Unigold Systems vs Fortune Spirits Ltd

National Company Law Appellate Tribunal Principal Bench, New Delhi COMPANY APPEAL (AT) (INSOLVENCY) No. 325 of 2021 (Arising out of Order dated 02nd March, 2021 passed by National Company Law Tribunal, Cuttack Bench, Cuttack, in C.P. (IB) No.- 152/CTB/2019).

IN THE MATTER OF:

Unigold System, a proprietorship concern Through its Proprietor, Rajesh Kumar Gupta

Having its Registered Office at: 143, Karl Max, Sarani, Kolkata - 700023 ...Appellant

Versus

Fortune Spirit Limited

Having its Registered Office at: Plot No. 31, Kharavala Nagar, Unit-III, Bhubaneswar, Khordha Odisha-751001 ...Respondent

Appellant: Mr. Anirudh Wadhwa, Mr. Rohit Sharma & Mr. Bhargav Thali, Advocates. Respondent: Mr. Philomon Kani, Ms. Rajdipal Behura, Ms. Neha Lingwal, Ms. Hansika Sahu, Mr. Swayamthosh Rath & Mr. Ashray Behura, Advocates.

JUDGEMENT

[Per; Shreesha Merla, Member (T)]

1. Aggrieved by the Order dated 02.03.2021 in CP (IB) No.

152/CTB/2019 passed by the Learned Adjudicating Authority (National

Company Law Tribunal, Cuttack Bench, Cuttack), 'M/s. Unigold

Systems'/the 'Operational Creditor' preferred this Appeal. The Adjudicating

Authority dismissed the Application preferred under Section 9 of the

Insolvency and Bankruptcy Code, 2016 (in short the 'Code') on the ground

that it was 'barred by Limitation'.

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2. By the Impugned Order, the Learned Adjudicating Authority has

observed as follows:-

"From the perusal of the Bank Statements, this is clear that Bank Statement for the period from 05.05.2017 to 29.05.2017 and 25.02.2019 to 16.10.2019 only have been filed in the support of the claim. The invoices are from the period of 19.05.2015 to 09.1.2.2016 but no Bank Statements pertaining to this period have been enclosed along with the petition. Ld. Counsel for the Petitioner state that Rs. 2,00,000/-(Two Lakh) received from the Corporate Debtor on 17.05.2017 was already adjusted towards dues and therefore only the balance amount is claimed in the application.

Ld. Counsel for the respondent brings to the notice of this Adjudicating Authority that there is no basis for the claiming of interest by the petitioner. The petitioner in the application has claimed 18 % as the interest per annum though he is not entitled to any interest. The petitioner has failed to satisfy this Adjudicating Authority on the total amount due and payable. It is clearly a time barred debt. Since, the period of the invoices is from the date 19.05.2015 to 09.12.2016 and 16 out of 17 invoices filed by the petitioner are clearly time barred the argument of the Ld. Counsel for the petitioner on the issue of limitation that Rupees two lakh has been received on 17.05.2017 is negated. As per the judgement of the Hon'ble High Court and Hon'ble NCLAT this application ought to have been filed within the period of three years from the date of default of invoices.

Ld. Counsel for the respondent state that the statutory pecuniary jurisdiction of NCLT has been raised from Rupees One Lakh to Rupees One Crore and in this context also the application is not maintainable. However, this point is declined. The application was filed much before the pecuniary jurisdiction of the NCLT was raised to One Crore. At the given point of time when application was filed on 18.11.2019, any debt due and payable above Rs. 1,00,000/- (One Lakh) under Section 7 ,9 and 10, this adjudicating authority had jurisdiction to adjudicate. The amendment does not stopple this Adjudicating Authority to hear the application filed prior to the amendment. Hence, this application is clearly barred

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by limitation. Furthermore, petitioner has not filed the Statement of Account for the entire period of transactions to satisfy this Adjudicating Authority that the amount was due and payable. Accordingly, this CP (IB) No. 152/CTB/2019 is DISMISSED."

3. Submissions on behalf of the Learned Counsel appearing for the

Appellant:

 The Learned Counsel submitted that the Appellant/'Operational

Creditor' supplied mono cartons and labels to the

Respondent/'Corporate Debtor' pursuant to the purchase orders

raised by the 'Corporate Debtor' in the period between 2015 and 2016.

17 Invoices amounting to Rs.36,29,968/- were raised in this period

and as per the terms of the invoices, the 'Corporate Debtor' was liable

to pay interest at 18% per annum for any delayed payments.

 The first of such invoices which forms part of the Section 9 Application

is dated 19.05.2015 and the last of such invoices is dated 09.12.2016.

An amount of Rs.4 Lakhs/- was paid to the Appellant on 16.03.2017

and thereafter another block payment of Rs.2 Lakhs/- was made on

17.05.2017. After adjustment of these payments, a principal sum of

Rs.33,27,709/- remained outstanding as can be seen in the Ledger

Accounts for the period between 01.04.2015 and 31.03.2018.

 Despite repeated communication to the 'Corporate Debtor', the

outstanding payment was not cleared. On 10.05.2018, the 'Corporate

Debtor' issued an email acknowledging the outstanding debt of

Rs.33,27,708/- together with the statement of account.

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 The Appellant issued a Demand Notice under Section 8 of the Code on

25.02.2019 seeking payment of the principal amount together with

interest at 18% per annum, for which the 'Corporate Debtor' did not

choose to issue any Reply or make any payment towards the

outstanding debt.

 It is contended by the Counsel that pursuant to the part payment

made by the 'Corporate Debtor' on 17.05.2017, there is a default of an

outstanding debt of Rs.33,77,708/-. By way of email dated

10.05.2018, the 'Corporate Debtor' issued a Statement of Account

admitting and acknowledging this outstanding debt. Hence, the period

of Limitation calculated from 10.05.2018 ends on 10.05.2021 and

therefore the Section 9 Application is within the Limitation period.

 Additionally, the Limitation period should extend on account of part

payment made by the 'Corporate Debtor' on 17.05.2017 which is

evident from the Ledger Statement maintained by the Appellant Qua

the 'Corporate Debtor'.

 The Learned Counsel placed reliance on the following Judgements in

support of his case:-

i. 'Laxmi Pat Surana' Vs. 'Union Bank of India & Anr.', 2021 SCC OnLine SC 267.

ii. 'Lakshmi Narayan Sharma' Vs. 'Punjab National Bank & Ors.' 2021 SCC OnLine NCLAT 155.

iii. 'Hussan Kadri' Vs. 'Edelweiss Asset Reconstruction Co. Ltd. & Anr.', 2020 SCC OnLine NCLAT 1077.

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4. Submissions on behalf of the Learned Counsel appearing for the

Respondent:

 Learned Counsel appearing for the Respondent vehemently contended

that the Adjudicating Authority has rightly dismissed the Section 9

Application on the ground of Limitation as there was never any

express acknowledgement of debt of any kind to the Appellant. The

Counsel denied that the amount of Rs.2 Lakhs/- paid on 17.05.2017

was towards the alleged running account or towards the invoices

submitted alongwith the Application.

 The Counsel denied that there was any running account between the

parties; that the Appellant did not produce any documentary evidence

before the Adjudicating Authority to establish that there was any

'running account' maintained between the parties; that the Appellant

filed the Bank Statements only for the period between 05.05.2017 to

29.05.2017 and 25.02.2019 to 16.10.2019 and submitted that there

was no part payment made towards any running account.

 Email dated 10.05.2018 cannot be an 'acknowledgement of debt' as

the 'Corporate Debtor' never admitted that it owed an outstanding

amount of Rs.33,27,708/-.

 The Learned Counsel placed reliance on the Judgement of the Hon'ble

Supreme Court in 'Khan Bahadur Shapoor Freedom Mazda' Vs.

'Durga Prasad Chamaria & Ors.' (1962) 1 SCR 140, and submitted

that the key ingredient of an acknowledgement is admission and

existence of a jural relationship, which in the instant case is absent.

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 In the absence of any running account or any other acknowledgement

of debt and any jural relationship between parties, there is no

acknowledgement of debt made and hence this Appeal is dismissed.

Assessment:

5. At the outset we address to the contention raised by the Learned

Counsel for the Respondent that the Appellant herein is a propriety concern

and therefore does not have a locus standi to initiate CIRP. Section 2(f) of the

Code reads as hereunder:-

"2. Application.--The provisions of this Code shall apply to--

(a) any company incorporated under the Companies Act, 2013 (18 of 2013) or under any previous company law;

(b) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act;

(c) any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009);

(d) such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf;

(e) personal guarantors to corporate debtors;

(f) partnership firms and proprietorship firms;

and

(g) individuals, other than persons referred to in clause (e)"

(Emphasis Supplied) It is evident from Section 2(f) that proprietorship firms also can initiate

CIRP Proceedings.

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6. It is not in dispute that the Appellant supplied mono cartons and

labels to the 'Corporate Debtor' during the period 2015 to 2016 and the last

payment of Rs.2 Lakhs/- was made by the 'Corporate Debtor' to the

Appellant on 23.05.2017. It is the case of the Appellant that there is an

outstanding principal amount of Rs.33,27,708/- to be paid by the 'Corporate

Debtor' towards the invoices raised for the supply of mono cartons and

labels. In this background we address to the contention raised by the

Learned Counsel for the Respondent that there was never any 'running

account' between the parties and therefore the part payment made on

23.05.2017 should not be construed as any payment made towards 'supply

of mono cartons and labels' by the Appellant to the 'Corporate Debtor'. A

brief perusal of Annexure-6, the Ledger Account of the Appellant for the

period 01.04.2015 to 31.03.2018 shows that there were periodical

transactions between the parties and an amount of Rs.4 Lakhs/- was paid

on 16.03.2017 and a further amount of Rs.2 Lakhs/- was paid on

07.05.2017. Email communication dated 20.02.2018, 28.05.2018,

07.05.2018 and 28.11.2017 between the parties shows that repeated

request were made by the Appellant to the 'Corporate Debtor' to settle the

outstanding amount.

7. At this juncture, it is relevant to reproduce the email dated

10.05.2018 sent by the 'Corporate Debtor' to the Appellant herein, wherein

the Statement of Account for the period 2017 to 2018 was appended.

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8. In the aforenoted Ledger Account it is clearly stated that on

17.05.2017, an amount of Rs. 2 Lakhs/- was paid to the Appellants.

Keeping in view the submissions made by the Respondent in their Reply

read together with Ledger Account that mono cartons and labels 'were

purchased from the Appellant from time to time and invoices were raised

periodically', we are of the considered view that there was indeed continuous

transactions vide purchased orders raised between the parties to establish a

'running account'.

9. It is the main case of the Respondents that this part payment and

email cannot be construed as 'acknowledgement of debt' as provided for

under Section 18 of the Limitation Act, 1963. Sections 18 and 19 of the

Limitation Act, 1963 relevant for disposal of this Appeal are reproduced as

hererunder:-

"18. Effect of acknowledgment in writing.- (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

Explanation.--For the purposes of this section,-

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(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,

(b) the word "signed" means signed either personally or by an agent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right."

"19. Effect of payment on account of debt or of interest on legacy.- Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:

Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.

Explanation.- For the purposes of this section, -

(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment;

(b) "debt" does not include money payable under a decree or order of a court."

10. The effect of Section 18 of the Limitation Act, 1963, is that an

acknowledgement of liability in respect of a right made in writing and signed

by the Debtor before expiration of the prescribed period for a Suit or

Application would result in a fresh period of Limitation being computed from

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the time when acknowledgement was so signed. It is seen from the

aforenoted Ledger Account reproduced in para 7 read with Annexure-6, that

an amount of Rs.32,27,708/- was due and liable to be paid by the

Respondent to the Appellant. It is relevant to note that the part payment was

made on 23.05.2017, the email sent by the 'Corporate Debtor' is dated

10.05.2018 and the Application was filed in November, 2019 well within the

Limitation period.

11. It is significant to mention at this stage that on 23.02.2019, the

Appellant issued a Demand Notice dated 25.02.2019 under Section 8 of the

Code which was delivered to the 'Corporate Debtor' on 01.03.2019 but there

was no Reply.

12. Section 8 of the Code reads as hereunder:-

8. Insolvency resolution by operational creditor.--(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.

(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor--

(a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;

(b) the [payment] of unpaid operational debt--

(i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or

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(ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.

Explanation.--For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding [payment] of the operational debt in respect of which the default has occurred.

13. In their Reply Affidavit filed before this Tribunal there is no whisper

regarding the Section 8 Notice nor were any grounds raised for not replying

to the same. Even in their Reply to the Section 9 Application filed before the

Adjudicating Authority, the Respondent/'Corporate Debtor' does not deny

receipt of the Section 8 Notice nor do they give any reasons for not replying

to the same though in para 7 of the Reply the 'Corporate Debtor stated that

'the notice dated 25th February, 2019, issued under I.B. Code, 2016 is not in

accordance with statutory provisions as mentioned in Section 8 of the Code

hence the application is liable to be rejected' which establishes that the

'Corporate Debtor' did receive the Notice under Section 8, but did not choose

to Reply. Learned Adjudicating Authority has not addressed to this issue.

14. For all the aforenoted reasons, we are of the considered view that the

part payment made on 17.05.2017 read together with the Ledger Account

given by the 'Corporate Debtor' on 10.05.2018 vide email and also the

Ledger Account on Annexure A-6, we are of the considered view that the

right to sue has accrued. Section 18 of the Limitation Act, 1963 posits that a

fresh period of Limitation shall be computed from the date when the party

against whom the right is claimed acknowledges its liability. Hence, we are

of the view that the fresh period of Limitation is required to be computed

from the date of acknowledgement of debt by the principal borrower and part

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payment made on 17.05.2017 read with the Ledger Account and the email

dated 10.05.2018 evidences that the Application filed on 2019 is well within

the period of Limitation. It is pertinent to mention that the 'Corporate

Debtor' has not replied to the Demand Notice issued under Section 8 of the

Code.

15. Hence, this Appeal is allowed and the Order of the Learned

Adjudicating Authority is set aside. The Adjudicating Authority shall proceed

in accordance with law.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

NEW DELHI 12th November, 2021

ha

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