The criteria for determining the limitation period with respect to the debt and the criteria for determining the date of default with respect to the debt are two different questions of law and fact and cannot be tested on the same scale – DB Power Ltd. Vs. Kreate Energy (I) Pvt. Ltd. – NCLT New Delhi Bench Court-IV

In Sec. 9 application, NCLT New Delhi Bench Court-IV held that the criteria for determining the limitation period with respect to the debt and the criteria for determining the date of default with respect to the debt are two different questions of law and fact and cannot be tested on the same scale. The submission of the applicant that the dates of acknowledgement of liability towards the operational debt, the date of the last part payment, the date of issuance of cheque, the date of dishonour of the said cheque, the date of sending the demand notice, and consequential failure of the Respondent to pay the operational debt, would give rise to a fresh cause of action can only be sustained for the purposes of Limitation Act, 1963.

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I. Case Reference

Case Citation : (2023) ibclaw.in 792 NCLT
Case Name : DB Power Ltd. Vs. Kreate Energy (I) Pvt. Ltd.
Operational Creditor : DB Power Ltd.
Corporate Debtor : Kreate Energy (I) Pvt. Ltd.
Application/Appeal No. : Company Petition No.(IB)-521/ND/2022
Judgment Date : 31-Oct-23
Court/Bench : NCLT New Delhi Bench Court-IV
Member (Judicial) : Mr. Manni Sankariah Shanmuga Sundaram
Member (Technical) : Dr. Binod Kumar Sinha

II. Brief about the decision

The instant application is filed by on behalf of M/s. DB Power Limited (Operational Creditor) under Section 9 of the IBC with a prayer to initiate CIRP in respect of M/s. Kreate Energy (I) Private Limited (Corporate Debtor) for defaulting the payment of Rs.9,62,38,371/- including principal amount of Rs.7,08,98,749/- and interest amounting Rs.2,53,39,62/-.

The Adjudicating Authority observes that:

  • This Adjudicating Authority would like to make a pertinent note of the fact that the criteria for determining the limitation period with respect to the debt and the criteria for determining the date of default with respect to the debt are two different questions of law and fact and cannot be tested on the same scale. The submission of the applicant that the dates of acknowledgement of liability towards the operational debt, the date of the last part payment, the date of issuance of cheque, the date of dishonour of the said cheque, the date of sending the demand notice, and consequential failure of the Respondent to pay the operational debt, would give rise to a fresh cause of action can only be sustained for the purposes of Limitation Act, 1963.(p12)
  • The term ‘default‘, is defined under Section 3(12) of the code, 2016 and the same is to be considered by this Adjudicating Authority for the purpose of determining the ‘date of default‘.(p13)
  • Operational debt of Rs.20,87,05,151.88/- raised through an invoice dated 01.10.2020 bearing no. 100006518 was to be paid within 60 days of issue i.e., on or before 01.12.2020. The Corporate Debtor had defaulted in the payment of the entire due as per invoice dated 01.10.2020 within the stipulated period of 60 days and accordingly, the date of default in the present case is 01.12.2020, as correctly mentioned by the Applicant in the Part IV of the instant Application.(p17)
  • Accordingly, in view of the discussion, the submission of the applicant that the dates of acknowledgement of liability towards the operational debt, the date of the last part payment, the date of issuance of cheque, the date of dishonour of the said cheque, the date of sending the demand notice, and consequential failure of the Respondent to pay the operational debt, having fallenafter the period stipulated under Section 10A of the Code i.e. after 24.03.2021 and each of the said events gave rise to a fresh cause of action, being new date of default on the part of the Corporate Debtor to pay the operational debt to the Applicant, for preferring the present proceedings under Section 9 of the Code, 2016 cannot be accepted.(p19)
  • Therefore, on appreciation of the facts of the case, arguments advanced by both parties and the documents mentioned herein above, this Adjudicating Authority is of the view that in the light of provisions of Section 10A of the Code, 2016, the facts of the present case are such that the provisions of Sec 10A are clearly attracted in the present case as the date of default in this case admittedly fell within the shadow period of Section 10A of the Code, 2016.(p20)
  • As per Sec 10A of the Code, 2016, no IBC proceedings can be initiated against the Corporate Debtor for the default which has occurred between the period from 25/03/2020 till 24/03/2021, keeping in view the extended period of Sec 10A of the Code, 2016 and the intention of the legislature, the present Company Application i.e., C.P.(IB)521/2022, filed under Section 9 of the Code, 2016 cannot succeed and is hereby dismissed.(p21)

 

III. Full text of the judgment

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