Insolvency & BankruptcyA period of limitation does not commence when the debt becomes due but only when the default has occurred.

FACTS

Sterling and Wilson Private Limited, (hereinafter referred to as “the Petitioner”) a Company Petition on 30.08.2020 under section 9 of the Insolvency and Bankruptcy Code, 2016 (‘the Code’) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for the initiation of the Corporate Insolvency Resolution Process (“CIRP”) against Bridge and Roof Company (India) Limited (“herein referred to as “the Respondent”).

ISSUES BEFORE THE NATIONAL COMPANY LAW TRIBUNAL

1. Whether an application filed under Section 9 of the Code is barred by limitation?
2. Whether there is any pre-existing dispute between the parties?

CONTENTIONS OF THE PARTIES

The Petitioner contended that; the Respondent engaged Petitioner for electrical work in connection with the building and development of Phase-I of Guru Gobind Singh Indraprastha University Campus at Sector-16 C, Dwarka, Delhi (‘Project’), and the project was completed in the month of April-May of 2012, for which the Applicant raised time and again the invoices wherein the last invoice was issued to Respondent on 30.12.2013. The total value of the invoices issued amounts to Rs. 9,68,70,706/-

The Petitioner submitted that, from the total amount of the invoice, the Respondent has already paid the amount of Rs. 8,70,90,292/-. However, the Respondent failed to pay the remaining amount of Rs. 97,80,494/-.

The Petitioner stated that several reminders and letters were sent to Respondent for the payment of the outstanding dues wherein Petitioner issued a letter dated 09.08.2017 demanding the payment of outstanding dues wherein the Respondent vide letter dated 25.09.2017 informed the Petitioner that since already Arbitration proceedings are pending before the Arbitration Tribunal between the Respondent and GGIPSU, the Petitioner shall corporate with Respondent till the conclusion of the Arbitration Proceedings.

Further, since the dispute between the Respondent GGIPSU was concluded, the Petitioner on 19.05.2020 issued the Legal Notice to the Respondent for the payment of outstanding dues, however, there was no response from the Respondent. Thereafter, the Petitioner issued a demand notice under Section 8 of the Code on 10.08.2020 to the Respondent, however, the Respondent never replied to the said notice.

The Respondent contended that the Petitioner has suppressed the fact that the Operational Creditor has filed an application under section 11(6) of the Arbitration and Conciliation Act, 1996 (herein referred to as “the Act”) the for appointment of an arbitrator to adjudicate the disputes between the parties and the same is pending before the Hon’ble High Court at Calcutta in the case of Sterling & Wilson Private Limited v. Bridge & Roof Company India Limited A.P. No. 259 of 2020.

The Respondent submitted that the filing of the present application itself shows the acceptance of the Petitioner about the existence of the pre-existing dispute with respect to a similar claim between the parties. Thus, the Petitioner is not entitled to recover the claim from the Respondent under the present proceedings and the dispute between the Respondent and GGIPSU is still pending adjudication before the Hon’ble Delhi High Court.

The Respondent relied upon the invoices and states that the final invoice attached by the Petitioner is incomplete as Petitioner received the amount of Rs. 4,20,494/- from the Respondent on 29.03.2020 and 30.05.2020 as a final settlement amount.

DECISION AND FINDINGS

The National Company Law Tribunal (herein referred to as “the Adjudicating Authority”) after considering the submissions of both the parties and observed that; the date of default is an extremely important parameter to consider to determine the time when the cause of action arises as the right to sue under code arises only subject to the occurrence of the event of default and in the present matter the date of default is not provided by the Petitioner.

The Adjudicating Authority noted that even if the date of the final invoice i.e., 30.12.2013 is considered as the date of default, the limitation period as per Article 137 of Limitation Act 1963 shall end in the year 2016, and from the mere reading of the Respondent’s letter dated 27.09.2017 the nothing in the said letter would construe as an acknowledgment of debt.

The Adjudicating Authority further observed that the arbitration proceedings were already initiated by the Petitioner in the year 2020 thus, there exists a pre-existing dispute, and the similar issues were dealt with in the arbitration proceedings and held that the present application is dismissed and the remedy shall be availed under the available law.

AMLEGALS REMARKS

The present decision has retreated the position of law wherein the Adjudicating Authority has enlightened upon the meaning of term debt and event of default. The Adjudicating Authority has clearly explained that, in order to determine the existence of the debt, the identification of the event of default becomes a most pivotal aspect and it is a settled proposition of the law by the decision of the Supreme Court in the case of B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates [(2019) 11 SCC 633 wherein it was held that the period of limitation does not commence when the debt becomes due but only when a default has occurred.

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