{"id":306753,"date":"2023-11-07T16:00:42","date_gmt":"2023-11-07T10:30:42","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=306753"},"modified":"2023-11-08T17:45:36","modified_gmt":"2023-11-08T12:15:36","slug":"nclat-rejects-application-under-section-9-of-the-ibc-as-being-time-barred-scc-blog-legal-research-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/11\/07\/nclat-rejects-application-under-section-9-of-the-ibc-as-being-time-barred-scc-blog-legal-research-news\/","title":{"rendered":"\u2018Withdrawal of suit cannot be considered as failure of prior proceeding\u2019; NCLAT rejects Section 9 application as being time-barred"},"content":{"rendered":"
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National Company Law Appellate Tribunal, New Delhi:<\/span> In an appeal against the dismissal of the application preferred under Section 9<\/a> of the Insolvency and Bankruptcy Code, 2016<\/a> (IBC) on being time-barred, a 3-member bench comprising of Ashok Bhushan,* J.<\/span>, Barun Mitra (Technical Member) and Arun Baroka (Technical Member), held that the benefit of Section 14<\/a> of the Limitation Act, 1963<\/a> could not be extended to the appellant due to the absence of an essential condition. The NCLAT further opined that the withdrawal of the suit and the appellant’s claimed reason for withdrawal did not establish a sufficient cause for extending the limitation period.<\/p>\n

Factual Matrix<\/p>\n

In the instant matter, the appellant-operational creditor filed the present appeal against the impugned order dated 22-05-2023, issued by the Adjudicating Authority dismissing Section 9 application submitted by the appellant.<\/p>\n

The operational creditor is engaged in the trade and service of providing equipment and manpower. The operational creditor alleged that the corporate debtor issued three Purchase Orders, dated 23-02-2013, 23-10-2013, and 28-0-2017.<\/p>\n

In response to Purchase Orders 1 and 2, the operational creditor issued 65 invoices on various dates between 31-10-2013 and 29-03-2014, in total for the amount Rs. 3,61,40,025\/-. A payment of Rs. 2,88,84,623 was made, leaving an unpaid amount of Rs. 72,55,402 as of 03-06-2014. In response to the 3rd Purchase Order, the operational creditor issued three invoices totaling Rs. 21,91,122.<\/p>\n

The operational creditor filed a suit on 03-10-2017, seeking recovery of money under the 1st two Purchase Orders (Stage 1). This suit was withdrawn by the operational creditor on 18-07-2022. Subsequently, on 27-07-2022, the operational creditor issued a demand notice claiming a total amount of Rs. 1,78,78,390, which included the principal amount for both Stage 1 and Stage 2, as well as interest. The default date for Stage 1 was 30-04-2015, and for Stage 2, it was 23-10-2018.<\/p>\n

The operational creditor filed the Section 9 Application on 05-12-2022, seeking initiation of insolvency proceedings against the corporate debtor. The Adjudicating Authority, in the impugned order, dismissed the Section 9 Application, citing that it was time-barred due to limitations and lacked an agreement for interest that would meet the threshold of Rs. 1 Crore.<\/p>\n

Key Legal Principles<\/p>\n