The NCLAT ruled on the admission of CIRP, addressing the extension of limitation, eligibility of unregistered partnerships, and procedural compliance.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Member Mr. Arun Baroka, reviewed an appeal on Friday and observed that the limitation period under the IBC is extended by part payments as per the Limitation Act, that an unregistered partnership can file an insolvency application, and that procedural lapses cannot override substantive rights under the IBC.
The National Company Law Appellate Tribunal (NCLAT) dismissed the appeal filed by the suspended management of C & A Farm Fresh Private Limited ("Corporate Debtor"), thereby upholding the order of the Adjudicating Authority, Chandigarh Bench ("NCLT"), admitting the Corporate Debtor to the Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC). The appeal challenged the maintainability of the Section 9 petition on multiple grounds, including limitation, pre-existing dispute, and the eligibility of the Operational Creditor (OC) under Section 69(2) of the Indian Partnership Act, 1932.
The Appellant contended that the Operational Creditor submitted an incomplete and defective Form-5, warranting dismissal under Section 9(5)(b) of the IBC. Additionally, it was argued that the Section 9 petition was time-barred as the default dates of 26.10.2016 and 30.12.2016 exceeded the prescribed limitation period. The Appellant alleged that the Operational Creditor introduced a third default date to circumvent the limitation. Further, the Appellant raised objections regarding the authenticity of the bank statements and the calculation of debt, which included GST charges on invoices predating the introduction of GST in July 2017. The Appellant also asserted that the debt had been settled through a deferred payment agreement and cash payments between May 2018 and February 2019.
In response, the Operational Creditor maintained that the petition was filed within the limitation period, citing the last part of the payment made on 17.02.2017, which extended the limitation by three years under Sections 18 and 19 of the Limitation Act, 1963. The Tribunal accepted this argument, holding that the filing of the petition on 17.02.2020 was within the permissible limitation period and valid under Section 4 of the Limitation Act, as the limitation period expired on a non-working day. The Tribunal further rejected the Appellant's claim regarding non-service of the Demand Notice reply, holding that the Demand Notice was duly served with tracking details.
Regarding the maintainability of the petition under Section 69(2) of the Partnership Act, the Tribunal ruled that the bar under the said provision applies to suits and not to applications filed under the IBC. The Tribunal also dismissed the pre-existing dispute claim, noting the absence of any documentary evidence supporting such disputes before the issuance of the Demand Notice. Moreover, the allegations concerning GST calculations were found to be baseless, as the invoices reflected VAT and CENVAT for the relevant periods, with GST applied only to interest on delayed payments.
Consequently, the NCLAT affirmed the Adjudicating Authority's order, allowing the Section 9 proceedings to continue against the Corporate Debtor. The appeal was dismissed, with no order as to costs. The Tribunal's decision reinforces the principle that procedural and technical objections cannot override the substantive provisions of the IBC aimed at resolving corporate insolvency in a time-bound manner.
Mr. Manish Jain, Advocate represented the Appellant.
Mr. Devul Dighe, Advocate appeared for the respondent.
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