NCLAT New Delhi: Operational Creditor Not Entitled To Benefit U/S 14 Of Limitation Act When Suit Filed By It Was Withdrawn By Itself Without Any Liberty To Institute Fresh suit
Sachika Vij
30 Oct 2023 9:00 AM GMT
The National Company Law Appellate Tribunal (‘NCLAT’) Principal Bench, New Delhi comprising Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member) held that an Operational Creditor is not entitled for benefit of Section 14 of the Limitation Act where the Suit filed by it was withdrawn on its own application without any...
The National Company Law Appellate Tribunal (‘NCLAT’) Principal Bench, New Delhi comprising Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member) held that an Operational Creditor is not entitled for benefit of Section 14 of the Limitation Act where the Suit filed by it was withdrawn on its own application without any liberty to institute a fresh suit.
Facts:
GRI Towers India Pvt. Ltd. (Operational Creditor) filed a Suit dated 03.10.2017 for recovery of monies under 1st two Purchase Orders i.e. Stage 1 which the suit was withdrawn by it by order dated 18.07.2022. It issued a Demand notice dated 27.07.2022 claiming an amount of Rs.1.78 Crores (including principal amount under Stage 1 i.e. Rs. 72.55 Lakhs and Stage 2 i.e. Rs.21.91 Lakhs and an interest of Rs. Rs.84.31 Lakhs). The date of default is 30.04.2015 for Stage 1 and 23.10.2018 for Stage 2.
A Corporate Insolvency Resolution Application (‘CIRP’) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) was filed by the Operational Creditor on 05.12.2022. NCLT Chandigarh via order dated 22.05.2023 dismissed the CIRP application stating that it is barred by limitation as well as there being no agreement placed on record for interest, it does not fulfill the threshold of Rs.1 Crore. The Appeal has been preferred to challenge the said order.
NCLAT Verdict:
The NCLAT held that several pre—conditions are to be fulfilled as per the provisions of the statute as laid down in SREI Equipment Finance Ltd. Vs. Kalpataru Properties Pvt. Ltd. to take benefit of Section 14 of the Limitation Act.
It pointed out that the condition of “failure of the prior proceedings due to defect of jurisdiction or other cause of like nature” is to be fulfilled for application of Section 14. The Operational Creditor had withdrawn its own application which does not meet the condition.
Further, on the perusal of the Civil Court order, it is clear that the Operational Creditor himself has withdrawn the suit for filing the application subject to payment of the cost of Rs.5,000/- to the Defendant. The same was withdrawn without any liberty to the Operational Creditor to institute a fresh suit which is clear from the order itself. Further, there is no instance that the Operational Creditor at any point in time resorted to arbitration proceedings which has been submitted by the Operational Creditor as the reason for withdrawal.
Thus, the Operational Creditor is not entitled to benefit from Section 14 of the Limitation Act and the delay in filing the Section 9 application with delay cannot be said to be a sufficient cause for Section 5 of the Limitation Act.
In conclusion, The NCLAT observed that NCLT Chandigarh was correct in dismissing the CIRP since IBC proceedings are not for recovery of contractual dues, as is apparent from the conduct of the Operational Creditor’s claim.
Case Title: GRI Towers India Pvt. Ltd. vs. Inox Wind Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 1106 of 2023
