Petition Filed U/S 9 Of IBC Based On Arbitral Award Cannot Be Entertained After 3 Yrs From Date Of Award: NCLT Mumbai

The National Company Law Tribunal (NCLT) Mumbai bench of Shri K. R. Saji Kumar (Judicial Member) and Shri Sanjiv Dutt (Technical Member) has held that an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (Code), based on an Arbitral Award passed in favor of the Operational Creditor, cannot be admitted after three years from the date of the Award, as per Article 137 of the Limitation Act, 1963 (Limitation Act) read with Section 238A of the Code. Brief Facts: Between 2006 and 2008, the Corporate Debtor procured packaging materials from the Operational Creditor but had failed to discharge its outstanding liabilities. Consequently, the Operational Creditor initiated arbitration proceedings against the Corporate Debtor before the Andhra Pradesh Micro, Small and Medium Enterprises Council (MSME Council). On 26 February 2011, the MSME Council passed two awards in favor of the Operational Creditor and directed the Corporate Debtor to pay ₹72,48,465 and ₹6,96,608 with compound monthly interest at the rate of three times the bank rate under Reserve Bank of India (RBI) notification. Since the Corporate Debtor defaulted in payment of its outstanding dues, the Operational Creditor prayed that Corporate Insolvency Resolution Process (CIRP) may be initiated in respect of the Corporate Debtor under Section 9 of the Code. The Corporate Debtor filed the IA (I.B.C) No. 2362/MB/2023 on 10.04.2023, under Sections 65 and 76 of the Code read with Rule 11 of the National Company Law Tribunal Rules, 2016, to challenge the maintainability of the present Application on the ground of limitation and absence of debt and default by the Corporate Debtor. The Corporate Debtor also seeks imposition of maximum penalty against the Operational Creditor and its directors under Section 76 of the Code for punishment for false information furnished in the Application before this Tribunal. Contentions: The Operational Creditor submitted that there is no notice from the Corporate Debtor regarding existence of any dispute or pendency of a suit or arbitration proceeding, before service of the demand notice dated 01.12.2019.Though, the Corporate Debtor had replied to the Operational Creditor's demand notice, it was not done within the period of 10 days from the receipt of the demand notice. It was also argued that the Operational Creditor did not receive any amount from the Corporate Debtor as full and final settlement regarding its operational debt. The Consent Terms had no bearing on the debt due and payable by the Corporate Debtor to the Operational Creditor. Per contra, the Corporate Debtor submitted that the Application is barred by limitation as the MSME Council Awards were passed by MSME Council by its order dated 26.02.2011, while the present Application is filed on 23.03.2022, which is much beyond the limitation period of three years as per Article 137 of the Limitation Act, 1963. It was further submitted that the Corporate Debtor was not liable to the Operational Creditor in relation to the MSME Council Awards since its assets and liabilities were already transferred to the SPCPL under the Business Transfer Agreement (BTA) dated 30.12.2010. The said BTA was executed between the Corporate Debtor and Supermax Personal Care Private Limited (SPCPL) under the restructuring process. Lastly, it was submitted that the Operational Creditor's, claims based on the MSME Council Awards, are misplaced since it had already received Rs.1,90,00,000/- in full and final settlement from SPCPL, which was almost equivalent of its claims under the MSME Council Awards against the Corporate Debtor & RCC Sales Private Limited (RCC). Observations: The Tribunal noted that the MSME Council awards passed on 23 February 2011 against the Corporate Debtor attained finality after the Corporate Debtor had withdrawn its appeal before the Supreme Court on 11 March 2013. It further observed that however, the present application was filed on 23 March 2022 which was beyond the three year period of limitation under Article 137 of the Limitation Act. Therefore, the contention of the Operation Creditor that Article 136 of the Schedule to the Limitation Act is applicable in the present case cannot be accepted as proceedings under the Code are not in the nature of execution of decrees. The Supreme Court in B.K. Educational Services Private Limited Vs. Parag Gupta and Associates. held that Article 137 of the Limitation Act shall be applicable in matters under the IBC. The MSME Council Awards were passed in 2011 and had attained finality in 2013, whereas the present Application was filed on 23.03.2022. Hence, the Application is clearly hit by Section 238A of the Code read with Article 137 of the Limitation Act. Accordingly, the present petition was rejected. Case Title: Haabia Resources Private Limited V/S Vidyut Metallics Private...

Petition Filed U/S 9 Of IBC Based On Arbitral Award Cannot Be Entertained After 3 Yrs From Date Of Award: NCLT Mumbai

Mohd Malik Chauhan

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