CAN AN APPLICATION FILED UNDER SECTION 9 OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 BE DISMISSED IF SOME OF THE INVOICES ARE TIME BARRED BUT REMAINING INVOICES ARE WITHIN LIMITATION?
BRIEF FACTS:
The operational creditor had provided digital classroom services between the period of 12.03.2011 and 30.06.2017 to the Corporate Debtor and pursuant thereto, the operational creditor raised 187 invoices in respect of the same. The amount under some of the invoices were unpaid which led the operational creditor to file an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before the National Company Law Tribunal (“NCLT”). NCLT while adjudicating the same considered the starting point of limitation as 12.03.2011 and held that the claim was barred by limitation, thus, dismissed the Section 9 application.
Being aggrieved by the order passed by the NCLT, the operational creditor filed an appeal before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”). The NCLAT dismissed the said appeal confirming the order passed by the NCLT dismissing the application filed under Section 9 of the IBC solely on the ground that the claim was barred by limitation as the invoices were time-barred.
FINDINGS OF SUPREME COURT:
Being dissatisfied by the order passed by the NCLAT, the operational creditor preferred an appeal before the Hon’ble Supreme Court. The Supreme Court held that the NCLT did not take into consideration the subsequent invoices for the period preceding three years from the date of filing of the application under Section 9 of the IBC. The NCLT and the NCLAT erred in considering the starting point of limitation as 12.03.2011 which is the date of starting of raising of the invoices. The NCLT and NCLAT failed to consider the invoices that were within the limitation, i.e., within the period of three years from filing of Section 9 application.
The Hon’ble Supreme Court allowed the appeal filed by the operational creditor and the orders passed by the NCLT and the NCLAT were quashed and set aside. The Supreme Court remitted the Section 9 application to the NCLT to consider the application afresh.
CONCLUSION:
The Supreme Court was of the view that the NCLT must consider the invoices which are within the limitation period and see whether they fulfil the minimum threshold of Rs. 1 Crore while adjudicating the Section 9 application filed by the operational creditor. The Supreme Court held that the Section 9 application should not have been dismissed on the sole ground that some of the invoices were time barred.
CASE REFERRED: M/S Next Education India Private Limited. Vs. M/S K12 Techno Services Private Limited [CIVIL APPEAL NO. 1775 OF 2021]