Date of limitation starts from date of denial by debtor: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has held that a dispute raised with respect to the “quantum of the amount” in the absence of any suit or arbitration or other evidence cannot be said to be a “pre-existing dispute” in terms of Section 9 of the Insolvency and Bankruptcy Code, 2016..In the present case, the Appellate Tribunal also accepted the period of limitation to have begun from the date of the denial of the claim amount by the Corporate Debtor, and not from the date of invoices..The Judgment was passed by a three-member Bench of Chairperson, Justice SJ Mukhopadhaya, Member (Judicial) Justice AIS Cheema and Member (Technical) Kanthi Narahari. .Tricolite Electrical Industries Ltd had filed an application under Section 9 IBC against HBN Homes Colonisers Private Limited (Corporate Debtor) in its capacity as an operational creditor..The Operational Creditor claimed that the Corporate Debtor had outstanding dues of Rs. 58,28,478 along with interest of Rs. 36,73,378 @ 18% as on September 30, 2017, totalling to a sum of Rs. 95,01,856/- as the payable amount..After the Adjudicating Authority i.e. National Company Law Tribunal, New Delhi admitted the same and initiated corporate insolvency resolution process, one of the shareholders of the Corporate Debtor preferred an appeal before the Appellate Tribunal..It was the Appellant’s case that the claim was ‘barred by limitation’. It was argued for invoices were from the year 2012-2013, hence the Insolvency Code could not be invoked for the said transactions by a demand notice under Section 8(1) on October 25, 2017..The Operational Creditor, on the other hand, informed the Appellate Tribunal that on May 20, 2015, a Legal Notice under Section 271 of the Companies Act, 2013 was issued to the ‘Corporate Debtor’ to pay the outstanding amount of Rs. 58,28,478/- along with 18% interest..While stating that in its reply to the Legal Notice on August 26, 2015, the Corporate Debtor denied any liability, the Operational Creditor contended that the limitation period for the purpose of the claim shall begin from the date of such denial..The Appellate Tribunal accepted the argument made by the Operational Creditor and stated that the claim was not barred by limitation..The Appellate Tribunal then dealt with the Appellant’s submission that since the amount was “disputed” by the Corporate Debtor, it indicated at the “existence of a dispute” and thus Section 9 could not be invoked..The Appellate Tribunal noted the Supreme Court’s decision in Innoventive Industries Ltd. Vs. ICICI Bank and observed that the scheme of Section 7 for a Financial Creditor stood in contrast with the scheme under Section 8 for an Operational Creditor..It quoted from the Supreme Court’s judgement to state that in case of existence of a “pre-existing dispute” with respect to the claim, the IBC is not applicable to an Operational Creditor while in case of a Financial Creditor even if the claim is disputed and the default is more than Rs. 1 lakh, proceedings against Corporate Debtor could be initiated..“Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing- i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.”.The Appellate Tribunal, however, clarified the scope of “pre-existing dispute” and held that a dispute raised regarding quantum of the amount in the absence of any suit or arbitration or other evidence could not be said to be a pre-existing dispute..In view of the above, the Appellate Tribunal stated that there was no “existence of dispute” in the present case..Finding no merit in the appeal, the Appellate Tribunal dismissed it..The Appellant was represented by Advocates Vipul Srivastava, Rajindra Vats, Sidhartha Masson. .The Respondent was represented by Advocates Shikhil Suri, Shiv Kumar Suri, Shilpa Saini, Nikita Thapar..Read the Order:.Bar & Bench is available on WhatsApp. For real-time updates on stories, Click here to subscribe to our WhatsApp.