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Synopsis

The National Company Law Tribunal (NCLT) Mumbai has recently ruled that there is no provision in the Insolvency and Bankruptcy Code (IBC) stating that the period of demand notice is liable to be excluded when calculating the period of limitation for filing a petition under Section 9.

“However, we are of the considered view that the law laid down in the cited cases cannot be applied to the facts and circumstances of the instant case. It is well settled that the IB Code of 2016 is a complete code in itself, there is no provision in the Code that the period of demand notice is liable to be excluded while reckoning the period of limitation for filing the Petition under Section 9 of the Code,” the order reads.

A division bench of the National Company Law Tribunal (NCLT) comprising Judicial Member Kuldeep Kumar Kareer and Technical Member Anil Raj Chellan was hearing a petition filed under Section 9, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against a company.

The corporate debtor and operational creditor entered into two Letters of Intent (LOI) on January 19, 2010, wherein the corporate debtor appointed the operational creditor as a sub-contractor for one of the works under the main contract.

The operational creditor issued running invoices, but only partial payment was made. Upon reconciliation, a sum of Rs. 50,13,602 was due and payable by the corporate debtor to the Operational Creditor.

Since no payment was received, the operational creditor, through their advocates, issued a notice under Section 8 of the Insolvency and Bankruptcy Code to the corporate debtor but no reply or payment was received.

The operational creditor argued that the existence of operational debt and default by the corporate debtor had been established on record. Despite a demand notice, the corporate debtor failed to make the payment. Therefore, the petition under Section 9 of the Code should be admitted.

The corporate debtor countered by stating that the last invoice issued by the operational creditor was dated 30.11.2012. The corporate debtor's counsel pointed out that the present company petition, filed on 09.10.2019, is barred by time, even if the email dated 07.10.2016 is taken into consideration.

The bench pointed out that the petition was filed on 09.10.2019, which is beyond the period of three years, even from the so-called acknowledgement through the email dated 07.10.2016.

The Operational Creditor argued that the demand notice period of 10 days should be excluded from the period of limitation, but the NCLT rejected this argument and dismissed the application filed under Section 9 of IBC 2016.

Advocates Adv. Akshay Doctor,  Sunil A. Vyas and Deep Morabia appeared for the operational creditor.

Advocate Adv. P. G. Sabnis appeared for the corporate debtor

Case title: WPIL Limited vs Gammon India Limited