NCLAT (01.02.2021) in Srinivasa Reddy Velagala Vs Sravanthi Infratech Pvt. Ltd. [Company Appeal (AT)(Insolvency) No. 188 of 2020] held that;
It is seen from the correspondences between the parties and from the perusal of the clauses/articles as enumerated under the EPC contract that the contract has not been terminated by either parties and the contract still subsists. Therefore, the Adjudicating Authority rightly held that there is no termination of contract and the issue raised with regard to barred by limitation cannot be accepted. Therefore, we hold that the Application filed by the Respondent under Section 9 of IBC before the Adjudicating Authority is not barred by limitation.
It is reiterated that when we already held that there is no termination of contract from either of the parties, therefore, the contract still subsists and the claim is within limitation.
Excerpts of the order;
# 2. Learned Counsel for the Appellant mainly raises two grounds stating that the Application filed under Section 9 of Insolvency and Bankruptcy Code, 2016 (in short ‘IBC’) by the Respondent herein (Operational Creditor) was barred by limitation as prescribed under Article 137 of Limitation Act 1963. Second ground raised by the Appellant is that the contract was frustrated by efflux of time. Since the Respondent failed to establish the above grounds he prays the Bench to allow the Appeal by dismissing Section 9 Application. The learned Counsel corroborated his arguments on legal and factual issues.
# 3. Learned Counsel for the Respondent submitted that the Application filed under Section 9 of IBC by them before the Adjudicating Authority does not barred by limitation on the ground that the contract, which they entered with the Appellant is still subsisting. He further submitted that there is no such provision that the contract would frustrate by efflux of time. He submitted that there is continuous correspondence between the Respondent and the Appellant and the Appellant even did not reply to the correspondences and even to the Demand Notice. He further submitted that the claim of the Respondent admittedly an operational debt the same is due and payable. He further submitted that the Appeal does not have any merit and prayed the Bench to dismiss the same.
# 4. Heard learned Counsel for the respective parties, perused the pleadings, documents submitted in their support. The learned Adjudicating Authority framed issues – viz,
(a) whether the Company Petition is maintainable,
(b) whether they owed an operational debt to the Respondent and,
(c) whether the Company Petition is barred by limitation.
Learned Adjudicating Authority dealt with the issues and found that the Application filed by the Respondent herein is not barred by limitation as contemplated under Article 137 of the Limitation Act and held that the debt owed by the Appellant herein is an operational debt. With the aforesaid findings, the Application filed by the Respondent herein under Section 9 of IBC was admitted.
# 8. From the aforesaid facts we have seen that except the grievance raised by the Appellant herein with regard to limitation contending that the claim of the Respondent herein does not fall under the category of Operational debt and the contract was frustrated by efflux of time. The other factual aspects are admitted. Therefore, we deal with the same.
# 15. Further, the Respondent issued a Demand Notice dated 02.07.2018 to the Appellant under Section 8(1) of IBC (in Form-3 under Rule – 5 of the IBC Application to Adjudicating Authority) Rules, 2016. The Appellant did not reply to this Notice nor raised any existence of dispute prior to the issuance of this Notice.
# 16. In answer to the plea of barred by limitation i.e., as per the amendment to the IBC incorporating Section 238A to the IBC applicability of the limitation to the Applications filed under IBC. It is seen from the correspondences between the parties and from the perusal of the clauses/articles as enumerated under the EPC contract that the contract has not been terminated by either parties and the contract still subsists. Therefore, the Adjudicating Authority rightly held that there is no termination of contract and the issue raised with regard to barred by limitation cannot be accepted. Therefore, we hold that the Application filed by the Respondent under Section 9 of IBC before the Adjudicating Authority is not barred by limitation.
# 17. Further the issue is whether the claim of the Respondent is an Operational Debt. The Operational Debt is defined under sub-section 21 of Section 5 of IBC which reads as under:
“5(21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.”
# 18. Admittedly, the claim of the Respondent is an operational debt. Therefore, the arguments of the Appellant that the claims of the Respondent is not an operational debt does not hold any field.
# 19. Efflux of time:
The other issue with regard to frustration of contract by efflux of time is concerned, we hold that the EPC contract between the Appellant and Respondent still subsists and there is no such clause in the contract regarding frustration or termination by efflux of time, we hold that there is no merit in this point and accordingly, we negate this point issue also.
# 20. Learned Counsel for the Appellant relied upon a judgment in the matter of KLA Construction Technologies Pvt. Ltd. V. CKG Realty Pvt. Ltd., rendered in CA(AT)(Ins.) No. 67/2018. In this judgment this Tribunal was of the view that if the machinery or equipment was not moved to the construction site would be a debatable issue which can be agitated before the Civil Court. However, in the facts of the present case, the Appellant did not raise any existence of dispute prior to the issuance of Demand Notice and there is no termination of contract as held by us. Therefore, this judgment is not applicable to the facts of the present case.
# 21. Learned Counsel for the Appellant also relied upon the decision of Hon’ble Apex Court in B.K. Educational Services Pvt. Ltd. Vs. Paras Gupta & Associate, AIR 2018 SC 5601 and Vashdeo R. Bhojwani Vs. Abhudaya Co-operative Bank Ltd. (2019) 9 SCC 158 citing that the period of limitation for Applications seeking initiation of CIRP under Sections 7 & 9 of IBC is covered under Article 137 of the Limitation Act and therefore three years period to be taken into consideration from the date when default occurs for the purpose of limitation. It is reiterated that when we already held that there is no termination of contract from either of the parties, therefore, the contract still subsists and the claim is within limitation.
CONCLUSION:
# 22. From the perusal of the facts it is evident that the default has arisen out of EPC Contract, which itself is a continuing contract. Even from the Demand Notice dated 02.07.2018 in particulars of operational debt at column-1, the Respondent had clearly stated that the debt fell due on 24.12.2010 and the last payment made to the Respondent was on 25.02.2011 through RTGS. It is also mentioned that the debt continues to fall even today as the EPC contract between the Appellant and Respondent never terminated by either parties.
# 23. We hold that the Adjudicating Authority had rightly admitted the Application of the Respondent which in our considered opinion does not require any interference in the instant Appeal.
----------------------------------------------------------
No comments:
Post a Comment