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Limitation Period to be Computed from the Date of Denial of Debt

Facts of the Order

Tricolite Electrical Industries Ltd had filed an application before NCLT New Delhi bench under Section 9 of 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. 95.01 Lacs along with interest as on September 30 2017 as the payable amount. The application was admitted by AA and moratorium declared.

Case History

After initiation of CIRP by the  Adjudicating Authority i.e. National Company Law Tribunal, New Delhi, one of the shareholders of the Corporate Debtor preferred an appeal before the Appellate Tribunal, claiming that the amount payable considered as default, was ‘barred by limitation’. It was argued on behalf of the corporate debtor that considered 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. Corporate Debtor in its reply to this legal notice on August 26, 2015, denied any liability. 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 Court (NCLAT) didn’t accept the contention of the appellant that the amount disputed by the Corporate Debtor amounts to the existence of dispute & observed the following:

“It does not come within the meaning of the existence of a dispute. The dispute raised regarding quantum of the amount in the absence of any suit or arbitration or other evidence, it cannot be said to be a pre-existing dispute.”

About the Author: Binay Kumar Singhania