filing an application under Section 9, no period of limitation

has been prescribed in any of the Division or part of Schedule of the

'Limitation Act, 1963', therefore, Article 137 of Part II of 3rd Division of

Schedule to the 'Limitation Act, 1963' will be applicable, which reads as

follows:

Part II-OTHER APPLICATION Description of application Period of Limitation Time from which period begins to run

137. Any other application for which Three years When the right to no period of limitation is provided apply accrues elsewhere in this division.

8. In the present case, it is not in dispute that right to apply under

Section 9 accrued to the Appellant on 1st December, 2016, when 'I&B

Company Appeal (AT) (Insolvency) No. 118 of 2019 5

Code' came into force. Therefore, we find that the application under

Section 9 filed by the Appellant is within the period of three years from

the date of right to apply accrued.

9. The next question arises for consideration is whether the claim of

the Appellant is barred by limitation? If it is barred by limitation, then

the Respondent has right to take plea that there is no debt payable by

him in law. In such case, the application under Sections 9 cannot be

entertained.

10. To decide the aforesaid issue, we have noticed the facts which were

also brought to the notice of the Adjudicating Authority by the Appellant-

('Operational Creditor') and recorded in Part IV- 'Particulars of

Operational Debt' of Form-5, as noticed below.

11. The 'Corporate Debtor' placed work orders on 24th October, 2011

with the 'Operational Creditor' for 150 MT Manitowoe M 400 C Crane.

After execution of the work at the designated site on the designated date,

the Appellant- ('Operational Creditor') raised different invoices from time

to time for the services rendered by it.

12. According to the Appellant, a sum of Rs.88,87,900/- was payable,

out of which, the 'Corporate Debtor' paid only a sum of Rs.41,76,493/-

and subsequently a sum of Rs.8,26,698/-. As the 'Corporate Debtor'

stopped payment, the Appellant- ('Operational Creditor'), issued legal

notice on 6th May, 2013 to the 'Corporate Debtor' calling upon it to pay

the outstanding amount. The 'Corporate Debtor' by reply dated 17th May, Company Appeal (AT) (Insolvency) No. 118 of 2019 6

2013, admitted the outstanding dues and agreed to pay the same within

six months.

13. According to the Appellant, on considering the business

relationship and relying on assurance of the 'Corporate Debtor' to clear

its dues in instalments, the 'Operational Creditor' vide letter dated 21st

May, 2013 offered discount of 10% on the outstanding amount. The offer

given by the 'Corporate Debtor' was also accepted by the 'Operational

Creditor' as it was informed that the amount will be paid in five monthly

instalments commencing from 1st June, 2013.

14. Further the case of the Appellant is that the 'Corporate Debtor'

having failed to honour its commitments, the 'Operational Creditor'

issued a statutory notice dated 14th October, 2013 to the 'Corporate

Debtor' to which the 'Corporate Debtor' replied on 7th November, 2013

and admitted the default. In the said reply, the 'Corporate Debtor'

informed that they would write a letter to the principal employer i.e.

'IOCL' to make direct payment to the 'Operational Creditor'. A copy of the

said letter was also sent to the 'IOCL' and also enclosed with Form-5.

15. There being no progress of payment either from the 'Corporate

Debtor' or from the 'IOCL' in clearing the outstanding dues of the

'Operational Creditor', the Appellant issued a statutory notice under

Sections 433 and 434 of the Companies Act, 1956 on 24th May, 2014 to

the 'Corporate Debtor' calling upon to pay a sum of Rs.38,84,709/-

together with interest. The amount having not paid, the Appellant filed a

Company Appeal (AT) (Insolvency) No. 118 of 2019 7

winding up petition/ Company Petition before the Hon'ble High Court of

Judicature at Madras on 4th July, 2015 which was registered and

numbered.

16. During the pendency of the winding-up petition before the Hon'ble

High Court of Judicature at Madras, the 'I&B Code' came into force since

1st December, 2016. Section 434 of the Companies Act, 2013 was

substituted by Eleventh Schedule of the 'I&B Code'. As per substituted

Section 434 (c) of the Companies Act, 2013, all proceeding including

winding up proceeding pending before the Hon'ble High Courts stood

transferred to the Tribunal. In this background, the notice was issued by

the 'Operational Creditor' under Section 8(1) calling upon the 'Corporate

Debtor' to pay a sum of Rs.38,84,709/- with interest at the rate of 24%

p.a. Thereafter, the 'Corporate Debtor' having failed to pay the amount,

the application under Section 9 was filed by the Appellant- ('Operational

Creditor').

17. The aforesaid facts brought to the notice of the Adjudicating

Authority in Part IV of Form-5 (application under Section 9) have not been

considered by the Adjudicating Authority nor discussed and without

going into the facts and law, the Adjudicating Authority held that the

claim is barred by limitation.

18. From the facts as narrated above, it will be evident that the winding

up petition was filed before the Hon'ble High Court of Judicature at

Madras which had not reached finality and in the meantime, as the 'I&B

Company Appeal (AT) (Insolvency) No. 118 of 2019 8

Code' came into force, the demand notice under Section 8(1) was issued

on 14th November, 2017 for payment of outstanding amount along with

the interest. Thus, as we find that there is continuous cause of action the

claim is within the period of limitation. The Appellant had moved before

an appropriate forum for appropriate relief in time, in accordance with

law and so we hold that the claim of the Appellant is not barred by

limitation as the petition under Section 433 & 434 of the Companies Act,

1956 become infructuous, by operation of law.

19. For the reasons aforesaid, we set aside the impugned order dated

2nd January, 2019 passed by the Adjudicating Authority and remit the

case to the Adjudicating Authority for admission of the case after notice

to the parties. Before admission of the case, it will be open to the

Respondent to settle the matter with the Appellant.

The appeal is allowed with aforesaid observations. No costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice A.I.S. Cheema) Member(Judicial)

(Kanthi Narahari) Member(Technical)

NEW DELHI 23rd July, 2019 AR

Company Appeal (AT) (Insolvency) No. 118 of 2019